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Poor response to international pepper exchange in Kerala

D Jose in Thiruvananthapuram

The response to the International Pepper Futures Exchange, likely to be commissioned shortly at Kochi in Kerala, has been poor.

The exchange is being set up by the Indian Pepper and Spice Trade Association on the basis of a study conducted by the United Nations Conference on Trade and Development.

The commissioning of the exchange, originally scheduled for June 1996, was delayed due to bureaucratic bottlenecks created by different agencies including the RBI. IPSTA president T Vidyasagar says the exchange will be commissioned after getting the final clearance from the RBI.

Although a pre-launch membership drive for the exchange was launched in June last year, only about 15 applications have been received so far, according to IPSTA sources.

One reason for the poor response is the cumbersome procedure involved in getting the membership, thanks to the two-tier registration followed by the exchange. Registration with the Forward Markets Commission, the regulatory authority for forward markets in commodities in India, is a must for all applicants as per the guidelines issued by the ministry of civil supplies.

Besides, foreign applicants will have to obtain clearance from the secretariat for industrial approval, the Foreign Investment Promotion Board, the industry ministry and the Reserve Bank of India under the Foreign Exchange Registration Act if they intend to incorporate themselves as a registered company in India. They also have the option of opening a branch office in the country or operating as a 'registered non-member' through another member of the exchange after obtaining necessary permissions.

The infrastructural facilities for establishing the exchange are almost ready. While the new trading floor is expected to be inaugurated by the third week of May, the fully computerised clearing house is almost ready.

Two vital functions of the exchange are price discovery and risk transfer. The exchange would enable a wide group of international participants to benefit from risk management and collection and dissemination of information on prevailing prices of pepper.

The exchange will have five categories of members, with the membership fee ranging from Rs 15,000 to Rs 100,000.