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8/14/2019 FFV Seminar Write Up Final
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TAMIL NADU AGRICULTURAL UNIVERSITYHORTICULTURAL COLLEGE AND RESEARCH INSTITUTE
SEMINAR REPORT
on
Fresh Fruits & Vegetables Marketing Constrains & Opportunities
CHAIRMAN STUDENT Dr. N. Selvaraj Mr. Abid Hussain
Professor and Head ID. No.: 06-6290-01HRS,TNAU,Ooty II M.Sc. (Hort.)- Vegetable Science
HC & RI, TNAU, Coimbatore
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CONTENTS
Fresh Fruits and Vegetables marketing- constrains &
opportunities
INTRODUCTION:
Horticulture – Success story of India
SN. Titles Page No.
1. Introduction and the turnaround 1-32. Fresh fruits and vegetables (FFV) 4-5
3. FFV Marketing 6-11
4. Constrains 12-14
5. Opportunities in FFV sector 15-19
6. The Way Out
a) Direct Marketing
b) Co-operative Marketingc) Regulated Marketing
d) Contract Farming
e) Organized FFV Retailing
20-24
25-27
28-2929-33
33-37
7. SAFAL Market- a case study 37-39
8. Online /e-Trading of FFV 40-48
9. Conclusion 49-51
10. Literatures cited 52
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Horticultural development had not been a priority until recent years in India. It
was later in the post 1993 period that focused attention was given to horticulture
development through an enhancement of plan allocation and knowledge-based
technology. Despite of this decade being a period of “golden revolution” productivity of
the horticultural crops has increased only marginally from 7.5 tonnes per hectare in 1991-
92 to 8.4 tonnes per hectare in 2004-05 (NHB, 2005 In 2005 total area under fruits and
vegetables had been 11.72 million hectares and total production had been 150.73 million
tones (NHB, 2005). Of the 456 million tons of vegetable produced in the world, India’s
share is 59 million tons. All taken together, India’s share of the world’s vegetable market
is 17 per cent. Presently, the horticultural crops cover 13.6 million hectares, i.e. roughly 7
per cent of the gross cropped area and contributes 18-20 per cent of the gross value of
India’s agricultural output. India is the second largest producer of fruits and vegetables in
the world next only to China and accounts for about 16% of the world’s production of
vegetables and 10% of world’s fruits production. Annual area and production growth
under fruits and vegetables in the period 1991-2005 was 2.6 per cent and 3.6 per cent
respectively in India. Share of fruits and vegetables in total value of agricultural exports
has increased over years from 9.5 per cent in 1980-81 to 16.5 per cent in 2002-03. But we
are still lagging behind in actual exports of these produce. For example, India produces
65 per cent and 11 per cent of world’s mango and banana, respectively, ranking first in
the production of both the crops. Yet our exports of the two crops are nearly negligible of
the total agricultural exports from India. It is a known fact that horticulture sector in India
is constrained by low crop productivity, limited irrigation facilities and underdeveloped
infrastructure support like cold storages, markets, roads, transportation facilities etc.
There are heavy post-harvest and handling losses, resulting in low productivity per unit
area and high cost of production. However, on the other hand India’s long growing-
season, diverse soil and climatic conditions comprising several agro-ecological regions
provide ample opportunity to grow a variety of horticulture crops. Thus, efforts are
needed in the direction to capitalize on our strengths and remove constrains to meet the
goal of moving towards a horticulture lead agricultural growth in India. The foreign trade
policy 2004-09 emphasized that to boost agricultural exports, growth and promotion of
exports of horticultural products is important. Horticulture contributes nearly 28 per cent
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of the GDP in agriculture and 54 per cent of export share in agriculture.
ACREAGE UNDER HORTICULTURE: Includes fruits, vegetables, spices,
floriculture, and plantations-is expected to be 20 million hectares in 2006-07. With
production of 53 MT and 108 MT, respectively, in 2005-06, India was the second largest
producer of both fruits and vegetables in the world. India occupies first position in the
production of cauliflower, second in onion and third in cabbage. The National
Horticulture Mission (NHM) was launched in May 2005 as a major initiative to bring
about diversification in agriculture and augment income of farmers through cultivation of
high value horticultural crops. The National Horticulture Mission (NHM) aims at
doubling horticulture production by 2012.
Area and Production of Major Horticulture Crops (Area-Million ha,Production-Million tonnes)
Crops 2002-03 2003-04 2004-05* 2005-06*
Area Production Area Production Area Production Area Production
Fruits 4.8 49.2 5.1 49.8 5.3 52.8 5.9 54.4
Vegetables 5.9 84. 8 6.7 101.4 7.1 108.2 7.2 113.5
Spices 2.4 3.8 5.2 4.0 3.2 4.9 3.2 5.9
Plantation
Crops
3.1 13.1 3.3 9.4 3.1 10.4 3.2 9.8
Flowers 0.1 0.2 0.2 0.6 0.1 0.7 0.1 0.8
Others 0.09 0.9 0.1 0.3 0.4 0.4 0.4 0.5
Total 16.4 152.0 20.6 165.5 19.2 177.4 20.0 184.9
Source: National Horticulture Board * Estimated
PRODUCTION AREA:
Vegetables are typically grown in India in field conditions; the concept is opposed
to the cultivation of vegetables in green houses as practiced in developed countries for
high yields. The fruits and vegetables considered important by the horticulture board are
mostly grown in the areas of Jammu & Kashmir, Himachal Pradesh, hilly regions of
North Uttar Pradesh, Bihar, Tamil Nadu, Maharashtra, Karnataka, Gujarat, Andhra
Pradesh, Assam, Madhya Pradesh, Rajasthan, Punjab, Tripura, West Bengal and Orissa.
GROWTH PROMOTIONAL ACTIVITIES:
Ongoing liberalization and the emergence of and integrated global market have
opened new vistas for Indian horticulture. In fact, till very recently, India’s main policy
focus that until recently was only on grains and cereals, has been changed in a timely
manner, with the launch of National Horticulture Mission in 2005-06 by Government of
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India with a mandate to promote integrated development in horticulture, to help in
coordinating, stimulating and sustaining the production and processing of fruits and
vegetables and to establish a sound infrastructure in the field of production, processing
and marketing with a focus on post harvest management to reduce losses. It envisages to
double the production of horticulture produce by the end of 1912. This enabled India to
exploit its true potential. Since liberalization and withdrawal of excise duty on fruit and
vegetable products there has been significant rise in the growth rate of the industry. No
industrial license is required for setting up Fruits & Vegetables Processing industries;
setting-up 100% EOUs require specific Govt. approvals. Many subsidies, irrigation plans,
loans, pre and post harvesting schemes led to the following figures of production.
FRUIT & VEGETABLE INDIA'S PRODUCTIONSTATUS
Mango, Guava, Banana & Peas World's largest producer
Lemon, Onion, Brinjal, Cabbage, Cauliflower,
Pumpkins & Gourds, Total Vegetables and Total Fruits
World's 2nd largest producer
Coconut World's 3rd largest producer
Oranges World's 4th largest producer
Papaya, Lettuce & Pineapple World's 5th largest producer
Tomato World's 6th largest producer
Citrus Fruits/ Mosambi & Cassava World's 7th largest producer
Sweet Potato World's 9th largest producer
Apple World's 10th largest producer Grapes World's 16th largest producer &
World record in productivity
COMPETITIVENESS OF INDIAN HORTICULTURE:
Commodity that a nation should produce and export is determined by the
principal of
comparative advantage. The comparative advantage tells about that capability of the
country to export a commodity, while the competitiveness of the commodity in the world
market is determined by the measure of export competitiveness.
Export Competitive Commodities
Fruits: Banana, Papaya
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Vegetables: Brinjal, Cabbage, Cauliflower, Peas
Commodities with Comparative Advantage
Fruits: Mosambi, Mango and Guava and
Vegetables: Onion
FRESH FRUITS AND VEGETABLES - CHARACTERISTICS
1. Perishability of products: Involvement of many bio-physio-chemical processes
make its highly vulnerable to damages at short intervals and thus contributes to
product’s limited shelf life.
2. Seasonability of production: The inconsistent supply due to the close involvement
of many biotic and abiotic factors of production break the cycle of the produce
availability in the market throughout the year.
3. Bulkiness of products: The bulkiness of the fresh produce adds to the
transportation, handling and packaging charges. Alongwith makes its prone to pre
and post harvest damages in the supply chain accounting upto the extent of 20-40
percent.
4. Quality variation of products : Nonadherence to GAP practices leads to variationin quality
5. Irregular supply of products: Seasonability and non planned insufficient
production creates gluts and shortages in the market.
6. Small Holdings size & scattered production processing: As majority of the Indian
farmers falls in marginal and small category.
RISING
FRESH FRUITS AND VEGETABLES CONSUMPTION:
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1. Rising income / Economic growth: Spurge in the sensex and improved living
paved the way for the fresh fruits and vegetables
2. India’s burgeoning middle-class: Emergence of the majority middle class and
drastic changes in the demographic figures mainly the substantial rise of the youth
population viz. more than 50 percent of Indian population is under the age of 35
years. This given the needed thrust to fresh fruits and vegetables consumption.
3. Demographical changes : Due to vast cultural and social diversity available in
India majority of which is vegetarian, fresh fruits and vegetables found driver’s
seat in the food palate of every
4. Health awareness: Due to emergence of new diseases and improvement in
education level provided the demand for the fresh fruits and vegetables among the
population due to its disease prevention and health promoting properties.
5. Increased literacy: Improvement in the education status backed with higher
income and the awareness about fresh fruits and vegetables indirectly leads the
way for higher demand and consumption.
6. New diseases prevalence: Eruption of new diseases due to the resurgent changes
in the food habits and lifestyle also created the much needed thrust for the fresh
fruits and vegetables among the masses, due to its disease prevention and health
promoting properties.
7. Trade liberalization /Globalization: Aftereffect of the WTO and the globalization
the fresh fruits and vegetables are available almost round the year from one or the
other production pockets at reasonable prices and desirable quality in sufficient
amount.
8.8. Development of better infrastructure & transit facilities: Public-Private –
Partnership efforts brought the necessary infrastructure viz. coolchains, better
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roads, transportation and storage facilities for the perishable commodities in the
investment shying sector to the satisfactory status.
MARKETING OF FRESH FRUITS AND VEGTABLES:Marketing plays an important role not only in stimulating production and
consumption, but in accelerating the pace of economic development. The marketing
system plays a dual role in economic development in countries whose resources are
primarily agricultural. Marketing comprises all the operations, and the agencies
conducting them, involved in the movement of farm-produced foods, raw materials and
their derivatives from the farms to the final consumers, and the effects of such operations
on farmers, middlemen and consumers. Agricultural marketing deals with all the
activities, agencies and policies involved in the procurement of farm inputs by the
farmers and the movement of agricultural products from the farms to the consumers. The
agricultural marketing system is a link between the farm and the non-farm sectors. It
involves all the aspects of market structure or system, both functional and institutional,
based on technical and economics considerations, and includes pre and post-harvest
operations, assembling, grading, storage, transportation and distribution. The expansion
in the size of farm output stimulates forward linkages by providing surpluses or food
which requires transportation, storage, processing, packaging and retailing to the
consumers. Increasing demands for money with which to purchase other goods leads to
increasing sensitivity to relative prices on the part of the producers, and specialization in
the cultivation of those crops on which the returns are the greatest, subject to socio-
cultural, ecological and economic constraints. It is the marketing system that transmits
the crucial price signals. The fruit and vegetable marketing in India is highly
decentralized having wide capacities. There has been concern in recent years regarding
the efficiency of marketing of fruits and vegetables, and that this is leading to high andfluctuating consumer prices and only a small share of the consumer rupee reaching the
farmers. It is overviewed by many committees and reports that Indian farmers are good
producers but not good marketer. As early as 1976 National Commission on Agriculture
pointed about the inefficiency in agricultural marketing with particular to fresh
perishables and strongly recommended in following words that “It is not enough to
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produce a crop; it must be satisfactorily marketed.” Marketing of horticultural crops is
complex especially because of perishability, seasonality and bulkiness. Fruits and
Vegetables are an item of daily consumption, they are essential in human diet but they are
very perishable in nature. Therefore, the cultivation of fruits and vegetables is generally
concentrated around towns and cities, so that they can be harvested and transported to the
nearby market immediately and in fresh form. With the increase in transport and
communication facilities, fruits and vegetables cultivation has spread in interior areas
where irrigation facilities are available. This is because growing vegetable crops is more
profitable than any other seasonal crop particularly the foodgrain crops. The spread of
fruits and vegetables cultivation in rural areas has solved the perennial problems,
particularly of transport, handling, packing and storage. There is also some regional
specialisation in growing some fruits and vegetables. They are grown in one area but
marketed in other areas for creating wider market and also to fulfill the demand of some
people, who have liking for them. This also involves long distance transport. For this
purpose good roads in the interior villages is necessary. Fortunately there are good state
and national highways, but there are no good roads in the interior. Sale of the fruits is
generally through pre- harvest contactors, so that the farmer gets an advanced payment
and cover his risk. Vegetables are usually sold through commission agents and very little
of pre-harvest contacting is done. Due to this the net returns are generally low. Farmers
spend means to devote more time to their field crops rather than to the orchards. If the
farmer does the marketing of his produce himself then the net returns to him would be
double. So also in the marketing of fruits and vegetables, producer cannot go to
wholesale market or long distant market and he has to depend on some intermediaries to
sell his fruits and vegetables. Therefore, in the marketing of fruits and vegetables costs
are involved for grading, packing, transport, loading/unloading, fees, etc. In addition, the
intermediaries also take some margins for them. These costs and margins determine the
final price to be paid by the consumer. After deducting market costs and margins from the
final price paid by the consumer, farmer gets his net price, which is referred to "Farmer’s
share in consumer’s price". This determines efficiency of marketing. Price spread and
producer’s shares in consumer prices of some vegetables is given in table.
PRODUCER'S SHARE IN SOME VEGETABLES
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Channel Producer's share (%)
Tomato
I Producer - commission agent -retailer - consumer 80.00
II Producer - commission agent - masakhore - retailer 47.60
III Producer - commission agent - secondary wholesaler - retailer - consumer 66.9
IV Producer - commission agent - primary wholesaler - retailer - consumer 53.5
Cauliflower
I Producer - commission agent - retailer - consumer 54.60
II Producer - commission agent - Masakhore - retailer - consumer 52.10
Cabbage
I Producer - commission agent - retailer - consumer 54.90
II Producer - commission agent - Masakhore - retailer - consumer 52.50
Vegetables
I Producer - consumer 89 to 96
II Producer - retailer - consumer 69 to 84
III Producer - wholesaler cum - commission agent - retailer - consumer 63 to 73
Vegetables
I Producer - wholesale - cum- commission agent - retailer - consumer 51 to 55
Sometimes, agricultural commodities directly pass from producers to consumers. Butin indirect marketing agricultural commodities generally move from producers to
consumers through intermediaries or middlemen. The number of intermediaries may vary
from one to many.
AGENCIES
Producers: Most farmers or producers, perform one or more marketing functions. They
sell the surplus either in the village or in the market. Some farmers, especially the large
ones, assemble the produce of small farmers, transport it to the nearby market, sell it here
and make a profit.
Middlemen: Middlemen are those individuals or business concerns which specialize in
performing the various marketing functions and rendering such services as are involved
in the marketing of goods.
Wholesalers: Wholeselling is the one ion of goods is the wholesale dealers. Wholeselling
is the one that covers activities of all individuals or businessmen, which sell to or
negotiate sales with customers, who buy for resale or industrial use. His position is that of
an intermediary between manufacturer and retailer.
Wholesalers are classified as:
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1) Local wholesalers, who deliver their purchases to local retailer.
2) Provincial wholesalers some time called as distributor selling to the retailers of a
particular district or a state and
3) National wholesalers located at a strategic place and distribute goods all over the
country.
Retailers: He is the last link in chain of middleman, who sells directly to consumer. He
takes title to goods, sells and sets up business usually amidst the consumer's groups. He
buys his requirement usually from the wholesalers. Retailers in producing areas may have
direct contact with producers and buys goods from them for resale.
Co-operative Marketing Societies
Main function:
1) Selling the produce of member's.
2) They also undertake outright purchases.
3) Provide storage facilities for storage and grading and
4) Save cultivators from exploitation by traders and help farmers in getting fair price
for their produce.
5) Performing functions of processing of raw produce.
Pucca Arhatias: He is the real purchase in the wholesale market on his own behalf of
acting for some businessmen, firms in consuming markets. Big industries play as their
agent and order him to purchase certain quantity within a given range of price. When
pucca arhatia trades on his own, he dispose of his produce brought by him through
dealers in different parts of country.
Katcha Arhatia: He also advances money to the cultivators and village banias on the
condition that the produce will be disposed off through him alone and hence charges a
very nominal rate of interest on the money advanced. Katcha arhatia charges commission
for services rendered by him. Important link between the village cultivator or traders on
the one hand.
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Village Merchants: He is an important agency in the collection of produce and more so
when the mandi is situated at a considerable distance from the village. He advances from
his shop either on credit or for exchange of foodgrain or so price given for cultivator's
produce. The quantities of agril. Produce so collected are either disposed off in the mandi
or retained for resale in the village in the processed forms, such as rice, flour, oil etc.
Intinerant Traders: They are small merchants, who move from village to village and
buy the produce from cultivator's house. They give a lower price than selling in the
nearby market and in setting transportation take into consideration, the factors such as
cost of transportation, market charges and profit margin.
Transport Agency: This agency assists in the movement of the produce from one market
to another e.g. railways, trucks, bullock carts, camel carts, tractor trolleys.
Communication Agency: It gives information about the prices prevailing, and quantity
available and transactions e.g. post, telephone, telegraph, newspapers, radio.
Advertising Agency: It enables prospective buyers to know the quality of the product
and decide about the purchase of commodities e.g. newspapers, radio, television, cinema
slides.
Auctioners: They put produce for auction and bidding by the buyers.
Government Agencies / Institutions: In addition to individuals, corporate, co-operative
and government institutions are operating in the field of agricultural marketing. Some
important institutions are:-
The State Trading Corporation (STC)
1) To make available supplies of essential commodities to consumers at reasonable
prices on a regular basis;
2) To ensure a fair prices of the produce to the farmers so that there may be an
adequate incentive to increase production;
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3) To minimize violent price fluctuations occurring as a result of seasonal variations
in supply and demand;
4) To arrange for the supply of such inputs as fertilizers and insecticides so that the
tempo of increased production is maintained;
5) To undertake the procurement and maintenance of buffer stock, and their
distribution, whenever and wherever necessary;
6) To arrange for storage, transportation, packaging and processing;
7) To check hoarding, black-marketing and profiteering.
THE VICIOUS MARKETING CHANNELS:
The channels of marketing is an important aspect of agricultural marketing
affecting the prices paid by consumers and shares of them received by the producer. The shorter the channel, lesser the market costs and cheaper the commodity to the
consumer . When the channel is long with more intermediaries, prices are more and
producer’s share is less. The channel which provides commodities at cheaper price to
consumer and also ensures greater share to producer is considered as the most
efficient channel Several studies have been carried out in India on this topic for different
commodities and in different regions and the results are of mixed nature due to local
socio-economic conditions and infrastructure facilities.
Normally producer’s shares in different commodity groups are as follows:
1
.
Food grains- 55 to 65%
2
.
Other commodities- 60 to 70%
3
.
Fruits- 30 to 40%
4
.
Vegetables- 40 to 50%
Channels of Vegetables:
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i. Producers–consumer (village sale)
ii. Producer–retailer–consumer (local sale)
iii. Producer–Trader–commission agent–retailer–consumer.
iv. Producer–commission agent–retailer–consumer
v. Producer–primary wholesaler–secondary wholesaler– retailer– consumer (distant
market).
Channels of Fruits:
i. Producer–consumer (village sale)
ii. Producer–Trader–consumer (local sale)
iii. Producer–pre-harvest contractor–retailer–consumer
iv. Producer–commission agent–retailer–consumer.v. Producer–pre-harvest contractor–commission agent– retailer–consumer
vi. Producer–commission agent–secondary wholesaler– retailer–consumer (distant
market).
These channels have great influence on marketing costs such as
transport, commission charges, etc. and market margins received by the intermediaries
such as trader, commission agent, wholesaler and retailer. Finally this decides the price to
be paid by the consumer and share of it received by the farmer producer. That channel is
considered as good or efficient which makes the produce available to the consumer at the
cheapest price also ensures the highest share to the producer.
CONSTRAINTS IN FRESH FRUITS AND VEGETABLES MARKETING:
1. Lack of basic infrastructure viz.cool chains, logistics and supply chain
management. The infrastructural problems, pertaining to the cold storage facilities
are dual as some places don’t have the cold storage while some places have the
problem of underutilisation of the existing cold storages. The utilisation is even
lower than 30 per cent of the total capacity in many cases. Development of
competitive international transportation, linked to domestic air transport or road
and rail transport would help in reduction of post harvest losses.
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2. Preponderance of Intermediaries in the channel results in unfair and exploitative
practices in marketing of fresh produce is very common.
3. Lack of proper grading and quality control system.
4. Scattered productions and sometimes in isolated places where even the
transportation facilities and other infrastructure is not sufficient for the
perishables.
5. Lack of unity and organization skill among the farming community, which proves
a major impediment in the formation of cluster groups and co-operatives.
6. Inefficient & Imperfect markets: Due to prevalence of many intermediaries and
malpractices followed by them in the price fixation and auction of the perishables
in between the marketing channel results in uprise of consumer’s price in the
producer’s share.
7. Concept of consumer packaging practically unknown in domestic markets :
Improper pre and post harvest handling without any sound packaging leads to
heavy loss ranging from 20-40 percent of the produce at the time when its reaches
the final consumer.
8. Lack of forward & backward linkages: Absolute lack of the much needed quality
inputs and extension backup at proper time and after harvest processes.
9. Ignorance to new methods of cultivation and dependence on traders for extension
knowledge.
10. Perishability and Storability: Having limited shelf life due to its typical bio-
physio-chemicals constitutions, fresh fruits and vegetables penetration is
restricted to the certain niche markets and stakeholders. Besides the presence of
insufficient numbers of storages and coolchain facilities adding to the woes.
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A study conducted by IIM, Ahmadabad to examine different aspects of marketing,
focusing particularly, on the wholesale markets for fruits and vegetables which have been
established to overcome deficiencies and improve the marketing efficiency. It indicated
that in Ahmedabad the direct contact between commission agents and farmers is very
low. For vegetables this is 50 percent and for fruits only 31 percent. Further, in the system
of transaction, secret bidding and simple transaction dominate and open auction is
relatively rare. In KFWVM, Chennai, the wholesalers act as commission agents and
receive consignments directly from producing centers through agents or producers. By
and large the system of transaction remains traditional and open auction is rarely seen.
This is one major reason for poor efficiency. However, in the small Uzhavar sandie in
Chennai, the farmers sell directly to consumers. The share of farmers in the consumer
rupee in Ahmedabad was 41.1 to 69.3 percent for vegetables and 25.5 to 53.2 percent for
fruits. In Chennai KFWVM, the farmers' share was 40.4 to 61.4 percent for vegetables
and, 40.7 to 67.6 percent for fruits. In the small Uzhavar sandie market in Chennai, where
the farmers sell directly to the consumers, the share of farmers was as high as 85 to 95.4
percent for vegetables. This indicates that if there are few or no middlemen, the farmers’
share could be much higher. In the Kolkata market the share of farmers ranged from 45.9
to 60.94 percent for vegetables and 55.8 to 82.3 percent for fruits. Thus, the shares are
frequently very low, but somewhat better in Chennai, lower in Kolkata and even lower in
Ahmedabad. The margin as a percentage of farmer-consumer price difference (an
efficiency measure) shows that in Ahmedabad, the margins are very high and range from
69 to 94 percent. In Chennai they range from 15 to 69 percent, and in Kolkata they range
from 46 to 73 percent. The high percentage of margin to farmer-consumer price
difference is indicative of large inefficiencies and relatively poor marketing efficiency.
There is great need to improve the marketing of fruits and vegetables. These regulated
markets were established to improve the marketing efficiency. The system of sale
followed in these markets indicated that open auction as a system of sale is yet to take
roots in these markets and the marketing system was dominated by open auction or secret
bidding resulting to significant erosion of marketing efficiency.
INDIA TRADE GAINS FRESH MOMENTUM
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India is a land of huge potential, and always would be. It was a mood of
resignation captured that modern forms of food retailing would never take off in India
during lifetime. Skip to 2007 and you can’t open a newspaper in India without reading
about the latest major corporate to announce its entry to the country’s burgeoning modern
retail sector. It is this retail ‘revolution’, coupled with the economic boom that looks set
to provide the impetus for India’s fresh produce sector to make real strides. Everyone
singles out the supply chain challenge, resulting from a chronic lack of infrastructure, as
the key hurdle to the modern retailers that are setting up shop in India, but the real
challenge will be at the front-end rather than the back-end, where they must change the
way fresh produce is marketed as well as the mindset and tastes of the Indian consumer.
For instance, the Indian consumer ‘eats curry, not vegetables’, making fresh produce a
value-driven purchase. Fruit and vegetable retail in India is low margin, high cost, not the
other way around. Traditional small vendors with few overheads thrive in this climate,
offering consumers a service that inspires loyalty. Changing consumers’ behavior may be
the main hurdle for India’s modern retail sector, but there are plenty of others to
overcome - poor infrastructure, shortage of expertise, high real estate costs to name a few.
Indeed, it’s possible that the fledgling retail revolution will falter and fizzle out, given the
size of the challenges ahead. But this looks unlikely, as major corporates are driving the
push and the momentum has already been gained. Indeed, Fresh Produce India would
have departed with a sense of the challenges and complexity of the Indian market, but a
genuine optimism that the country is finally on track to deliver on the huge potential it
offers.
ASIAN PERSPECTIVE:
Unsurprisingly, China and India remains the driving force in the region. Fruits and
vegetables prices in China have shown a double-digit upturn during 2006 over the
previous year, reflecting both rising production costs and increasing consumer demand
(and incomes). In particular, an “off-year” for Chinese apple crops in 2005/06 saw
domestic prices scale heights that made export a far less attractive option. Indeed, while
low prices continue to drive China’s export expansion, volume growth has slowed down
this year, while values have risen. New speciality lines are coming to the fore as China
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turns its labour-cost advantage to value-adding and innovation. China’s increasing
production costs should not be overlooked however, and rising fuel prices are a key issue,
especially as so many of the country’s best growing-regions are located some distance
into the interior. Food safety issues also continue to trouble India’s export trade, with
maximum chemical residue levels (MRLs) and microbial contamination impacting
heavily on the fruits and vegetables industry. While the SPS under WTO regime has
caused confusion and upheaval for European and other countries import trade, it could
benefit consumers in the long-term as it brings MRLs and filth problems into line with
EU and US standards.
Meanwhile, South East Asian countries have been facing an influx of low-priced Chinese
produce under regional free trade deals, with farmers in Thailand and Vietnam feeling the
heat. Nevertheless, some good opportunities are clearly developing for high-value items
in these markets. The shift from tariff- to quarantine-based import restrictions in Asia has
continued, with Indonesia introducing new rules, Taiwan toughening its stance on pests
and Thailand mulling a move towards market regulation. The modern retail trade has also
made further inroads across the region. Even India, the final frontier for global retailing,
now appears to be poised for a retail revolution led by local corporate giant Reliance.
This market will be ‘one to watch’ in 2007, as will Vietnam, whose entry to the WTO is
set to create new opportunities for retailers and the fresh produce trade alike.” India is a
land of huge potential... and always will be. The snail-like progress of the country’s fruit
and vegetable industry in addressing fundamental issues such as lack of infrastructure,
fragmented production and poor quality standards. But recent developments in India’s
fresh produce sector and food retail industry are enough to persuade even long-term
sceptics that the worm has turned. Most notably, Indian business conglomerate Reliance
has unveiled plans for a US$5.6bn foray into the retail sector. Its move serves as an
example of the kind of money that is being invested by domestic companies into retailing
and agribusiness – sums that are unprecedented and more usually associated with global
retail giants. Reliance has several major issues to overcome to live up to its media billing
as the ‘Indian Wal-Mart’, but if it can pull off its plans, it will improve the country’s
entire retail and horticulture sectors. For Reliance’s project calls for the creation of a
whole new supply chain, including cold storage facilities and contract farming. And it is
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not alone, with other local retailers such as Big Bazaar, Subikhsha, Hypercity, Spencer’s
and FoodWorld seeking to form similar systems. While the debate rumbles on as to if and
when the government will open its market to multi-brand global retail groups like Wal-
Mart and Tesco, local chains are already transforming India’s chaotic retail industry.
Meanwhile, big-hitters in the global fresh produce trade are now taking the opportunity to
capitalise on India’s vast procurement potential. Capespan and Fyffes recently set up joint
ventures for grapes and ‘high-altitude fruits’ respectively, while Field Fresh, the alliance
between Bharti Enterprises and European equity firm Rothschild, is also ploughing
substantial investment into the horticulture sector. India’s own market for high quality
fruit and vegetables is also growing strongly as its middle-class expands. Moreover, this
growth is not confined to the top four or five mega-cities. Rather, India’s burgeoning
middle-class, unlike China’s, spans the length and breadth of the country, with studies
showing that the smaller cities actually boast the largest increase in millionaire
households. Such ‘B’ cities are driving demand for imported fruits, and while suppliers
must deal with a restrictive import system and bottlenecks in distribution to reach their
market, things are improving as the import trade has consolidated and the government’s
threat perceptions over foreign fruits have diminished. In short, India is beginning to
deliver on its huge potential, and the time is ripe for an international approach that
enables the fresh produce trade to build on this progress.
A CASE STUDY - Marketing of Banana:
Cauvery Delta (Tamil Nadu)
The practice of opting pre-harvest contractors at the time of 50per cent maturity
of the crop is commonly followed by majority ((88%) of the growers. The prime reason
stated by the farmers was that the pre-harvest contractors give advance payments before
harvest of the bananas to meet their immediate needs for production, consumption and
social activities. Other reasons were
1. High fluctuations in prices (400%)
2. High winds during monsoon causing damage to the plants.
3. Absence of institutional credit.
4. Absence of crop insurance
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5. Small production and uneconomic quantities available for marketing
6. Long association with contractors.
7. Price discrimination in the markets.
8. High marketing costs.
Constraints:
1. Non-institutional agencies and undesirable market practices in the markets.
2. Deduction of 2 bunches for every 100 bunches as Profit bunches.
3. Combining two small bunches as one bunch during counting for price fixing.
4. Non-harvest of small size bunches.
5. Delay in payment of balance amount after harvest
6. Violation of contracts i.e. abandoning the harvest if there is slump in prices.7. Non-availability of institutional agency for banana which is highly perishable.
8. Non-availability of any viable storage preservation methods.
9. Non-existing institutional marketing agency like regulated market, co-
op.marketing or producer's association.
Suggestions:
1. Setting up banana based agro-processing industry.
2. Marketing banana through regulated markets.
3. Bringing co-operative marketing as new channel in the existing channels which
will increase producer's share in the consumer's rupee
Jalgaon (Maharashtra):
In the marketing of banana in Jalgaon district three channels were identified.
Channel I Producer-co-operative fruit sale society-commission agent-wholesaler-
retailer– consumer Channel II Producer -Group sale agency commission agent - wholesaler - retailer –
consumer
Channel III Producer –Private agency - commission agent - wholesaler - Retailer –
consumer.
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Marketing costs, margins and price spreadParticulars Channels
I II III
Marketing costs 82.89 84.46 91.0
Marketing margins 282.26 282.86 287.58
Producer's share 32.57 32.47 31.31
All these indicators indicate comparatively greater economic as well as
operational efficiency of the marketing mechanism of channel I i.e. Co-operative Fruit
Sale Society over remaining ones. However, it is suggested that the producer's share in
consumer's rupee in Channel I can further be increased if the co-operative Fruit Sale
Society directly deals with the markets in terminal markets rather than selling the produce
to the commission agent.
Jalgaon & Sangli: (Maharashtra):
The major proportion of produce was marketed through two marketing channels
I .Producer - Co-op. Society - retailer - consumer
II .Producer - wholesaler - retailer - consumer
The producer's share was 34.53% and 31.05% for member and non-member
producer's respectively. The members of producer's co-operative association could
therefore derive relatively higher profit margins.
Parbhani (Maharashtra)
Channel I: Producer - co-op. Society - wholesaler -Retailer - consumer
Comm. to society 8% and Comm. To wholesaler 5%
Shares of expenditure on:
i. Cultivation 65.6%
ii. Transportation 19.30%
iii. Commission 15.10% 100.00
Nanded (Maharashtra)
i. Producer - wholesaler - Retailer - consumers
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ii. Producer - co-operative society - commission agent -cum-wholesaler- Retailer -
consumer
Cost of marketing through
i. Co-op. Society Rs.58.37%
ii. Private 61.59
Producer's share through
i. Co-op. 51.65%
ii. Private 48.37%
Marketing Harichhal Banana in Gorakhpur (U.P)
Produce - Retailer - consumer channel for the sale of Harichhal banana was more
profitable compared to other systems of sale.
For increasing marketing efficiency, grower should develop:
1. Co-operative system of transport.
2. Storage facility should be developed on co-operative lines, so that the farmers will
be protected from stress sale.
3. Weights and measures should be standardized.
4. Market information should be communicated to the growers regarding prices of
banana
INNOVATIVE DIRECT MARKETING MODELS IN INDIA:
It has been realized that the marketing channel for farm products which are highly
perishable (fruits, vegetables and flowers) should be as short as possible. Perishable farm
produce should move quickly from farmers to consumers. If farmers directly sell their
produce to the consumers, it will not only Save losses but also increase farmer's share in
the price paid by the consumers. Therefore, direct marketing by the farmers is being
encouraged as an alternative channel. Some examples of these channels are given below:
(I) APNI MANDI / KISAN MANDI
An innovative concept of 'Apni Mandi' has been introduced in some states. Apni
Mandi is also called 'Kisan Mandi', as it is different from the traditional mandi or market
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yard, where the produce moves to the buyer through either a commission agent or trader.
In Apni Mandi there is a direct contact between the farmer producer and the buyer who is
generally the consumer. This system does away with the middlemen. In Apni Mandi,
farmers sell their produce directly to the consumers without involvement of the
middlemen. The price spread in Apni Mandi is considerable low. These are working
satisfactorily in the case of fruits and vegetables. These, 'Apni Mandi' are similar to the
Saturday markets of United Kingdom and United States of America.
OBJECTIVES
The main objectives of popularising the concept of Apni Mandi are:
i. Better marketing of agricultural produce especially of fruits and vegetables.
ii. Ensuring direct contact of the producer-farmers and the consumers and therebyenhancing the distributional efficiency of the marketing system.
iii. Increasing the profitability of agricultural crops for the producers by minimization
of marketing costs and the margin of the middlemen.
iv. Ensuring the availability of fresh fruits and vegetables and other farm produce at
reasonable prices to the consumers.
v. Removing social inhibitions among the farmers for retail sale of their produce .
vi. Encouraging additional employment to the producers and thereby enhancing their
incomes.
vii. Promoting national integration by inviting the farmers of other states to sell the
produce grown by them directly to the consumers in Apni Mandis of other states
and
viii. Providing business techniques to the farmers so that in the long-run they may
adopt this practice for other crops and enterprises too.
HISTORY
The first Apni Mandi was started in Punjab by the Punjab Mandi Board at
Chandigarh in February, 1987. Punjab Mandi Board took the initiative with a view to
providing small farmers around cities a direct access to consumers. Similarly, in Haryana,
the first Apni Mandi was started at Kamal in 1988. In Rajasthan also, this scheme has
been introduced in several district towns.
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The initiative is worth emulating.
FUNCTIONING
The market committee of the area where Apni Mandi is located provides space,
water, sheds, counters, balances and other facilities to the farmers in . Apni Mandis. The
Market Committee Staff need to work hard with dedication for the success of Apni
Mandis. The State Marketing Boards provide financial assistance to the Market
Committees for these services rendered by them to the Apni Mandi. This scheme is being
implemented with certain resistance from middlemen. Some farmers also have
reservations about the success of the scheme as it assumes adequate skills of retailing on
the part of farmers. However, farmers as well as consumers would benefit from the Apni
Mandi Scheme and its popularity may pick up after sometime.
(II) HADASPAR VEGETABLE MARKET
Hadaspar vegetable market is a model market for direct marketing of vegetables
in Pune city. This sub-market yard is situated nine kms away from Pune city. This
belongs to the Pune Municipal Corporation and the fee for using the space in the market
is collected by the municipal corporation from the farmers. This is one of the ideal
markets in the country for marketing of vegetables. In this market there are no
commission agents/middlemen. The market has modern weighing machines for weighing
the produce. Buyers purchase vegetables in lots of 100 kgs. or 100 numbers. The produce
is weighed in the presence of licensed weigh men of the market committee and sale bill is
prepared. The purchasers make payment of the value of produce directly to the farmer.
The purchaser is allowed to leave the market place along with the produce after showing
the sale bill at the gate of the market. Disputes, if any, arising between buyers and sellers
are settled by the supervisor of the market committee after calling the concerned parties.
The market committee collects one percent sale proceeds as market fee for the services
and facilities provided by the committee to the farmers and buyers.
(III) RYTHU BAZARS
Rythu bazars have been established in the major cities of. Andhra Pradesh state
with the prime objective to provide direct link between farmers and consumers in the
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marketing activity of fruits, vegetables and other essential food items. Both producers and
consumers are benefited from Rythu Bazars as producer's share in the consumers rupee is
more by 15 to 40 percent and consumer's get fresh vegetables, fruits and food items at 20
to 35 percent less prices than the prevailing prices in nearby markets. Further, marketing
costs are at the minimum level as middlemen are completely eliminated from the
marketing activities in Rythu Bazars. The maintenance expenditure of Rythu Bazars is
being met from financial sources of Agricultural Production Market Committee (APMC)
nearer to the Rythu Bazars. Rythu Bazars started functioning in the Andhra Pradesh State
from January20, 1999. Presently there are 95 Rythu bazars operating in all the 23 districts
of the state. There is no government involvement in price fixation. This function is left to
farmers who organise themselves into committees and these committee are fixing sale
prices daily after taking into consideration the wholesale and retail prices prevailing in
the nearby towns. Generally, in the Rythu Bazar, prices are fixed20 percent over the
wholesale prices and 15 to 20percent less than local market prices. Prices fixed are
displayed at several places all over the Rythu Bazar for the benefit of the consumers. The
major highlights of Rythu bazars are: District collectors are making the land available for
the Rythu Bazars. Permanent infrastructure with all support system are being constructed
in the Rythu Bazars by the concerned Agricultural Produce Market Committee. The
vegetable cultivators in the identified villages are provided the photo identity cards and
only these cultivators are remitted to sell vegetables in these bazars. State Government
arranges special buses on most routes for transport of vegetables. Temporary storage
facilities are on anvil. Coordination exists between revenue, marketing and horticulture
departments for smooth functioning of these markets. A distinct and common identity of
such markets across the state is being established. Other essential commodities like
pulses and edible oils are also sold in these markets at reasonable prices. Vegetable
production programme in the area is also undertaken by the horticulture department of
the state to ensure regular supplies of vegetables to the consumers. Rythu Bazars have
generated a great deal of enthusiasm both among
farmers and consumers as farmers get better prices for their produce due to curtailment of
commission and overhead costs on account of the non-existence of middlemen and the
consumers get vegetables at low prices compared to the prices in other markets.
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(IV)UZHAVAR SANDIES
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Uzhavar Sandies (Farmers' Market)were established in selected municipal and
panchayat areas of the Tamil Nadu by thestate government. In these markets,farmers enjoy better marketinginfrastructure free of cost and also receiveconsiderably high prices for the productsthan what they use to receive frommiddlemen at village or primary marketsof towns. Farmers are additionally benefited in the form of interaction withother farmers and with departmental personnel. Farmers also get good quality
seeds and other inputs in the market yarditself. The consumers in these markets are benefited by getting fresh vegetables atrelatively lower prices. Farmer’s market /Uzhavar Sandie is an innovative scheme
introduced by the Government of Tamil Nadu, to help the farmers at large. It is thefirst of its kind in whole India. Such amarket was first started in Madurai on
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14.10.1999 and the State Government proposes to establish totally 100 farmers
markets in the important centres coveringthe whole State.
Mode of Operation:
The farmer’s market provides the place for the growers of vegetables and fruits to
sell their produce directly to the people without recourse to the middlemen. These
markets are mainly started to establish a direct link between the farmers and the
consumers. There will be no place for the middlemen to the consumers. When the goods
are routed through middlemen, the farmers are not getting remunerative prices for their
produce. Likewise, as the middlemen at wholesale and retail levels add their respective
margins in the sale prices, the goods are sold at higher prices to the consumers. By
eliminating the middlemen, this scheme aims at benefiting both the farmers as well as the
consumers. The market place is established in the important centres to help the farmers
living in and around that centre. Every market has 80 to 100 small shops or sheds. Each
farmer is allotted a shop to sell his produce. The State Government appoints the
marketing Committee to regulate the marketing Centre. The committee will also havefarmers as its representatives. This Committee identifies the farmers and gives them a
permit card. Such farmers alone are being allotted the shops to market their produce. The
farmers need not pay any rent or Commission for selling their goods at the market.
Farmers can transport their produce to the marketing centres free of cost using State
Transport Corporation Buses. The market is open for the public from 7.00 A.M. to 7.00
P.M.daily. As and when the farmers bring their produce to the market, the committee will
fix the prices for the same. The same price will be ruling for that particular commodity
for the whole day. The prices are fixed for different commodities on the basis of previous
day prices of that commodity in the wholesale market.
Benefits to the farmers: In a short period of one month, since farmers’ market came into
existence, it was found that the income of the farmers, who are using the farmers market,
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has doubled. This is made possible, as the farmers need not spend any amount towards
handling and marketing their produce. The rise in the farm income of the farmers is also
due to the direct marketing of their produce to the consumers. Wherever middlemen play
their role in distributing the farm produce, the farmers do not get remunerative prices.
The middlemen of a particular area usually form a cartel and accordingly fix low prices
for the agricultural goods. But, the scheme of farmers market enables the farmers to
realise just prices for their produce by eliminating all types of middlemen. As the sale at
the farmers market is only for cash, the farmers are getting money immediately. This is
absent when they sell their produce to the middlemen. Most of the traders make delayed
payments to the farmers.
(V) SHETKARI BAZAR On the lines of farmers' markets in other states viz., Apni Mandi in Punjab,
Haryana and Rajasthan since 1988, Rythu Bazar in Andhra Pradesh since January 26,
1999 and Uzhavar Sandies in Tamil Nadu, the Shetkari Bazars were established in the
state of Maharashtra for the marketing of fruits and vegetables. The Shetkari Bazar, by
eliminating intermediaries, links producers direct to the consumers, reduces price-spread
(marketing margin of intermediaries) and enhances producer's share in consumer's rupee.
Thus, these markets increase the farm income, well being of the farmers and bring
stability in prices of horticultural and plantation crops.
(VI) KRUSHAK BAZARS
On the lines of Rythu Bazars in Andhra Pradesh and Uzhavar Sandies in Tamil
Nadu, Government of Orissa has taken a programme of establishing Krushak Bazars in
the state of Orissa in the year 2000-01 with the purpose to empower farmer-producer to
compete effectively in the open market to get a remunerative price for his produce and to
ensure products at affordable prices to the consumers. The government provides
following incentives for opening of the Krushak Bazars in the state.
(a) Provides 1 to 2 acres of land at suitable place, free of cost, for establishing the bazar.
(b) A cluster/group of villages within the proximity of market area and farmers growing
vegetable are identified having the surplus produce for sale.
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(c) The identified farmers are allowed to use marketing facilities so that there is no
intervention of middlemen and farmers get better prices for their produce.
(d) Public utility facilities viz., drinking water, electricity, toilet, canteen and rest house
are provided to farmers by the Krushak Bazars.
(e) Identified farmers are provided inputs like seeds and fertilizer at the reasonable prices
in the Krushak Bazars, and
(f) Storage facilities in the market area are also provided to the farmers in Krushak
Bazars.
(VII) MOTHER DAIRY BOOTHS: Mother Dairy, basically handling milk in Delhi,
was asked to try its hand in retail vegetable marketing by direct purchasing vegetables
from the farmers, Moving them in specially built vehicles, storing them in air conditionedgodowns and distribute them to the consumers through its retail outlets if 1989afterthe
notorious onion and potato price crisis. Mother Dairy management has opened retail
outlets in almost all important colonies of Delhi for providing vegetables to the
consumers at reasonable prices.
CO-OPERATIVE MARKETING SOCIETY
When producers of agricultural commodities or any other product form a society
with an objective of carrying out marketing of their produce, such society is called as co-
operative marketing society. The need for co-operative marketing arose due to many
defects observed and experienced in the private and open marketing system. Those are
several malpractices prevail in the marketing of agricultural produce. For example,
arbitrary deductions from the produce, manipulation of weights and measures and
cheating the farmers, collusion between the broker and the buyer while fixing the prices,
delay in payment of amounts due to farmers, etc. The result is the farmers are indebted to
trader - moneylender. In such circumstances co-operative marketing society can largely
help the farmers reduce the malpractices and offer honest and correct services.
There exists a chain of intermediaries between the producer and the final consumer. They
include village merchant, itinerant trader, wholesaler, commission agent, pre-harvest
contractor and retailer. They take their own margins for the services, they render. But
these margins are generally exorbitant, making the commodities costly for the consumers
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3. To provide storage facilitates to their members by renting or owning the godowns
and thereby facilitate to grant advances against pledge of produce.
4. To protect members from all types of malpractices eliminates the middleman in
the chain of marketing.
5. Co-operative marketing society ensures grading, etc. and supply of good quality
material to consumers.
6. It teaches business methods to farmers and serves them as agency for supply
market information.
7. The society is able to stabilize prices over a long period by adjusting the supply
with the demand.
8. Marketing societies are also encouraged to undertake export trade so that they can
give better prices to their members.
Weak Co-op. Marketing: Although, many advantages are envisaged in the co-operative
marketing the structure has remained relatively weak as compared to credit co-operatives.
There are only about 1000 marketing societies as against 20,000 credit societies in
Maharashtra. The marketing is more difficult involving many technical and commercial
aspects. Marketing of perishable is still more different. Arranging quick transport,
arranging storage to avoid losses, to keep watch on demand – supply position to ensure
good prices to members are all matters need for good marketing. For want of these
managerial aspects, desired number of co-operative marketing societies have not come up
and those, which were started, could not succeed. Several marketing surveys/studies at
farmer's levels have revealed that among several marketing channels, co-operative
channel has offered greater share of consumer's prices to the producers. Whichever,
marketing is unorganized, farmer - producers have expressed that marketing co-operative
societies should be formed. This was particularly reported in the cases of marketing of
perishables.
Few Successes:
Inspite of the difficulties encountered in the marketing of perishables like fruits,
vegetables, milk, etc. there are few examples of good success viz. Maha-grape - co-
operative federation marketing grapes in Maharashtra, Co-operatives marketing
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pomegranate, Co-operatives marketing banana in Jalgaon district, Vegetables co-
operatives in Thane District, Milk co-operatives in Maharashtra, HOPCOMS,Bangalore
and Gujarat and Co-operative cotton marketing society.
ORGANISED AND REGULATED MARKETS:
Organised marketing of agricultural commodities has been promoted in the
country through a network of regulated markets. Most of the State governments and
Union Territories have enacted legislations (APMC Act) to provide for regulation of
agricultural produce markets. While by the end of 1950, there were 286 regulated markets
in the country, today the number stands at 7,521 (31.3.2005). Besides, the country has
27,294 rural periodical markets, about 15 per cent of which function under the ambit of
regulation. Progress in the production of food grains, commercial crops and horticultural
products depends critically on the marketing infrastructure available to the farmers.
Efficient marketing with a dynamic supply chain is essential for the development of the
agriculture sector. The number of regulated agricultural markets stood at 7,566 as on
March 31, 2006. Besides, there were 21,780 rural primary/periodic agricultural markets,
of which about 15 percent functioned under the ambit of regulation. Ministry of
Agriculture had formulated a model law on agricultural marketing in consultation with
State/UT Governments to deal with emerging trends in agricultural marketing. This
model legislation enables establishment of private markets/ yards, direct purchase
centres, consumers/ farmers markets for direct sale, and promotion of public-private-
partnership (PPP) in the management and development of agricultural markets in the
country. It also provides for exclusive markets for onions, fruits, vegetables, and flowers.
Regulation and promotion of contract farming arrangement has also been a part of this
legislation. A provision has also been made for constitution of State Agricultural Produce
Standards Bureau for promotion of grading, standardization and quality certification of
agricultural produce. Several state/UT governments have initiated steps for amending the
Agricultural Produce Marketing Committee (APMC) Act. So far 15 States and 5 Union
Territories have amended their Agricultural Produce Marketing Committee (APMC) Act
to derive the benefits of market reforms.
The advent of regulated markets has helped in mitigating the market handicaps of
producers/ sellers at the wholesale assembling level. but, the rural periodic markets in
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general, and the tribal markets in particular, remained out of its developmental ambit.
Agriculture sector needs well functioning markets to drive growth, employment and
economic prosperity in rural areas of the country. In order to provide dynamism and
efficiency into the marketing system, large investments are required for the development
of post harvest and cold chain infrastructure nearer to the farmers’ field. A major portion
of this investment is expected from the private sector, for which an appropriate regulatory
and policy environment is necessary. Alongside, enabling policies need to be put in place
to encourage procurement of agricultural commodities directly from farmers’ field and to
establish effective linkage between the farm production and the retail chain and food
processing industries. Accordingly, amendment to the State APMC Act for deregulation
of marketing system in the country is suggested to promote investment in marketing
infrastructure, motivating corporate sector to undertake direct marketing and to facilitate
a national integrated market. The Ministry of Agriculture formulated a model law on
agricultural marketing for guidance and adoption by State Governments. The model
legislation provides for establishment of Private Markets/Yards, Direct Purchase Centres,
Consumer/Farmers Markets for direct sale and promotion of Public Private Partnership in
the management and development of agricultural markets in the country. Provision has
also been made in the Act for constitution of State Agricultural Produce Marketing
Standards Bureau for promotion of Grading, Standardisation and Quality Certification of
agricultural produce. This would facilitate pledge financing, direct purchasing,
forward/future trading and exports. Several States have initiated steps for amending the
APMC Act.
CONTRACT FARMING/CONTRACT MARKETING
(Farmer-Processor Linkages)
Contract farming or marketing essentially is an arrangement between the farmer-
producers and the agri-business firms to produce certain pre-agreed quantity and quality
of the produce at a particular price and time. It can only be a pure procurement
transaction or can extend to the supply of inputs or even beyond. Contract farming is
emerging as an important mode of procurement of raw materials by agri-business firms in
India due to the developments in the field of agricultural marketing, changes in food
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habits and in agricultural technology in the new economic environment. This is an
important initiative for reducing transaction costs by establishing farmer-processor
linkages in addition to the already existing methods of linking the farmers to the
consumers. The distinction between 'sales' and 'contract to sell' needs to be understood
clearly. In the case of sale, the title or ownership of goods is transferred at once whereas
in the 'contract to sell', the goods are transferred at a later date. A contract to sell is not in
the true sense of the word a sale, rather it is merely an arrangement to sell. A contract is
an agreement but an agreement is not necessarily a contract. In contract farming,
companies or organizations engaged in processing and marketing of agricultural products
are entering into contracts with the farmers. They provide inputs to the farmers and buy
back the product at a rate specified in advance.
Following type of inputs and services are normally provided by the company to the
farmers.
Seeds of the variety they need for processing/marketing
Guide lines to grow the crops
Pesticides which do not result in residual toxicity
Extension services
Fertilizers/hormones required for the crop
Other material if not locally available.
The contract may be entered into by parties anytime from the start of the sowing
or planting to the harvesting, processing, packaging and marketing stage of the crop.
Normally, the contract is entered before the start of the sowing or planting because the
buyer can then stipulate the conditions cultivation, use of the seed variety needed by
them, use of pesticides and insecticides, and requirement of on farm grading, sorting,
packaging and processing. The buyer of the product generally keeps the right to monitor
the crop at every stage of its growth.Following documents are obtained/given to selected farmers by the companies:
Application/Registration form
Contract farming agreement
Issue of pass book
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Issue of ID Card
ADVANTAGES OF CONTRACT FARMING
Contract farming/marketing is beneficial both for the producer-farmers as well as to the
processing company in several ways:
To the farmer, contract farming -
(i) Reduces the risk of price/production
(ii) Ensures the price as market is assured
(iii) Increases the quality consciousness
(iv) Ensures higher production because of better quality seeds and pesticides.
(v) Reduces marketing costs
(vi) Provides financial support in cash or kind.
(vii) Ensures efficient/timely technical guidance almost free of cost.
To the company, contract farming-
(i) Ensures supply of quality agricultural produce at right time and at lesser cost to the
company
(ii) Canalizes direct private investment in agricultural activities.(iii) Ensures that the toxicity level is reduced as per requirement for export.
Government is increasingly looking towards the corporate sector to augment the
rural incomes and employment through agro-processing. In this context, policy makers
see the contract farming/marketing as an important avenue to ensure greater private
sector participation in agriculture.
FLIP SIDE OF CONTRACT FARMINGThe important weaknesses of contract farming are:
(i) Contract farming is involved mostly in cash crops which may lead to shift in area from
food
crops which, beyond a limit may endanger food security, biodiversity and agricultural
crops cycle of the country.
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(ii) Contract farming may create the danger of imposition of undesirable seeds.
(iii) The temptation of getting commercial profits from cultivation of a variety of the crop
may cause permanent damage to the land.
(iv) Market making outside the country may cause market breaking inside the country.
However, contract farming is a welcome development. But the contract should be
made under high scrutiny possibly because of exploitation of the farmers. The terms of
the contract should be spelt out in advance and a consent letter is obtained both from the
farmer and the company. The government should establish a monitoring mechanism and a
dispute settlement
body to ensure that both parties adhere to the terms of contract.
EXPERIENCES IN CONTRACT FARMING
The following companies are presently under the tie-ups in India for contract farming
for the products specified:
1. Poultry- Contract farming of broilers between the hatchery with farmers in
Coimbatore
2. ITC/WIMCO/JK Papers and farmers in Andhra Pradesh, Orissa, Punjab and Uttar
Pradesh.
3. Organic dyes - Marigold farmers and extraction units in Coimbatore.
4. Dairy processing - Chitale of Pune and small farmers in Maharashtra and Gujarat.
5. Pepsi Company and farmers of Punjab and Rajasthan for tomato growing.
6. Exotic vegetables - Trikaya Foods NST and small farmers of Maharashtra and
Andhra Pradesh.
7. NAFED and Sonepat (Haryana) farmers.
8. Exporters with farmers of Bangalore.
9. ITC Agro-Tech and sunflower cultivators in Andhra Pradesh and Karnataka.
Other areas where farmer processor linkage (contract farming) is being practiced in India
are:
Baby corn cultivation
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Tomatoes for manufacture of sauce and ketchup
Chillies for manufacture of chilly paste
Garlic and onion for manufacture of paste, powder and dehydrated
products
Special varieties of Banana
Potato for making chips and wafers
Barley in making of bears
Onions and Mandarin Oranges
Durum Wheat
Pulpwood
Tomato pulp
Mushrooms
Gherkins
Edible oils
Presently contract farming is confined to few selected crops in selected pockets.
However, here is enormous scope for contract farming/marketing because with the
increasing income, consumers are becoming more health and quality consciousness and
look for branded products.
INCENTIVES FOR PROMOTING CONTRACT FARMING
Contract farming is means of allocating/distribution of risk between processor and
the farmers. It will succeed if both the parties share the risks and rewards. The Ministry
of Food Processing Industries of Government of India has launched a scheme entitled
'Grant under Backward Linkages' to promote contract farming. Under this scheme, a
grant of 10 percent of value of raw material purchased from the contract farmers (subject
to a maximum of Rs. 10 lakhs per annum) is provided to food processing units upto three
years. The Ministry has also prescribed a model agreement form. The criteria for the
grant are:
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(i) The processing unit should provide seed, insecticides, fertilizers and extension
services to contract farmers at reasonable charges.
(ii) The number of contract farmers should be atleast 25.
(iii) There should be an agreement prior to the period of contract farming for a maximum
period of one year.
(iv) The processing unit should give advance intimation about its contract with farmers to
the Ministry as well as State Nodal Authority (One Month before the contract comes into
operation).
(v) The claim for reimbursement should be recommended by the State Nodal Authority.
THE FRESH (RETAIL) REVOLUTION IN INDIA : Cause of concern or happiness
Organized retailing in Fresh Fruits and Vegetables (FFV) is gaining a lot of
momentum in India with huge investment by leading Indian corporations in this area. Modern
formats of supermarkets such as Reliance Fresh, Choupal Fresh, Food World, etc. promoted
by different companies are emerging very rapidly in small and large towns around the
country. Two of the major players in the supermarket sector in the country are Reliance
Industries and Bharti- Walmart tie up. Other key players include ITC, Food World (JV of
RPG Group of India and Dairy Farm International based in Hong Kong), Spencer, Godrej,
Pantaloon (Big Baazar and Food Baazar), Subhiksha and Aditya Birla Group. From thedevelopment perspective, literature review of the evolution of supermarkets in other
developing countries suggests that these changes have strong implications for the small and
marginal farmers. Experiences of these countries suggest that the development efforts in this
area are based on three grounds: First, farmers associated with the modern value chains earn
higher returns than selling to the traditional markets. Second, the modern supply chains have
specific quality requirements which are easier to meet by the large and medium farmers and
the small farmers tend to get left out of these markets. Third, there are several successful
examples of linking small farmers to these modern value chains with effort from government
agencies, NGOs and development agencies. The concept of organised retail has been
existing in India since early 80s with the existence of players like Mother Dairy and Safal
but it's only in past one year that the fever of retail in FFV has caught up fast. Bargaining
with the vendor to reduce price, moving out early in the morning for the mandi to get
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fresh fruits and vegetables, sweating profusely and trying to find a way out in the hustle
bustle of the crowd, a nagging feeling of weighing machine not being correct and many
more. On the contrary, there is a fixed price shop with prices at par and sometimes even
less than your nearest vegetable vendor, getting fresh fruits and vegetables at any time of
the day and shopping in the luxury of ACs, paying for exactly 867gms of onion, etc.
That's exactly where retail in fresh fruits and vegetables (FFV) come into picture. India is
the second largest producer of fruits and vegetables, next only to China and the total
cultivated area of fruits and vegetables is around 12 million hectares, which is close to
7% of the total cultivated area. India produces around 90 million tonnes of vegetables and
40 million tonnes of fruit every year. This accounts for 13.7% of global production in
vegetables and around 10% in global production of fruits. The total market size for fresh
fruits and vegetables in India is Rs 145,000 crores and organised retail in this segment is
a miniscule 300 crores. Fruits and vegetables constitute about 22% of the average
monthly household consumption expenditure in urban areas of Rs 4,300. Food and
groceries as a whole accounts for about 50% of the monthly expenditure. This is the
rationale for setting up exclusive food and grocery stores, with at least 30% of space
reserved for fruits and vegetables. These figure reflects the huge untapped potential in
the Indian FFV market. The concept of organised retail has been existing in India since
early 80s with the existence of players like Mother Dairy and Safal but it's only in past
one year that the fever of retail in FFV has caught up really fast. In the past three months
60 new outlets have opened across various parts of the country. Earlier the marketing of
fruits and vegetables was undertaken by the farmer’s cooperatives only. Now a number of
big corporate houses like Reliance, ITC, Aditya Birla Group, Godrej, and Bharti have
entered into the retailing of fresh fruits and vegetables. Some of the retail and wholesale
stores area already under operations by the name of Reliance fresh, Choupal fresh,
Namdhari’s fresh etc. ITC, Metro and Adani fresh are also entering into wholesaling.
Exports of fresh fruits and vegetables are being done with EUREPGAP certification by
Namdhari fresh and Bharti Airtel. They have developed a supply chain with forward and
backward linkages operating in an efficient manner with heavy investments in
infrastructure and cold chain. These business houses have indicated that contract farming
may get them timely, consistent and adequate supply of produce of good quality.
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Challenges and Opportunities The present agriculture supply chain has tremendous
amount of inefficiencies at the farm level, the intermediary level and at the marketing and
distribution level.
About 60% of the land is with small and medium farmers. These farmers are not left with
much of bargaining power and hence are left exploited at the hands of intermediaries.
Until recently, the private sector was restricted from directly purchasing agricultural
produce from farmers. The infrastructure of mandis is lacking and the mandis are mired
with inefficiencies. Another inefficiency existent in the structure is the large mark-ups
between the farmers' realization and the final consumers' price. Retail chain outlets
reduce these inefficiencies to a significant level. Efforts are seen from big retail players to
improve the efficiency of the agriculture supply chain helping both, the farmers, on onehand (by having fair prices for their produce) and the customer, on the other hand (by
giving them a fair price and a comfortable shopping experience). Better price for farmers
is the high point of the policy sales pitch of everybody, from the government to retail
chains. There is a great amount of wastage happening post harvest. This wastage is to the
tune of nearly 25-30 percent of the total produce. The reason for this loss is the shortages
of the cold storage facilities and refrigerated transport. Wastage will reduce when the
same company handles the produce from the farm to the fork, as against now, when farm
produce goes through several levels of wholesale and territory traders before reaching the
retailer. Losses would further reduce with investments in cold-storage. Add to this
difficulty of cold storage, the opposition that the retail outlets face is from the small
vendors. The recent protests in three major cities (Ranchi, Bhubaneswar and Lucknow)
against the opening of Reliance fresh are evidence to the opposition that comes from
small vendors. Whether this fear of small vendors is founded in reason or hype will be
discussed in the next section and is there a reason at all for these small vendors to be
afraid of? Effect on Small Players India has an estimated 12 million street vendors in its
cities-the 2004 National Policy for Urban Street Vendors pegs it at 10 million-and
roughly 2.5 per cent of each city's population is engaged in vending on streets. About
one-fourth of these vendors sell vegetables and fruits which brings their number close to
3 million.
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still prefer the loose option. Most Indians still like to touch and feel the products. Some
customers are wary of packed products partly because they are seen to perish faster.
When the vegetables breathe, they cause humidity inside the pack that could lead to
fungal growth. But there are others who think fewer people would have touched the
packed stuff, so they prefer that. Besides, it’s very convenient for those like working
couples who are in a hurry. Reliance has thin plastic bag rolls around the store which
customers can pull out to put their vegetables or fruits into. There’s even a weighing scale
next to the racks for anybody who wants to check the weight before going to the cash
counter. Most are planning to offer the home delivery option, and even of taking orders
on the phone. But phone-ordering will require us to build a lot of confidence in people’s
minds about the quality. The prices in the newer stores are competitive with general
market prices. In some cases, it is actually lower, but whether these will be sustained
remains to be seen. Most of these players eliminate part of the ‘middle-men’ costs and
reduce wastage by handling the products better. But against these benefits are the
significantly higher infrastructure and retail costs, compared to those borne by the
roadside vendor. The cut vegetables are likely to offer higher margins. While shredded
carrots are sold by Reliance in a packed form at Rs 3.60 for 250 gms (or Rs 14.40 a kg),
the same carrot in its loose form is Rs 11.50 a kg. Part of this difference is on account of
greater wastage when a shredding machine is used. Farm connect Most players are
investing heavily in backend infrastructure and supply chain. There are collection centres
of different companies across the states , where farmers come and deliver the produce.
Spencer’s has its own huge farm in Hoskote. There are processing centres and
distribution centres closer to the store locations. The processing centres are where the
products get cut and cleaned, most of those operations untouched by human hands. Big
investments have gone into setting up cooling facilities — in every location and in the
transport vehicles — to minimise wastage and increase shelf-life. Normally, a lot of the
capsicum and tomato are broken in transport. But as companies provide crates to farmers,
which ensure proper handling.
SAFAL MARKET CASE STUDY:
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The supply chains to run on their efficiency level need to build a long term
relation between the retailers and farmers for procurement and to provide extension
services regarding use of inputs, production technology, information on harvesting,
prices, precooling, grading, sorting, packaging and on-farm sorting. There is a strong
need of government initiative in removing the infrastructural constraints like setting up of
distribution centres, cold chains, roads to the markets are important. Ensuring quality and
quantity of the produce to the stores is another must requirement for smooth functioning
of the supply chain. If these constraints are removed then a regular and uninterrupted
supply of the produce is assured. Setting up of an alternate terminal market by SAFAL
Market is a move in this direction. The existing traditional system of wholesale market is
a set up where a commission agent procures the produce from the farmers at a price after
cutting for his charge and then sells the produce in the wholesale market to traders and
retailers. There might be more than one commission agent in between this chain. This
market has the problems of unorganised small farmers who lack market power, they have
low share in the final consumer price, the produce is distributed through the commission
agents that have no incentive for the quality and the wholesale markets are poorly
designed and congested (Coulter, 2004). The traditional Indian markets have a non-
existent infrastructure of packing, grading, sorting and cold storages. The commission
agents and traders dominate the supply chain and are the major price setters, thus most of
the times farmers are dependent on them for credit. Farmers are not aware of the price
setting mechanisms as the system is not transparent and thus don’t have any incentive to
produce efficiently. Wholesale markets are not clean, lack cold storage network and thus
huge wastage of fresh produce is observed, this wastage range between 20-40 per cent.
Institutions like cooperatives, contract farming and growers association are considered to
improve producers access to markets, minimise transaction costs and remove production
constraints. It is believed that a single gateway to the regulated markets would save time
and improve efficiency. Ever since the India’s National Agriculture Policy has envisaged
the participation of the private sector through contract farming and land leasing
arrangements to allow accelerated technology transfer, capital inflow and assured market
for crop production, especially of oilseeds, cotton and horticultural crops, investment in
food processing industry on part of the private sector is being encouraged. This would
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help farmers of fruits and vegetables through backward linkages of such investment. It is
a much felt need that the role of private institutions is to be encourages as the
government’s ability to intervene is seriously constrained by resources
(Chengappa,2006). Vertical coordination of farmers with cooperatives, contract farming
and retail chains would facilitate them to deliver better output due to lower market risk,
better infrastructure, public investment, acquired extension services, created awareness to
prevailing and new technologies, better prices stable income etc. Its multiplier effect
helps in increasing incomes, output and employment (Birthal et.al, 2007).. National Dairy
Development Board (NDDB) started with a Fruit and Vegetable Unit of SAFAL at Delhi
which was one of the first fruit and vegetable retail chain set up as a unit of Mother Dairy
Foods Processing Ltd. The retail unit provided a direct link between fruit and vegetable
growers and consumers. The other initiative was a fruit processing Plant of SAFAL at
Mumbai, a 100 per cent export oriented unit, which capitalizes NDDB's food processing
strength. NDDB has set up an alternate system of wholesale markets in Bangalore as a
pilot project. The initiative is named as SAFAL Market and is initiated to fine-tune
horticultural growth in India, by a shift in their earlier retail chain model to a wholesale
market concept. This market is a move to introduce a transparent and efficient platform
for sale and purchase of horticultural produce by connecting growers through Growers’
Associations with farmers and wholesale buyers in various markets across the country.
The model involves establishment of an alternate marketing structure that provides
incentive for quality and productivity thereby improving farmer’s income. Through this
approach there is an expected increased integration between growers, wholesalers and
retailers into the market system. SAFAL Market operates outside the purview of the
APMC act and the Government of Karnataka is the first State government to amend the
Agricultural Produce Marketing (Regulation) Act to enable NDDB to own and operate
such a market. SAFAL Market is a government initiative and located near Bangalore,
Karnataka and emphasise on fresh fruits and vegetables only. Bangalore is a major
horticultural producing state with a total area under horticulture of 15.3 lakh hectares.
Bangalore has a huge floating population of around 8 per cent of the total Bangalore
population and the per capita demand of horticultural produce is very large, because the
city is fast growing with lot of information technology jobs. The state has a number of
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horticultural satellite markets and four major wholesale markets. The existence of large
and diverse market functionaries like commission agents, pre-harvest contractors, push
cart vendors etc. indicate existence of competitive environment in the horticulture market
in Bangalore (Chengappa and Nagaraj, 2005). Bangalore has seen number of retail chains
and new models being initiated in last few years, but SAFAL market is the first one of its
kind to establish a terminal wholesale market. The impact of its operations are evident on
farmers, traders and retailers. The following sections would highlight on the structure and
functioning, supply chain, forward and backward linkages, constrains and achievements
in this terminal market. A traditional commission agent was charging them 8-10 per cent
while the handling charges at SAFAL market are only 4.25 per cent (Chengappa and
Nagaraj, 2005). Farmers selling their produce to SAFAL realize 10 to 15 per cent higher
profit as compared with traditional channel (Chengappa and Nagaraj, 2005). SAFAL
Market on large has been operating successfully in over coming the constraints that the
fresh fruits and vegetables marketing is facing in India. It has been able to establish an
efficient supply chain both in backward and forward linkages. An experiment of
backward and forward integration provided by NDDB- SAFAL has benefited the farmers
immensely (Chengappa, 2006). moving ahead, SAFAL has recently set up a National
Exchange of India, which is the country's first spot exchange for trading on perishable
agri-commodities including horticulture, floriculture, dairy products and other allied
commodities. This will provide on-line trading access to farmers, milk producer’s
organisations and traders across the country. The move to introduce high-tech farm
terminals will attempt to provide backward and forward linkages and is an outcome of
change in approach to agricultural marketing in India. Farmers are satisfied with the in
time payment, transparency, good price and quality of produce procured through SAFAL
market.
FUTURES MARKET
Revival of agricultural commodity futures market in India in early 2000 after the
ban in 1960s has helped in integrating the food grains and other agricultural goods
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markets through price discovery and price risk management. Fruits and vegetables can
also become a part of futures trading through the national commodity exchanges. At the
moment due to their perishable nature, short shelf life, inefficient storage facilities and
low year long availability the horticulture products have not entered the futures trading.
The involvement of the private institution in this process will help in getting the
horticulture produce linked to markets through more private investment. Development of
the infrastructure, availability of new techniques in this process will further help in
growth of the horticulture sector. SAFAL Market is collaborating with Multi Commodity
Exchange (MCX) for creating a SAFAL National Exchange exclusively for horticulture
produce spot trading and the operations are expected to begin by March, 2008. This
would be an electronic p[platform for perishable commodities and thus would help in
integrating the producers and buyers from different parts of the country. The transparent
price system would be able to create price awareness, leading to a creating a better price
discovery. This would further lead to linking up of all the stake holders and also reduce
post harvest losses due to storage and transportation. The system would facilitate delivery
of the produce from the shortest possible production area, leading to further reduction in
transportation cost. This will be a step forward for the development of the horticulture
sector.
ONLINE /E- TRADING OF FRUITS & VEGETABLES
Overview:
Safal National Exchange of India Ltd. (SNX) provides a technology based
competitive market place with wide choice to farmers in Marketing of their perishables
and other allied produce in a fair and a transparent manner by using modern IT and
improved Logistic. It is a joint venture between Mother Dairy Foods Processing
Limited(MDFPL)- a wholly owned subsidiary of National Dairy Development Board of
India (NDDB), MCX and Financial Technologies Ltd It provides a platform, where seller
can sell at the best possible rate, buyers can buy at the most competitive rate and SNX
would provide counter party guarantee in respect of all trades.SNX facilitates provision
of services like quality certification, Warehousing and Logistics and other customized
value added services .Thus SNX offers Power of Exchange technology in combination
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with the F & V Expertise under a single banner, for the good of producer & consumer, in
an electronic spot market
1. Empower farmer in price discovery; Growers will have option to conclude price
for their produce for sale prior to harvest
2. Minimal intermediation- better quality, lower transaction cost
3. Narrower price spread: Farmer-Consumer
4. Trading terminals all over the country, truly National
5. Payments are guaranteed
6. Quality certification protocol administered by SNX
7. Initially on a handful of crops, finally all F&V items with negative list
8. Improvement in post harvest practices for better shelf life and Quality of Grading,Packing & Overall delivery, match with rapidly raising expectations of quality by
average urbanite
Vision:
One India One Market: A national level transparent equal opportunity e- enabledmarket for all
Mission:
A seamless national electronic market an hour from every F & V farm enabled by
Transparent online trading and a rule based clearing system abd ensuring final settlement
Price discovery only by market forces enabling equal and fair opportunity to all Real time
market information dissemination availble to all Snx would derisk the farmer from price
fluctuations besides also maximising revenues Enable farmer on imrpoved post harvest
practices imrpoving shlef life and product presentation
Promoters:
(i) Mother Dairy: Mother Dairy, Delhi was set up in 1974 under the Operation Flood
Programme. It is now a subsidiary company of National Dairy Development Board
(NDDB). Mother Dairy sources its entire requirement of liquid milk from dairy
cooperatives. Similarly, Mother Dairy sources fruits and vegetables from farmers/
growers associations. It is Mother Dairy's constant endeavor to ensure that milk
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producers and farmers regularly and continually receive market prices by offering quality
milk, milk products and other food products to consumers at competitive prices and
uphold institutional structures that empower milk producers and farmers through
processes that are equitable. Mother Dairy markets dairy products like Liquid Milk, Ice
Creams, Flavoured Milk, Dahi, Lassi, Mishti Doi, Ghee, Butter, Cheese, Dairy Whitener,
UHT Milk, Dhara range of edible oils and the Safal range of fresh fruits & vegetables,
frozen vegetables and fruit juices at a national level, through it's sales and distribution
networks, for marketing food items. In times to come, Mother Dairy shall strive to
become a leading player in the food industry in India.
(ii) National Dairy Development Board: The National Dairy Development Board
(NDDB) was founded in 1965 to replace exploitation with empowerment, tradition withmodernity, stagnation with growth, transforming dairying into an instrument for the
development of India's rural people. In addition, NDDB also promotes other commodity-
based cooperatives, allied industries and veterinary biologicals on an intensive and
nation-wide basis.NDDB’s established dairy cooperative movement and their expertise in
post harvest management including quality control and supply chain management will
give the exchange a leading edge in taking the electronic Horticulture spot market to the
India farmers.
(iii) Multi Commodity Exchange of India Limited: MCX is an independent and de-
mutualised multi commodity exchange. It was inaugurated on November 10, 2003 and
has permanent recognition from the Government of India for facilitating online trading,
clearing and settlement operations for commodities futures market across the country.
Today, MCX features amongst the world's top three bullion exchanges and top four
energy exchanges. MCX offers a wide spectrum of opportunities to a large cross section
of participants including producers/ processors, traders, corporate, regional trading
centre, importers, exporters, co-operatives and industry associations amongst others.
Headquartered in the financial capital of India, Mumbai, MCX is led by an expert
management team with deep domain knowledge of the commodities futures market.
Presently, the average daily turnover of MCX is around USD1.55 bn (Rs.7, 000 crore -
April 2006), with a record peak turnover of USD3.98 bn (Rs.17, 987 crore) on April 20,
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2006. In the first calendar quarter of 2006, MCX holds more than 55% market share of
the total trading volume of all the domestic commodity exchanges. The exchange has also
affected large deliveries in domestic commodities, signifying the efficiency of price
discovery. Being a nation-wide commodity exchange having state-of-the-art
infrastructure, offering multiple commodities for trading with wide reach and penetration,
MCX is well placed to tap the vast potential poised by the commodities market.
(iv) Financial Technologies India Limited: FTIL proven mettle of End-To-End
exchange trading technologies addressing trading/ surveillance/ clearing and settlement
operations help enhance the SNX Trade Life Cycle operations (Pre-Trade, Trade and
Post-Trade). In addition to its technological capabilities, FTIL also brings to SNX its
associations with technology giants such as Microsoft/ Intel and HP. FTIL has promoted
India No 1 commodity exchange (Market share more than 62%) world’s 2nd largest
exchange in Silver & Natural Gas trading volumes and the world’s 3rd largest exchange
in gold trading volumes. MCX also is among the top ten commodity derivatives
exchanges in the world.
BENEFITS:
Direct Benefits to Farmers
1. Transparent pricing mechanism: real time price quote accessible
2. Accessibility to National Level Markets: as buyers from all over the nation is
connected in the system
3. Price manipulation is restricted to larger extent: since the system allows the
participation at national level there is no room for manipulation by any group of
traders. And the Maximum allowable open position imposed at member level will
restrict the volume handled by individual member
4. Distress selling avoided to larger extent: unlike in the existing mechanism
wherein farmer sells the produce after brining the produce to market place. In the
proposed mechanism farmer will first sell his produce and than delivers at later
stage
5. Assured and prompt payment: exchange will take the third party guarantee to all
the trade that takes place on the exchange platform
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Indirect Benefits to Farmers
1. Increase in productivity
2. Reduction in cost of production
3. Reduction in post harvest losses
4. Increase in marketable yield
5. Increase in quality of the produce produced
6. Access to extension services
7. Increase in risk taking capabilities of farmers
8. Inspire co-operation
Benefits to Traders/Commission agents/Forwarders
1. Traders would get a bigger market, where they can sell huge quantity
2. 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
3. Since large number of investors from all across the country would be available at
SNX platform, they can realize better price for their product
4. They can expand their activities to multiple commodities, because of operational
ease, availability of finance and absence of counter party risk under SNX system
Benefits to Exporters/Processors
1. Buy certified quality material through a secured platform
2. Avoid hassles relating to procurement of material in physical market
3. Looking at the price available at SNX, they can make export commitment and
cover themselves immediately by buying at SNX
4. Customized services regarding logistics can be provided
ASSOCIATES & PARTNERS:
TRADING:
Trading Mechanism
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SNX follows the system of price-time priority for order matching. Members place
orders on their Trader Work Stations (TWS) and the orders get matched and executed
through the order book in the Trading engine. Members have a facility to download
various reports, by connecting FTP, through which they can access the reports such as
Bhav Copy, Contract Master, Trade Report, Margin Report at the end of trading.
Transparent trading mechanism and efficient risk management, combined with effective
surveillance, enhances the trust among the participants in SNX, for realizing reasonable
price for the produce of the farmers and other participants.
Risk Management:
Surveillance: The surveillance mechanism at SNX includes the monitoring of price
movement, volatility, through real-time alerts, etc. Surveillance is also carried out in
monitoring positions, granting limits, investigating, by adopting various techniques.
Exposure Limits: The Surveillance of SNX will fix the trading limits for each Member,
depending on the margin available to their credit and monitor their positions online.
Initial Margin (IM): SNX levies initial margin (IM) on open positions of Members and
their clients for both buy and sell. The percentage of IM varies depending on the
commodity and its volatility. IM is calculated and reduced from the total margin of a
Member available with SNX. Exposure is given to Members, based on the balance
amount available with SNX. When the Initial Margin increases, the exposure will
automatically decrease.
Mark-to-Market Margin (MTM): SNX has devised a mechanism of MTM margin to
prevent any potential loss due to price volatility, in which case the Members or their
clients may commit default. SNX will mark all trades and open positions for the day on
closing price, by which the notional gain or loss is calculated compared to the trade price.
Such gain / loss is credited / debited to the respective Member’s account on T+1 day. The
CnS software automatically calculates Mark to Market margins on a daily basis.
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SAFAL National Exchange of India Ltd (SNX)” an online perishable commodity
Exchange, prompted by a joint venture of NDDB, Mother Dairy & FTIL-MCX.
Headquartered in Bangalore, SNX is led by an expert management team, with deep
knowledge of the horticulture markets.With the production estimated at around 140
million tonnes, one fourth of the global output, the Indian commodities market offers
unparalleled growth opportunities to a large section of the market.SNX has opened its
national membership, as Trading-cum-Clearing Member (TCM). Membership on SNX
offers benefits in more than one ways for market participants. It has sound technology
infrastructure through its association with market leaders such as Stratus for Fault
Tolerant Servers, Financial Technologies (India) Ltd. for Exchange Technologies, and a
panel of banks for funds transfer.
SNX V/S Existing Market
(i) Number of Buyers and Sellers: From every nook & corner of all producing centres
in the country simultaneously present, Limited to local participants
(ii) Bargaining Power: Faceless bid, price offer by seller based only on grade with no
other inputs such as profile of seller, body language, etc., Small lots by small farmers
would invariably be at a discount
(iii) Right to reject offered price : Absolute right to define price expectation and also
modify based on the farmer's judgement/need, Virtually not an option to reject as the
produce is out in the market, besides pressures of having to return to the same trader next
day
(iv) Dependence on Local Traders: Minimised as there are options of selling on the
exchange through Farmer Association, Perpetual dependence on local traders
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(v) Trade system: Has the option to first conclude on the price and later delivers
produce at delivery center, Produce to be physically brought to the market for finding
out price
(vi) Grades standardization: Standardization with dispute redressal system, Informal
standardization without an effective grievance redressal system for the farmer
(vii) Price Quotation: Both buyers and seller can quote their price, Seller is the price
taker
(vii) Effect of supply- Demand balance: Based on demand and supply at national level,
Limited to local balance, impact of distant market situations leveraged by middlemen
(viii) Price dissemination: Multiple Channel- electronic-instantaneous-all key centres
Limited sources after a lag of a day often, more as data than as a
decision tool for the farmer
(ix) Payment: Immediately after the sale, Varies from 1 week to 1 month
PRODUCTS:
Mango,Banana,Onion,Tomato,Potato,Aplle,Citrus and Grapes
Fruits
Apple : Royal Delicious, J & K Delicious, Mango: Bangenpalli, Totapari
and
Banana : Dwarf Cavendish
Vegetables
Potato : Kufri Bahar , Onion: Nashik Red and Tomato:Hybrids
CONTACT :
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Safal National Exchange of India Ltd. /SNX
Safalmarket
Whitefield-HoskoteHighway
Bangalore-560067
Ph:(080)25053000
Fax: (080) 28457382
Web:http::/www.snxindia.com or, safalindia.com
Email : [email protected]
FINDINGS
1. “India is a land of huge potential... and always will be.”
2. India’s own market for high quality fruit and vegetables is also growing stronglyas its middle-class expands
3. Snail-like progress of the country’s F & V industry: Lack of infrastructure,fragmented production and poor quality standards
4. Along with the desi-corporate houses big-hitters in the global fresh produce tradeare now taking the opportunity to capitalise on India’s vast procurement potential
RANDOM THOUGHTS…….(PRESUMPTIONS)
1. After 5 years, with the most optimistic estimate the organized retailing sector willstill not handle more than 20% of the produce
2. Most of the fresh produce will still be going to fresh market
3. Importance of traditional markets and the efforts to upgrade the traditional marketcannot be ignored
4. Need to avoid dichotomy in the agriculture sector – those selling to modern
chains and others caught up in the low value traditional chains
CONCLUSION: POLICY AND STRATEGIES
Development of agriculture in India needs some critical management inputs
particularly that of supply chain management- collaboration among various stake-holders
along with efficient vertical and horizontal integration. The horticulture sector in
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particular has to prioritize development of research in the issues of genetics,
biotechnology, integrated and sustainable production systems, post harvest handling,
storage, marketing and consumer education. Government should create a policy
environment that will ensure a mutually beneficial relationship between farmers and
organised sector. Along with investment in infrastructure, development of extension
activities and linkages with farmers is also important areas where government can play
influential roles. After the successful trials of SAFAL Market in Bangalore, many state
governments have expressed their desire to establish similar markets after they have
amended their State APMC acts (NDDB, 2004-05).
The two golden rules for successful development of the horticulture sector are to
ensure
consistency in supply; and provide recorded and demonstrated traceability of products.
Thus, production and marketing strategies are the most crucial in strategy development.
The development strategy should be based on innovation. Production innovations initially
focused on efficiency and effectiveness in order to increase yields and lower costs.
India being a land of small and marginal farmers and studies have being
advocating the fact that small farmers are going to feed India, thus it is important to
mobilise them and help them to diversify to meet the increasing domestic demand of
horticulture products. Small farmers are key to initiate the horticultural revolution and
with technical change and increase in international competitiveness large scale operations
and vertical integration takes place. Linking small farmers with high value urban and
export markets would lead to development and growth of the rural sector. Horticultural
crop diversification should be encouraged by intercropping horticultural with non-
horticultural crops without being a threat to the nation’s food security and biodiversity.
This will yield more food, more income, and better soil health. There is a strong need to
strengthen research on horticultural crops to develop demand driven technology by
improved variety, pest management, etc. in both public and private sectors. These
technologies should be quickly disseminated through government institutions, NGOs and
even private participants by encouraging farmers’ participation and upgrading their
technical capabilities.
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The horticultural development requires a minimum set of basic production
factors, and further requires an optimal crop management and developing a post-harvest
infrastructure; entrepreneurial management and horticultural expertise; logistical
infrastructure; and supporting financial infrastructure. Thus the production strategy
should target not only meeting domestic and export demand of fresh products but also of
the processed products. Improving post harvest operations related to handling, storage,
and marketing of fresh and processed produce. Volumes saved in post harvest losses are
actually the surpluses generated, without additional cost. Horticulture sector needs to be
developed as an organised industry and has to be run collectively by all the stake holders
with farmers as the entrepreneurs. The marketing cost of fruits and vegetables is almost
50 per cent of the total cost of production, thus, there is a need to set up institutionalagencies that can advance credit to farmer and motive them to market the produce
themselves.
Post harvest losses in horticultural crops range from 15-50 per cent. At micro
level these looses increase the marketing cost of the product and at macro level they also
reduce the per capita availability. Thus there is need to develop technologies, methods
and mechanics to reduce these losses. There is need to remove the distortions in the
present supply chain, create more integration between the different links of the supply
chain and reduce these losses. This will result in net gain to producers, consumers and to
the nation. Farmers usually procure inputs from the retail market and end up selling their
produce in the wholesale market. Buying at retail price and selling at wholesale price is
the most uneconomic way of business. Thus the involvement of an institutional structure
in coordinating the demand of individual farmers of the village can reduce the total cost
of inputs to them. The market needs to be demand driven rather than supply driven. The
price of the produce should not be based on the prevailing whole sale price but on the
basis of cost of cultivation of that produce. Farmers should be their own price setters
rather than price followers.
There is also an immediate need to integrate the production, marketing and
processing processes of the produce to get maximum benefits from fruits and vegetables
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cultivation. There are problem with price structure in the marketing, the price offered by
them is not justifying the prevailing whole sale price or even the cost of production of the
produce. Further successful implementing of the core marketing strategies will help in
future expansion of the domestic and international markets. But the exports face certain
tariff and non-tariff barriers too. To enhance exports their is a need to develop air
transport cargo system specialised for fresh fruits and vegetables, along with the airports,
road and rail connectivity with the area of procurements. Countries capability to generate
surpluses for exports depend on its ability to tab the potential of small farmers. For this
assistance from APEDA and exporters association as well as training to the farmers is
necessary. Quality control, longer shelf life is crucial for exports. Organic production of
fresh fruits and vegetable is important to capture markets in Europe.
Several steps are required to improve the agricultural supply chain. Farmers
should start dealing with large corporate, which in-turn would reduce large mark-up due
to the large number of intermediaries coming into picture. Contract farming is likely to
start by large retail players who will start dealing with the farmers, providing them with
the right quantity and timely supply of inputs and ensuring the forward links upto the
disposal front. As competition by the private sector players increase, investment in
logistics and infrastructure would also increase which would lead to an increase in the
efficiency of complete agricultural chain.
One important measure would be to bring more markets under regulation and
supervision of a well-represented market committee. Another measure would be the
promotion and perhaps enforcement of open auctions in the markets. Yet another measure
could be efforts to bring more buyers and sellers into the markets, bringing them closer to
perfect markets. The direct participation of farmers should be increased. Market
infrastructure should be improved through storage (go-down) facilities, cold storages,
loading and weighing facilities. Improvement in the road network, and cold-chain
facilities are also of substantial importance. Greater transparency of the operations
through supervision and systems can also help substantially. The market integration and
efficiency can also be improved by making up-to-date market information available to all
participants through various means, including a good market information systems,
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internet and good telecommunications facilities at the markets. Thus, efforts are needed
in the direction to capitalize on our strengths and remove constrains to meet the goal of
moving towards a horticulture lead agricultural growth in India.
ONLINE /E- MARKETING OF FRUITS & VEGETABLES
OVERVIEW:
Safal National Exchange of India Ltd. (SNX) provides a technology basedcompetitive market place with wide choice to farmers in Marketing of their perishablesand other allied produce in a fair and a transparent manner by using modern IT andimproved Logistic. It is a joint venture between Mother Dairy Foods Processing
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Limited(MDFPL)- a wholly owned subsidiary of National Dairy Development Board of India (NDDB), MCX and Financial Technologies Ltd It provides a platform, where seller can sell at the best possible rate, buyers can buy at the most competitive rate and SNXwould provide counter party guarantee in respect of all trades.SNX facilitates provisionof services like quality certification, Warehousing and Logistics and other customized
value added services .Thus SNX offers Power of Exchange technology in combinationwith the F & V Expertise under a single banner, for the good of producer & consumer, inan electronic spot market
9. Empower farmer in price discovery; Growers will have option to conclude pricefor their produce for sale prior to harvest
10. Minimal intermediation- better quality, lower transaction cost11. Narrower price spread: Farmer-Consumer 12. Trading terminals all over the country, truly National13. Payments are guaranteed14. Quality certification protocol administered by SNX15. Initially on a handful of crops, finally all F&V items with negative list
16. Improvement in post harvest practices for better shelf life and Quality of Grading,Packing & Overall delivery, match with rapidly raising expectations of quality byaverage urbanite
VISION:
One India One Market: A national level transparent equal opportunity e- enabledmarket for all
MISSION:
A seamless national electronic market an hour from every F & V farm enabled byTransparent online trading and a rule based clearing system abd ensuring final settlementPrice discovery only by market forces enabling equal and fair opportunity to allReal time market information dissemination availble to all Snx would derisk the farmer from price fluctuations besides also maximising revenues Enable farmer on imrpoved post harvest practices imrpoving shlef life and product presentation
PROMOTERS:
(i) Mother Dairy: Mother Dairy, Delhi was set up in 1974 under the Operation FloodProgramme. It is now a subsidiary company of National Dairy Development Board(NDDB). Mother Dairy sources its entire requirement of liquid milk from dairycooperatives. Similarly, Mother Dairy sources fruits and vegetables from farmers/growers associations. It is Mother Dairy's constant endeavor to ensure that milk producers and farmers regularly and continually receive market prices by offering qualitymilk, milk products and other food products to consumers at competitive prices and;uphold institutional structures that empower milk producers and farmers through processes that are equitable. Mother Dairy markets dairy products like Liquid Milk, IceCreams, Flavoured Milk, Dahi, Lassi, Mishti Doi, Ghee, Butter, Cheese, Dairy Whitener,UHT Milk, Dhara range of edible oils and the Safal range of fresh fruits & vegetables,frozen vegetables and fruit juices at a national level, through it's sales and distribution
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networks, for marketing food items. In times to come, Mother Dairy shall strive to become a leading player in the food industry in India. (ii) National Dairy Development Board: The National Dairy Development Board(NDDB) was founded in 1965 to replace exploitation with empowerment, tradition with
modernity, stagnation with growth, transforming dairying into an instrument for thedevelopment of India's rural people. NDDB began its operations with the mission of making dairying a vehicle to a better future for millions of grassroots milk producers. Themission achieved thrust and direction with the launching of ”Operation Flood", a programme extending over 26 years and which used World Bank loan to finance India'semergence as the world's largest milk producing nation. Operation Flood's third phasewas completed in 1996 and has to its credit a number of significant achievements.As onMarch 2006, India’s 1,17,575 village dairy cooperatives federated into 170 milk unionsand 15 federations procured on an average 21.5 million litres of milk every day. 12.4million farmers are presently members of village dairy cooperatives. Since its inception,the Dairy Board has planned and spearheaded India's dairy programmes by placing dairy
development in the hands of milk producers and the professionals they employ to managetheir cooperatives. In addition, NDDB also promotes other commodity-basedcooperatives, allied industries and veterinary biologicals on an intensive and nation-wide basis.NDDB’s established dairy cooperative movement and their expertise in post harvestmanagement including QC and supply chain management will give the exchange aleading edge in taking the electronic Horticulture spot market to the India farmers. (iii) Multi Commodity Exchange of India Limited: MCX is an independent and de-mutualised multi commodity exchange. It was inaugurated on November 10, 2003 by Mr.Mukesh Ambani, Chairman and Managing Director, Reliance Industries Ltd.; and has permanent recognition from the Government of India for facilitating online trading,clearing and settlement operations for commodities futures market across the country.Today, MCX features amongst the world's top three bullion exchanges and top four energy exchanges. MCX offers a wide spectrum of opportunities to a large cross sectionof participants including producers/ processors, traders, corporate, regional tradingcentre, importers, exporters, co-operatives and industry associations amongst others.Headquartered in the financial capital of India, Mumbai, MCX is led by an expertmanagement team with deep domain knowledge of the commodities futures market.Presently, the average daily turnover of MCX is around USD1.55 bn (Rs.7, 000 crore -April 2006), with a record peak turnover of USD3.98 bn (Rs.17, 987 crore) on April 20,2006. In the first calendar quarter of 2006, MCX holds more than 55% market share of the total trading volume of all the domestic commodity exchanges. The exchange has alsoaffected large deliveries in domestic commodities, signifying the efficiency of pricediscovery. Being a nation-wide commodity exchange having state-of-the-artinfrastructure, offering multiple commodities for trading with wide reach and penetration,MCX is well placed to tap the vast potential poised by the commodities market.
(iv) Financial Technologies India Limited: FTIL proven mettle of End-To-Endexchange trading technologies addressing trading/ surveillance/ clearing and settlementoperations help enhance the SNX Trade Life Cycle operations (Pre-Trade, Trade and
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Post-Trade). In addition to its technological capabilities, FTIL also brings to SNX itsassociations with technology giants such as Microsoft/ Intel and HP. FTIL has promotedIndia No 1 commodity exchange (Market share more than 62%) world’s 2nd largestexchange in Silver & Natural Gas trading volumes and the world’s 3rd largest exchangein gold trading volumes. MCX also is among the top ten commodity derivatives
exchanges in the world.
BENEFITS:
Direct Benefits to Farmers
6. Transparent pricing mechanism: real time price quote accessible7. Accessibility to National Level Markets: as buyers from all over the nation is
connected in the system8. Price manipulation is restricted to larger extent: since the system allows the
participation at national level there is no room for manipulation by any group of traders. And the Maximum allowable open position imposed at member level willrestrict the volume handled by individual member
9. Distress selling avoided to larger extent: unlike in the existing mechanismwherein farmer sells the produce after brining the produce to market place. In the proposed mechanism farmer will first sell his produce and than delivers at later stage
10. Assured and prompt payment: exchange will take the third party guarantee to allthe trade that takes place on the exchange platform
Indirect Benefits to Farmers
9. Increase in productivity10. Reduction in cost of production11. Reduction in post harvest losses12. Increase in marketable yield13. Increase in quality of the produce produced14. Access to extension services15. Increase in risk taking capabilities of farmers16. Inspire co-operation
Benefits to Traders/Commission agents/Forwarders
5. Traders would get a bigger market, where they can sell huge quantity6. 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 bemaintained for this purpose
7. Since large number of investors from all across the country would be available atSNX platform, they can realize better price for their product
8. They can expand their activities to multiple commodities, because of operationalease, availability of finance and absence of counter party risk under SNX system
Benefits to Exporters/Processors
5. Buy certified quality material through a secured platform6. Avoid hassles relating to procurement of material in physical market7. Looking at the price available at SNX, they can make export commitment and
cover themselves immediately by buying at SNX8. Customized services regarding logistics can be provided
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ASSOCIATES & PARTNERS:
TRADING:Trading Mechanism
SNX follows the system of price-time priority for order matching. Members placeorders on their Trader Work Stations (TWS) and the orders get matched and executedthrough the order book in the Trading engine. Members have a facility to downloadvarious reports, by connecting FTP, through which they can access the reports such asBhav Copy, Contract Master, Trade Report, Margin Report at the end of trading.Transparent trading mechanism and efficient risk management, combined with effectivesurveillance, enhances the trust among the participants in SNX, for realizing reasonable price for the produce of the farmers and other participants.Risk Management:
Surveillance: The surveillance mechanism at SNX includes the monitoring of pricemovement, volatility, through real-time alerts, etc. Surveillance is also carried out inmonitoring positions, granting limits, investigating, by adopting various techniques.
Exposure Limits: The Surveillance of SNX will fix the trading limits for each Member,depending on the margin available to their credit and monitor their positions online.
Initial Margin (IM): SNX levies initial margin (IM) on open positions of Members andtheir clients for both buy and sell. The percentage of IM varies depending on thecommodity and its volatility. IM is calculated and reduced from the total margin of aMember available with SNX. Exposure is given to Members, based on the balance
amount available with SNX. When the Initial Margin increases, the exposure willautomatically decrease.
Mark-to-Market Margin (MTM): SNX has devised a mechanism of MTM margin to prevent any potential loss due to price volatility, in which case the Members or their clients may commit default. SNX will mark all trades and open positions for the day onclosing price, by which the notional gain or loss is calculated compared to the trade price.Such gain / loss is credited / debited to the respective Member’s account on T+1 day. TheCnS software automatically calculates Mark to Market margins on a daily basis.Special Margin: Special Margin is levied by SNX whenever there is high volatility intrading in a specific commodity / contract. This margin is levied when price reaches a
particular level compared to previous day’s closing price.
Clearing & Settlement: SNX has efficient system of clearing & settlement (CnS) of trades. All open positions at the end of the trading day will be compulsorily settled bydelivery. CnS Dept. will receive the information about physical receipt of commodities atthe Buyer’s place through the concerned Delivery Centre. Thereafter CnS Dept. willrelease the funds pay-out to the Sellers. Settlement of all trades in SNX takes place on theSettlement Price. The members’ positions are computed on a daily basis, depending on
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the settlement cycle. The information regarding pay-in and pay-out of funds arising out of settlement of transactions is calculated and transferred electronically to the ClearingBanks, through FTP. MEMBERSHIP CATEGORIES:
SNX offers Three Categories of Membership:(i) Category " A "
The following are eligible to apply in this Category:Growers Association ,Co-Operative Society - (Agri or Consumer) ,SHG (self help group)- promoted by recognized institutions or SNX ,Producer company under Section 581 (a)to (z)(ii) Category " B "
The following are eligible to apply in this Category:State level apex co-operative societies, Marketing Federations, Marketing Boards,Similar bodies set up by the State Governments(iii) Category " C "
Any entity or individual desirous of membership in this category may submit duly filledin Membership Application as per the terms and conditions of the Exchange.
Advantages
Advantages of SNX over existing Market
SAFAL National Exchange of India Ltd (SNX)” an online perishable commodityExchange, prompted by a joint venture of NDDB, Mother Dairy & FTIL-MCX.Headquartered in Bangalore, SNX is led by an expert management team, with deepknowledge of the horticulture markets.With the production estimated at around 140million tonnes, one fourth of the global output, the Indian commodities market offersunparalleled growth opportunities to a large section of the market.SNX has opened itsnational membership, as Trading-cum-Clearing Member (TCM). Membership on SNXoffers benefits in more than one ways for market participants. It has sound technologyinfrastructure through its association with market leaders such as Stratus for FaultTolerant Servers, Financial Technologies (India) Ltd. for Exchange Technologies, and a panel of banks for funds transfer. SNX V/S Existing Market
Number of Buyers and Sellers: From every nook & corner of all producing centres inthe country simultaneously present, Limited to local participantsBargaining Power: Faceless bid, price offer by seller based only on grade with no other inputs such as profile of seller, body language, etc., Small lots by small farmers wouldinvariably be at a discountRight to reject offered price : Absolute right to define price expectation and alsomodify based on the farmer's judgement/need, Virtually not an option to reject as the produce is out in the market, besides pressures of having to return to the same trader nextdayDependence on Local Traders: Minimised as there are options of selling on theexchange through Farmer Association, Perpetual dependence on local traders
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Trade system: Has the option to first conclude on the price and later delivers produce atdelivery center, Produce to be physically brought to the market for finding out priceGrades standardization: Standardization with dispute redressal system, Informalstandardization without an effective grievance redressal system for the farmer Price Quotation: Both buyers and seller can quote their price, Seller is the price taker
Effect of supply- Demand balance: Based on demand and supply at national level,Limited to local balance, impact of distant market situations leveraged by middlemenPrice dissemination: Multiple Channel- electronic-instantaneous-all key centres
Limited sources after a lag of a day often, more as data than as adecision tool for the farmer Payment: Immediately after the sale, Varies from 1 week to 1 month
PRODUCTS:
Mango,Banana,Onion,Tomato,Potato,Aplle,Citrus and GrapesFruits
Apple : Royal Delicious, J & K Delicious, Mango: Bangenpalli, Totapari and
Banana : Dwarf CavendishVegetables
Potato : Kufri Bahar , Onion: Nashik Red and Tomato:Hybrids
CONTACT :
Safal National Exchange of India Ltd. /SNX
SafalmarketWhitefield-HoskoteHighwayBangalore-560067Ph:(080)25053000Fax: (080) 28457382
Web:http;;/www.snxindia.com or, safalindia.com
Email : [email protected]
LITERATURES CITED
1. Chengappa, P.G. and N. Nagaraj (2005). Marketing of Major Fruits andVegetables in and around Bangalore. Report 2004-05. Department of AgriculturalEconomics. University of Agricultural Sciences. Bangalore.
2. Chengappa, P.G. (2006). Evolution of Food Retail Chains: Evidence from SouthIndia. Paper presented at IFPRI-IEG Workshop on From Plate to Plough:
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Agricultural Diversification and its Implications for the smallholders. September 20-21, 2006. New Delhi.
3. Acharya, S. S. and Agarwal, N. L.2004.Agricultural marketing in India. Oxford &IBH Pub. New Delhi
4. Acharya, S.S. (2006). Agricultural Marketing Reforms: Status and Road Map. National Institute for Agricultural Marketing, Jaipur
5. Reddy, I.1995.Marketing of vegetables. Rupa Books Pvt. Ltd..Jaipur
6. Kumar, Praduman and Promod Kumar (2003). Demand, Supply and TradePerspective of Vegetables and Fruits in India”.Indian Journal of AgriculturalMarketing. Vol 17(3):121-130.
7. FRONTLINE (July 13,2007 – Fresh Retail special issue
8. BUSINESSWORLD (July 9,2007-Fresh Retail special edition )
9. SURVEY OF INDIAN AGRICULTURE-2007
10. Viswanadham, N (2006). Food and retail chains in India. ISAS Working Paper No15. 6October 2006, Singapore.
11. http://www.freshplaza.com
12. http://www.safalindia.com
13. http://www.snxindia.com
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