(MENAFN- Khaleej Times)In a new episode of the defaulting saga a large number of commodity traders at Dubai's Al Ras wholesale market have gone bust creating a crisis at over a dozen local and foreign banks and financial institutions sources said.
Between 40-50 commodity traders dealing in rice sugar edible oil and frozen chicken legs have defaulted in the last three-four months on their banking obligations traders and bankers said. The defaulting traders at least 25 of whom are reportedly missing also owe millions to the market said Mian Sajjad Ahmed managing director of Batala General Trading at the Al Ras wholesale market. The sources attribute the trouble to a glut in the market caused by a bumper basmati crop in India and Pakistan and an Iranian ban on imports from India. Prices of Indian basmati rice plummeted from $610 per metric tonne to $305-443 in 2014-15. In Pakistan basmati prices plunged 40 per cent to $730-750 in 2014-15 from $1000. India's premium long grain rice 1121 is sold at $750 per metric tonnes Sella basmati traded at $720-730 and Pakistan's IRRI- 386 is sold at $750 all down from $1200-1300 at the start of the year. According to a retailer in Dubai prices of Pakistani rice brands Falak and Mehran sustained a downward trend with Falak available in market at as low as Dh28 on offer for a 5kg bag compared to the Dh45 normal price. "Indian brands - Dawat Pride of India and India Gate among others - also fluctuated in rates depending on hypermarket and grocery stores but overall these brands sustained stable trend in the market ranging from Dh9 to Dh14 per kilogram" he said. Sajjad told Khaleej Times that out of 50 traders only four companies were operating out of the Al Ras wholesale market and the rest were having offices elsewhere in the Jabel Ali Free Zone Sharjah and Ajman. "On the average these small and medium enterprises had borrowed Dh20-25 million" a source at a multinational bank said. However one firm's exposure is as big as Dh150 million while several borrowed between Dh50 and Dh100 million he said. The bankers fear they may have to write off Dh2 billion-Dh2.5 billion this financial year due to the crisis. A banker said in most cases the default was not "wilful" a view also echoed by Sajjad. One company owner fled with not only his bank loan but his own Dh1.5 million and another Dh20 million from the market Sajjad said while another trader paid all his creditors before he left. According to him it all started with the plunge in prices. Sajjad said some genuine traders could not pay on time following which banks suddenly stopped their credit line and demand to pay their dues. This panicked the traders said Sajjad who blamed nervous bankers for creating a crisis out of nothing. However Sajjad said most of the companies whose names were revealed to him by Khaleej Times were never heard before. They were not at all involved in foodstuff business but may have built their books to con the banks. "The whole situation developed in just two months as everything was fine until Eid Al Fitr" he said. One banker said at least 20-25 defaulted traders have already left the country to avoid legal action including immediate arrest and litigation for recovery. He said at least four rice traders sold a total of 40000 metric tonnes of rice in the market at 40-50 per cent discount. At least a dozen of traders have not defaulted but they are in a dire straits and unable to meet their commitments with the banks and market. Traders dealing in Indian rice were largely affected when Iran put a temporary ban on imports from India in November 2014 on the grounds of having adequate stocks and for political reasons.
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