Terminal Markets and Special Economic Zones for Agricultural Produce
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 2.5 1.7 4.1 3.3 FARMER TRADER WHOLESALER RETAILER CONSUMER PRICE Retail Markups 350 220 160 100 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
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
TerminalMarket Infrastructure: Packhouse, Quality Testing Facility, Palletisation Services: Transport (incl. cool chain), Settlement of Payments, Banking, Market information Banking Institution Electronic Auction Processor Exporter Wholesaler/ Trader/ Retail chain operator Storage: Cold Storage, Temperature controlled warehouse, Ripening Chamber Direct Selling Collection Centre Infrastructure: Washing, grading, sorting, weighment, transport to TM Services: Collection & Aggregation of produce, Settlement of payment, advisory on inputs, prices, quality, multi-modal transport Producers/Farmersand theirAssociations
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
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
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 • Forbasic servicesof aggregation at CC and auction at TM • User charge not to exceed 2% of the produce value
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
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
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
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.
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
Risk Factors • Attractiveness to Private Enterprises • Availability of Suitable Land • Success in establishing backward linkages with farmers
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
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
India is the front ranking producer of many perishable commodities Cattle / buffaloes Largest in the world 283 million Milk Largest Producer 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 (0.85 Mn T) Sugarcane # 2 in the world (245 Mn T) Goat & Sheep 182 million
India’s competitiveness in global markets Source: UN COMTRADE Statistics, World Bank Staff Estimates
Inherent Indian strength in Agriculture • Opportunities emerging out of WTO Regime Exports of Agricultural Products, Why ?
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 How did the concept of AEZ come about ?
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 What is Agri Export Zone ?
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 Tariff & Non tariff Related issues 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. : Import of duties, product standards, pesticide residues, Codex, etc. What does AEZ entail ?
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. Stages for setting up of AEZ ?
AEZs on a MAP Conclusion
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.
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
This is not an end …… Thanks for your attention!