Presentation is loading. Please wait.

Presentation is loading. Please wait.

PRIVATE MARKETS: UNTAPPED POTENTIAL By: Dr. J. S. Yadav COO Premium Farm Fresh Produce Ltd., New Delhi (The LaLiT Suri Group company)

Similar presentations

Presentation on theme: "PRIVATE MARKETS: UNTAPPED POTENTIAL By: Dr. J. S. Yadav COO Premium Farm Fresh Produce Ltd., New Delhi (The LaLiT Suri Group company)"— Presentation transcript:

1 PRIVATE MARKETS: UNTAPPED POTENTIAL By: Dr. J. S. Yadav COO Premium Farm Fresh Produce Ltd., New Delhi (The LaLiT Suri Group company)

2 Flow of Presentation 1 Introduction 2 Prospects of Private Wholesale Markets 3 Problems & their proposed solutions: Private wholesale Market PFFPL, New Delhi2

3 I. Introduction PFFPL, New Delhi3 Wholesale Formats Wholesale Markets 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. Cash & Carry 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

4 Response from Private players still not encouraging PFFPL only company to acquire 11 licenses in 3 States (Maharashtra -1, Karnataka-4, Gujarat-6) PFFPL, New Delhi4 1 st phase reforms Model Act: Provision of Private Markets 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)

5 2. Prospects of Private Wholesale Markets PFFPL, New Delhi5

6 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 Delhi6

7 II. Problems being faced by Private Wholesale Market Operators PFFPL, New Delhi 7

8 Issues and bottlenecks in attracting investment from Private Players PFFPL, New Delhi8 Private Markets Stringent provisions in Act/ Rules/ Guidelines which require amendment and inclusion of investor friendly clauses through SECOND PHASE REFORMS. Private Markets Stringent provisions in Act/ Rules/ Guidelines which require amendment and inclusion of investor friendly clauses through SECOND PHASE REFORMS.

9 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 Sub- Yards, treating Spokes as Sub-Yards. PFFPL, New Delhi9

10 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 Delhi10

11 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 Delhi11

12 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 Delhi12

13 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 Delhi13

14 PFFPL, New Delhi14 Sources of Income to APMCs and their contribution to Total Income A.P.M.C,S MARKET FEE INTEREST FROM BANK DEPOSIT SHOP RENT &TRANSFE R FEE MARKET ENTRY FEE LICENSE FEE OTHER MICELLAN EOUS INCOMETOTAL BANGALORE73.8%20.7%2.7%0.0%1.1%1.6%100.0% BELGAUM79.0%7.8%0.0% 1.9%11.3%100.0% HASSAN86.8%2.1%4.1%0.0%3.8%3.2%100.0% KOLAR83.0%4.0%0.5%0.0%3.7%8.8%100.0% SHIMOGA93.4%0.0%0.1%0.0%1.1%5.4%100.0% MUMBAI73.2%0.9%0.0%3.2%0.1%22.5%100.0% PUNE74.5%8.6%8.7%1.1%1.6%5.6%100.0% NAGPUR56.4%2.9%0.4%0.0%0.2%40.1%100.0% NASIK84.3%0.0%4.3%2.7%1.4%7.4%100.0% JALGAON66.2%13.8%8.4%2.2%0.0%9.3%100.0% AHMADABAD77.6%7.6%1.1%3.7%0.2%9.8%100.0% SURAT52.5%24.5%2.3%1.2%0.1%19.3%100.0% RAJKOT79.6%11.2%0.6%0.0%0.2%8.4%100.0% LUDHIANA93.7%0.6%0.2%0.0%0.1%5.3%100.0% JALANDHAR90.1%0.4%0.0% 0.1%9.3%100.0% AMRITSAR88.7%0.4%0.0% 0.2%10.7%100.0% Average78.3%6.6%2.1%0.9%1.0%11.1%100.0%

15 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 Delhi15

16 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

17 Classification of different components of a market Classification of different components of a market 17

18 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 Delhi18

19 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 Delhi19

20 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 Delhi20

21 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 Delhi21

22 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 Delhi22

23 III. Problems faced by Terminal Markets (OMDA Provisions) PFFPL, New Delhi23

24 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.50,000- 60,000acre/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 Delhi24

25 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 Delhi25

26 Market Services Platforms and Electronic auction facility Storage/Cold storage facility Temperature controlled warehouse Ripening chamber Facility for sorting, grading, washing and packing lines. Facilities for manual/ mechanical of carriage of produce. Facilities for waxing, labeling and quality testing. Material handling equipment (palletisation and plastic crates ) Movement and parking facility for vehicles attached to market Futures trading facility Transport services related to market(including cool chain/refer vans) Banking services including settlement of transactions related to market Vehicle fuelling services related to market Waste and refuse treatment and disposal facilities related to market Adequate space for handling and storage of produce, plastic crates, packaging material related to market Facilities for sanitary and phyto- sanitary measures. Facilities and devices for prevention, disinfection and control of rat, rodent and other insect pests and diseases. Bulk Weighment etc Price displays / market information services Compulsory Services Proposed in Private & Terminal Markets

27 Non-Market Services Business Centre services Catering services Freight consolidators/forwarders or agent services General retail shops Hotels and Motels services including reservation services Locker rental Logistic Centers Messenger services Porter service Restaurants, and other refreshment services Vehicle rental services Vending services Leisure service Facilities Shopping Complex Processing facilities Toilets and nursing mothers rooms; Waiting /rest rooms; Drinking water Cleaning, heating, lighting and air conditioning public areas Facilities for the disabled and other special needs people Information desks Policing and general security Fire fighting services Emergency services Any other services deemed to be necessary for the safe and efficient operation of the Wholesale Market Complex. Essential Services

28 Current Status of Available & Non Available Facilities in Major Markets of India Market servicesNon-market servicesEssential services PresentAbsent % presentPresentAbsent % presentPresentAbsent % present % of total facilities present Azadpur91537.5081436.369564.2943.33 Nashik71729.1751722.737750.0031.67 Kolar51920.8341818.187750.0026.67 Hassan51920.8351722.736842.8626.67 Belgau m91537.5061627.278657.1438.33 Average29.1725.4552.8633.33

29 Facility wise Return on Investment from: Market Services Major FacilitiesAzadpurNashikKolarHassanBelgaumAverage Platforms-1.94-0.280-0.250-0.49 Bulk weighment --0.05 - -0.080.02 Cold storage facility1.25 - - - Facilities for manual carriage of produce 8.4 - - - -8.40 Material handling equipment (palletisation & plastic crates) 2.81 -1.92 - -2.37 Movement and parking facility for vehicles attached to market 5.79 - - - - Banking services including settlement of transactions related to market. 60.55 - -0.472.34 Price displays/market information services -0.25-1.11 --1.39-34.18-9.23 Average3.15-0.220.96-0.82-6.481.30

30 Facility wise Return on Investment from: Non-Market Services FacilitiesAzadpurNashikKolarHassanBelgaumAverage Catering services - - -6.4 -6.40 Restaurants/canteens/food kiosks & other refreshment services 6.350.352.42153311.42 Logistic Centres/Transporters shops 1.27 - - Porter service39.1722. Shopping complex -2.78 -1.5 1.93 Exporter’s shops0.29 - - - - Input shops/Nurseries0.352.53.08 -2.832.19 Conference/Multipurpose Hall-0.05-0.2-0.14 --0.04-0.11 Library-0.04 - - - - Average6.765.592.126.516.565.51

31 FacilitiesAzadpurNashikKolarHassanBelgaum Average Waiting/rest rooms -0.0200 --0.03-0.0125 Drinking water -0.95-0.04-0.1-0.72-0.29-0.42 Toilets 0.440.120.230.3-0.130.192 Cleaning -6.39-3.67-0.77-8.05-4.98-4.772 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 - - - - 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 -0.580.12 - - --0.23 Average -25.92-4.8-3.07-11.16-7.69-10.528 Facility wise Return on Investment from: Essential Services

32 PFFPL, New Delhi32 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% Kind of ServiceAvg. ROI Market Services1.3 Non Market Services5.51 Essential Services-10.53 Total Avg. ROI-3.72

33 PFFPL, New Delhi 33 Thank You

Download ppt "PRIVATE MARKETS: UNTAPPED POTENTIAL By: Dr. J. S. Yadav COO Premium Farm Fresh Produce Ltd., New Delhi (The LaLiT Suri Group company)"

Similar presentations

Ads by Google