NSEL tangle leaves government clueless

A calling attention motion expected to be taken up in Parliament on Tuesday

Amid demands of a multi-agency probe into the crisis-ridden National Spot Exchange Ltd (NSEL) by brokers, various departments of the government today appeared to be passing the buck to one another because of regulatory gaps over the Rs 5,600 crore payment mess.

Meanwhile, a calling attention motion is expected to be taken up in Parliament on Tuesday over the NSEL mess.

As the issue of regulatory gaps over NSEL surfaced, the Warehouse Development and Regulatory Authority (WDRA) demanded that it be entrusted with the task of regulating spot exchanges.

The Prime Minister's Office (PMO) has already communicated to the Finance Ministry to form a task force to look into the NSEL imbroglio.

However, a finance ministry official said,“ Legal authority doesn’t rest with us. It is with the consumer affairs ministry.”He said the task force could only give recommendations.

Another official said the finance ministry has no jurisdictions over NSEL.

When asked whether a multi-agency probe was being initiated into the matter, economic affairs secretary Arvind Mayaram said the finance ministry has not looked into the issue yet.

He said the Department of Economic Affairs will lead the task force, but its terms of reference are yet to be worked out.  

The task force would also comprise secretaries of Department of Consumer Affairs and Ministry of Corporate Affairs, officials said. It would also have officials of the Reserve Bank of India, the Securities and Exchange Board of India, Directorate of Revenue Intelligence and Enforcement Directorate.     

Meanwhile, Minister of State for Telecom and Shipping Milind Deora wrote to Prime Minister Manmohan Singh and sought his intervention to resolve the settlement crisis in NSEL.

The NSEL payment crisis came into fore after the exchange suspended trading in all future contracts, following objections from the government. Subsequently, there were reports that the exchange in violation of law had been allowing trading in forward contracts and it pre-sold commodities without having adequate quantities in the stock.

Later, a group of investors also alleged that the exchange did not have adequate stocks in its warehouses and was in process of defaulting in payments.

The brokers also demanded a multi-agency probe into the whole tangle, which will involve ministries of consumer affairs, finance and regulators Sebi among others.

Reverberations of the crisis will be heard in Parliament on Tuesday when a calling attention motion on the issue is expected to be taken up. However, there will  be no voting on the motion.

Consumer Affairs Minister K V Thomas said the motion has been moved for discussion on the issue in the Lok sabha.
In a calling attention motion, any member can ask for specific reply from the minister concerned on any issue, overtaking all other business of the House.

Meanwhile, WDRA has expressed willingness to probe into the stocks in NSEL warehouses and also urged the regulator Forward Markets Commission (FMC) to give it powers to regulate spot exchanges -- a demand which it has been making for long.