PRIVATE MARKETS: UNTAPPED
POTENTIAL
By:
Dr. J. S. Yadav
COO
Premium Farm Fresh Produce Ltd., New Delhi
(The LaLiT Suri Group company)
Flow of Presentation
1
2
3
• Introduction
• Prospects of Private Wholesale Markets
• Problems & their proposed solutions:
Private wholesale Market
PFFPL, New Delhi
2
I. Introduction
Wholesale
Formats
Wholesale
Markets
Cash &
Carry
central places in cities or major urban
areas where the bulk of grains, fruit &
vegetables, meat, eggs/poultry and dairy
products, fish, etc. arrive daily from
local producing areas or from abroad
for display and sale to retailers.
wholesale depot operations from
which retail customers purchase
goods and provide their own
transport.
Eg. METRO, Bharti Wallmart, Safal
Daily Fresh, Tata Khet Se etc.
Regulated Agricultural Markets
continue to play pivotal role in
agricultural marketing
The concept of cash and
carry is new in India
PFFPL, New Delhi
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1st phase reforms
Model Act: Provision
of Private Markets


Response from
players
still
encouraging
Private
not
PFFPL only company to
acquire 11 licenses in
3
States (Maharashtra -1,
Karnataka-4, Gujarat-6)
Terminal Market
Complex Scheme: NHM
(2006)
• In the first Phase in 2007, no
market could be allotted in
Bihar, Maharashtra, Tamil
Nadu and Chandigarh(UT).
• Revised guidelines 2009-10
also could not attract
investors (only Lukeworm
interest)
PFFPL, New Delhi
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2. Prospects of
Private Wholesale
Markets
PFFPL, New Delhi
5
Opportunities Unlimited

Farmers’ perspective

Strong backward – forward ; clustrisation of small & marginal farmers and
formation of groups ; reducing chain of mediators ; expanding zone of
influence of commodities(upstream & downstream) and as such reducing
distress sale; door step services and ATMs.

Investors’ perspective

Wide scope for Investment ; long term Revenue generation; Untapped Potential ;
Innovative multiple revenue model; First mover advantage; Monetization and Value
Proposition of Assets (Only Pvt. Can do this not the Govt.) ; PAN India Presence by
networking of Markets

Traders’ perspective

PAN India registration for Traders/Exporters/Processors (Single Market Concept)

Advanced systems to online buy and sell in International Markets; DSAs/ Merchant
Banking Partners, Volume Business advantages

States’ perspective

Food safety and hygiene; Integration with food parks; Professionally Managed
Markets; transparency; quick cash payments to farmers; Development of
Processing Units; meeting storage challenges.
PFFPL, New Delhi
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II. Problems being faced
by Private Wholesale
Market Operators
PFFPL, New Delhi
7
Issues and bottlenecks in attracting
investment from Private Players
Private Markets
Stringent provisions in Act/ Rules/ Guidelines
which require amendment and inclusion of
investor friendly clauses through SECOND PHASE
REFORMS.
PFFPL, New Delhi
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1. No classification for Collection Centers

Approved format is ‘Hub and Spoke’ but Act/Rules
speaks about Hub only.

Spokes can not be awarded Direct Marketing License
(DML) as not being Buyer or Seller.

Only way out is to declare CCs as Sub- Yards, but no
Rules/Guidelines available.
Solution: Hence Rules be framed for Pvt. Market SubYards, treating Spokes as Sub-Yards.
PFFPL, New Delhi
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2. Multiple License System for
Establishment of Private Market in Hub &
Spoke Format

Procuring separate license for each CC is a tedious task
(minimum 20 CCs prescribed by NHM)

Submit separate application forms, deposit securities, bank
guarantees, etc, is cumbersome

Example: PFFPL has 6 licenses in Gujarat. Hence 120
licenses need to be taken assuming minimum of 20 CCs for
each market.
Solution: Single Unified REGISTRATION for entire state be issued.
(License word be replaced with Registration)
PFFPL, New Delhi
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3. Restriction of Distance Limit
between Markets
Karnataka : No private market can be located within
the radius of 25km from existing APMC [ref:
KAPMR 87 B, 1, (i) c]
Solution: This provision leaves no space for viable
investment and attracting private players for healthy
competition. No space for CCs is available in Market
Area. These restrictions should be abolished.
PFFPL, New Delhi
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4. Levy of Market Fee at multiple points

This has cascading impact on prices

Provision for Single point levy of market fee exists in Model
Act [ref: Model Rules: Chap 9, 84(7), pg61].

Maharashtra, M. P., Chandigarh(UT), Chhattisgarh, Goa &
Sikkim have adopted this provision.
Solution: This should be implemented with true spirit.
PFFPL, New Delhi
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5. Market Fee Payable by Private
Market Authority

Only source of income to private investor is market fee and service charges
permitted at different rates in each State.

This to be used to repay the loans availed by the banks and for the maintenance
assets, facilities and infrastructure created by PE.

Some States ask Private Markets to pay market fees to local APMCs which is not a
valid charge.
Private Market authority to be treated at par with Govt. APMCs
 Independent Regulator should ensure level - playing field to private markets,
Equal concessions to APMCs and private markets, standardize services and
facilities, act as bridge between licensing authority and private markets.

Solution: private markets should not be directed to pay either full or part of the
market fee collected by it to the local APMC or to the Govt.
PFFPL, New Delhi
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Sources of Income to APMCs and their contribution to Total Income
A.P.M.C,S
BANGALORE
BELGAUM
HASSAN
KOLAR
SHIMOGA
MUMBAI
PUNE
NAGPUR
NASIK
JALGAON
AHMADABAD
SURAT
RAJKOT
LUDHIANA
JALANDHAR
AMRITSAR
Average
MARKET
FEE
SHOP
INTEREST
RENT
FROM BANK &TRANSFE MARKET
LICENSE
DEPOSIT
R FEE
ENTRY FEE FEE
OTHER
MICELLAN
EOUS
INCOME
TOTAL
73.8%
79.0%
86.8%
83.0%
93.4%
73.2%
74.5%
56.4%
84.3%
66.2%
77.6%
52.5%
79.6%
93.7%
90.1%
88.7%
20.7%
7.8%
2.1%
4.0%
0.0%
0.9%
8.6%
2.9%
0.0%
13.8%
7.6%
24.5%
11.2%
0.6%
0.4%
0.4%
2.7%
0.0%
4.1%
0.5%
0.1%
0.0%
8.7%
0.4%
4.3%
8.4%
1.1%
2.3%
0.6%
0.2%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
3.2%
1.1%
0.0%
2.7%
2.2%
3.7%
1.2%
0.0%
0.0%
0.0%
0.0%
1.1%
1.9%
3.8%
3.7%
1.1%
0.1%
1.6%
0.2%
1.4%
0.0%
0.2%
0.1%
0.2%
0.1%
0.1%
0.2%
1.6%
11.3%
3.2%
8.8%
5.4%
22.5%
5.6%
40.1%
7.4%
9.3%
9.8%
19.3%
8.4%
5.3%
9.3%
10.7%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
78.3%
6.6%
2.1%
0.9%
1.0%
11.1%
100.0%
PFFPL, New Delhi
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6. No Classification for Markets Either as
Infrastructure/Service/Real Estate

Markets should be classified under ‘Service Industry and
Infrastructure’ as the markets provide infrastructure and
services to its stakeholders

In China this facility is classified as Infrastructure and allowed
even for FDI and ECBs

Shenzhen Agricultural Products Co. Ltd. is a wholesale
Market promoted by Bill Gates in China
PFFPL, New Delhi
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Current Status of Wholesale Markets as per RBI guidelines
and DIPP(Govt. of India)
1. Wholesale Markets are not Infrastructure
2. Wholesale Markets are not classified as Real Estate Projects
3. Wholesale Markets are not classified as Service Industry
4. In service industry FDI is partly allowed
5. ECB restricted to Infrastructure only
6. Wholesale Markets are not considered as an agricultural activity.
7. Concessional Lending to infrastructure prescribed by RBI- restricted to storage
& laboratory only.
8. As per RBI-FDI (100%) is allowed only in Storage and Warehousing
9. FDI in Cash & Carry allowed but not in wholesale markets
16
Classification of different components of a market
Classification of different components of a Market
Real Estate
Infrastructure
Service Sector
Office buildings, to-lets, Banks,
Business Centre, Freight
Mini solid
Services
system;
Retail space, Locker rental
Residential buildings
(Farmers' Guest House),
shopping complex
waste
management
Storage (Cold Storage)
An industrial park or Special
Economic Zone
Construction relating to projects
involving
agro-processing(at
hub/Spokes) and supply of inputs
Industrial or warehouse space (one stop shopping)
Construction for preservation and
storage of processed agroproducts, perishable goods such as
fruits, vegetables and flowers
including testing facilities for
Hotels, Catering services
quality;
Storage and Warehouse
Cash & Carry/Wholesale Trading
Distribution, Spot Exchange,
Electronic auctions
Parking and Movement area,
Transport services, Banking
services, vehicle Fuelling
Toilets, waiting Rooms, Drinking
Water, Cleaning, Lighting, Police
Post, fire Fighting, Emergency
services etc.
17
7. Ceiling Limits Barrier for purchase of
Land for Spokes (Collection Centers)

Ceiling limit for purchase of land in various States

For 20 CCs minimum land required in a District is 120acres
(@6acres/CC)

In Karnataka this limit is 25acres/district (Ref: Karnataka
Land Reform Act,1961)
Solution: Ceiling Limit should be increased in case of Agri
Service Industry Infrastructure.
PFFPL, New Delhi
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8. Heavy Security Deposit for Issue of
License for opening of Spokes (CCs)

For opening 1 CC in Karnataka a security deposit of Rs.50
lakhs is required. For 4 markets in the State with 20 CCs each
a total of 40 crores need to be deposited.

Moreover, Private market authority neither purchases nor sells
any commodity and as such how is it required to deposit
Rs.50 lakhs security (refer Karnataka APMC Rule 87 C (5)).

While there is no mention in the Act, this discourages and
makes the project unviable.
Solution: No Security deposit for issue of license for Spokes
(CCs)
PFFPL, New Delhi
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9. Heavy Security Deposit for Traders
operating in Private Markets and the Spokes
(CCs)



In Karnataka as per Rule 87 C (5), a trader is required to
deposit Rs. 50 lakhs as security with Director Agricultural
Marketing for operating in Spokes(CCs).
Security Deposit will restrict him to trade only in few markets
and hence creating a hurdle for his business expansion.
It will also restrain him to shift his trade from the existing
market to Private Market and thus no business will take place
in these markets.
Solution: Traders operating in private markets should be free to
operate in entire state under Single Unified Registration with private
market authority along with Unique Identification Code (UIC) and
not requiring to deposit any security.
PFFPL, New Delhi
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10. No Separate Rules for Development

Since the Preamble of the Act has been changed as
“Development and Regulation”, development related
aspects must find exhaustive explanation in Rules.

Single window clearance system is needed for activities
like
Change of land use, Zone change, Approval of drawings,
Permission to purchase of land, environmental clearance

Food Safety & Hygiene compliance
Solution: Hence, more details of development planning need to be
incorporated by bringing amendments in Rules/Guidelines so
framed.
PFFPL, New Delhi
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New Role of Market Authority in India
Market authorities should enforce
improved working conditions.
 Management of Vehicles Traffic and city
congession
 Safety of goods and people
 Hygiene and safety requirements
 Compliance with various standards
 Transparency of transactions
 Allocation of pooled charges etc.
PFFPL, New Delhi
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III. Problems faced by
Terminal Markets
(OMDA Provisions)
PFFPL, New Delhi
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No Concessioner- concessionee relation

No concession/holidays like exemption of rental
charges, taxes and fees for various approvals (eg.
NOCs & CLUs)
Example: In case of Mumbai Terminal Market Govt.
is providing land @Rs.4-5lakhs/acre/year, whereas
land in surrounding area is available @Rs.50,00060,000acre/year
 Past experiences show that PEs submit bids at
around 25% against existing provision of 40%.
Hence policy should be changed to flat 40% and not
through bids.
 This is simply a subsidy scheme for which normal
agreement of NHM will be sufficient. Hence
applicability of OMDA poses a question mark.

PFFPL, New Delhi
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Issues in Terminal market Guidelines

As a general rule applicable world over Market Authority
should not be allowed to buy and sell (ref: Terminal Market
Guidelines, July 2009, ‘Role of the Private Enterprise’, item
‘e’, pg. 20, buying-selling is allowed)
The market authority-cum-market regulator, would like to pay
the minimum and the farmer would like to receive the
maximum price of produce, hence having conflict of interest.
Solution: This clause may be deleted, keeping in view the
future repercussions and potential conflict between the
producers and the market authorities.
PFFPL, New Delhi
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Compulsory Services Proposed in Private
& Terminal Markets
Market Services

Platforms and Electronic auction
facility

Banking services including settlement
of transactions related to market

Storage/Cold storage facility


Temperature controlled warehouse
Vehicle fuelling services related to
market

Ripening chamber


Facility for sorting, grading,
washing and packing lines.
Waste and refuse treatment and
disposal facilities related to market


Facilities for manual/ mechanical of
carriage of produce.
Adequate space for handling and
storage of produce, plastic crates,
packaging material related to market

Facilities for waxing, labeling and
quality testing.

Facilities for sanitary and phytosanitary measures.

Material handling equipment
(palletisation and plastic crates )

Facilities and devices for prevention,
disinfection and control of rat, rodent
and other insect pests and diseases.

Movement and parking facility for
vehicles attached to market

Bulk Weighment

Futures trading facility

Transport services related to
market(including cool chain/refer
vans)


etc
Price displays / market information
services
Non-Market Services
Essential Services

Business Centre services

Toilets and nursing mothers rooms;

Catering services

Waiting /rest rooms;

Freight consolidators/forwarders or
agent services

Drinking water

General retail shops

Cleaning, heating, lighting and air
conditioning public areas

Hotels and Motels services including
reservation services

Facilities for the disabled and other
special needs people

Locker rental

Information desks

Logistic Centers

Policing and general security

Messenger services

Fire fighting services

Porter service

Emergency services

Restaurants, and other refreshment
services


Vehicle rental services

Vending services
Any other services deemed to be
necessary for the safe and efficient
operation of the Wholesale Market
Complex.

Leisure service Facilities

Shopping Complex

Processing facilities
Current Status of Available & Non
Available Facilities in Major Markets of
India
Market services
Non-market services
Essential services
% of total
%
Present Absent
%
present Present Absent
%
present Present Absent present
facilities
present
Azadpur
9
15
37.50
8
14
36.36
9
5
64.29
43.33
Nashik
7
17
29.17
5
17
22.73
7
7
50.00
31.67
Kolar
5
19
20.83
4
18
18.18
7
7
50.00
26.67
Hassan
5
19
20.83
5
17
22.73
6
8
42.86
26.67
9
15
37.50
6
16
27.27
8
6
57.14
38.33
52.86
33.33
Belgau
m
Average
29.17
25.45
Facility wise Return on Investment from:
Market Services
Major Facilities
Azadpur Nashik Kolar Hassan
Platforms
-1.94
-0.28
0
-0.25
Bulk weighment
-0.05
Cold storage facility
1.25
Facilities for manual
carriage of produce
8.4
Material handling
equipment (palletisation
& plastic crates)
2.81
1.92
Movement and parking
facility for vehicles
attached to market
5.79
Banking services including
settlement of
transactions related to
market.
6
0.55
Price displays/market
information services
-0.25
-1.11
-1.39
Average
3.15
-0.22 0.96 -0.82
Belgaum Average
-0.49
0
0.02
0.08
1.25
1.25
-
8.40
-
2.37
-
5.79
0.47
2.34
-34.18
-6.48
-9.23
1.30
Facility wise Return on Investment from:
Non-Market Services
Facilities
Azadpur
Nashik Kolar Hassan
Belgaum Average
Catering services
-
-
-
6.4
-
6.40
Restaurants/canteens/food
kiosks & other refreshment
services
6.35
0.35
2.42
15
33
11.42
Logistic Centres/Transporters
shops
1.27
-
-
8.4
0.18
3.28
Porter service
39.17
22.5
3.12
1.14
1.91
13.57
Shopping complex
-
2.78
-
1.5
1.5
1.93
Exporter’s shops
0.29
-
-
-
-
0.29
Input shops/Nurseries
0.35
2.5
3.08
-
2.83
2.19
Conference/Multipurpose Hall
-0.05
-0.2
-0.14
-
-0.04
-0.11
Library
Average
-0.04
6.76
5.59
2.12
6.51
6.56
-0.04
5.51
Facility wise Return on Investment from:
Essential Services
Belgaum Average
Facilities
Azadpur
Nashik
Kolar
Hassan
Waiting/rest rooms
-0.02
0
0
-
-0.03
-0.0125
Drinking water
Toilets
Cleaning
-0.95
-0.04
-0.1
-0.72
-0.29
-0.42
0.44
-6.39
0.12
-3.67
0.23
-0.77
0.3
-8.05
-0.13
-4.98
0.192
-4.772
Lighting of public
areas
-0.44
-0.18
-0.07
-0.13
-0.6
-0.284
Information desks
-15.59
-
-1.3
-
-
-8.445
Waste treatment
plants
1.33
-
-
-
-
1.33
Disposal trucks
-1.22
-
-0.13
-
-
-0.675
Policing & general
security
-2.5
-1.15
-0.93
-2.56
-1.66
-1.76
Emergency services
Average
-0.58
0.12
-
-
-
-0.23
-3.07
-11.16
-25.92
-4.8
-7.69
-10.528
Kind of Service
Avg. ROI
Market Services
1.3
Non Market Services
5.51
Essential Services
-10.53
Total Avg. ROI
-3.72
• Market
is totally dependent on Non-Market
services to make it a viable proposition
• The Private Investor should have the freedom of
deciding the Non-Market services as per his own
estimates of profit generating activities
• Also, to maximize the returns from Market Services,
the cap on user charge which is 2%, should be
increased atleast upto 3.5%
PFFPL, New Delhi
32
Thank You
PFFPL, New Delhi
33