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SAFAL National Exchange of India Limited: An Electronic Spot Exchange for Fruits & Vegetables

SAFAL National Exchange of India Limited (SNX) is an electronic spot exchange that aims to revolutionize the marketing of fruits and vegetables in India. With the vision to improve professionalism, transparency, and price discovery in the horticulture sector, SNX provides a platform for farmers, traders, and consumers to transact directly. This initiative, a joint venture between NDDB, MCX, and FTIL, offers numerous benefits to growers, traders, and the state government.

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SAFAL National Exchange of India Limited: An Electronic Spot Exchange for Fruits & Vegetables

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  1. SAFAL NATIONAL EXCHANGE OF INDIA LIMITED An Electronic Spot Exchange for Fruits & Vegetables Safal Market, Whitefield, Bangalore 560067 www.snxindia.com

  2. Present Status of Horticulture in India

  3. F & V in India • World’s second largest producer of fruits and vegetables • Produces about 140 million tons, one fourth of global output. • Share of Global Production • 41% in Mangoes • 36% in Green peas • 30% in Cauliflower • 23% in Banana • 10% in Onion • Grown on 7-8% of gross cropped area contributes over 18% of the gross value of agricultural output • One half of export earnings of total agricultural produce exported. • Value of significant F & V items at production location estimated at over Rs.60,000 crores (USD 13 Bn.) • Presently, all agricultural produce marketing is under the government administered APMC markets

  4. APMC markets – in F & V APMC laws provided a framework for functioning of markets for agricultural produce and the physical infrastructure for farmers & traders to transact, which also stipulates that Only APMC’s can create markets for Horticulture produce , private Markets not allowed Only APMC license-holders can buy from farmers/growers , end user/consumer can buy from the farmers directly. Under the present APMC systems, markets are regionalized and fragmented limiting price discovery as a localized activity. Existing market system evolved over the decades under the APMC Act has been meeting the basic needs.

  5. Trade Links : F & V

  6. The Promotors

  7. NDDB: In F & V • NDDB pursuing a vision for horticulture produce as in Milk • Integrating Small Milk Producers to meet the quality milk supply needs at affordable prices to the consumer & the farmer getting a fair share of the money spent by the consumer • Initiatives in this direction include the following • Fruit & Vegetable Unit – Delhi – 1988 • Maiden & the only effort until recently by the organised sector in India • Improving professionalism and transparency in trade and quality • Direct Participation in the market • SAFAL Auction Market – Bangalore 2000 • Maiden & the only market in India outside the APMC • Auction platform modelled on the flower auction market in Amsterdam • Incorporating cold stores, scientific ripening chambers, ambient storage, etc • Fruit Processing Unit – Mumbai 1998 Bangalore 2003 • State of the art processing units, multi-item capability, which also supports price stabilisation purchases of items in glut • Has several international buyers on its client list • Governments support to NDDB exempt from APMC in Kar/AP/Mah

  8. MCX: In Spot • By 2003, India saw the emergence of futures commodity exchanges and in no time have come to stay for good, MCX posting impressive YoY growth. • Same time, Telecommunication and Internet reach in rural India at one of the best comparable to any other developed country. • Success of Exchange technology was proof of concept in being able to connect huge number of market players effectively spread across e-enabled remote rural India • In this, MCX saw an opportunity in establishing spot exchanges in agricultural commodities, keen on partnering with organisations with domain expertise.

  9. A JOINT INITIATIVE: SNX • JV agreement signed in June 2006 between NDDB and MCX along with FTIL to promote a spot exchange for perishables. • In September 2006, Safal National Exchange of India Limited registered in Bangalore.

  10. Market Characteristics: SNX & Present

  11. Market Characteristics: SNX & Present

  12. Market Characteristics: SNX & Present

  13. Indirect Benefits of SNX to Growers…. SNX intervention with grower associations on post harvest practices, Packaging etc Increase in productivity Quality- Price Equation Reduction in post harvest losses Access to extension services SNX – A reference price even for those not connected

  14. Advantages to State Government Better price realization for farmers Catalyse industrial activity- Processing and Export due to assurance of uninterrupted supply of raw materials through SNX. More decentralised centers will emerge as important trading hubs, which generates lot of direct and indirect employment. In states where there is a cess, SNX would have 100% compliance, as all deliveries are recorded electronically. All these objectives achieved with minimal support from the state government in the form of amendment to their APMC Act.

  15. Advantages to Traders • Every Trader would have access to a bigger market, an opportunity to enhance their turnover • In physical market, they always face the risk of counter party defaults, which will be totally guaranteed on SNX platform. A settlement guarantee fund would be maintained for this purpose. • Since large number of traders from all across the country would be available at SNX platform, they can realize better price for their product, particularly the small/medium ones. • They can expand their activities to multiple commodities, because of operational ease, availability of finance and absence of counter party risk under SNX system. • This group may require some extra effort in appreciating the potential of the concept, as most other businesses have been impacted by technology

  16. Advantages to Processors/Exporters • They can buy certified quality material through a secure platform, free from hassles relating to procurement of material in physical market. • Lower brokerage or commission payable to procurement agents. • Customised Contracts can be designed in the case of large volumes of a specific quality • Looking at the price available at SNX, they can make export commitment and cover themselves immediately by buying at SNX • Customized logistics services can be organised.

  17. Opportunities In Rural Finance KYC registration with unique ID in rural lending could be the equivalent of PAN in financial securities market – Medium Term Potential Crop loans linked to recovery can be structured through SNX members- Trade working capital credit cards of shorter settlement cycles can be explored to bring the transactions in banking system Promote membership amongst Agri-professionals who could be offered a financial package and training, which would develop a new breed of traders

  18. Functioning of SNX

  19. Who can be a member • On seller front • Coop societies • Farmers association • Self Help Groups • Traders/Commission agents • Big Retail Chains • Entrepreneurs • On buyer front • Individual Farmer/ self help groups • Traders/commission agents • Processing industries • Exporters • Big Retail Chains • Entrepreneurs • Any member can act both as seller and buyer • Exposure in F & V considered an essential pre-requisite

  20. Member Location and Requirements • Where will be the members located? • District Headquarters • Taluka Head quarters • Village Level provided the availability of infrastructure • Requirements for setting up of member location • Power source • Phone connection or • VSAT connection

  21. Working Model of SNX from Member to Exchange Level • Contracts shall be for T + 1 initially • Any client/member from any part of the nation can enter sell quote and/or buy quote. • The trade happens whenever there is match between buy and sell quote. • As the trade is complete initial margin specified is deducted from both the account • After the trade, the seller member brings the produce to specified delivery center before specified period while buyer member should maintain sufficient amount in his account to clear his dues same day. • SNX shall check quality confirming to contract spec. and permits handing over of delivery. • Delivery is all ex-production centres

  22. Model Contract

  23. Model Contract

  24. Quality Certification • SNX will establish a Quality Assurance Protocol • Quality Certification at Delivery Centers, initially in-house • Contract Quality Specifications closest to the produce being traded in traditional markets in phase –I • Quality improvement through out the chain in phase-II • Minimize Quality related disputes, Play role in dispute resolution at Delivery Centers • Continuous training to all stakeholders on post harvest handling management

  25. Initial List of F & V Items to be Traded on SNX

  26. ravishankar@safalmarket.com

  27. Thank You

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