Nafed seeks a 12% cut in NSEL dues

Argues that NSEL procured low quality cotton resulting into losses of Rs 12 cr to Nafed

National Agricultural Cooperative Marketing Federation of India (Nafed) has sought a 12 per cent cut in its dues payable to the scam-hit National Spot Exchange Ltd (NSEL).

Currently, Nafed, also a minority shareholder at NSEL, owes Rs 102 crore to the exchange for the services the latter had rendered to the former. The public-sector commodity trading company procures cotton, pulses and other farm output directly at the minimum support price (MSP) from farmers, in an attempt to dissuade them from distress sale.

However, before the Rs 5,574-crore payment crisis erupted at NSEL in July 2013, Nafed had engaged the Financial Technologies-promoted online spot commodity trading company to procure cotton on its behalf.

“We continued procurement of cotton for three years on behalf of Nafed in remote places without any issue until last year,” said Saji Cherian, managing director and CEO of NSEL.

NSEL wrote several letters to Nafed asking it to clear the dues. On its part, Nafed sought several details from NSEL, seeking detailed proofs of cotton procurement done and deposited in Nafed-registered warehouses. A source in the know said that NSEL provided all necessary details along with proofs of procurement and transportation of cotton to Nafed-accredited warehouses.

Surprisingly, Nafed in a letter to NSEL last week alleged that the cotton procured by it contained moisture higher than permissible level. Such cotton was sold at a discount to the quality cotton procured by it or even NSEL, resulting in an accumulative a loss of Rs 12 crore. As a consequence, NSEL should send a revised account statement factoring in the proposed cut to enable Nafed to clear the dues, said a source privy to the letter.

Cherian declined to comment on the letter, saying the recovery team would be in the know of the latest developments.

An NSEL official, however, said: “Being a government company, Nafed should discharge its duty appropriately. It must be aware of many government agencies including the Economic Offences Wing (EOW) of the Mumbai Police, Ministry of Corporate Affairs, and Ministry of Finance, to name a few, are after it to clear investors’ money. If Nafed clears the dues, we would be able to pay a small, but important, portion of investors’ money.”

S K Verma, general manager of Nafed defended the cut sought from NSEL. “We have entered into an agreement with NSEL. Neither NSEL nor we can go beyond the terms and conditions agreed by both of us. The deduction sought by us is well within the conditions accepted by both parties. The cut sought from NSEL is, therefore, not arbitrary,” said Verma.

He added: “The argument posted by NSEL that Nafed was holding NSEL investors’ money - once Nafed pays, we would be able to pay investors – is totally wrong. In fact, NSEL has held over Rs 250 crore from two public-sector companies including MMTC and STC. Even if we factor our dues with the ones NSEL holds of the two public-sector companies, NSEL will have to pay the additional money to them. Why don’t they pay to the two public-sector companies first?”

According to a source, Nafed has assured NSEL that it was awaiting funds from the Centre - the first instalment of Rs 500 crore allocated to set up a  ‘market stabilisation fund’ - for clearing NSEL dues.