PRESENTATION
ON
VARIOUS DIMENSIONAL
IMPACTS OF DE-LISTING
OF FRUIT & VEGETABLES
By
Dr. J S Yadav
CEO & President – PFFPL
Director, WUWM (Ex-Office)
05.09.2014
BACKGROUND
• To achieve efficient system of buying and selling of
scheduled commodities States Enacted Legislation
(APMC Acts).
• APMC’s came into existence a ‘Service Oriented
Institution’ operating to protect the interest of
farmers and check malpractice and provide
Marketing Extension/ training.
• Gradually, over the years, APMC shifted from
Service
–Oriented
Institution
to
Revenue
Generating Institutions- sometimes for State
Exchequer by Siphoning of funds
CONTD…..BACKGROUND
• Since APMCs could not fulfill their mandate in real
sense and legal obligations, Discussion started early
2000 to strengthen them by introducing the element of
‘Development’ Making ‘Enforcement’ secondary and
hence Model Act came into being.
• During entire process of reforms, till date, no
Committee/ Group/ Task Force etc. recommended for
delisting of fruit & vegetables from list of scheduled
commodities.
• If APMC’s still fail to discharge duties of ‘Development’
(though need not accomplished) second generation
reforms should be focused on Development only and
not leaving fruit and vegetables orphan.
RESEARCH REQUIRED TO GENERATE EMPIRICAL
EVIDENCE TO SUPPORT ACTION
• Announcement Needs Deep In-Sighted Discussion and Research :
a) Effects of Non- Competitive and Non Uniform Pattern of
Regulation.
b) Benefits of Delisting vis-à-vis Reduction/ Abolition of Market Fee
and Regulation of Sale, Purchase, System of Sale, Price Discovery,
Payment Settlement, Dispute Redressal etc.
c) Alternate Agency & Mandatory Roles and Responsibilities towards
Development Infrastructure like, Shops, Auctions, IT Application
Platforms, Public health, Roads, Banks, Premises, Modern Machines
of Post Harvest etc.
d) To what extent reimbursement of Market Fees by Government of
India can fulfill the objective.
e) Whether Delisting will really attract Private Investment?
CURRENT STATUS OF MARKET
INFRASTRUCTURE IN APMC F&V MARKETS
The National Horticulture Mission, India has provided a list of Market,
Non-Market and Essential Services which can be considered as a
benchmark for service Investment but current status of facilities in APMC
Markets is as under:
Category of Services
Availability Status in Markets
Market Services
29.17 %
Non-market Services
25.45 %
Essential Services
52.86 %
of total facilities
33.33
%
MostAverage
of the markets
are old, to suit conditions very
different
from those
of the present day.
•
Towns are growing at a rate of more than 5% per year leading to a
doubling of urban population within few years.
•
Shifting of trade from old to new market is a gigantic task and takes
around 5-6 years (hence always an apprehension of under-utilization)
(Source: Premium Study)
•
RETURN ON INVESTMENT CALCULATED FOR
SERVICES AVAILABLE IN WHOLESALE MARKETS
Kind of Service
Avg. ROI
Market Services
-0.143
Non-market Services
0.924
Essential Services
-0.524
Average
0.085
To make the project viable and sustainable, the
government is providing subsidies so as to encourage
them for investment in the sector.
MARKET CONDUCT AND STRUCTURE
• Wholesale Market Conduct and Structure is Unique in the World
• Top 10 fruits account for 80% of arrival (shows strong
interdependency)
• Top 10 Markets of the country handle 74% of throughput arrived
in major markets
• Top 5 fruits and vegetables constitutes 75% of volume handled
• Top 10% of traders handle about 70% of volume
(Time has come to bring Reform towards conduct and Structure of
Markets)- to leave at the mercy of economic factors)
STRUCTURAL DYNAMICS OF TRADERS’ PROFILE
Population of
City (in
million)
No. of Cities
No. of
Markets
No. of
Traders
No. of
Traders per
Market
No. of
Traders per
City
0.5-1.0
32
43
14378
334
449
1.0-2.0
9
16
10740
671
1193
2.0 & above
7
44
16350
372
2336
Total
48
103
41468
Avg. = 459
Avg. = 1326
There are 1/3rd (33%) of the cities where 50 % traders are without
premises.
66% cities offer less than 40 sqm for average shop area (including
display, sorting and cleaning, office and storage etc) to traders.
In 75% cities traders are operating with inadequate shop area.
CONTRIBUTION OF FRUITS AND VEGETABLES IN
TOTAL MARKET FEES FOR VARIOUS STATES (2009-10)
State / Market
Madhya Pradesh
Punjab
Haryana
Karnataka
Orissa
Andhra Peadesh
Vashi (Mumbai)
Gujarat
Maharashtra
Uttarakhand
Himanchal Pradesh
Delhi
Total M.F
M.F from F & V
(Rs. in crores)
571.52
624.37
371.01
294.15
105.59
306.99
56
180.87
375.99
30.26
19
83.6
(Rs. in crores)
24.26
35.55
23.58
21.93
10.56
32
6
22.78
48.5
5.53
14.2
65.44
% share of
F&V
in total M.F
4%
6%
6%
7%
10%
10%
11%
13%
13%
18%
75%
78%
WHOLESALE MARKET – A GROWTH CENTRE
(Impact on Social Benefits)
QUANTIICATION OF SOCIAL BENEFITS ENVISAGED FOR ONE
YEAR FROM WM’s
Value in crores
Facilities/Services
In %
(Rs.)
Hub & Spoke Format
Electronic Auctions
Online Spot Commodity Trading
Cold Storage
Ripening Chamber
Pre-Cooling Unit
Material Handling Equipment (Crates, pallets, etc.)
Electronic Grading and Sorting Line
Food Testing Lab
Movement and Parking Facility
Refer Vans
Employment generation
Packaging unit management
Warehouse management
Total
39.73
71.50
17.34
55.68
17.37
47.79
14.73
13.77
29.14
0.32
7.08
0.93
6.85
9.30
331.53
Total Benefit from all the facilities – Rs. 331.53 cr for Rs.100 cr Investment
11.98
21.57
5.23
16.79
5.24
14.41
4.44
4.15
8.79
0.10
2.14
0.28
2.07
2.81
100
SOCIAL - BENEFIT OF FACILITIES OVER 15 YEARS
Years
Total (In Cr.)
First Year
331.5
Increase @10% for 2nd year
364.68
Increase @10% for 3rd year
401.15
Increase @10% for 4th year
441.27
Increase @10% for 5th year
485.4
Increase @5% for 6th years
533.94
Increase @5% for 7th year
560.64
Increase @5% for 8th year
588.67
Increase @5% for 9th year
618.1
Increase @5% for 10th year
649.0
Increase @5% for 11th year
681.5
Increase @5% for 12th year
715.5
Increase @5% for 13th year
751.3
Increase @5% for 14th year
788.9
Increase @5% for 15th year
828.3
Total
8739.9
The total benefit to the society over a span of 15 years is Rs.8740 crores
DISTRIBUTION OF BENEFITS DERIVED BY THE
BENEFICIRIES IN A YEAR THROUGH VARIOUS
FACILITIES PROVIDED BY WM
Beneficiaries Farmers Traders
Commission Exporters
Labors Total
Agents
/Suppliers
Total No
5000
250
20
10
350
5630
Value
Rupees in
Crores
323.43
5.3
1.52
0.082
1.2
331.53
Percentage
97.56
1.60
0.46
0.02
0.36
100
This shows that the Wholesale Market is Farmer Centric/Farmer
Oriented Service Industry.
IMPACT ON INTERDEPENDENCY OF MARKETS
• Markets have cardinal links and do not work in isolation
• Interdependency between Primary, Secondary & Tertiary
Markets) is very high because of Regulatory Mechanism.
• Eg. Maharashtra Market network has increased its zone of
influence – hence 90% of fruits sent to other States.
• If F&V is delisted in Maharashtra, this will reduce varied
Geographical spread because of, payment assurance from
long distance buyers, reduced established networks of
traders; differentiated marketing practices Differentiated
fee rate & charges will break confidence of Maharashtra
farmers. Maharashtra Wholesale Markets will reduce its
importance.
HIGH DEGREE OF INTERDEPENDENCY BETWEEN MARKETS (SELECTED 19)
NAME OF THE MARKET
Ahemdabad
Mehsana
DEPENDENT UPON
(Name of Market)
Nashik
Nashik
Bhavnagar
Amritsar
Jaipur,Amritsar,Azadpur
Nashik
Amritsar
Nashik
Vadodara
Nashik
Amritsar
Bhavnagar
Mysore,Belgaum
Mehsana
Nashik
Kolar,Bangalore
Jaipur,Amritsar
Nashik
Mumbai(Vashi Market)
Bhavnagar
Rajkot
Belgaum
Kolar
Bhavnagar
Ahemdabad
Jaipur
Ahemdabad
Nashik
Jaipur(Chomu)
Jaipur
Ahemdabad
Nashik
Chandigarh,Amritsar,Jaipur
Kolar,Hassan,Mysore,Belgaum
Hassan
Ahemdabad,Mehsana,Vadodara,
Surat,Bhavnagar,Rajkot
Nashik
Jaipur
Nashik
Hassan
Nashik
Nashik
Belgaum
Nashik,Pune
Nashik
Hassan
For Commodity
Season
Volume
Interdependency
Pomegranate
Onion
Onion
Potato
Tomato
Tomato
Potato
Onion (Nashik Red)
Onion (Nashik White/Peela)
Onion(Nashik white/Peela)
Onion (Nasik red)
Onion
Onion
Potato
Tomato
Tomato
Tomato
Onion(Nashik Red)
Onion(Nashik White/Peela)
Onion
Onion
Onion
Tomato
Tomato
Tomato
Pea
Mango
Onion
Potato
Potato
Tomato
May-Dec
Jan-Mar
Nov-feb
May-June
June-Oct
Nov-Jan
Nov-Mar
June-Oct
May-Oct
Nov-Mar
June-july
Aug-Nov
Mar-May
Apr-June
May-June
May-June
Jan-Mar
Sept-oct
Jan-Apr
Jan-Feb
June-sept
Jan-Mar
Sept-Dec
mar-May
Jan-Mar
May-June
Sept-May
Oct-Dec
Aug-Nov
June-Nov
100%
80%
50%
100%
100%
300-400 ton/day
80 ton/day
60-70%
90%
80-90%
100%
20%
500-600 Qtl./day
70%
70%
30%
50 ton/day (56%)
150-200ton/day
60%
15%
5%
20%
10%
15-20%
Not Specific
10%
10-15%
40%
12%
30%
15%
strong
strong
strong
strong
strong
strong
strong
strong
strong
strong
strong
weak
weak
strong
strong
medium
strong
strong
strong
weak
weak
weak
weak
weak
weak
weak
weak
medium
weak
medium
weak
22%
80%
20%
90%
10%
65%
15%
5%
40%
70%
30%
medium
strong
weak
strong
weak
strong
weak
weak
medium
strong
medium
Potato
Tomato
Tomato
Tomato
Tomato
Onion(Nashik Yellow)
Cabbage
Cabbage
Onion
Onion
Potato
May-Dec
May-Dec
july-Nov
july-Nov
mar-Apr
Mar-May
Oct-May
Sept-dec
IMPACT ON PRIVATE INVESTMENT IN WHOLESALE
MARKETS
-
Since Law of land will prevail, no private investor/players will be
allowed to charge market fee.
-
Additional user charges make the transaction more competitive and
costly.
-
Huge Investment of App. Rs. 100 crore in a modern Wholesale Markets
requires minimum of 3.5% user charge for a market with 5 lakh MT
arrival.
-
ROI on Investment is extremely low
-
Market Services
-
Non Market Services - (+) 0.924
-
Essential Services Average
-
(-) 0.143
(-) 0.524
-
0.085%
DEVELOPMENT RESPONSIBILITY DILUTED
-
Fee charge has Direct Link with Development Responsibility
-
77% of income drawn from MF spent on Marketing
Development
-
In a State like, HP, Delhi, where F&V has share more than
75% who will develop huge infrastructure.
-
For a modern Market at Gannaur estimated cost is Rs.1500
crore
-
For modern Market at Delhi – Khanpur Boarder cost is
around 700 crore
-
Level of Requirement of funds has doubled in last 5 years
-
How this gap will be bridged up – moving towards world
class infrastructure
INCOME AND EXPENDITURE STATEMENT
MANIPULATION AND EXPLOITATION BY
STAKEHOLDERS
- Mechanics of trade is better understood by players
(traders)
- Commission Agents, in case of shortages, may act as
buyer and seller as per his economic convenience
- Faith and belief between Farmers & Traders is age old.
- To avoid potential manipulation, there is need for
unified registration and strong regulator, at least for
fruit & vegetables in the country.
HURDLE FOR BARRIER FREE SINGLE NATIONAL
MARKET
• Strengthening of smooth, efficient, modern logistics and
national payment gateway systems etc are necessary tools
for Single National Market under umbrella Regulator .
• Since APMCs divides the States into various notified area,
it is necessary to introduce PAN – India, Single UID
Registration Number for traders with proper Regulation.
• National Level Regulatory
required for any SNM.
Authority/Institution
is
• If F&V is delisted, there will not be any work for such
institution.
UNIFORM SYSTEM OF SALE
- APMC Act provides for Uniform System of Sale i.e. Open
Auction
- Now, various types of traders with varied economic
capabilities will follow different sale practices with no
existence of regulatory authority like:-
- Negotiations with farmers with no transparent price
discovery
- Mutual Agreement
- Pre Harvest Contract
- Distress sale for self supply /consumption by traders
- Any other non-prescribed way of market practice
SCIENTIFIC PRICE DISCOVERY MECHANISM
-
For Mitigating Risk of farmers – Transparent Price
Discovery Mechanism
-
Hence, Assembly of Large Number of Buyers and
Sellers
-
No Level Playing Field for Private Market Players
-
Who will oversee price discovery frauds, protected
conveyance, data collection etc and disseminate price
for decision making up to farmers.
-
Who will protect the Farmers from inappropriate price
fixation system.
RESPONSIBILITY OF TIMELY PAYMENT
- Act provides for timely payment to farmers
- Complaints are lodged with APMCs
- Deterrent pressure on Commission Agent to take
responsibility and make payment from their
own.
- What is Alternate Mechanism for correct, without
deduction and full payment to farmers, if
delisted.
PROTECTION FROM RETRACTMENT
OF SALE
- Act provides:- “Once Auction is over, no produce
can be returned to farmers”
- Chances of farmers exploitation since produce is of
perishable nature.
- Non – Common unit of Measurement will prevail.
- Wholesale system will
dominate - Wholesale
deteriorate.
collapse, Retail
Retail Relation
will
will
DIFFERENTIATED MARKET CHARGES
- Currently entire country follows same system of market
charges, regulated by APMCs
- (Labour, Weighment, loading, unloading etc)
- As experienced in transport,
availability of trucks not available
during
peak
season
- During crop season charges of large scale variation in
market charges
- Increase marketing cost – varied geographic charges
- National level uniformity of marketing charges is essential
for uniform commodity spread and maximise down stream
– upstream index of commodity
WHAT CAN BE DONE NOW?
1.
Remove Regulatory Deficit and Improve Regulatory
Institutions & Infrastructure – especially drawing
regulating process
2.
Design Role of Market Regulator for ;
(a) Settle Market Practices (for Unified Registration,
Payments, Trade expansion, Disputes, Pan India
Transactional Gateway)
(b) Setting Service Standards for Market/Non-market and
Essential Services
(c)
Market Order
Standards
Standards
including
Food
Safety
(d) Governance Manual for Systems, Methods, Process,
Social Obligation, CSR, Regulatory etc.
(e)
Providing Level Playing Field to Private Investors
(f)
Inter-Regulator Co-operation
(g)
Cross Fertilization of Ideas Across Regulators
3. Second Generation Reforms under Strict Advice of
Established Regulator.
4. Remove Notified Area Jurisdiction (APMC be limited to
Market Yard)
5. Pan India Single Unified Market Systems and Registration
(to be suggested by Regulator)
6. Responsibility towards Public Service including CSR
THANK YOU