1

Increasing Farm Income

More production with better marketing

Production stagnating, big scope for better marketing

Double the income through more efficient marketing

But the present day markets are not efficient

Infrastructure for marketing of perishables Primary grading/ collection centers - non existent Warehousing and cold storage - inadequate Cold chain - non existent Quality certification system - non existent Transportation for perishables - non existent Rural markets - complete lack of infrastructure Wholesale markets - in government control, lack modern facilities Private / direct markets - not permitted Post harvest losses: 25 to 30 % in perishables

Present Scenario in Value Chain

Cost Build Up For One Kg. Basket Of Fruit

11.6

1.7 4.1 3.3 FARMER TRADER WHOLESALER

2.5

RETAILER

Retail Markups
160 220

CONSUMER PRICE 350

100

FARM GATE PRICES

MILK

FISH

FRUITS &VEGETABLES

Terminal markets

Catalysts for transformation

Concept

Modern terminal markets:

A professionally managed competitive structure To provide market services

to farmers at their door step Comprehensive solution to meet needs of stakeholders

Auction Processing industry Exports Retail chain and Consumers

Requiring high investment and efficient management skills

Can be infused by private enterprise
7

Structure of Terminal market

Hub-and-Spoke Format:

Terminal Market (the hub) to be linked to number of collection centres (the spokes) production centres to allow easy access to farmers

Collection centres (Spokes) to be conveniently located at key Provide state of art facilities for
electronic auction, grading, washing and packing lines, processing and exports, banking etc.

Commodities to be covered include

Fruits and vegetables, Flowers, aromatics and herbs
8

Meat & Poultry

Terminal Market
Banking Institution

Infrastructure:

Electronic Auction

Processor

Exporter

Wholesaler/ Trader/ Retail chain operator

Direct Selling

Storage: Cold Storage, Temperature controlled warehouse, Ripening Chamber

Packhouse, Quality Testing Facility, Palletisation

Services:

Transport (incl. cool chain), Settlement of Payments, Banking, Market information

Collection Centre

Infrastructure: Washing, grading, sorting, weighment, transport to TM Services: Collection & Aggregation of produce, Settlement of payment, advisory on inputs, prices, quality, multimodal transport

Producers/ Farmers and their Associations

Salient Features of the Terminal Markets

Feature Area of market (in acre) Yearly handling capacity (lac MT)
Mumbai Nasik Chandigarh Rai Patna Bhopal Kolkata Nagpur

200 6

100 3

100 2.25

88 3

75 2

59 2

55 5.47

100 2.4

No. of collection centres

60

20

20

30

26

25

12

25

Peak throughput 3000 (MT/day) Cold Store 15000 Capacity (in MT)

1500

800

1000

800

1000

1500

800

5000

3000

5000

2550

2000

10000

2000

Financial Parameters of Nasik Project

Total Cost of Project ( in Rs. Crore) Debt Equity Ratio Debt Service Coverage Ratio Pay Back Period ( years) Break Even Point( %) Cash Break Even Point(%) IRR ( % )

60.00 1.60 1.82 10.00 46.68 28.79 17.25

11

Key expectation from the private enterprise

Provide envisaged infrastructure at the TM and the CC in the hub- and- spoke format Establish backward linkage with growers in the catchment area of the TM through establishing the collection centers. Progressively involve farmers and their organizations in the operation and management of the collection centers Facilitate direct supply to processing units, retail chains and exporters, in addition to auction facility via the collection centers and terminal market

12

Key expectation from the private enterprise

Provide advisory services to farmers on inputs, prices, quality, multi modal transport and exports Project DPR only illustrative. Project should, however, be designed to handle the minimum quantity of peak throughput (MT/day) and yearly handling capacity as prescribed. Private enterprise at liberty to

Prepare own business model with regard to Size of market and Scale of operation Set up additional facilities to provide complimentary services (input supply, processing, consumer goods etc.) Collect user charges for the infrastructure and services provided

For basic services of aggregation at CC and auction at TM

User charge not to exceed 2% of the produce value

13

Expectation from the State Government

Reforms in APMC Act

To allow the private enterprise:

Establish collection centres in the catchment area of the TM Source material from farmers field directly in the
catchment area of the TM

Organize supply to traders, retail chain, processing industry

and to institutional buyers throughout the country

Cold storage/ warehouses of TM to act as delivery point for

trading in perishables on the commodity exchanges

Pack house of the TM to act as exit point for exports

14

Expectation from the State Government

Regulatory clearances:

Single license to operate in the entire State/adjoining States Single point levy & collection of market fee Autonomy in commercial operations of TM Clearance of land use for the TM/CCs Provision of Civic amenities (including drinking water, municipal waste disposal, police security, post office etc) Statutory clearance from

Local authority Town planning & Urban development Revenue department

15

Expectation from the State Government

16

Play a pro-active role: Appointment of a Nodal Officer/Empowered Committee to facilitate securing regulatory compliance to remove difficulty in operation of the project Identification of land for the TM/CC Provision of Government land on long term lease, subject to availability and suitability Infrastructure support to TM/CC road connectivity, power and water supply etc. States free to participate in the equity of Project
Direct funding Land/infrastructure support

Role of the Central Government

Support the project through participation in its equity capital Terms for financing:

Up to 49% of project equity, including contribution from State NHM/State will have the option to allocate its equity to farmers organisations actively participating in the business of the project

Private enterprise to be selected through an open, transparent competitive bidding process. Project to be awarded to bidder with the request for minimum Government equity participation.

17

Outlay in 2006-07

Approved outlay for NHM X Five Year Plan During 2006-07 Rs.2300 crore Rs.1000 crore

Outlay for Terminal Markets Participation in Equity Capital Rs.148.00 crore Project Development Assistance Rs. crore General Awareness & Publicity Rs. 1.00 crore 1.00

18

Parameter

Baseline status

Expected outcome Transparent auctions through electronic auction system Setting up of cold storage at each market ranging from 2000 to 15000 MT capacity Minimum of 20 collection centers nearer to the farmers field will be set up. The farmer will have alternative options to supply to the supply chains, processing, export of commodities etc. Farmer is provided with alternative option of taking his produce to terminal markets. Length of the chain of commission agents will substantially be reduced with an ideal situation of

Non-existing Trade transparency poor Cold chain infrastructure

Backwardforward linkages

poor

Monopoly of prevalent APMC Markets

prevalent Multiple intermediarie s

19

Risk Factors
Attractiveness to Private Enterprises Availability of Suitable Land Success in establishing backward linkages with farmers

20

Process so far

General Council of the NHM approved the concept on 14.12.05 Honble FM announced in the Budget Speech of 2006-07 for setting up of Terminal Markets with an outlay of Rs.150 crore National Conference on Terminal Markets held on 20.02.2006 discussed with States and Private Enterprises There is adequate enthusiasm among Private Enterprises on the proposal as seen in the responses to Expression of Interest

21

Way Forward

Approval of the proposal by October end Finalization of Bid Process/ Bid documents by NIAM Inviting the bids by States and selecting the private enterprise National Executive Committee of NHM approves & releases the equity Project Execution General Council of NHM monitors the progress

22

Agri Export Zones

India is the front ranking producer of many perishable commodities

Milk Largest Producer 91 Mn T

Cattle / buffaloes Largest in the world 283 million

F&V #2 in the world 151 Mn T Fisheries Marine: 2.7 Mn T Inland : 3.1 Mn T Food Grains #2 in the world (220 Mn T) Sugarcane # 2 in the world (245 Mn T) Tea Largest Producer (0.85 Mn T) Goat & Sheep 182 million

24

Indias competitiveness in global markets

India's share in global production (2001 -03) Vegetables 1% 1
India's share in global exports

Fruits

1 5%
2.1 % (1 -93) 991 (2001 -03) Vegetables 1 .7%

0%

5%

1 0%

1 5%

20%

Indian pric es as a % o f wo rld pric es (2001 -03)

0.4%

Vegetables

53%

Fruits 0.5%

F ruits

63%

0%

2%

4%

6%

8%

1 0%

0%

20%

40%

60%

80%

1 00%

Source: UN COMTRADE Statistics, World Bank Staff Estimates

Exports of Agricultural Products, Why ?

Inherent Indian strength in Agriculture

Opportunities emerging out of WTO Regime

How did the concept of AEZ come about ?

Analysis of existing export promotion measures for agri exports Inability to address the entire value chain Hence, the policy of Agri Export Zones announced on 31st March, 2001 under Exim Policy

What is Agri Export Zone ?

Agri export Zone attempts to take a look at an identified produce/ product or a group or a group of produce/ products sourced from a geographically contiguous area with a view to comprehensively addressing all the issues relating to each stage of the entire value chain, from farm to the ultimate consumer

Agri Exports activities

MARKET

IDENTIFICATION OF PRODUCT & QUALITY PARAMETERS INPUTS SEEDS, FERTILIZER, NUTRIENTS WATER, PESTICIDES, CRED IT

MARKETING

TRANSPORATION PACKAGING PROCESSING SORTING & GRADING TRANSPORTATION

RESEARCH & DEVELOPMENT

PRE HARVEST

TECHNOLOGY & PRACTICES

POST HARVEST

HARVESTING

TECH NOLOGY & PRACTICES

CENTRAL GOVT. & ITS AGENCIES

1. APEDA 2. NHB 3. MFPI 4. SFAC 5. DGFT 6. MOA 1. DOA

STATE GOVT. & ITS AGENCIES

PARTNERSHIP

2. DOH 3. MARKETING BOARDS 4. SIDC 5. SEB 6. FINANCE DEPTT . 7. RESEARCH AGENCIES

What does AEZ entail ?

Utilise existing interventions in a coordinated manner to promote exports (Convergence) Partnership of farmers, processors, exporters, State Government agencies and Central Government agencies. Focus on important issues.

What does AEZ entail ?

Fiscal Financial Monetary Administrative Legal

Excise, Custom, Sales Tax, Mandi Tax etc. rebate by central and State agencies : Schemes of APEDA, NHB, MFPI, MOA etc. : Reduction in interest on credit by banks : Manpower requirement for research & extension related activities : Amendment of regulations with regard to movement of goods, institutional arrangement for consistent supply of produce etc.

Tariff & Non tariff Related issues : Import of duties, product standards, pesticide residues, Codex, etc.

Stages for setting up of AEZ ?

Preparation of proposal by the State Governments. Clearance by the Steering Committee chaired by Commerce Secretary. Signing of MoU between Central (APEDA) and State Govt. undertaking commitments Nodal Officers appointed Detailed action plan for each activity and monitoring by the inter departmental Coordination Committee. Notification by DGFT Advertisement by State Govt./Agencies inviting private investment DPR and the execution of the detailed action plan.

Conclusion

AEZs on a MAP

Monitoring System
A web based monitoring system has been evolved wherein Each activity as a part of detailed action plan is clearly defined ; The agency responsible for undertaking such activity is identified ; The time within which such activity has to be performed is clearly indicated. State governments have committed a nodal agency for the purpose of coordination and the progress is monitored at the level of Chief / Addl Chief Secretary.

34

SOME SUGGESTIONS
Restructuring of Project Monitoring System (Single Window Concept for disbursement) Blue Print Project Reports for attracting Investments Market Intelligence Reports Funding Mechanism to give liberty to state nodal agencies Income Tax Incentive Higher scale of Financial Assistance Direct Finance by NABARD on concessional terms Rebate on premium for crop insurance

Thanks for your attention!

This is not an end