1. PRESENTATION ON VARIOUS DIMENSIONAL IMPACTS OF DE-LISTING OF FRUIT & VEGETAB LES By Dr. J S Yadav CEO & President – PFFPL Director, WUWM (Ex-Office) 05.09.2014

2. 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

3. 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.

4. 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?

5. 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 ServicesAvailability Status in Markets Market Services29.17 % Non-market Services25.45 % Essential Services52.86 % Average of total facilities33.33 % Most 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)

6. RETURN ON INVESTMENT CALCULATED FOR SERVICES AVAILABLE IN WHOLESALE MARKETS To make the project viable and sustainable, the government is providing subsidies so as to encourage them for investment in the sector.

7. 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)

8. STRUCTURAL DYNAMICS OF TRADERS’ PROFILE Population of City (in million) No. of CitiesNo. of Markets No. of Traders No. of Traders per Market No. of Traders per City 0.5-1.0324314378334449 1.0-2.0916107406711193 2.0 & above744163503722336 Total4810341468Avg. = 459Avg. = 1326 There are 1/3 rd (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.

9. CONTRIBUTION OF FRUITS AND VEGETABLES IN TOTAL MARKET FEES FOR VARIOUS STATES (2009-10 ) State / Market Total M.FM.F from F & V % share of F&V in total M.F (Rs. in crores) Madhya Pradesh571.5224.264% Punjab624.3735.556% Haryana371.0123.586% Karnataka294.1521.937% Orissa105.5910.5610% Andhra Peadesh306.993210% Vashi (Mumbai)56 611% Gujarat180.8722.7813% Maharashtra375.9948.513% Uttarakhand30.265.5318% Himanchal Pradesh1914.275% Delhi83.665.4478%

10. WHOLESALE MARKET – A GROWTH CENTRE (Impact on Social Benefits) QUANTIICATION OF SOCIAL BENEFITS ENVISAGED FOR ONE YEAR FROM WM’s Facilities/Services Value in crores (Rs.) In % Hub & Spoke Format 39.73 11.98 Electronic Auctions 71.50 21.57 Online Spot Commodity Trading 17.34 5.23 Cold Storage 55.68 16.79 Ripening Chamber 17.37 5.24 Pre-Cooling Unit 47.79 14.41 Material Handling Equipment (Crates, pallets, etc.) 14.73 4.44 Electronic Grading and Sorting Line 13.77 4.15 Food Testing Lab 29.14 8.79 Movement and Parking Facility 0.32 0.10 Refer Vans 7.08 2.14 Employment generation 0.93 0.28 Packaging unit management 6.85 2.07 Warehouse management 9.30 2.81 Total 331.53100 Total Benefit from all the facilities – Rs. 331.53 cr for Rs.100 cr Investment

11. SOCIAL - BENEFIT OF FACILITIES OVER 15 YEARS YearsTotal (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

12. DISTRIBUTION OF BENEFITS DERIVED BY THE BENEFICIRIES IN A YEAR THROUGH VARIOUS FACILITIES PROVIDED BY WM This shows that the Wholesale Market is Farmer Centric/Farmer Oriented Service Industry.

13. 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.

14. HIGH DEGREE OF INTERDEPENDENCY BETWEEN MARKETS (SELECTED 19) NAME OF THE MARKET DEPENDENT UPON (Name of Market)For CommoditySeasonVolumeInterdependency AhemdabadNashikPomegranate 100%strong NashikOnionMay-Dec80%strong BhavnagarOnionJan-Mar50%strong AmritsarPotatoNov-feb100%strong Jaipur,Amritsar,AzadpurTomatoMay-June100%strong NashikTomatoJune-Oct300-400 ton/daystrong MehsanaAmritsarPotatoNov-Jan80 ton/daystrong NashikOnion (Nashik Red)Nov-Mar60-70%strong Onion (Nashik White/Peela)June-Oct90%strong VadodaraNashikOnion(Nashik white/Peela)May-Oct80-90%strong Onion (Nasik red)Nov-Mar100%strong BhavnagarOnionJune-july20%weak Mysore,BelgaumOnionAug-Nov500-600 Qtl./dayweak MehsanaPotatoMar-May70%strong NashikTomatoApr-June70%strong Kolar,BangaloreTomatoMay-June30%medium Jaipur,AmritsarTomatoMay-June50 ton/day (56%)strong AmritsarNashikOnion(Nashik Red)Jan-Mar150-200ton/daystrong Onion(Nashik White/Peela)Sept-oct60%strong BhavnagarOnionJan-Apr15%weak AhemdabadOnionJan-Feb5%weak JaipurOnionJune-sept20%weak AhemdabadTomatoJan-Mar10%weak NashikTomatoSept-Dec15-20%weak Jaipur(Chomu)Tomatomar-MayNot Specificweak JaipurPeaJan-Mar10%weak AhemdabadMangoMay-June10-15%weak Mumbai(Vashi Market)NashikOnionSept-May40%medium Chandigarh,Amritsar,JaipurPotatoOct-Dec12%weak Kolar,Hassan,Mysore,BelgaumPotatoAug-Nov30%medium HassanTomatoJune-Nov15%weak Ahemdabad,Mehsana,Vadodara, Surat,Bhavnagar,RajkotPotato 22%medium BhavnagarNashikTomatoMay-Dec80%strong JaipurTomatoMay-Dec20%weak RajkotNashikTomatojuly-Nov90%strong HassanTomatojuly-Nov10%weak NashikOnion(Nashik Yellow)mar-Apr65%strong NashikCabbage 15%weak BelgaumCabbage 5%weak BelgaumNashik,PuneOnionMar-May40%medium KolarNashikOnionOct-May70%strong HassanPotatoSept-dec30%medium

15. 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 - (-) 0.143 - Non Market Services - (+) 0.924 - Essential Services - (-) 0.524 Average - 0.085%

16. 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

17. INCOME AND EXPENDITURE STATEMENT

18. 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.

19. 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 Authority/Institution is required for any SNM. If F&V is delisted, there will not be any work for such institution.

20. 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

21. 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.

22. 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.

23. 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 collapse, Retail will dominate - Wholesale Retail Relation will deteriorate.

24. DIFFERENTIATED MARKET CHARGES -Currently entire country follows same system of market charges, regulated by APMCs -(Labour, Weighment, loading, unloading etc) -As experienced in transport, during peak season availability of trucks not available -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

25. 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 including Food Safety Standards

26. (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

27. THANK YOU