It remains to be seen whether the association will let the licence lapse or find a viable proposal to seek an extension of the licence by another two to three months. While Upasi officials claim that the organisation is cash-starved and is looking at roping in others to launch the trade, a section in the company, Upasi Commodities Exchange, mooted for futures trade, feels that in another two months the company would be able to go ahead with its plans raising funds from within and not depending on an outside agency.
Company chairman BR Bhansali has been in talks with Over the Trade Counter Exchange of India (OTCEI) which has sought a majority stake in the company. He told FE that further talks would be held and in a week something concrete would come up. Admitting that in case OTECI was roped into the company, Upasi would have to raise funds for the capital and a way would have to be found for this. A trade source said that a capital of Rs 1 crore would mean Upasi chipping in Rs 49 lakh which was highly impossible and if the association could raise around Rs 25 lakh, it could go independently with the project.
Also, the issue of giving over the futures trade to OTCEI would be gross violation of principle as the licence was given to Upasi, a growers organisation. Controlling stake could not be transferred and it would be a violation of FMCs trust, the source added.
However, Mr Bhansali said that it was not matter of concern as OTECI or for that matter any other firm would be taking stake in the company. A proposal being earnestly considered was making a few major tea firms contribute to the fund needed for launching the trade. Upasi officials said the whole system was in place and with the buying of the software, futures trade could be launched. Already the association has spent over Rs 10 lakh on the project. Another Rs 25 lakh could be raised through contributions from different companies. This would solve a major problem, admitted Mr Bhansali, adding that the company could go independently with the project. A director said a least half a dozen companies were already willing to contribute and in a month this could go to over a dozen. He felt that the company could go independently and was confident that the trade could be launched soon.
Meanwhile, Tea Board which has contributed Rs 13.25 lakh towards futures trade felt that its e-auction platforms could be used by Upasi. A Tea Board official told FE that what was needed was customising the system which would have to be done by the association. A company director said that when the board could set aside Rs 23 crore for developing e-auction platforms throughout the country, it could certainly lend a helping hand to Upasi. Talks could be held with the board to consider giving the association a grace period, he added.
About trade guarantee fund (TGF) which has been fixed at Rs 25 lakh, Upasis going independently could make it consider seeking a lower limit. Of the board contribution of Rs 13.25 lakh, Rs 11.25 lakh has been set aside for the TGF.
The whole concept of futures trade in tea promoted by growers was readied by Dr A Damodaran of the Indian Institute of Plantation Management as this would be an ideal situation where growers themselves had a mechanism for price discovery and risk management. But in the event of Upasi being forced to back out, mainly owing to lack of funds, the system could get into the hands of traders, fear association members.