Row persists over NCDEX circular on jeera quality

Controversy over jeera delivery on the National Commodity and Derivatives Exchange (NCDEX) still persists despite repeated efforts by all stakeholders to resolve the row.

In a circular dated May 9, NCDEX announced the acceptance of low quality jeera with up to 6 per cent contaminants (the maximum permissible limit) at a discount.

Losses are imminent for traders as the permissible discount will be deducted from the customers' payable amount.

Praveen Patel, a noted Unjha-based trader, said, "We were demanding the delivery acceptance of low quality jeera at the market price as the output this year is substandard due to unfavourable conditions." Since machine clean quality is unavailable this year, the exchange should accept the delivery of low quality jeera, the trader said.

The exchange specified in its circular that it would accept impurity above 2 per cent and up to 4 per cent with 1:1 discount, and 4-6 per cent with 1:2.5 discount.

However, Pankaj Thakkar, a Mumbai-based spices trader quipped that the introduction of new system is not only confusing but also time consuming. "You never know what quality product you are buying or selling till it is verified by an independent laboratory," he said.

Traders are also unhappy with the fact that the new delivery system would be applicable from the August contract as they were not expecting anything earlier than the December contract.

Meanwhile, the Forward Markets Commission (FMC) has reduced the minimum initial margin to 7.5 per cent from 17.5 per cent earlier. However, there has been no change in the additional margin of 5 per cent on long and short position and a new levy of 6 per cent on long position only effective July 6.

Traders believe that the margin pushed to the peak in May to 32.5 per cent has been objected by almost all traders in the country. "Such a high margin for smooth trade is not feasible, hence it was in the best interest of the fraternity to bring it down. Gradually, we are losing interest in futures trade in jeera," said a local trader. Commodities such as jeera requires high level of quality inspection as the spice is consumed directly, he added.

The commodity market regulator is likely to revisit the position limit in jeera for clients and members, which stands at 40 tonnes and 120 tonnes respectively. Meanwhile, July and August contracts of jeera on NCDEX rose by Rs 93 and Rs 85 to close on Wednesday at Rs 12988 a quintal and Rs 12917 a quintal respectively amid lower output and high exports demand.

India's exports of jeera is likely to hit 7 lakh bags (each of 55 kg) this year against 5 lakh bags last year following damaged crop in Syria and Turkey due to adverse weather conditions.

The country already has an overall shortage of around 30,000 tonnes. Last year's production was around 85,000 tonnes, whereas current year's estimates is 55,000 tonnes.