Distortion of prices on the national exchanges, as in the case of pepper, is the norm.

Market manipulations in futures trading in black pepper, the latest of its kind, after such episodes in guarseed and guar gum, chillies, cumin and turmeric, created a stir. A stakeholders’ meet for Kerala-specific commodities., viz pepper, cardamom and rubber, flagged off concerns

Union Minister of State (independent charge) for Consumer Affairs, Food and Public Distribution K. V. Thomas said the Centre will set up two separate committees for pepper and cardamom to look into various issues connected with futures trading.

But, the crux of the problem is making available of thousands of tonnes of black pepper which are locked in accredited warehouses. The potential time for marketing Indian pepper overseas is from January to March, that is, till the Vietnamese new crop hits the market in April.

Therefore, holding of around 8,000 tonnes of pepper is going to affect the trade negatively, apart from Indian exporters losing their credibility even in selected markets with selective buyers. This important fact does not seem to have received the consideration of the authorities.

At the same time, there emerges a question as to how the adulterated material got into the accredited warehouses at a time when there are assayers to check and pass the lots that they conform to the prescribed specifications of the exchange/Regulator.

Also, a staggered delivery system was introduced by the Forward Markets Commission several months ago. It was when the staggered delivery system was in force that big cartels accumulated large quantities of pepper through the NCDEX exchange and have cornered and monopolised nearly 8,000 tonnes of the commodity, expecting prices to cross Rs. 500 per kg mark.


When the prices fell instead of moving up, contrary to the cartels’ expectations, the story of adulteration came up. The statements made by FMC sources speak for themselves. “The complaint lodged with us was primarily with regard to high moisture content and light berries in the product. We found no truth in this complaint. Apparently, the complainant is sitting with high stocks, which it bought at very high prices. Since, the price has crashed since then, the complainant is furious.”

Meanwhile, the FMC Chairman said, “the mineral oil issue has been raised for the first time”.

At the stakeholders' meet, Mr Ramesh Abhishek, Chairman, FMC, said “We will not allow the cartels to function. The government does not want the futures market to be controlled by few cartels in the country”, he said. But, majority in the trade called these pronouncements as “an eyewash”.

Non-delivery of material/receipt of money has put some of the stakeholders in such difficulty that they could not pay the growers the money for their produce, a trader-cum-grower in Rajakumari in Kerala’s Idukki district said.


It is against this background that there has emerged a call, of late, for reviving the commodity-specific regional exchanges. The reasons attributed to such a demand are that the prices for the commodities traded, at present, at the national commodity exchanges are distorted everyday.

Therefore, a good section in the trade, feel that the operators at the national level commodity exchanges require to be controlled. .

Many leading broking houses and operators who are members on the NCDEX claimed to have managed large volumes on all commodities, except rubber and cardamom. However, pepper trading was totally captured by this exchange, thanks to the operating cartels who are members of the exchange.

They were allegedly having a free hand in the trading -- as the results revealed in the media recently on the market manipulations in guar seed and guar gum trading as well as in chillies, cumin and turmeric trading brought out.

Kerala farmers and dealers, whose stock position is anybody's guess, have liquidated the pepper stocks they held. High prices prevailed at the exchange platform without converging with the spot prices on maturity, resulting in big deliveries since June, August, October and November, totalling 8,000 tonnes.

Now, having received such large quantities as deliveries, and with the market not behaving as per expectation of the cartels, they are raising unwarranted disputes and claims about the quality of the material deposited at the exchange.

They forget that the cartels’ own agents have reprocessed and deposited large quantities of validity expired stocks into the exchange platform to avail finance for these stocks, which will be financed by any financing agency, only if stocks are valid.

The principle of futures trading stresses that the final delivery on maturity should be zero percentage or maximum less than 1 per cent of the total turnover. The delivery mechanism should also be in place to avoid unforeseen squeeze, cornering and monopolising stocks as well as dumping of stocks through the national exchanges, and thus prevent the price rigging both ways, up and down.

Large quantities of pepper were cornered and accumulated by operators at the national level exchange platform as operators were seen interested in buying pepper at unduly high prices for later deliveries.


Earlier, when NMCE was trading in pepper, the stock position at one point of time at its designated warehouse in Palghat belonging to CWC had crossed the 5,000 tonne-mark. Later, it was realised that many unscrupulous depositors, with the help of warehousing agency managers, had managed to store sub-standard material and, therefore, the prices at the exchange started falling sharply and were trading at Rs.5 to Rs.10 per kg below market prices.

This phenomenon attracted many exporters as well as domestic dealers at time of shortage of material to cover it from the exchange and thus the stocks were taken care of, but with that episode the pepper trading at the NMCE platform came to an end.

Given these facts, they demanded that certain commodities, such as pepper, which are currently traded at the national level commodity exchanges, may be restricted to the respective regional commodity specific exchanges only.

The disparity in the rules and regulations regarding the price band of daily fluctuation is one of the major hurdles for the commodity specific regional exchanges to fight with national level exchanges. Therefore, the Government it has to ensure commodity specific regional exchanges have rules at par with the national commodity level exchanges for same commodities.

Regional exchanges must be permitted to utilise yield from the basic trade guarantee fund for the improvement and benefit of trade in general to compete with the national level exchanges' electronic platform.

(This article was published on January 23, 2013)
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