Pepper volatile over delay in subsidy ruling

Delay in taking a decision on export subsidy by the commerce ministry has led to volatility in the pepper market, traders said Wednesday. The ministry should take a firm view on this issue to avoid manipulation by vested interests, they said.

The Spices Board had on April 15 submitted a Rs 21 crore subsidy scheme for pepper and cardamom to the ministry, in boosting the country's flagging exports.

India was the world's leading exporter of pepper till late 1990s, when it lost out to Vietnam.

Pepper exports from the country touched their lowest level of 14,150 tonne by volume and Rs 121 crore by value in 2004-05.This, according to Spices Board data, is the lowest pepper export from India since 1958-59.

The board had sought the subsidy to meet the costs on upgrading quality and domestic and international freights.

Over the past six months rumours that the ministry and Planning Commission had cleared the proposal had appeared from time to time.

On each of these occasions, the market flared up, only to hit a low again after sometime.

The delay in decision making is helping vested interests to manipulate the market, said K S Girish Kumar, manager - commodities, Peninsular Multi-Comex Services, a Kochi-based broking firm.

"Government agencies concerned should take into consideration how to handle such market sensitive information in an era of online trading on commodity futures exchanges," he said.

The Forward Markets Commission should pay attention to such issues, he said. Last Wednesday, Malabar Garbled pepper contracts had risen by nearly Rs 100 per 100 kg across all exchanges on such talk.

The prices moved up Rs 146 per 100 kg on the National Multi Commodity Exchange of India while on the National Commodity and Derivatives Exchange of India and Multi Commodity Exchange of India prices rose by Rs 98 and Rs 78, respectively, that day.

But the prices fell immediately the next day, traders pointed out. The delay in taking a decision on the export subsidy is a cause for the instability in the market, said Kishore Shamji, president, India Pepper and Spice Trade Association.

"I think selective leak of information on subsidy was used at least half a dozen times in the past six months to jack up prices in the market," said T Vidyasagar, former president IPSTA.

Today too the market moved up after some local papers said the subsidy amount is going to be Rs 14 crore, said another leading exporter.

"If the government has decided to provide subsidy it should declare it in a forthright manner instead of allowing unsubstantiated information to shape the fortunes in the market," he said.