PRIVATE MARKETS: UNTAPPED

POTENTIAL

By:
Dr. J. S. Yadav
COO
Premium Farm Fresh Produce Ltd., New Delhi
(The LaLiT Suri Group company)
Flow of Presentation

PFFPL, New Delhi 2

I. Introduction

Regulated Agricultural Markets The concept of cash and

continue to play pivotal role in carry is new in India
agricultural marketing
PFFPL, New Delhi 3
 • In the first Phase in 2007, no
 Response from Private
players still not market could be allotted in
encouraging Bihar, Maharashtra, Tamil
Nadu and Chandigarh(UT).
 PFFPL only company to
acquire 11 licenses in • Revised guidelines 2009-10
3 States (Maharashtra -1, also could not attract
Karnataka-4, Gujarat-6)
investors (only Lukeworm
interest)
PFFPL, New Delhi 4
 2. Prospects of
Private Wholesale
Markets

PFFPL, New Delhi 5

Opportunities Unlimited
 Farmers’ perspective
 Strong backward – forward ; clustrisation of small & marginal farmers and formation
of groups ; reducing chain of mediators ; expanding zone of influence of
commodities(upstream & downstream) and as such reducing distress sale; door step
services and ATMs.
 Investors’ perspective
 Wide scope for Investment ; long term Revenue generation; Untapped Potential ;
Innovative multiple revenue model; First mover advantage; Monetization and Value
Proposition of Assets (Only Pvt. Can do this not the Govt.) ; PAN India Presence by
networking of Markets
 Traders’ perspective
 PAN India registration for Traders/Exporters/Processors (Single Market Concept)
 Advanced systems to online buy and sell in International Markets; DSAs/ Merchant
Banking Partners, Volume Business advantages
 States’ perspective
 Food safety and hygiene; Integration with food parks; Professionally Managed Markets;
transparency; quick cash payments to farmers; Development of Processing Units; meeting
storage challenges.

PFFPL, New Delhi 6

 II. Problems being faced
by Private Wholesale
Market Operators

PFFPL, New Delhi 7

Issues and bottlenecks in attracting
investment from Private Players

PFFPL, New Delhi 8

1. No classification for Collection Centers
 Approved format is ‘Hub and Spoke’ but Act/Rules
speaks about Hub only.

 Spokes
can not be awarded Direct Marketing License
(DML) as not being Buyer or Seller.

 Onlyway out is to declare CCs as Sub- Yards, but no

Rules/Guidelines available.

Solution: Hence Rules be framed for Pvt. Market Sub-

Yards, treating Spokes as Sub-Yards.

PFFPL, New Delhi 9

 2. Multiple License System for
Establishment of Private Market in Hub &
Spoke Format
 Procuring separate license for each CC is a tedious task
(minimum 20 CCs prescribed by NHM)

 Submit separate application forms, deposit securities, bank

guarantees, etc, is cumbersome

 Example: PFFPL has 6 licenses in Gujarat. Hence 120 licenses

need to be taken assuming minimum of 20 CCs for each
market.
Solution: Single Unified REGISTRATION for entire state be issued.
(License word be replaced with Registration)

PFFPL, New Delhi 10

 3. Restriction of Distance Limit
between Markets

Karnataka : No private market can be located within

the radius of 25km from existing APMC [ref:
KAPMR 87 B, 1, (i) c]

Solution: This provision leaves no space for viable

investment and attracting private players for
healthy competition. No space for CCs is available
in Market Area. These restrictions should be
abolished.
PFFPL, New Delhi 11
 4. Levy of Market Fee at multiple points

 This has cascading impact on prices

 Provision for Single point levy of market fee exists in Model

Act [ref: Model Rules: Chap 9, 84(7), pg61].

 Maharashtra, M. P., Chandigarh(UT), Chhattisgarh, Goa &

Sikkim have adopted this provision.

Solution: This should be implemented with true spirit.

PFFPL, New Delhi 12

 5. Market Fee Payable by Private
Market Authority

 Only source of income to private investor is market fee and service charges
permitted at different rates in each State.

 This to be used to repay the loans availed by the banks and for the maintenance
assets, facilities and infrastructure created by PE.

 Some States ask Private Markets to pay market fees to local APMCs which is not
a valid charge.

 Private Market authority to be treated at par with Govt. APMCs

 Independent Regulator should ensure level - playing field to private markets,
Equal concessions to APMCs and private markets, standardize services and
facilities, act as bridge between licensing authority and private markets.

Solution: private markets should not be directed to pay either full or part of the
market fee collected by it to the local APMC or to the Govt.

PFFPL, New Delhi 13

 Sources of Income to APMCs and their contribution to Total Income
OTHER
INTEREST SHOP RENT MICELLAN
MARKET FROM BANK &TRANSFE MARKET LICENSE EOUS
A.P.M.C,S FEE DEPOSIT R FEE ENTRY FEE FEE INCOME TOTAL
BANGALORE 73.8% 20.7% 2.7% 0.0% 1.1% 1.6% 100.0%
BELGAUM 79.0% 7.8% 0.0% 0.0% 1.9% 11.3% 100.0%
HASSAN 86.8% 2.1% 4.1% 0.0% 3.8% 3.2% 100.0%
KOLAR 83.0% 4.0% 0.5% 0.0% 3.7% 8.8% 100.0%
SHIMOGA 93.4% 0.0% 0.1% 0.0% 1.1% 5.4% 100.0%
MUMBAI 73.2% 0.9% 0.0% 3.2% 0.1% 22.5% 100.0%
PUNE 74.5% 8.6% 8.7% 1.1% 1.6% 5.6% 100.0%
NAGPUR 56.4% 2.9% 0.4% 0.0% 0.2% 40.1% 100.0%
NASIK 84.3% 0.0% 4.3% 2.7% 1.4% 7.4% 100.0%
JALGAON 66.2% 13.8% 8.4% 2.2% 0.0% 9.3% 100.0%
AHMADABAD 77.6% 7.6% 1.1% 3.7% 0.2% 9.8% 100.0%
SURAT 52.5% 24.5% 2.3% 1.2% 0.1% 19.3% 100.0%
RAJKOT 79.6% 11.2% 0.6% 0.0% 0.2% 8.4% 100.0%
LUDHIANA 93.7% 0.6% 0.2% 0.0% 0.1% 5.3% 100.0%
JALANDHAR 90.1% 0.4% 0.0% 0.0% 0.1% 9.3% 100.0%
AMRITSAR 88.7% 0.4% 0.0% 0.0% 0.2% 10.7% 100.0%
Average 78.3% 6.6% 2.1% 0.9% 1.0% 11.1% 100.0%
PFFPL, New Delhi 14
 6. No Classification for Markets Either as
Infrastructure/Service/Real Estate
 Markets should be classified under ‘Service Industry and
Infrastructure’ as the markets provide infrastructure and
services to its stakeholders

 InChina this facility is classified as Infrastructure and allowed

even for FDI and ECBs

 Shenzhen Agricultural
Products Co. Ltd. is a wholesale
Market promoted by Bill Gates in China

PFFPL, New Delhi 15

Current Status of Wholesale Markets as per RBI guidelines and
DIPP(Govt. of India)
1. Wholesale Markets are not Infrastructure

2. Wholesale Markets are not classified as Real Estate Projects

3. Wholesale Markets are not classified as Service Industry

4. In service industry FDI is partly allowed

5. ECB restricted to Infrastructure only

6. Wholesale Markets are not considered as an agricultural activity.

7. Concessional Lending to infrastructure prescribed by RBI- restricted to storage

& laboratory only.

8. As per RBI-FDI (100%) is allowed only in Storage and Warehousing

9. FDI in Cash & Carry allowed but not in wholesale markets

16
 Classification of different components of a market
 

17
7. Ceiling Limits Barrier for purchase of
Land for Spokes (Collection Centers)

 Ceiling limit for purchase of land in various States

 For20 CCs minimum land required in a District is 120acres

(@6acres/CC)

 InKarnataka this limit is 25acres/district (Ref: Karnataka

Land Reform Act,1961)

Solution: Ceiling Limit should be increased in case of Agri

Service Industry Infrastructure.

PFFPL, New Delhi 18

 8. Heavy Security Deposit for Issue of
License for opening of Spokes (CCs)
 For opening 1 CC in Karnataka a security deposit of Rs.50 lakhs is
required. For 4 markets in the State with 20 CCs each a total of 40
crores need to be deposited.

 Moreover, Private market authority neither purchases nor sells any

commodity and as such how is it required to deposit Rs.50 lakhs
security (refer Karnataka APMC Rule 87 C (5)).

 While there is no mention in the Act, this discourages and makes

the project unviable.

Solution: No Security deposit for issue of license for Spokes (CCs)

PFFPL, New Delhi 19

 9. Heavy Security Deposit for Traders
operating in Private Markets and the Spokes
(CCs)
 In Karnataka as per Rule 87 C (5), a trader is required to
deposit Rs. 50 lakhs as security with Director Agricultural
Marketing for operating in Spokes(CCs).
 Security Deposit will restrict him to trade only in few markets
and hence creating a hurdle for his business expansion.
 It will also restrain him to shift his trade from the existing
market to Private Market and thus no business will take place
in these markets.

Solution: Traders operating in private markets should be free to

operate in entire state under Single Unified Registration with private
market authority along with Unique Identification Code (UIC) and
not requiring to deposit any security.
PFFPL, New Delhi 20
 10. No Separate Rules for Development
 Since the Preamble of the Act has been changed as
“Development and Regulation”, development related aspects
must find exhaustive explanation in Rules.
 Singlewindow clearance system is needed for activities like
Change of land use, Zone change, Approval of drawings,
Permission to purchase of land, environmental clearance
 Food Safety & Hygiene compliance

Solution: Hence, more details of development planning need to be

incorporated by bringing amendments in Rules/Guidelines so
framed.

PFFPL, New Delhi 21

New Role of Market Authority in India

Market authorities should enforce

improved working conditions.
Management of Vehicles Traffic and city
congession
Safety of goods and people
Hygiene and safety requirements
Compliance with various standards
Transparency of transactions
Allocation of pooled charges etc.

PFFPL, New Delhi 22

III. Problems faced by
Terminal Markets
(OMDA Provisions)

PFFPL, New Delhi 23

 No Concessioner- concessionee relation
 No concession/holidays like exemption of rental
charges, taxes and fees for various approvals (eg. NOCs
& CLUs)
 Example: In case of Mumbai Terminal Market Govt. is
providing land @Rs.4-5lakhs/acre/year, whereas land in
surrounding area is available @Rs.50,000-
60,000acre/year
 Past experiences show that PEs submit bids at around
25% against existing provision of 40%. Hence policy
should be changed to flat 40% and not through bids.
 This is simply a subsidy scheme for which normal
agreement of NHM will be sufficient. Hence
applicability of OMDA poses a question mark.

PFFPL, New Delhi 24

 Issues in Terminal market Guidelines

 As a general rule applicable world over Market Authority

should not be allowed to buy and sell (ref: Terminal Market
Guidelines, July 2009, ‘Role of the Private Enterprise’, item
‘e’, pg. 20, buying-selling is allowed)

The market authority-cum-market regulator, would like to pay

the minimum and the farmer would like to receive the
maximum price of produce, hence having conflict of interest.

Solution: This clause may be deleted, keeping in view the

future repercussions and potential conflict between the
producers and the market authorities.
PFFPL, New Delhi 25
 Compulsory Services Proposed in Private
& Terminal Markets
Market Services
 Platforms and Electronic auction
facility
 Storage/Cold storage facility
 Temperature controlled warehouse
 Ripening chamber
 Facility for sorting, grading, washing
and packing lines.
 Facilities for manual/ mechanical of
carriage of produce.
 Facilities for waxing, labeling and
quality testing.
 Material handling equipment
(palletisation and plastic crates )
 Movement and parking facility for
vehicles attached to market
 Futures trading facility
 Transport services related to
market(including cool chain/refer
vans)
 Banking services including settlement
of transactions related to market
 Vehicle fuelling services related to
market
 Waste and refuse treatment and
disposal facilities related to market
 Adequate space for handling and
storage of produce, plastic crates,
packaging material related to market
 Facilities for sanitary and phyto-
sanitary measures.
 Facilities and devices for prevention,
disinfection and control of rat, rodent
and other insect pests and diseases.
 Bulk Weighment
 etc
 Price displays / market information
services
Non-Market Services Essential Services
 Business Centre services  Toilets and nursing mothers rooms;
 Catering services  Waiting /rest rooms;
 Freight consolidators/forwarders or agent
 Drinking water
services
 General retail shops
 Cleaning, heating, lighting and air
conditioning public areas
 Hotels and Motels services including
reservation services  Facilities for the disabled and other
 Locker rental special needs people
 Logistic Centers  Information desks
 Messenger services  Policing and general security
 Porter service  Fire fighting services
 Restaurants, and other refreshment  Emergency services
services
 Any other services deemed to be
 Vehicle rental services necessary for the safe and efficient
 Vending services operation of the Wholesale Market
 Leisure service Facilities Complex.
 Shopping Complex
 Processing facilities
 Current Status of Available & Non Available
Facilities in Major Markets of India

  Market services Non-market services Essential services  

% of total
% % % facilities
  Present Absent present Present Absent present Present Absent present present
Azadpur 9 15 37.50 8 14 36.36 9 5 64.29 43.33
Nashik 7 17 29.17 5 17 22.73 7 7 50.00 31.67
Kolar 5 19 20.83 4 18 18.18 7 7 50.00 26.67
Hassan 5 19 20.83 5 17 22.73 6 8 42.86 26.67

Belgaum 9 15 37.50 6 16 27.27 8 6 57.14 38.33

Average 29.17 25.45 52.86 33.33

 Facility wise Return on Investment from:
Market Services
Major Facilities Azadpur Nashik Kolar Hassan Belgaum Average
Platforms -1.94 -0.28 0 -0.25 0 -0.49
Bulk weighment - -0.05 - - 0.08 0.02
Cold storage facility 1.25 - - - 1.25 1.25
Facilities for manual
carriage of produce 8.4 - - - - 8.40
Material handling
equipment (palletisation
& plastic crates) 2.81 - 1.92 - - 2.37
Movement and parking
facility for vehicles
attached to market 5.79 - - - - 5.79
Banking services
including settlement of
transactions related to
market. 6 0.55 - - 0.47 2.34
Price displays/market
information services -0.25 -1.11 - -1.39 -34.18 -9.23
Average 3.15 -0.22 0.96 -0.82 -6.48 1.30
Facility wise Return on Investment from:
Non-Market Services
Facilities Azadpur Nashik Kolar Hassan Belgaum Average
Catering services - - - 6.4 - 6.40

Restaurants/canteens/food
kiosks & other refreshment 6.35 0.35 2.42 15 33 11.42
services

Logistic Centres/Transporters
1.27 - - 8.4 0.18 3.28
shops

Porter service 39.17 22.5 3.12 1.14 1.91 13.57

Shopping complex - 2.78 - 1.5 1.5 1.93
Exporter’s shops 0.29 - - - - 0.29

Input shops/Nurseries 0.35 2.5 3.08 - 2.83 2.19

Conference/Multipurpose Hall -0.05 -0.2 -0.14 - -0.04 -0.11

Library -0.04 - - - - -0.04

Average 6.76 5.59 2.12 6.51 6.56 5.51
 Facility wise Return on Investment from:
Essential Services
Facilities Azadpur Nashik Kolar Hassan Belgaum Average

Waiting/rest rooms -0.02 0 0 - -0.03 -0.0125

Drinking water -0.95 -0.04 -0.1 -0.72 -0.29 -0.42

Toilets 0.44 0.12 0.23 0.3 -0.13 0.192
Cleaning -6.39 -3.67 -0.77 -8.05 -4.98 -4.772

Lighting of public -0.44 -0.18 -0.07 -0.13 -0.6 -0.284

areas

Information desks -15.59 - -1.3 - - -8.445

Waste treatment 1.33 - - - - 1.33

plants

Disposal trucks -1.22 - -0.13 - - -0.675

Policing & general -2.5 -1.15 -0.93 -2.56 -1.66 -1.76

security

Emergency services -0.58 0.12 - - - -0.23

Average -25.92 -4.8 -3.07 -11.16 -7.69 -10.528
 Kind of Service Avg. ROI

Market Services 1.3

Non Market Services 5.51

Essential Services -10.53

Total Avg. ROI -3.72

• Market is totally dependent on Non-Market

services to make it a viable proposition
• The Private Investor should have the freedom of
deciding the Non-Market services as per his own
estimates of profit generating activities
• Also, to maximize the returns from Market Services,
the cap on user charge which is 2%, should be
increased atleast upto 3.5%

PFFPL, New Delhi 32

 Thank You

PFFPL, New Delhi 33