Food Processing Industries in India: Opportunities

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Modern Terminal Markets for Fruits, vegetables
and other perishables
New Delhi 13-11-2006
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CCEA Approved Component

• A New Component, in the National Horticulture
  Mission for funding Modern Terminal Market
  projects for fruits, vegetables and other
  commodities in Public-Private-Partnership (PPP)
  mode, in the form of equity participation upto
  49 of the Project equity.

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Background

• General Council of the NHM approved the concept
  on 14.12.05
• DPRs prepared for 8 Terminal Markets
• Expression of Interest was invited for the
  Projects
• National Conference on Terminal Markets held on
  20.02.2006 to discus with States and Private
  Enterprises
• Honble FM announced in the Budget Speech of
  2006-07
• CCEA approved TMs on 2nd November, 2006

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Present Scenario in Value Chain

• Cost Build Up For One Kg. Basket Of Fruit
• (Farmers share will improve with Terminal
  Markets )

11.6
2.5
1.7
4.1
3.3
FARMER
TRADER
WHOLESALER
RETAILER
CONSUMER PRICE
Retail Markups
350
220
160
100
FARM GATE PRICES
MILK
FISH
FRUITS VEGETABLES
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Domestic markets scenario

• Infrastructure for marketing of perishables
• Primary grading/ collection centers - non
  existent
• Warehousing and cold storage - inadequate
• Cold chain - non existent
• Quality certification system - non existent
• Transportation for perishables - non existent
• Rural markets - complete lack of infrastructure
• Wholesale markets - in government control, lack
  modern facilities
• Private / direct markets - limited
• Post harvest losses 25 to 30 in perishables

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What is the way forward ?

• Modern terminal markets
• A professionally managed competitive structure
• To provide market services
• to farmers at their door step
• Comprehensive solution to meet needs of
  stakeholders
• Auction
• Processing industry
• Exports
• Retail chain and Consumers
• Requiring high investment and efficient
  management skills
• Can be infused by private enterprise

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Concept of Terminal market

• Hub-and-Spoke Format Terminal Market (the hub)
  to be linked to number of collection centres (the
  spokes).
• Collection centres to be conveniently located at
  key production centres to allow easy access to
  farmers
• Provide state of art facilities for
• Transparent price discovery (electronic auction),
• Primary value addition( washing, grading, packing
  etc),
• Sourcing for processing and exports,
• Other services such as banking etc.
• Commodities to be covered include
• Fruits and vegetables, Flowers, aromatics and
  herbs
• Meat Poultry
• Other Commodities

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Terminal market

• Infrastructure
• At Terminal Market
• Electronic auction facility
• Packhouse
• Quality testing facility
• Pallestisation
• Material handling equipment
• Cold storage, temperature controlled warehouse,
  ripening chamber etc.
• e-trading
• At Collection Centre
• Washing, grading sorting facility for produce
• Weighing
• Plastic Crates

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Terminal market

• Services
• At Terminal Market
• Transport (including cool chain)
• Warehousing and commodity exchange
• Transactional Banking services
• Dissemination of Market information
• Settlement of payment
• At Collection Centre
• Collection Aggregation of produce
• Spot payment to farmer at CC
• Advisory on inputs, prices, quality
• Multi-modal transport to TM

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Key expectation from the private enterprise

• Provide envisaged infrastructure at the TM and
  the CC in the hub- and- spoke format
• Establish backward linkage with growers in the
  catchment area of the TM through establishing the
  collection centers
• Progressively involve farmers and their
  organizations in the operation and management of
  the collection centers
• Facilitate direct supply to processing units,
  retail chains and exporters, in addition to
  auction facility via the collection centers and
  terminal market.

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Key expectation from the private enterprise

• Provide advisory services to farmers on inputs,
  prices, quality, multi modal transport and
  exports.
• Project DPR only illustrative. Project should,
  however, be designed to handle the minimum
  quantity of peak throughput (MT/ day) and yearly
  handling capacity as prescribed.
• Private enterprise at liberty to
• Prepare own business model with regard to Size of
  market and Scale of operation
• Set up additional facilities to provide
  complimentary services (input supply,
  processing, consumer goods etc.)
• Collect user charges for the infrastructure and
  services provided

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Expectation from the State Government

• Reforms in APMC Act
• To allow the private enterprise
• Establish collection centres in the catchments
  area of the TM
• Source material from farmers field directly in
  the catchment area of the TM
• Organize supply to traders, retail chain,
  processing industry and to institutional buyers
  throughout the country
• Cold storage/ warehouses of TM to act as delivery
  point for trading in perishables on the commodity
  exchanges
• Pack house of the TM to act as exit point for
  exports

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Expectation from the State Government

• Regulatory clearances
• Single license to operate in the entire State/
  adjoining States
• Single point levy collection of market fee
• Autonomy in commercial operations of TM
• Clearance of land use for the TM/ CCs
• Provision of Civic amenities (including drinking
  water, municipal waste disposal, police
  security, post office etc)
• Statutory clearance from
• Local authority
• Town planning Urban development
• Revenue department

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Expectation from the State Government

• Play a pro-active role
• Appointment of a Nodal Officer/ Empowered
  Committee
• to facilitate securing regulatory compliance
• to remove difficulty in operation of the project
• Identification of land for the TM / CC
• Provision of Government land on long term lease,
  subject to availability and suitability
• Infrastructure support to TM / CC
• road connectivity, power and water supply etc.
• States free to participate in the equity of
  Project
• Direct funding
• Land / infrastructure support/Covert existing
  market

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Role of the Central Government

• Support the project through participation in its
  equity capital
• Terms for financing
• Up to 49 of project equity, including
  contribution from State
• State will have the option to allocate its
  equity to farmers organisations actively
  participating in the business of the project
• Private enterprise to be selected through an
  open, transparent competitive bidding process.
• Project to be awarded to bidder with the request
  for minimum Government equity participation.

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Salient Features of the Terminal Markets
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Outlay in 2006-07

• Approved outlay for NHM
• X Five Year Plan Rs.2300 crore
• During 2006-07 Rs.1000 crore
• Outlay for Terminal Markets
• Participation in Equity Capital Rs.148.00
  crore
• Project Development Assistance Rs. 1.00
  crore
• General Awareness Publicity Rs. 1.00 crore
• Total Rs. 150.00 crore

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Expected Outcomes
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Next Steps

• Operational guidelines are under issue
• Appointment of Nodal Officer
• Selection of number and location of TMs by State
• Freezing the basic infrastructure for TM
• Draft RFQ/RFP and DOMA will be circulated
• Two bid system-Technical Financial
• Business plan to be appraised by FI
• Global tenders
• Short listing the technically qualified PEs

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Next Steps

• Evaluate Financial bids and submit to National
  Executive Committee for approval release equity
• Entering Development Operation Management
  Agreement with selected PE
• Project Execution
• Monitoring the project through IC
• Prescribe the infrastructure requirement for new
  locations
• NIAM will be the nodal agency for training

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• Thanks

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Salient Features of the Terminal Markets
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Comparison between two methods

• In Rs. Crores
• Total cost of the 8 Projects 556
• Out flow with 25 back-ended subsidy 139
• Out flow with 49 equity participation 136
• (with 11debt equity ratio)