Govt probes NK Proteins-NSEL conflict of interest

Ministry has received complaints on firm's relationship with NSEL chairman and reliability of castor, cotton oil stocks it holds

The ministry of consumer affairs is looking into the alleged conflict of interest issues in NK Proteins, a key debtor of beleaguered National Spot Exchange Ltd (NSEL), and claims by the company that it holds huge castor seed and cottonseed oil stocks.

NK Proteins, run by relatives of NSEL chairman Shankarlal Guru, owes the exchange around Rs 930 crore. According to the latest stock position filed by the exchange on August 6, the company had 7,553 tonnes of castor oil, 96,581 tonnes of castor seed and 84,766 tonnes of cotton wash oil.

The ministry has received complaints from people who claimed to have visited the facilities of the company. They say the storage capacity of NK Proteins, which makes the Tirupati brand of cooking oils, “is far less than what is claimed. We have taken note of this”, a ministry official said, on condition of anonymity.

NK Proteins is one of the 13 processors which have sought 20 weeks’ time to settle the dues with NSEL. Last week, NSEL had said: “There are 13 members/ processors, who have offered to pay five per cent of their total dues every week, if the same is agreed upon. Total amount comes to Rs 3,107 crore approximately.”

NK Proteins’ dues amounted to 25 per cent of this lot and 16 percent of the overall due of Rs 5,500 crore.

“The complaint also raised the issue of whether indeed there was stock and why do the processors need five months. The commodities can be easily sold within a month. In the worst case scenario, they would face a loss in price difference only was the argument put out by complainants,” the official said.

He added the conflict of interest angle was pressed pointing to the fact that NSEL chairman Guru is the father-in-law of Nilesh K Patel, the promoter of NK Proteins.

It would be extremely naïve on NSEL’s part to have had the confidence of storing such a huge quantity of stock within the premises of NK Proteins, the complainants are said to have suggested.

“Anyone who has visited the factory will laugh on hearing that there is a stock of 84,766 tonnes of cottonseed oil in there. This is because the total storage capacity of this factory is just 5,000 tonnes, let alone two tanks which NSEL claims to be storing this stock,” one of the complaints said.

According to the NSEL stock position dated August 6, the cotton oil stock, which is worth Rs 530.63 crore, was stored in two tanks in an NK Proteins facility in Thor in Mehasana district of Gujarat. NK Proteins officials were not available for comment.