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

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 Present Scenario in Value Chain

Cost Build Up For One Kg. Basket Of Fruit

2.5 11.6
1.7
4.1
3.3

FARMER TRADER WHOLESALER RETAILER CONSUMER

PRICE
Retail Markups
350
220
160
100

5 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

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 Structure of Terminal market

 Hub-and-Spoke Format: Terminal Market (the hub) to be

linked to number of collection centres (the spokes)
 Collection centres (Spokes) to be conveniently located at key
production centres to allow easy access to farmers
 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
– Meat & Poultry
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 Terminal Market Infrastructure:
Packhouse,
Banking Institution Quality Testing
Facility,
Palletisation
Electronic Processor Exporter Wholesaler/ Storage: Services:
Auction Trader/ Cold Storage, Transport (incl.
Retail chain Temperature cool chain),
operator controlled Settlement of
warehouse,
Payments,
Ripening
Chamber Banking, Market
Direct Selling information

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

Producers/ Farmers and their

Associations
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 Salient Features of the Terminal Markets

Feature Mumbai Nasik Chandigarh Rai Patna Bhopal Kolkata Nagpur

Area of market (in 200 100 100 88 75 59 55 100

acre)

Yearly handling 6 3 2.25 3 2 2 5.47 2.4

capacity (lac MT)
No. of collection 60 20 20 30 26 25 12 25
centres

Peak throughput 3000 1500 800 1000 800 1000 1500 800
(MT/day)

Cold Store 15000 5000 3000 5000 2550 2000 10000 2000
Capacity (in MT)

Total cost of 120 60 53.6 65.6 59 49.6 93.4 54.5

project (Rs. crore)
 Financial Parameters of Nasik Project

 Total Cost of Project ( in Rs. Crore) 60.00

 Debt Equity Ratio 1.60

 Debt Service Coverage Ratio 1.82

 Pay Back Period ( years) 10.00

 Break Even Point( %) 46.68

 Cash Break Even Point(%) 28.79

 IRR ( % ) 17.25

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 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

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 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
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 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
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 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
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 Expectation from the State Government

 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
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 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.

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 Outlay in 2006-07

 Approved outlay for NHM

X Five Year Plan Rs.2300 crore

During 2006-07 Rs.1000 crore

 Outlay for Terminal Markets

Participation in Equity Capital Rs.148.00 crore

Project Development Assistance Rs. 1.00 crore

General Awareness & Publicity Rs. 1.00 crore

Total Rs. 150.00 crore

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 Parameter Baseline status Expected outcome
Trade Non-existing Transparent auctions through
transparency electronic auction system
Cold chain poor Setting up of cold storage at each
infrastructure market ranging from 2000 to 15000 MT
capacity
Backward- poor Minimum of 20 collection centers
forward nearer to the farmers field will be set
linkages up. The farmer will have alternative
options to supply to the supply chains,
processing, export of commodities etc.
Monopoly of prevalent Farmer is provided with alternative
APMC option of taking his produce to terminal
Markets markets.
Multiple prevalent Length of the chain of commission
intermediaries agents will substantially be reduced
with an ideal situation of eliminating the
commission agents completely.
Beneficiary -- 16000 to 20000 farmers under each
farmers terminal market.
Share of the Varies from 30 to 60% for Farmer’s share is expected to increase
farmer in the perishables depending on to 50 to 70% of the consumer price.
consumer the location, season,
price demand and supply etc.

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 Risk Factors

 Attractiveness to Private Enterprises

 Availability of Suitable Land

 Success in establishing backward linkages with farmers

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 Process so far…

 General Council of the NHM approved the concept on 14.12.05

 Hon’ble 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

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 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

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Agri Export Zones
 India is the front ranking producer of many perishable commodities

Cattle / buffaloes
Milk Largest in the world
Largest Producer 283 million
91 Mn T

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) Tea
Largest Producer
Sugarcane (0.85 Mn T)
# 2 in the world
(245 Mn T) Goat & Sheep
182 million

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 India’s competitiveness in global markets

India 's s ha re in glo ba l pro duc t io n ( 2 0 0 1- 0 3 )

Vegetables 11%

India 's s ha re in glo ba l e xpo rt s

Fruits 15%
2.1% (1991-93)
Vegetables
0% 5% 10% 15% 20% 1.7% (2001-03)

India n pric e s a s a % o f wo rld pric e s ( 2 0 0 1- 0 3 )

0.4%

Vegetables 53% Fruits

0.5%

0% 2% 4% 6% 8% 10%
Fruits 63%

0% 20% 40% 60% 80% 100%

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

MARKETING INPUTS SEEDS, FERTILIZER, NUTRIENTS

WATER, PESTICIDES, CREDIT

TRANSPORATION RESEARCH & PRE HARVEST TECHNOLOGY & PRACTICES

DEVELOPMENT
PACKAGING
PROCESSING
SORTING & GRADING
TRANSPORTATION POST HARVEST HARVESTING TECHNOLOGY & PRACTICES

CENTRAL GOVT.
STATE GOVT. &
& ITS AGENCIES
ITS AGENCIES
1. APEDA 1. DOA

2. NHB PARTNERSHIP 2. DOH

3. MFPI 3. MARKETING BOARDS

4. SFAC 4. SIDC
5. DGFT 5. SEB
6. MOA 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 Excise, Custom, Sales Tax, Mandi Tax etc. rebate by central and State
agencies
Financial : Schemes of APEDA, NHB, MFPI, MOA etc.

Monetary
: Reduction in interest on credit by banks

Administrative : Manpower requirement for research & extension related activities

: Amendment of regulations with regard to movement of goods,

Legal institutional arrangement for consistent supply of produce etc.

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

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 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 ……