Transcript J.S.-YADAV-05.09.2014
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
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 Exchequer by Siphoning of funds for State
• •
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 Market Services Non-market Services Essential Services Availability Status in Markets 29.17 % 25.45 % 52.86 %
• Most of the markets are old, to suit conditions very different from those of the present day.
33.33 %
• 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 Market Services Non-market Services Essential Services Average Avg. ROI -0.143
0.924
-0.524
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)
0.5-1.0
1.0-2.0
2.0 & above
Total No. of Cities
32 9 7
48 No. of Markets
43 16 44
103 No. of Traders
14378 10740 16350
41468 No. of Traders per Market
334 671 372
Avg. = 459 No. of Traders per City
449 1193 2336
Avg. = 1326
There are 1/3 rd premises.
(33%) of the cities where 50 % traders are without 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 (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
M.F from F & V % share of (Rs. in crores) F&V in total M.F
24.26
35.55
4% 6% 23.58
21.93
6% 7% 10.56
32 6 22.78
48.5
5.53
14.2
65.44
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 Facilities/Services Value in crores (Rs.) Hub & Spoke Format Electronic Auctions Online Spot Commodity Trading Cold Storage
39.73
71.50
17.34
55.68
Ripening Chamber Pre-Cooling Unit Material Handling Equipment (Crates, pallets, etc.) Electronic Grading and Sorting Line
17.37
47.79
14.73
13.77
Food Testing Lab Movement and Parking Facility Refer Vans Employment generation
29.14
0.32
7.08
0.93
Packaging unit management Warehouse management Total
6.85
9.30
331.53
Total Benefit from all the facilities – Rs. 331.53 cr for Rs.100 cr Investment
In % 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 Increase @10% for 2nd year Increase @10% for 3rd year Increase @10% for 4th year Increase @10% for 5th year Increase @5% for 6th years Increase @5% for 7th year Increase @5% for 8th year Increase @5% for 9th year
331.5
364.68
401.15
441.27
485.4
533.94
560.64
588.67
618.1
Increase @5% for 10th year Increase @5% for 11th year Increase @5% for 12th year Increase @5% for 13th year Increase @5% for 14th year Increase @5% for 15th year
649.0
681.5
715.5
751.3
788.9
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 Agents Exporters /Suppliers Labors Total Total No Value Rupees in Crores
5000 323.43
250 5.3
20
1.52
10 0.082
350 1.2
5630 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.
NAME OF THE MARKET
Ahemdabad Mehsana Vadodara Amritsar Mumbai(Vashi Market) Bhavnagar Rajkot Belgaum Kolar
HIGH DEGREE OF INTERDEPENDENCY BETWEEN MARKETS (SELECTED 19) DEPENDENT UPON (Name of Market) For Commodity Season Volume
Nashik Nashik Bhavnagar Amritsar Jaipur,Amritsar,Azadpur Nashik Amritsar Nashik Pomegranate Onion Onion Potato Tomato Tomato Potato Onion (Nashik Red) Nashik Bhavnagar Mysore,Belgaum Mehsana Nashik Kolar,Bangalore Jaipur,Amritsar Nashik 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 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 Potato Tomato Tomato Tomato Tomato Onion(Nashik Yellow) Cabbage Cabbage Onion Onion Potato 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 May-Dec May-Dec july-Nov july-Nov mar-Apr Mar-May Oct-May Sept-dec 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% 22% 80% 20% 90% 10% 65% 15% 5% 40% 70% 30%
Interdependency
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 medium strong weak strong weak strong weak weak medium strong medium
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
Average
Non Market Services - (+) 0.924
Essential Services -
-
(-) 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 Authority/Institution is required for any SNM.
• 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 collapse, Retail will dominate - Wholesale Retail Relation will deteriorate.
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
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
(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