The National Commodity & Derivatives Exchange (NCDEX), India’s largest agri centric commodity exchange, is likely to short out pepper delivery default issue by Friday.
The issue erupted with sealing of around 5,000 tonnes of pepper stored in six Kochi – based warehouses by the Food Safety Standard Authority of India (FSSAI), a commodities’ quality watchdog. These warehouses are registered with NCDEX.
The FSSAI in its preliminary investigation found traces of mineral oil – a banned substance – in pepper samples taken from these warehouses.
Following that, the Authority sealed all godowns on December 18, 2012. Since, then the investigation is on without any concrete direction.
According to a source closed with the development, the exchange has sent its officials to FSSAI in Thiruvananthapuram to pursue the Authority to declare the goods either safe or unsafe. Without arriving at any conclusion, no forward direction can be taken, the source said.
Meanwhile, Ananda Kumar, Chief Corporate Services, the exchange has a total open position of just 29 tonnes worth around Rs 1 crore for pepper contract expired on December 20, 2012.
Since, the entire quantity held in these warehouses sealed by the FSSAI, the exchange has no option but to keep these positions open. All interest parties including buyers, sellers, warehouse keepers and the exchange are left with no option but to keep waiting for FSSAI’s final step.
Meanwhile, the exchange in its circular dated January 9, 2013 has asked pepper traders to deal with concerned warehouse directly and not to make it responsible for any delivery related issues.
“The exchange is not responsible and shall not be liable in any manner for the quality or quantity of commodities which have crossed the final expiry date and continue to be stored in the accredited warehouses,” the circular said.
Trading and Clearing Members and their Constituents are requested to note that in respect of all commodities which have crossed their final expiry date (FED) as on January 5, 2013 and for which remat request numbers (RRNs) have been generated and against which the respective physical deliveries have not been taken out of the accredited warehouses, the beneficiary holders are hereby advised to physically withdraw the commodity from the warehouse concerned on or before January 25, 2013.
It is further notified that the process of confirmation of such RRNs shall be initiated in the system by the respective warehouses on effective January 25, 2013, the circular said.
It may be noted that after confirmation of remat by the warehouse, the commodity holdings would not reflect in the electronic records and all accredited warehouses have been advised to issue a physical warehouse receipt for the corresponding electronic holdings to all those holders who have not removed the commodities out of the warehouse. The beneficiary holders are expected to contact the warehouse for their Physical
Warehouse Receipts corresponding to their electronic holding. Any beneficiary holder wanting to physically withdraw the commodities after the warehouse receipts are issued to them may do so by complying with the requirements of the warehouse to establish their identity and production of required documents such as remat request in original along with a confirmation from the Depository Participant/s about the date till when the warehouse rent is paid by the beneficiary holder besides any other document as may be required by the warehouses.
It may please be noted that storage of any commodity in accredited warehouse after the final expiry date is a private arrangement entirely between the holder concerned and the warehouse.
Any charges with respect to storage of commodities or incidental thereto payable from the date of remat confirmation shall be dealt with by the warehouse concerned directly.
Apparently, a lot of traders deposited pepper containing traces of mineral oil outside the purview of exchange platform for which the exchange should not be made accountable.
The existing guidelines from the Forward Markets Commission (FMC) does not bar mineral oil use with pepper.
NCDEX is looking at options including cash settlement between buyers and sellers.
