Commodity market regulator Forward Markets Commission (FMC) has rejected traders and exporters demand to hike the delivery default penalty, saying it is working on other alternatives to tighten the system.
"Imposing hefty penalty is not the only solution. Now we cannot raise it as it was recently slashed to 2.5 per cent from 8 per cent to converge spot and futures prices," Forward Markets Commission (FMC) Chairman B C Khatua said.
The Agricultural Produce Marketing Committee (APMC) of Unjha, Gujarat, has urged FMC that it should either hike penalty up to 25 per cent on sellers or ensure 100 per cent delivery of the commodity.
Jeera exporters have also complained of the delivery defaults as sellers can exit the market by paying only 2.5 per cent of the traded contract amount as penalty.
Khatua said, "Apart from the penalty provision, we are working on other alternatives to penalise defaulters".
One of the options, which FMC is working on currently, is that the exchange should buy and ensure the delivery of commodity to the opposite party and recover the differences in the futures and spot prices from the defaulter.
Since delivery of a number of farm commodities in the futures market have been made compulsory, the regulator has received complaints from traders and exporters that low penalty provision is encouraging more defaults.
Khatua pointed out that defaults are not very large in many cases, but "we are tightening the system to ensure healthy trading practises".
On the other hand, the leading agri commodity bourse NCDEX denied any delivery defaults.
"We do not have any cases of defaults as all contracts are settled as per the contract terms stipulated in all contracts," NCDEX Chief Business Officer Unopam Kaushik said.
