MCX faces delivery problems

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India's booming commodity markets have one more issue to grapple with. CNBC-TV18 reports on how some investors are discovering that products they receive are not the same as when they bought it.

Vivek Khandelwal, a commodity broker in Indore, who transacts on behalf of the city's pulses traders, is grappling with an unusual problem. On July 23, he took delivery of 30 metric tonnes of masoor on behalf of investors. But when he went to the warehouse to collect the consignment, he discovered that the bag it was packed in was of poor quality. What's more, the grade of masoor he got, too was not what he had bid for.

 

Vivek Khandelawal, broker, MCX said, "The material I got doesn't meet contract specifications. I intended to pick up the material, but this is not of the quality. I don't need this material, give my money back, I'll purchase it from the local market."

 

A quality certificate by SGS India, given at the time of delivery says the packaging was in old gunny bags. In an e-mail response, MCX said that the aggrieved party has been compensated for the loss incurred.

 

The issue of quality of delivery will get resolved when a new warehousing act come into play and when exchanges adopt a better quality and grading system.

 

The problem is hardly a one-off. Similar delivery related problems have taken place at other commodity exchanges like NMCE and NCDEX.

 

The Indian commodity markets had growth of about 400% over the previous year. But the market is largely non-delivery based with only 1% per cent resulting in physical deliveries. These may just be warning signals for a market that even Finance Minister, P Chidambaram says needs to better regulated.