Transcript Slide 1

Reforms in Agriculture Marketing
Synergy Between APMCs and National Spot
Exchange
Amit Mukherjee
Senior Manager
INDEX
1. Government’s perspective - Excerpts From Economic
Survey
2. Empirical data: Learning from past experience
3. Electronic Spot Exchange: National Spot Exchange Limited
4. A peep into our journey - Concept to Reality
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A Perspective of Government
EXCERPTS FROM ECONOMIC
SURVEY
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DEVELOPMENT OF ELECTRONIC
SPOT EXCHANGES
The Government has allowed the National Commodity Exchanges to set up three spot
exchanges in the country, namely the National Spot Exchange Ltd. (NSEL), NCDEX spot
Exchange Ltd. (NSPOT) and National Agriculture Produce Marketing Company of India
Ltd. (NAPMC). During 2009, there was significant expansion of spot exchanges’ trading
facilities in India. These spot exchanges have created an avenue for direct market linkage
among farmers, processors, exporters and end users with a view to reducing the cost of
intermediation and enhancing price realization by farmers. They will also provide the
most efficient spot price inputs to the futures exchanges. The spot exchanges will
encompass the entire spectrum of commodities across the country and will bring home the
advantages of an electronic spot trading platform to all market participants in the
agricultural and nonagricultural segments. On the agricultural side, the exchanges would
enable farmers to trade seamlessly on the platform by providing real-time access to price
information and a simplified delivery process, thereby ensuring the best possible price. On
the buy side, all users of the commodities in the commodity value chain would have
simultaneous access to the exchanges and be able to procure at the best possible price.
Therefore the efficiency levels attained as a result of such seamless spot transactions
would result in major benefits for both producers and consumers. These Spot Exchanges
will also provide a platform for trading of Warehouse Receipts.
-Economic Survey 2009-2010, Chapter 8, Section 106
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Economic Survey : 2009-10
Spot exchanges have created an avenue for direct market linkage among farmers,
processors, exporters and end users with a view to reducing the cost of
intermediation and enhancing price realization by farmers.)
On the agricultural side, the exchanges would enable farmers to trade seamlessly on
the platform by providing them real-time access to price information and a simplified
delivery process, thereby ensuring them the best possible prices.
So far, Maharashtra, Karnataka, Gujarat, Rajasthan, Orissa and Madhya Pradesh
have given licenses to the spot exchanges to undertake electronic spot trading. The
agricultural commodities traded on the spot exchange platform are cotton, castor
seed, desi chana, guar seed, RM seed, wheat, barley, red arecanut, maize, yellow
peas, urad, lemon tur, soyabean, Jeera, ground nut, sugar, moong and pepper. In the
process, Farmers’ realization has increased by 4-5 per cent.
Box 5.2 : Development of electronic spot exchanges
Some Quotes from Economic Survey :
July 2009
Extend spot commodity trading in electronic form to agricultural
markets by involving APMCs.
Economic Survey 2008-09
(Chapter 2: Box 2.4: Financial Markets: Funds for dynamic entrepreneurs)
The Government of India had appointed a committee under the chairmanship
of Prof. Abhijit Sen, Member, Planning Commission to study the impact of
futures trading, if any, on agricultural commodity prices. The Committee was
appointed on March 2, 2007 and submitted its report on April 29, 2008.
The main findings and recommendations of the committee are:
• Negative sentiments have been created by the decision to delist futures
trades in some important agricultural commodities;
• The period during which futures trading has been in operation is too short
to discriminate adequately between the effect of opening of futures
markets, if any, and what might simply be the normal cyclical adjustments
in prices;
Cont….
Some Quotes from Economic
Survey : July 2009
• Indian data analyzed does not show any clear evidence of either reduced or increased
volatility;
• The vibrant agriculture markets including derivatives markets are the frontline
institutions to provide early signs of future prospects of the sector.
The committee recommended for upgradation of regulation by passing of the
proposed amendment to FC(R) Act 1952 and removal of infirmities in the spot
market.
- Economic Survey 2008-09: Chapter 7: Para 7.126:
There is a need to narrow the gap between producer prices and consumer
prices through proper marketing support. The development of marketing
infrastructure and storage and warehousing and cold chains and spot
markets that are driven by modern technology will go a long way in
addressing this need.
- Economic Survey 2008-09: Chapter 7: Para 7.130
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Empirical data
LEARNING FROM PAST
EXPERIENCE
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Impact analysis : NSEL prices higher than mandi price:
case study: Castor Seed at Kadi, Gujarat
Comparison of NSEL and Mandi Prices of Castor seed in Kadi Region
685
NSEL Price Kadi
665
Mandi Kadi
645
Price / 20 kg
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Impact analysis : NSEL prices higher than mandi price:
case study: Castor Seed at Palanpur, Gujarat
Comparison of NSEL and Mandi Prices of Castor seed in Palanpur Region
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NSEL Price Palanpur
Mandi Palanpur
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4th
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Impact analysis : NSEL prices higher than mandi price:
case study: Castor Seed at Patan, Gujarat
Comparison of NSEL and Mandi Prices of Castor seed in Patan Region
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NSEL price Patan
Mandi Patan
Price / 20 kg
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Learning from one year of operation
• Farmers’ realization has gone up
• Mandi cess collection has gone up
• VAT collection has gone up due to reporting of all transactions at
initial stage
• Some mandis, which were non operational, have become active
when we started our operation in such mandis
• We have received good support from mandi authorities in terms of :
– Allottment of shops/ godown in the mandi
– Awareness drive among farmers
• We have received regulatory support from State Govts:
– Rebate in market cess to the extent of 25 % of existing rate by Govt. of
Maharashtra
– Rebate of 30 % in market cess by Government of Karnataka
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Model for Scaling up the operation
• Proof of concept available
• NSEL operational at 56 locations in different states:
– Gujarat, Maharashtra, Karnataka, Rajasthan, MP, Bihar, Orissa
• But, its real impact will be visible across the nation, if its operation is
scaled up to 1000s of locations
• This is possible through a structured synergy between APMCs and
National Spot Exchange
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APMCs : In perspective
 They have done a wonderful job in organizing trade for farm produce and
providing marketing infrastructure to farmers
 They were set-up to provide a platform, where a farmer can sell his
marketable surplus to traders, who in turn will sell to retailers and end
users located in the vicinity.
 By design, market for agri produce was conceptualized as a localized
market and so, the concept of market area, market yard, etc. came into
being, while for VAT and other taxes, entire state was considered as a
market place.
 Hence, APMCs continued to be a localized haat or market place, while in
the meantime, commodity markets became pan India as well as global.
 Today Indian mangoes are being sold in UP shopping malls, commodities
produced in one state frequently move to another state
 Hence, APMCs also need to re-define their role so as to provide better
price and marketing support to farmers.
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Suggested model: Synergy between APMCs
and National Spot Exchange
 APMCs:
 Ideal Model for Backward Integration: Connecting farmers to market
 National Spot Exchange:
 Ideal Model for Forward Integration: Connecting buyers located across the country
through Electronic Terminal
 Synergy between APMCs and National Spot Exchange:
 APMCs may become members of National Spot Exchange
 National Spot Exchange may set-up its trading terminals at APMC market yard
 Farmers bringing produce to mandi yard will be able to observe price in local auction vis
a vis price prevailing on National Spot Exchange terminal
 Wherever prices are high, they will sell their produce there
 NSEL may have its delivery center and payment counter at mandi yard itself, where
farmer can deliver and get his payment, if he has sold on NSEL platform.
 If a farmer wants to avail loan against pledge of warehouse receipt, NSEL will facilitate
the same.
 NSEL will collect mandi cess from buyers and pay to APMCs
 Under this model, National Spot Exchange and APMCs will complement each other
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NSEL : Way Forward
E procurement :
 MSP reach is limited to specific states, In states like Bihar, Orissa, etc.
farmers do not have access to government MSP procurement
 NSEL can conduct E Procurement in all these States
 NSEL did cotton procurement last year on behalf of Nafed worth Rs.
206 crores
 NSEL can do it in all states, where government procurement machinery
does not exist today. When government agencies is ready with its
infrastructure, we can withdraw
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NSEL: Way Forward
•
NSEL is conducting sale of Wheat by FCI under OMSS
•
NSEL can provide reach of FCI to various locations
•
FCI and other Government agencies can sell food grains/ coarse
grains through NSEL at multiple locations in small lots.
•
This will help in reducing price inflation and also extend reach of such
auction, connecting the actual users directly
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Advantages to the Farmers
Direct access to a
national level
market
Farmer using National
Spot Exchange
quote their own
selling price
Increase in Holding
and bargaining
power
Reduction in
cost of
intermediation
Loan against pledge
of warehouse receipts
(WR)
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Electronic Spot Exchange
NATIONAL SPOT EXCHANGE
LIMITED
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About NSEL
MISSION
“To develop a pan India, institutionalized, electronic, transparent
Common Indian Market offering compulsory delivery based spot
contracts in various agricultural and non agricultural commodities,
with a view to reduce the cost of intermediation by improving
marketing efficiency and thereby improving producers’ realization
coupled with reduction in consumer paid price.”
National Spot Exchange: An
Introduction
• A National level Electronic Transparent institutionalized spot market.
• A market place where farmers can sell at best possible price and
corporate, processors and end users can buy at the best possible and
competitive rates.
• Provides counter party guarantee in respect of all trades.
• Provides services like quality certification, storage of goods and other
customized value added services.
• Provides facility of bank finance against commodity deposits
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National Spot Exchange: Participants
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National Spot Exchange: The Process
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Some Clients of NSEL: Government
Companies
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A peep into our journey
CONCEPT TO REALITY
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Significant Milestones
February 2005 : MoU signed between Nafed, Financial Technologies and MCX
 May 2005: Incorporated on 18th May, 2005
June 2007 :
 Gazette Notification issued by the Government.
 Ministry of Agriculture, Govt. of India recommended NSEL project
October 2007: Obtained license from Gujarat Government
November 2007: Signed MoU with Govt. of Rajasthan
November 2007 : Signed MoU with IL & FS for common service centers being set
– up under National E Governance Project to be connected to NSEL project
January 2008 : Obtained license from Maharashtra Government
May 2008: Obtained license from Karnataka Government for setting up spot
exchange in the State of Karnataka
June 2008: NSEL signed a Memorandum of Understanding with the Gujarat AgroIndustries Corporation Ltd (GAIC) to create a strategic alliance for development of
agri-business and, providing an electronic market platform in the State.
contd…
Significant Milestones
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June 2008: NSEL starts its Membership drive
July 2008: Commencement of Mock trading
October 2008: Commencement of Live Trading on 15th October
December 2008 : Nafed Board approves sale of cotton through NSEL and the
contract was launched by NSEL as approved by Nafed Board to help exporters,
mills and merchants across the country
January 2009: Commenced cotton procurement in AP under PSS on behalf of
Nafed
July 2009: CCI follows the steps of Nafed and becomes member of NSEL to sell
cotton bales on NSEL platform on the same terms
Nov 2009: Government of Orissa granted license. Commencement of operation in
Orissa
December 2009: Signed agreement with Nafed for cotton procurement under PSS
operation in Andhra Pradesh
December 2009: Obtained license from Government of Rajasthan
 March 2010: FCI started using this platform for sale of wheat
Current Status
• Signed MoU with:
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Government of Madhya Pradesh
Government of Rajasthan
Government of Maharashtra
Government of Orissa
IL&FS
• Obtained license from:
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Government of Maharashtra
Government of Karnataka
Government of Gujarat
Government of Madhya Pradesh
Government of Orissa
Government of Rajasthan
• Live trading in 26 commodities in
12 states going on
NSEL by End of FY 2009-2010
 Total number of Members: 338
 Total Trading Terminals across the country: 1900
 Number of States currently operational: 11
 Total number of Commodities being traded: 25
 Total Number of commodities contract: 206
 Total number of Delivery location: 57
 Total deliveries handled during FY 09-10 year: Rs. 3045 crores.
 At present, a number of Government companies are using our
facilities. MMTC, PEC, CCI, FCI and Nafed are our members
 Our plan is to scale up our operations to 1000 locations
within next 3 years.
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Commodities Launched
Commodity
Delivery Centre (States)
Guar Seed
Bikaner, Jaipur (Rajasthan)
Guar Gum
Jodhpur (Rajasthan)
Jeera
Jodhpur (Rajasthan)
Lemon Tur
Mumbai (Maharashtra)
Maize
RM seed
Maheshkhoont (Bihar), Jalgaon (Maharashtra), Umerkote (Orissa), Davangiri
(Karnataka.)
Jaipur, Jodhpur (Rajasthan)
RBD Palmolein
Kandla, Mundra (Gujarat)
Silver
Ahmedabad, Rajkot (Gujarat), Mumbai (Maharashtra), Kolkata (West Bengal),
Hyderabad (Andhra Pradesh), Chennai (Tamilnadu), Jaipur (Rajasthan)
Ganj Basoda, Vidisha (Madhya Pradesh), Jalgoan, Nandurbar (Maharashtra)
Soyabean
Urad , Moong & Yellow
Peas
Wheat
Castor Oil
Mumbai (Maharashtra)
Steel (Ingots & Billets)
Raipur (Chattishgarh), Jharsuguda (Orissa)
Rajkot (Gujarat), Jaipur, Chomu (Rajasthan), Delhi
Kandla (Gujarat)
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Commodities Launched
Live trading in 25 commodities in 12 states
Commodity
Delivery Centre (States)
Arecanut
Shimoga, Channagiri (Karnataka)
Bajra
Jaipur (Rajasthan)
Barley
Jaipur ( Rajasthan)
Castor Seed
Palanpur, Kadi, Jagana, Mehsana, Patan ( Gujarat )
Chana Kantawala
Indore ( Madhya Pradesh)
Cotton Bales
Mumbai, Yeotmal, Nagpur, Wani, Amravati, Akola, Khamgaon, Dhule, Jalgaon,
Aurangabad, Parbhani, Nanded, Parli (Maharashtra),Himmatnagar, Rajkot
(Gujarat), Adilabad, Nizamabad (Andhra Pradesh)
Kadi (Gujarat)
Cottonseed Wash
Oil
Desi Chana
Gold
Groundnut
Delhi, Bikaner, Jaipur, Sri Ganganagar (Rajasthan), Ganj Basoda , Vidisha
(Madhya Pradesh), Osmanabad (Maharashtra)
Ahmedabad, Rajkot (Gujarat), Mumbai (Maharashtra), Kolkata (West Bengal),
Hyderabad, Vijayawada (Andhra Pradesh), Chennai (Tamilnadu), Jaipur
(Rajasthan), Delhi
Jaipur, Bikaner, Jodhpur (Rajasthan), Maliya Hatina (Gujarat)
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Thank You
National Spot Exchange Limited , 102 A, Landmark, Suren Road, Chakala, Andheri
(East), Mumbai - 400093. Tel: +91-22-67619900 Fax: +91-22-67619931, E-mail:
[email protected]