Transcript Slide 1

SAFAL NATIONAL EXCHANGE OF INDIA LIMITED
An Electronic Spot Exchange for Fruits & Vegetables
Safal Market, Whitefield, Bangalore 560067
www.snxindia.com
Present Status of Horticulture in India
F & V in India
• World’s second largest producer of fruits and vegetables
• Produces about 140 million tons, one fourth of global output.
• Share of Global Production
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41% in Mangoes
36% in Green peas
30% in Cauliflower
23% in Banana
10% in Onion
• Grown on 7-8% of gross cropped area contributes over 18% of the
gross value of agricultural output
• One half of export earnings of total agricultural produce exported.
• Value of significant F & V items at production location estimated at
over Rs.60,000 crores (USD 13 Bn.)
• Presently, all agricultural produce marketing is under the government
administered APMC markets
APMC markets – in F & V
APMC laws provided a framework for functioning of markets for agricultural
produce and the physical infrastructure for farmers & traders to transact, which
also stipulates that
Only APMC’s can create markets for Horticulture produce , private Markets
not allowed
Only APMC license-holders can buy from farmers/growers
user/consumer can buy from the farmers directly.
,
end
Under the present APMC systems, markets are regionalized and fragmented
limiting price discovery as a localized activity.
Existing market system evolved over the decades under the APMC Act has been
meeting the basic needs.
Trade Links : F & V
FARMER
LINKS TAKING OWNERSHIP OF GOODS AND RISKS OF TRADE
LOCAL BROKER
COMMISSION AGENT
FORWARDER
COMMISSION AGENT
Remote Location
WHOLE SALER
RETAILOR
LINKS OPERATING ON % COMMISSIONS ONLY
CONSUMER
The Promotors
NDDB: In F & V
 NDDB pursuing a vision for horticulture produce as in Milk
 Integrating Small Milk Producers to meet the quality milk supply needs at
affordable prices to the consumer & the farmer getting a fair share of the
money spent by the consumer
 Initiatives in this direction include the following
 Fruit & Vegetable Unit – Delhi – 1988
 Maiden & the only effort until recently by the organised sector in India
 Improving professionalism and transparency in trade and quality
 Direct Participation in the market
 SAFAL Auction Market – Bangalore 2000
 Maiden & the only market in India outside the APMC
 Auction platform modelled on the flower auction market in Amsterdam
 Incorporating cold stores, scientific ripening chambers, ambient
storage, etc
 Fruit Processing Unit – Mumbai 1998 Bangalore 2003
 State of the art processing units, multi-item capability, which also
supports price stabilisation purchases of items in glut
 Has several international buyers on its client list
 Governments support to NDDB exempt from APMC in Kar/AP/Mah
MCX: In Spot

By 2003, India saw the emergence of futures commodity exchanges
and in no time have come to stay for good, MCX posting impressive
YoY growth.

Same time, Telecommunication and Internet reach in rural India at
one of the best comparable to any other developed country.

Success of Exchange technology was proof of concept in being able
to connect huge number of market players effectively spread across
e-enabled remote rural India

In this, MCX saw an opportunity in establishing spot exchanges in
agricultural commodities, keen on partnering with organisations with
domain expertise.
A JOINT INITIATIVE: SNX
JV agreement signed in June 2006 between NDDB and MCX
along with FTIL to promote a spot exchange for perishables.

In September 2006, Safal National Exchange of India Limited
registered in Bangalore.

Market Characteristics: SNX & Present
SNX
Number of
buyers and
sellers
Existing Market
From every nook & corner of all
producing centres in the country Limited to local participants
simultaneously present
Faceless bid, price offer by seller
Small lots by small farmers
Bargaining
based only on grade with no
would invariably be at a
Power
other inputs such as profile of
discount
seller, body language, etc
Virtually not an option to reject
Absolute right to define price
as the produce is out in the
Right to
expectation and also modify
Reject offered
market, besides pressures of
based on the farmer's
Price
having to return to the same
judgement/need
trader next day
Market Characteristics: SNX & Present
SNX
Existing Market
Dependence on
Local Traders
Minimised as there are options of
Pepetual dependence on local
selling on the exchange through
traders
Farmer Association
Trade system
Has the option to first conclude
on the price and later delivers
produce at delivery center
Standardization with dispute
Grades
Standardization redressal system
Produce to be physically
brought to the market for
finding out price
Informal standardization
without an effective grievance
redressal system for the farmer
Market Characteristics: SNX & Present
SNX
Price
quotation
Effect of
SupplyDemand
Balance
Existing Market
Both buyers and seller can quote
Seller is always the price taker
their price
Limited to local balance,
Based on demand and supply at impact of distant market
national level
situations levereaged by
middlemen
Multiple Channel- electronicPrice
instantaneous-all key centresdissemination
Benefit even those not on SNX
Limited sources after a lag of a
day often, more as data than as
a decision tool for the farmer
Payment
Varies from 1 week to 1 month
Immediately after the sale
Indirect Benefits of SNX to Growers….
 SNX intervention with grower associations on
post harvest practices, Packaging etc
Increase in productivity
 Quality- Price Equation
Reduction in post harvest losses
Access to extension services
SNX – A reference price even for those not connected
Advantages to State Government

Better price realization for farmers
Catalyse industrial activity- Processing and Export due to assurance
of uninterrupted supply of raw materials through SNX.

More decentralised centers will emerge as important trading hubs,
which generates lot of direct and indirect employment.

In states where there is a cess, SNX would have 100% compliance,
as all deliveries are recorded electronically.

 All
these objectives achieved with minimal support from the state
government in the form of amendment to their APMC Act.
Advantages to Traders
 Every Trader would have access to a bigger market, an
opportunity to enhance their turnover
 In physical market, they always face the risk of counter party
defaults, which will be totally guaranteed on SNX platform. A
settlement guarantee fund would be maintained for this purpose.
 Since large number of traders from all across the country would
be available at SNX platform, they can realize better price for their
product, particularly the small/medium ones.
 They can expand their activities to multiple commodities,
because of operational ease, availability of finance and absence of
counter party risk under SNX system.
This group may require some extra effort in appreciating the
potential of the concept, as most other businesses have been
impacted by technology
Advantages to Processors/Exporters
They can buy certified quality material through a secure platform,
free from hassles relating to procurement of material in physical
market.
 Lower brokerage or commission payable to procurement agents.
Customised Contracts can be designed in the case of large
volumes of a specific quality
Looking at the price available at SNX, they can make export
commitment and cover themselves immediately by buying at SNX
Customized logistics services can be organised.
Opportunities In Rural Finance
KYC registration with unique ID in rural lending could be the
equivalent of PAN in financial securities market – Medium Term
Potential

Crop loans linked to recovery can be structured through SNX
members
Trade working capital credit cards of shorter settlement cycles can
be explored to bring the transactions in banking system

Promote membership amongst Agri-professionals who could be
offered a financial package and training, which would develop a new
breed of traders

Functioning of SNX
Who can be a member
 On seller front
 Coop societies
 Farmers association
 Self Help Groups
 Traders/Commission agents
 Big Retail Chains
 Entrepreneurs
 On buyer front
 Individual Farmer/ self help groups
 Traders/commission agents
 Processing industries
 Exporters
 Big Retail Chains
 Entrepreneurs
 Any member can act both as seller and buyer
 Exposure in F & V considered an essential pre-requisite
Member Location and Requirements
 Where will be the members located?
 District Headquarters
 Taluka Head quarters
 Village Level provided the availability of infrastructure
 Requirements for setting up of member location
 Power source
 Phone connection or
 VSAT connection
Working Model of SNX from Member to Exchange Level
 Contracts shall be for T + 1 initially
 Any client/member from any part of the nation can enter sell quote
and/or buy quote.
 The trade happens whenever there is match between buy and sell quote.
 As the trade is complete initial margin specified is deducted from both
the account
 After the trade, the seller member brings the produce to specified
delivery center before specified period while buyer member should
maintain sufficient amount in his account to clear his dues same day.
 SNX shall check quality confirming to contract spec. and permits
handing over of delivery.
 Delivery is all ex-production centres
Model Contract
Symbol
MTotapuriKR
Description
Daily Mango Totapuri processing quality Krishangiri
Trading related
Trading Period
Daily, May 15 2007 to Jul 31 2007
Trade Timings
Monday to Sunday, 10:00 A..M. to 1 P.M.
Trading Unit
1 MT
Quotation / Base value
Rs. Per Kg. Ex- Krishnagiri excluding Mandi tax, Cess
and other levies
Basis Variety
Totapuri
Tick Size (min. price
movement)
5 paisa
Price Quote
Ex-Krishangiri (exclusive of taxes levies & other charges)
Daily Price Limits (price band)
5%
Initial margin
15 %
Special margin
In case of additional volatility a special margin of such
percentage as deemed fit will be imposed immediately on
both buy and sell side in respect of all outstanding
positions
Model Contract
Delivery and Settlement Procedure
Delivery Logic
Compulsory Delivery
Mode Of Communication
Fax
Delivery Pay In
Next Working day (E+1) 8 A..M. to 4:00 P.M.
Delivery Pay-Out
Next working day (E+1 ) 8:00 A.M. to 6 P.M.
Pay In Of Funds
Not later than 12 noon of next working day
(E+1)
Pay Out Of Funds
Next working day (E+1) 1:00 p.m. to 5.00 P.M.
Delivery Details
SNX would intimate every buyer and seller of
the quantity delivery location wise as per
allocation made by the exchange,
Delivery Obligation (Tolerance Limit)
Delivery obligation by a seller member shall
be deemed as met if the quantity delivered is
95% of the traded volume at MQ grade at the
locations and within the time as stated in the
delivery instructions of the exchange.
Quality Certification
• SNX will establish a Quality Assurance Protocol
• Quality Certification at Delivery Centers, initially in-house
• Contract Quality Specifications closest to the produce
being traded in traditional markets in phase –I
• Quality improvement through out the chain in phase-II
• Minimize Quality related disputes, Play role in dispute
resolution at Delivery Centers
• Continuous training to all stakeholders on post harvest
handling management
Initial List of F & V Items to be Traded on SNX
Banana- Robusta
Banana-D Cavend
Onion-Nashi Red
Tomato-Hybrids
Supplies from
Theni, Bangalore, Jalgaon, Cudapah
Delivery Ex
Theni, Bangalore, Chennai, Cudapah
Supplies from
Jalgaon
Delivery Ex
Jalgaon, Mumbai
Supplies from
Nashik Region
Delivery Ex
Nashik, Ahmednagar
Supplies from
Sangamneer, Kolar, Hosur Regions
Delivery Ex
Nashik, A’nagar, Hosur, Kolar, Bangalore
[email protected]
Thank You