Now, NSEL's promoter plays hardball

Nafed, with less than 0.01% holding, owes Rs 94 cr to the bourse on cotton procurement

As if the tough time given by its two dozen borrowers wasn’t enough, beleaguered National Spot Exchange Ltd (NSEL) is facing payment issues with its own promoter. National Agricultural Cooperative Marketing Federation of India (Nafed), one of the promoters, is yet to clear a part of its dues pertaining to business in 2012-13.

Nafed owns 100 shares in NSEL; the NSEL website, promotional material and official correspondence refer to the company as promoter. With 44.99 million shares, Financial Technologies controlled the bourse.

Though both investors, as well as the exchange, have sought early settlement of dues on several occasions, citing the Rs 5,600-crore payment crisis, Nafed seems in no hurry.

Last month, in a letter to the agriculture minister, the NSEL investor forum said, “While analysing the balance sheet of NSEL for the year ended 2012-13, we observed an amount of Rs 277 crore is payable by Nafed to NSEL towards procurement and processing — ginning, pressing, loading, unloading, transportation, interest on borrowed funds, etc, incurred on behalf of Nafed. In its website, NSEL says Nafed is a promoter, with Financial Technologies. According to rules, there should not be any dues from Nafed, as it is the promoter company.”

Nafed, under the agriculture ministry, is said to have written to the agriculture minister, seeking clearance for the payment.

Following this, the ministry wrote to NSEL chief executive Saji Cherian, seeking details of the dues. Cherian told the ministry the actual dues were less than the Rs 277 crore indicated by the investors’ forum.

According to a detailed note provided by Cherian, NSEL made payments of Rs 702 crore to farmers towards the procurement of cotton bales. After taking other expenses into account, its total dues were Rs 767 crore. Nafed has made payments of Rs 600 crore. After adjusting for rejections and the commission payable to NSEL, the dues were Rs 94.34 crore.

An NSEL spokesperson declined to comment.

In his letter, the NSEL chief executive emphasised if Nafed cleared its undisputed dues, it “will help the cause of investors of the exchange”. He requested the ministry to instruct the body “to clear the payment expeditiously”.

D K Gulati, executive director (finance and accounts), Nafed, told Business Standard the amount due was for 3,000 cotton bales. “The shareholding of Nafed in NSEL is less than Rs 1,000,” he added, directing further queries to the division dealing with cotton.

S K Verma, the Nafed general manager dealing with cotton, told Business Standard the payments pertained to 2012-13. “We have used NSEL’s services for procurement of cotton. Typically, 90 per cent of the payment is made on an ad hoc basis. The remaining sum, whatever they have claimed, would be settled after the submission of necessary papers, bills, etc. The branch concerned would scrutinise the bills and the final settlement would be done on this basis.”

Promoter or debtor?

2005-06: Nafed acquires stake in exchange, named co-promoter

March 2013: According to FY13 balance sheet, Nafed owes Rs 277 crore to NSEL

July-August 2013: Rs 5,600-crore payment crisis breaks out at NSEL

September 2013: Investor forum writes to agriculture ministry, seeking clearance of dues

October 15, 2013: Ministry writes to NSEL

October 22, 2013: NSEL replies, explaining details of dues; seeks early clearance