Cottonseed crushers mull filing complaint to Sebi against NCDEX over quality

To seek government intervention against traders-manufacturers nexus

Cottonseed crushers are mulling over filing a complaint with the Securities and Exchange Board of India (Sebi) against National Commodity and Derivatives Exchange (NCDEX) over lower quality of cottonseed oil cake stock.

Also known as 'cocud', cottonseed oil cake of substandard quality have been found at the exchange warehouses, which the crushers are blaming on the traders-exchange nexus. It is the exchange which issues quality certificates for cocud.

Being represented by Gujarat Cottonseed Crushers' Association (GCCA), the crushers are also planning to approach the government to take necessary action against the traders and producers of cottonseed oil cake.

"It has been found that some cottonseed oil cake manufacturers are selling sub standard product and some members of our association have also complained about NCDEX's substandard stock of cottonseed oil cake. We are discussing with our members to file complaints against the exchange with Sebi. We will also ask the Gujarat government to step in and take strict action against the wrongdoers," said Devchand Thakkar, president of GCCA.

However, on its part, NCDEX has begun an independent quality audit after receiving complaints over substandard quality of cottonseed oil cake from market participants, an exchange official told Business Standard.

"The exchange has taken serious note of the concerns raised about the quality of cocud and has sensitized warehouse service providers (WSPs) to market participants' concerns and emphasized the need to ensure quality. An independent quality audit is also underway. The exchange shall take suitable action as may be warranted on receipt of the test results. The exchange shall adhere to stringent standards in this regard," said NCDEX official.

NCDEX has mandated a stringent process for accepting deposits by its empanelled WSPs at the exchange approved warehouses. The WSPs have to ensure that the deposits strictly conform to the exchange contract specifications for the specific commodity. It has also put in place suitable controls to ensure that the WSPs continually adhere to the norms.

According to the NCDEX official, the exchange is looking to ensuring good delivery of commodities during settlement of futures contracts. Meanwhile, NCDEX has also advised market participants to opt for the provision of remat sampling of the goods at the time of taking delivery to be assured of the quality of their delivery.