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"Since the traces of mineral oil appear to reflect long- standing industry practice, the Exchange will seek government intervention in the interests of industry and recommend that holders of the stock and the market participants should be given an opportunity to remove mineral oil coating and improve quality," NCDEX said in a statement.
Food Safety and Standards Authority of India (FSSAI) had seized stocks of pepper lying in six warehouses accredited by NCDEX in December, 2012, in response to a complaint from one of the buyers that the pepper contained mineral oil, which is not permitted under the FSSAI Act.
Since then, the FSSAI has been testing the goods with help from the Spices Board and the Exchange.
The FSSAI has now issued an order for destruction of 93 lots found with mineral oil traces.
Taking cognisance of the order, the respective owners have accordingly been informed to take up the matter with the FSSAI and take appropriate action, it said.
Specific lots that have been found to meet the FSSAI standards are to be released to the respective owners as per the order.
The Exchange, it said, has always ensured delivery of commodities in accordance with its contract specifications.
NCDEX does not have any liability regarding these stocks, NCDEX said.
The Exchange is also not liable for non-compliance by any member and market participant with all applicable laws on the underlying commodity.
In fact, most of the stocks in the godowns sealed by the FSSAI authorities were bought by the holders in off-market transactions outside the Exchange platform.
It further said, NCDEX only provides a trading platform for trading in forward contracts. It does not own, deposit or deal with the goods in the warehouses.
Industry players have informed the Exchange that farmers or traders engaged in cultivation, production and trading of pepper adopt various methods to preserve the spice, including by addition of small quantity of mineral oil as a fungicide, it said.
Traders routinely use a process of steaming to later remove the mineral oil coating, it added.
