FFV Seminar Write Up Final

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TAMIL NADU AGRICULTURAL UNIVERSITYHORTICULTURAL COLLEGE AND RESEARCH INSTITUTE

SEMINAR REPORT

on

Fresh Fruits & Vegetables Marketing Constrains & Opportunities

CHAIRMAN STUDENT Dr. N. Selvaraj Mr. Abid Hussain

Professor and Head ID. No.: 06-6290-01HRS,TNAU,Ooty II M.Sc. (Hort.)- Vegetable Science

HC & RI, TNAU, Coimbatore



CONTENTS

Fresh Fruits and Vegetables marketing- constrains &

opportunities

INTRODUCTION:

Horticulture – Success story of India

SN. Titles Page No.

1. Introduction and the turnaround 1-32. Fresh fruits and vegetables (FFV) 4-5

3. FFV Marketing 6-11

4. Constrains 12-14

5. Opportunities in FFV sector 15-19

6. The Way Out

a) Direct Marketing

b) Co-operative Marketingc) Regulated Marketing

d) Contract Farming

e) Organized FFV Retailing

20-24

25-27

28-2929-33

33-37

7. SAFAL Market- a case study 37-39

8. Online /e-Trading of FFV 40-48

9. Conclusion 49-51

10. Literatures cited 52



Horticultural development had not been a priority until recent years in India. It

was later in the post 1993 period that focused attention was given to horticulture

development through an enhancement of plan allocation and knowledge-based

technology. Despite of this decade being a period of “golden revolution” productivity of

the horticultural crops has increased only marginally from 7.5 tonnes per hectare in 1991-

92 to 8.4 tonnes per hectare in 2004-05 (NHB, 2005 In 2005 total area under fruits and

vegetables had been 11.72 million hectares and total production had been 150.73 million

tones (NHB, 2005). Of the 456 million tons of vegetable produced in the world, India’s

share is 59 million tons. All taken together, India’s share of the world’s vegetable market

is 17 per cent. Presently, the horticultural crops cover 13.6 million hectares, i.e. roughly 7

per cent of the gross cropped area and contributes 18-20 per cent of the gross value of

India’s agricultural output. India is the second largest producer of fruits and vegetables in

the world next only to China and accounts for about 16% of the world’s production of

vegetables and 10% of world’s fruits production. Annual area and production growth

under fruits and vegetables in the period 1991-2005 was 2.6 per cent and 3.6 per cent

respectively in India. Share of fruits and vegetables in total value of agricultural exports

has increased over years from 9.5 per cent in 1980-81 to 16.5 per cent in 2002-03. But we

are still lagging behind in actual exports of these produce. For example, India produces

65 per cent and 11 per cent of world’s mango and banana, respectively, ranking first in

the production of both the crops. Yet our exports of the two crops are nearly negligible of

the total agricultural exports from India. It is a known fact that horticulture sector in India

is constrained by low crop productivity, limited irrigation facilities and underdeveloped

infrastructure support like cold storages, markets, roads, transportation facilities etc.

There are heavy post-harvest and handling losses, resulting in low productivity per unit

area and high cost of production. However, on the other hand India’s long growing-

season, diverse soil and climatic conditions comprising several agro-ecological regions

provide ample opportunity to grow a variety of horticulture crops. Thus, efforts are

needed in the direction to capitalize on our strengths and remove constrains to meet the

goal of moving towards a horticulture lead agricultural growth in India. The foreign trade

policy 2004-09 emphasized that to boost agricultural exports, growth and promotion of

exports of horticultural products is important. Horticulture contributes nearly 28 per cent



of the GDP in agriculture and 54 per cent of export share in agriculture.

ACREAGE UNDER HORTICULTURE: Includes fruits, vegetables, spices,

floriculture, and plantations-is expected to be 20 million hectares in 2006-07. With

production of 53 MT and 108 MT, respectively, in 2005-06, India was the second largest

producer of both fruits and vegetables in the world. India occupies first position in the

production of cauliflower, second in onion and third in cabbage. The National

Horticulture Mission (NHM) was launched in May 2005 as a major initiative to bring

about diversification in agriculture and augment income of farmers through cultivation of

high value horticultural crops. The National Horticulture Mission (NHM) aims at

doubling horticulture production by 2012.

Area and Production of Major Horticulture Crops (Area-Million ha,Production-Million tonnes)

Crops 2002-03 2003-04 2004-05* 2005-06*

Area Production Area Production Area Production Area Production

Fruits 4.8 49.2 5.1 49.8 5.3 52.8 5.9 54.4

Vegetables 5.9 84. 8 6.7 101.4 7.1 108.2 7.2 113.5

Spices 2.4 3.8 5.2 4.0 3.2 4.9 3.2 5.9

Plantation

Crops

3.1 13.1 3.3 9.4 3.1 10.4 3.2 9.8

Flowers 0.1 0.2 0.2 0.6 0.1 0.7 0.1 0.8

Others 0.09 0.9 0.1 0.3 0.4 0.4 0.4 0.5

Total 16.4 152.0 20.6 165.5 19.2 177.4 20.0 184.9

Source: National Horticulture Board * Estimated

PRODUCTION AREA:

Vegetables are typically grown in India in field conditions; the concept is opposed

to the cultivation of vegetables in green houses as practiced in developed countries for

high yields. The fruits and vegetables considered important by the horticulture board are

mostly grown in the areas of Jammu & Kashmir, Himachal Pradesh, hilly regions of

North Uttar Pradesh, Bihar, Tamil Nadu, Maharashtra, Karnataka, Gujarat, Andhra

Pradesh, Assam, Madhya Pradesh, Rajasthan, Punjab, Tripura, West Bengal and Orissa.

GROWTH PROMOTIONAL ACTIVITIES:

Ongoing liberalization and the emergence of and integrated global market have

opened new vistas for Indian horticulture. In fact, till very recently, India’s main policy

focus that until recently was only on grains and cereals, has been changed in a timely

manner, with the launch of National Horticulture Mission in 2005-06 by Government of



India with a mandate to promote integrated development in horticulture, to help in

coordinating, stimulating and sustaining the production and processing of fruits and

vegetables and to establish a sound infrastructure in the field of production, processing

and marketing with a focus on post harvest management to reduce losses. It envisages to

double the production of horticulture produce by the end of 1912. This enabled India to

exploit its true potential. Since liberalization and withdrawal of excise duty on fruit and

vegetable products there has been significant rise in the growth rate of the industry. No

industrial license is required for setting up Fruits & Vegetables Processing industries;

setting-up 100% EOUs require specific Govt. approvals. Many subsidies, irrigation plans,

loans, pre and post harvesting schemes led to the following figures of production.

FRUIT & VEGETABLE INDIA'S PRODUCTIONSTATUS

Mango, Guava, Banana & Peas World's largest producer

Lemon, Onion, Brinjal, Cabbage, Cauliflower,

Pumpkins & Gourds, Total Vegetables and Total Fruits

World's 2nd largest producer

Coconut World's 3rd largest producer

Oranges World's 4th largest producer

Papaya, Lettuce & Pineapple World's 5th largest producer

Tomato World's 6th largest producer

Citrus Fruits/ Mosambi & Cassava World's 7th largest producer

Sweet Potato World's 9th largest producer

Apple World's 10th largest producer Grapes World's 16th largest producer &

World record in productivity

COMPETITIVENESS OF INDIAN HORTICULTURE:

Commodity that a nation should produce and export is determined by the

principal of

comparative advantage. The comparative advantage tells about that capability of the

country to export a commodity, while the competitiveness of the commodity in the world

market is determined by the measure of export competitiveness.

Export Competitive Commodities

Fruits: Banana, Papaya



Vegetables: Brinjal, Cabbage, Cauliflower, Peas

Commodities with Comparative Advantage

Fruits: Mosambi, Mango and Guava and

Vegetables: Onion

FRESH FRUITS AND VEGETABLES - CHARACTERISTICS

1. Perishability of products: Involvement of many bio-physio-chemical processes

make its highly vulnerable to damages at short intervals and thus contributes to

product’s limited shelf life.

2. Seasonability of production: The inconsistent supply due to the close involvement

of many biotic and abiotic factors of production break the cycle of the produce

availability in the market throughout the year.

3. Bulkiness of products: The bulkiness of the fresh produce adds to the

transportation, handling and packaging charges. Alongwith makes its prone to pre

and post harvest damages in the supply chain accounting upto the extent of 20-40

percent.

4. Quality variation of products : Nonadherence to GAP practices leads to variationin quality

5. Irregular supply of products: Seasonability and non planned insufficient

production creates gluts and shortages in the market.

6. Small Holdings size & scattered production processing: As majority of the Indian

farmers falls in marginal and small category.

RISING

FRESH FRUITS AND VEGETABLES CONSUMPTION:



1. Rising income / Economic growth: Spurge in the sensex and improved living

paved the way for the fresh fruits and vegetables

2. India’s burgeoning middle-class: Emergence of the majority middle class and

drastic changes in the demographic figures mainly the substantial rise of the youth

population viz. more than 50 percent of Indian population is under the age of 35

years. This given the needed thrust to fresh fruits and vegetables consumption.

3. Demographical changes : Due to vast cultural and social diversity available in

India majority of which is vegetarian, fresh fruits and vegetables found driver’s

seat in the food palate of every

4. Health awareness: Due to emergence of new diseases and improvement in

education level provided the demand for the fresh fruits and vegetables among the

population due to its disease prevention and health promoting properties.

5. Increased literacy: Improvement in the education status backed with higher

income and the awareness about fresh fruits and vegetables indirectly leads the

way for higher demand and consumption.

6. New diseases prevalence: Eruption of new diseases due to the resurgent changes

in the food habits and lifestyle also created the much needed thrust for the fresh

fruits and vegetables among the masses, due to its disease prevention and health

promoting properties.

7. Trade liberalization /Globalization: Aftereffect of the WTO and the globalization

the fresh fruits and vegetables are available almost round the year from one or the

other production pockets at reasonable prices and desirable quality in sufficient

amount.

8.8. Development of better infrastructure & transit facilities: Public-Private –

Partnership efforts brought the necessary infrastructure viz. coolchains, better



roads, transportation and storage facilities for the perishable commodities in the

investment shying sector to the satisfactory status.

MARKETING OF FRESH FRUITS AND VEGTABLES:Marketing plays an important role not only in stimulating production and

consumption, but in accelerating the pace of economic development. The marketing

system plays a dual role in economic development in countries whose resources are

primarily agricultural. Marketing comprises all the operations, and the agencies

conducting them, involved in the movement of farm-produced foods, raw materials and

their derivatives from the farms to the final consumers, and the effects of such operations

on farmers, middlemen and consumers. Agricultural marketing deals with all the

activities, agencies and policies involved in the procurement of farm inputs by the

farmers and the movement of agricultural products from the farms to the consumers. The

agricultural marketing system is a link between the farm and the non-farm sectors. It

involves all the aspects of market structure or system, both functional and institutional,

based on technical and economics considerations, and includes pre and post-harvest

operations, assembling, grading, storage, transportation and distribution. The expansion

in the size of farm output stimulates forward linkages by providing surpluses or food

which requires transportation, storage, processing, packaging and retailing to the

consumers. Increasing demands for money with which to purchase other goods leads to

increasing sensitivity to relative prices on the part of the producers, and specialization in

the cultivation of those crops on which the returns are the greatest, subject to socio-

cultural, ecological and economic constraints. It is the marketing system that transmits

the crucial price signals. The fruit and vegetable marketing in India is highly

decentralized having wide capacities. There has been concern in recent years regarding

the efficiency of marketing of fruits and vegetables, and that this is leading to high andfluctuating consumer prices and only a small share of the consumer rupee reaching the

farmers. It is overviewed by many committees and reports that Indian farmers are good

producers but not good marketer. As early as 1976 National Commission on Agriculture

pointed about the inefficiency in agricultural marketing with particular to fresh

perishables and strongly recommended in following words that “It is not enough to



produce a crop; it must be satisfactorily marketed.” Marketing of horticultural crops is

complex especially because of perishability, seasonality and bulkiness. Fruits and

Vegetables are an item of daily consumption, they are essential in human diet but they are

very perishable in nature. Therefore, the cultivation of fruits and vegetables is generally

concentrated around towns and cities, so that they can be harvested and transported to the

nearby market immediately and in fresh form. With the increase in transport and

communication facilities, fruits and vegetables cultivation has spread in interior areas

where irrigation facilities are available. This is because growing vegetable crops is more

profitable than any other seasonal crop particularly the foodgrain crops. The spread of

fruits and vegetables cultivation in rural areas has solved the perennial problems,

particularly of transport, handling, packing and storage. There is also some regional

specialisation in growing some fruits and vegetables. They are grown in one area but

marketed in other areas for creating wider market and also to fulfill the demand of some

people, who have liking for them. This also involves long distance transport. For this

purpose good roads in the interior villages is necessary. Fortunately there are good state

and national highways, but there are no good roads in the interior. Sale of the fruits is

generally through pre- harvest contactors, so that the farmer gets an advanced payment

and cover his risk. Vegetables are usually sold through commission agents and very little

of pre-harvest contacting is done. Due to this the net returns are generally low. Farmers

spend means to devote more time to their field crops rather than to the orchards. If the

farmer does the marketing of his produce himself then the net returns to him would be

double. So also in the marketing of fruits and vegetables, producer cannot go to

wholesale market or long distant market and he has to depend on some intermediaries to

sell his fruits and vegetables. Therefore, in the marketing of fruits and vegetables costs

are involved for grading, packing, transport, loading/unloading, fees, etc. In addition, the

intermediaries also take some margins for them. These costs and margins determine the

final price to be paid by the consumer. After deducting market costs and margins from the

final price paid by the consumer, farmer gets his net price, which is referred to "Farmer’s

share in consumer’s price". This determines efficiency of marketing. Price spread and

producer’s shares in consumer prices of some vegetables is given in table.

PRODUCER'S SHARE IN SOME VEGETABLES



Channel Producer's share (%)

Tomato

I Producer - commission agent -retailer - consumer 80.00

II Producer - commission agent - masakhore - retailer 47.60

III Producer - commission agent - secondary wholesaler - retailer - consumer 66.9

IV Producer - commission agent - primary wholesaler - retailer - consumer 53.5

Cauliflower

I Producer - commission agent - retailer - consumer 54.60

II Producer - commission agent - Masakhore - retailer - consumer 52.10

Cabbage

I Producer - commission agent - retailer - consumer 54.90

II Producer - commission agent - Masakhore - retailer - consumer 52.50

Vegetables

I Producer - consumer 89 to 96

II Producer - retailer - consumer 69 to 84

III Producer - wholesaler cum - commission agent - retailer - consumer 63 to 73

Vegetables

I Producer - wholesale - cum- commission agent - retailer - consumer 51 to 55

Sometimes, agricultural commodities directly pass from producers to consumers. Butin indirect marketing agricultural commodities generally move from producers to

consumers through intermediaries or middlemen. The number of intermediaries may vary

from one to many.

AGENCIES

Producers: Most farmers or producers, perform one or more marketing functions. They

sell the surplus either in the village or in the market. Some farmers, especially the large

ones, assemble the produce of small farmers, transport it to the nearby market, sell it here

and make a profit.

Middlemen: Middlemen are those individuals or business concerns which specialize in

performing the various marketing functions and rendering such services as are involved

in the marketing of goods.

Wholesalers: Wholeselling is the one ion of goods is the wholesale dealers. Wholeselling

is the one that covers activities of all individuals or businessmen, which sell to or

negotiate sales with customers, who buy for resale or industrial use. His position is that of

an intermediary between manufacturer and retailer.

Wholesalers are classified as:



1) Local wholesalers, who deliver their purchases to local retailer.

2) Provincial wholesalers some time called as distributor selling to the retailers of a

particular district or a state and

3) National wholesalers located at a strategic place and distribute goods all over the

country.

Retailers: He is the last link in chain of middleman, who sells directly to consumer. He

takes title to goods, sells and sets up business usually amidst the consumer's groups. He

buys his requirement usually from the wholesalers. Retailers in producing areas may have

direct contact with producers and buys goods from them for resale.

Co-operative Marketing Societies

Main function:

1) Selling the produce of member's.

2) They also undertake outright purchases.

3) Provide storage facilities for storage and grading and

4) Save cultivators from exploitation by traders and help farmers in getting fair price

for their produce.

5) Performing functions of processing of raw produce.

Pucca Arhatias: He is the real purchase in the wholesale market on his own behalf of

acting for some businessmen, firms in consuming markets. Big industries play as their

agent and order him to purchase certain quantity within a given range of price. When

pucca arhatia trades on his own, he dispose of his produce brought by him through

dealers in different parts of country.

Katcha Arhatia: He also advances money to the cultivators and village banias on the

condition that the produce will be disposed off through him alone and hence charges a

very nominal rate of interest on the money advanced. Katcha arhatia charges commission

for services rendered by him. Important link between the village cultivator or traders on

the one hand.



Village Merchants: He is an important agency in the collection of produce and more so

when the mandi is situated at a considerable distance from the village. He advances from

his shop either on credit or for exchange of foodgrain or so price given for cultivator's

produce. The quantities of agril. Produce so collected are either disposed off in the mandi

or retained for resale in the village in the processed forms, such as rice, flour, oil etc.

Intinerant Traders: They are small merchants, who move from village to village and

buy the produce from cultivator's house. They give a lower price than selling in the

nearby market and in setting transportation take into consideration, the factors such as

cost of transportation, market charges and profit margin.

Transport Agency: This agency assists in the movement of the produce from one market

to another e.g. railways, trucks, bullock carts, camel carts, tractor trolleys.

Communication Agency: It gives information about the prices prevailing, and quantity

available and transactions e.g. post, telephone, telegraph, newspapers, radio.

Advertising Agency: It enables prospective buyers to know the quality of the product

and decide about the purchase of commodities e.g. newspapers, radio, television, cinema

slides.

Auctioners: They put produce for auction and bidding by the buyers.

Government Agencies / Institutions: In addition to individuals, corporate, co-operative

and government institutions are operating in the field of agricultural marketing. Some

important institutions are:-

The State Trading Corporation (STC)

1) To make available supplies of essential commodities to consumers at reasonable

prices on a regular basis;

2) To ensure a fair prices of the produce to the farmers so that there may be an

adequate incentive to increase production;



3) To minimize violent price fluctuations occurring as a result of seasonal variations

in supply and demand;

4) To arrange for the supply of such inputs as fertilizers and insecticides so that the

tempo of increased production is maintained;

5) To undertake the procurement and maintenance of buffer stock, and their

distribution, whenever and wherever necessary;

6) To arrange for storage, transportation, packaging and processing;

7) To check hoarding, black-marketing and profiteering.

THE VICIOUS MARKETING CHANNELS:

The channels of marketing is an important aspect of agricultural marketing

affecting the prices paid by consumers and shares of them received by the producer. The shorter the channel, lesser the market costs and cheaper the commodity to the

consumer . When the channel is long with more intermediaries, prices are more and

producer’s share is less. The channel which provides commodities at cheaper price to

consumer and also ensures greater share to producer is considered as the most

efficient channel Several studies have been carried out in India on this topic for different

commodities and in different regions and the results are of mixed nature due to local

socio-economic conditions and infrastructure facilities.

Normally producer’s shares in different commodity groups are as follows:

1

.

Food grains- 55 to 65%

2

.

Other commodities- 60 to 70%

3

.

Fruits- 30 to 40%

4

.

Vegetables- 40 to 50%

Channels of Vegetables:



i. Producers–consumer (village sale)

ii. Producer–retailer–consumer (local sale)

iii. Producer–Trader–commission agent–retailer–consumer.

iv. Producer–commission agent–retailer–consumer

v. Producer–primary wholesaler–secondary wholesaler– retailer– consumer (distant

market).

Channels of Fruits:

i. Producer–consumer (village sale)

ii. Producer–Trader–consumer (local sale)

iii. Producer–pre-harvest contractor–retailer–consumer

iv. Producer–commission agent–retailer–consumer.v. Producer–pre-harvest contractor–commission agent– retailer–consumer

vi. Producer–commission agent–secondary wholesaler– retailer–consumer (distant

market).

These channels have great influence on marketing costs such as

transport, commission charges, etc. and market margins received by the intermediaries

such as trader, commission agent, wholesaler and retailer. Finally this decides the price to

be paid by the consumer and share of it received by the farmer producer. That channel is

considered as good or efficient which makes the produce available to the consumer at the

cheapest price also ensures the highest share to the producer.

CONSTRAINTS IN FRESH FRUITS AND VEGETABLES MARKETING:

1. Lack of basic infrastructure viz.cool chains, logistics and supply chain

management. The infrastructural problems, pertaining to the cold storage facilities

are dual as some places don’t have the cold storage while some places have the

problem of underutilisation of the existing cold storages. The utilisation is even

lower than 30 per cent of the total capacity in many cases. Development of

competitive international transportation, linked to domestic air transport or road

and rail transport would help in reduction of post harvest losses.



2. Preponderance of Intermediaries in the channel results in unfair and exploitative

practices in marketing of fresh produce is very common.

3. Lack of proper grading and quality control system.

4. Scattered productions and sometimes in isolated places where even the

transportation facilities and other infrastructure is not sufficient for the

perishables.

5. Lack of unity and organization skill among the farming community, which proves

a major impediment in the formation of cluster groups and co-operatives.

6. Inefficient & Imperfect markets: Due to prevalence of many intermediaries and

malpractices followed by them in the price fixation and auction of the perishables

in between the marketing channel results in uprise of consumer’s price in the

producer’s share.

7. Concept of consumer packaging practically unknown in domestic markets :

Improper pre and post harvest handling without any sound packaging leads to

heavy loss ranging from 20-40 percent of the produce at the time when its reaches

the final consumer.

8. Lack of forward & backward linkages: Absolute lack of the much needed quality

inputs and extension backup at proper time and after harvest processes.

9. Ignorance to new methods of cultivation and dependence on traders for extension

knowledge.

10. Perishability and Storability: Having limited shelf life due to its typical bio-

physio-chemicals constitutions, fresh fruits and vegetables penetration is

restricted to the certain niche markets and stakeholders. Besides the presence of

insufficient numbers of storages and coolchain facilities adding to the woes.





A study conducted by IIM, Ahmadabad to examine different aspects of marketing,

focusing particularly, on the wholesale markets for fruits and vegetables which have been

established to overcome deficiencies and improve the marketing efficiency. It indicated

that in Ahmedabad the direct contact between commission agents and farmers is very

low. For vegetables this is 50 percent and for fruits only 31 percent. Further, in the system

of transaction, secret bidding and simple transaction dominate and open auction is

relatively rare. In KFWVM, Chennai, the wholesalers act as commission agents and

receive consignments directly from producing centers through agents or producers. By

and large the system of transaction remains traditional and open auction is rarely seen.

This is one major reason for poor efficiency. However, in the small Uzhavar sandie in

Chennai, the farmers sell directly to consumers. The share of farmers in the consumer

rupee in Ahmedabad was 41.1 to 69.3 percent for vegetables and 25.5 to 53.2 percent for

fruits. In Chennai KFWVM, the farmers' share was 40.4 to 61.4 percent for vegetables

and, 40.7 to 67.6 percent for fruits. In the small Uzhavar sandie market in Chennai, where

the farmers sell directly to the consumers, the share of farmers was as high as 85 to 95.4

percent for vegetables. This indicates that if there are few or no middlemen, the farmers’

share could be much higher. In the Kolkata market the share of farmers ranged from 45.9

to 60.94 percent for vegetables and 55.8 to 82.3 percent for fruits. Thus, the shares are

frequently very low, but somewhat better in Chennai, lower in Kolkata and even lower in

Ahmedabad. The margin as a percentage of farmer-consumer price difference (an

efficiency measure) shows that in Ahmedabad, the margins are very high and range from

69 to 94 percent. In Chennai they range from 15 to 69 percent, and in Kolkata they range

from 46 to 73 percent. The high percentage of margin to farmer-consumer price

difference is indicative of large inefficiencies and relatively poor marketing efficiency.

There is great need to improve the marketing of fruits and vegetables. These regulated

markets were established to improve the marketing efficiency. The system of sale

followed in these markets indicated that open auction as a system of sale is yet to take

roots in these markets and the marketing system was dominated by open auction or secret

bidding resulting to significant erosion of marketing efficiency.

INDIA TRADE GAINS FRESH MOMENTUM



India is a land of huge potential, and always would be. It was a mood of

resignation captured that modern forms of food retailing would never take off in India

during lifetime. Skip to 2007 and you can’t open a newspaper in India without reading

about the latest major corporate to announce its entry to the country’s burgeoning modern

retail sector. It is this retail ‘revolution’, coupled with the economic boom that looks set

to provide the impetus for India’s fresh produce sector to make real strides. Everyone

singles out the supply chain challenge, resulting from a chronic lack of infrastructure, as

the key hurdle to the modern retailers that are setting up shop in India, but the real

challenge will be at the front-end rather than the back-end, where they must change the

way fresh produce is marketed as well as the mindset and tastes of the Indian consumer.

For instance, the Indian consumer ‘eats curry, not vegetables’, making fresh produce a

value-driven purchase. Fruit and vegetable retail in India is low margin, high cost, not the

other way around. Traditional small vendors with few overheads thrive in this climate,

offering consumers a service that inspires loyalty. Changing consumers’ behavior may be

the main hurdle for India’s modern retail sector, but there are plenty of others to

overcome - poor infrastructure, shortage of expertise, high real estate costs to name a few.

Indeed, it’s possible that the fledgling retail revolution will falter and fizzle out, given the

size of the challenges ahead. But this looks unlikely, as major corporates are driving the

push and the momentum has already been gained. Indeed, Fresh Produce India would

have departed with a sense of the challenges and complexity of the Indian market, but a

genuine optimism that the country is finally on track to deliver on the huge potential it

offers.

ASIAN PERSPECTIVE:

Unsurprisingly, China and India remains the driving force in the region. Fruits and

vegetables prices in China have shown a double-digit upturn during 2006 over the

previous year, reflecting both rising production costs and increasing consumer demand

(and incomes). In particular, an “off-year” for Chinese apple crops in 2005/06 saw

domestic prices scale heights that made export a far less attractive option. Indeed, while

low prices continue to drive China’s export expansion, volume growth has slowed down

this year, while values have risen. New speciality lines are coming to the fore as China



turns its labour-cost advantage to value-adding and innovation. China’s increasing

production costs should not be overlooked however, and rising fuel prices are a key issue,

especially as so many of the country’s best growing-regions are located some distance

into the interior. Food safety issues also continue to trouble India’s export trade, with

maximum chemical residue levels (MRLs) and microbial contamination impacting

heavily on the fruits and vegetables industry. While the SPS under WTO regime has

caused confusion and upheaval for European and other countries import trade, it could

benefit consumers in the long-term as it brings MRLs and filth problems into line with

EU and US standards.

Meanwhile, South East Asian countries have been facing an influx of low-priced Chinese

produce under regional free trade deals, with farmers in Thailand and Vietnam feeling the

heat. Nevertheless, some good opportunities are clearly developing for high-value items

in these markets. The shift from tariff- to quarantine-based import restrictions in Asia has

continued, with Indonesia introducing new rules, Taiwan toughening its stance on pests

and Thailand mulling a move towards market regulation. The modern retail trade has also

made further inroads across the region. Even India, the final frontier for global retailing,

now appears to be poised for a retail revolution led by local corporate giant Reliance.

This market will be ‘one to watch’ in 2007, as will Vietnam, whose entry to the WTO is

set to create new opportunities for retailers and the fresh produce trade alike.” India is a

land of huge potential... and always will be. The snail-like progress of the country’s fruit

and vegetable industry in addressing fundamental issues such as lack of infrastructure,

fragmented production and poor quality standards. But recent developments in India’s

fresh produce sector and food retail industry are enough to persuade even long-term

sceptics that the worm has turned. Most notably, Indian business conglomerate Reliance

has unveiled plans for a US$5.6bn foray into the retail sector. Its move serves as an

example of the kind of money that is being invested by domestic companies into retailing

and agribusiness – sums that are unprecedented and more usually associated with global

retail giants. Reliance has several major issues to overcome to live up to its media billing

as the ‘Indian Wal-Mart’, but if it can pull off its plans, it will improve the country’s

entire retail and horticulture sectors. For Reliance’s project calls for the creation of a

whole new supply chain, including cold storage facilities and contract farming. And it is



not alone, with other local retailers such as Big Bazaar, Subikhsha, Hypercity, Spencer’s

and FoodWorld seeking to form similar systems. While the debate rumbles on as to if and

when the government will open its market to multi-brand global retail groups like Wal-

Mart and Tesco, local chains are already transforming India’s chaotic retail industry.

Meanwhile, big-hitters in the global fresh produce trade are now taking the opportunity to

capitalise on India’s vast procurement potential. Capespan and Fyffes recently set up joint

ventures for grapes and ‘high-altitude fruits’ respectively, while Field Fresh, the alliance

between Bharti Enterprises and European equity firm Rothschild, is also ploughing

substantial investment into the horticulture sector. India’s own market for high quality

fruit and vegetables is also growing strongly as its middle-class expands. Moreover, this

growth is not confined to the top four or five mega-cities. Rather, India’s burgeoning

middle-class, unlike China’s, spans the length and breadth of the country, with studies

showing that the smaller cities actually boast the largest increase in millionaire

households. Such ‘B’ cities are driving demand for imported fruits, and while suppliers

must deal with a restrictive import system and bottlenecks in distribution to reach their

market, things are improving as the import trade has consolidated and the government’s

threat perceptions over foreign fruits have diminished. In short, India is beginning to

deliver on its huge potential, and the time is ripe for an international approach that

enables the fresh produce trade to build on this progress.

A CASE STUDY - Marketing of Banana:

Cauvery Delta (Tamil Nadu)

The practice of opting pre-harvest contractors at the time of 50per cent maturity

of the crop is commonly followed by majority ((88%) of the growers. The prime reason

stated by the farmers was that the pre-harvest contractors give advance payments before

harvest of the bananas to meet their immediate needs for production, consumption and

social activities. Other reasons were

1. High fluctuations in prices (400%)

2. High winds during monsoon causing damage to the plants.

3. Absence of institutional credit.

4. Absence of crop insurance



5. Small production and uneconomic quantities available for marketing

6. Long association with contractors.

7. Price discrimination in the markets.

8. High marketing costs.

Constraints:

1. Non-institutional agencies and undesirable market practices in the markets.

2. Deduction of 2 bunches for every 100 bunches as Profit bunches.

3. Combining two small bunches as one bunch during counting for price fixing.

4. Non-harvest of small size bunches.

5. Delay in payment of balance amount after harvest

6. Violation of contracts i.e. abandoning the harvest if there is slump in prices.7. Non-availability of institutional agency for banana which is highly perishable.

8. Non-availability of any viable storage preservation methods.

9. Non-existing institutional marketing agency like regulated market, co-

op.marketing or producer's association.

Suggestions:

1. Setting up banana based agro-processing industry.

2. Marketing banana through regulated markets.

3. Bringing co-operative marketing as new channel in the existing channels which

will increase producer's share in the consumer's rupee

Jalgaon (Maharashtra):

In the marketing of banana in Jalgaon district three channels were identified.

Channel I Producer-co-operative fruit sale society-commission agent-wholesaler-

retailer– consumer Channel II Producer -Group sale agency commission agent - wholesaler - retailer –

consumer

Channel III Producer –Private agency - commission agent - wholesaler - Retailer –

consumer.



Marketing costs, margins and price spreadParticulars Channels

I II III

Marketing costs 82.89 84.46 91.0

Marketing margins 282.26 282.86 287.58

Producer's share 32.57 32.47 31.31

All these indicators indicate comparatively greater economic as well as

operational efficiency of the marketing mechanism of channel I i.e. Co-operative Fruit

Sale Society over remaining ones. However, it is suggested that the producer's share in

consumer's rupee in Channel I can further be increased if the co-operative Fruit Sale

Society directly deals with the markets in terminal markets rather than selling the produce

to the commission agent.

Jalgaon & Sangli: (Maharashtra):

The major proportion of produce was marketed through two marketing channels

I .Producer - Co-op. Society - retailer - consumer

II .Producer - wholesaler - retailer - consumer

The producer's share was 34.53% and 31.05% for member and non-member

producer's respectively. The members of producer's co-operative association could

therefore derive relatively higher profit margins.

Parbhani (Maharashtra)

Channel I: Producer - co-op. Society - wholesaler -Retailer - consumer

Comm. to society 8% and Comm. To wholesaler 5%

Shares of expenditure on:

i. Cultivation 65.6%

ii. Transportation 19.30%

iii. Commission 15.10% 100.00

Nanded (Maharashtra)

i. Producer - wholesaler - Retailer - consumers



ii. Producer - co-operative society - commission agent -cum-wholesaler- Retailer -

consumer

Cost of marketing through

i. Co-op. Society Rs.58.37%

ii. Private 61.59

Producer's share through

i. Co-op. 51.65%

ii. Private 48.37%

Marketing Harichhal Banana in Gorakhpur (U.P)

Produce - Retailer - consumer channel for the sale of Harichhal banana was more

profitable compared to other systems of sale.

For increasing marketing efficiency, grower should develop:

1. Co-operative system of transport.

2. Storage facility should be developed on co-operative lines, so that the farmers will

be protected from stress sale.

3. Weights and measures should be standardized.

4. Market information should be communicated to the growers regarding prices of

banana

INNOVATIVE DIRECT MARKETING MODELS IN INDIA:

It has been realized that the marketing channel for farm products which are highly

perishable (fruits, vegetables and flowers) should be as short as possible. Perishable farm

produce should move quickly from farmers to consumers. If farmers directly sell their

produce to the consumers, it will not only Save losses but also increase farmer's share in

the price paid by the consumers. Therefore, direct marketing by the farmers is being

encouraged as an alternative channel. Some examples of these channels are given below:

(I) APNI MANDI / KISAN MANDI

An innovative concept of 'Apni Mandi' has been introduced in some states. Apni

Mandi is also called 'Kisan Mandi', as it is different from the traditional mandi or market



yard, where the produce moves to the buyer through either a commission agent or trader.

In Apni Mandi there is a direct contact between the farmer producer and the buyer who is

generally the consumer. This system does away with the middlemen. In Apni Mandi,

farmers sell their produce directly to the consumers without involvement of the

middlemen. The price spread in Apni Mandi is considerable low. These are working

satisfactorily in the case of fruits and vegetables. These, 'Apni Mandi' are similar to the

Saturday markets of United Kingdom and United States of America.

OBJECTIVES

The main objectives of popularising the concept of Apni Mandi are:

i. Better marketing of agricultural produce especially of fruits and vegetables.

ii. Ensuring direct contact of the producer-farmers and the consumers and therebyenhancing the distributional efficiency of the marketing system.

iii. Increasing the profitability of agricultural crops for the producers by minimization

of marketing costs and the margin of the middlemen.

iv. Ensuring the availability of fresh fruits and vegetables and other farm produce at

reasonable prices to the consumers.

v. Removing social inhibitions among the farmers for retail sale of their produce .

vi. Encouraging additional employment to the producers and thereby enhancing their

incomes.

vii. Promoting national integration by inviting the farmers of other states to sell the

produce grown by them directly to the consumers in Apni Mandis of other states

and

viii. Providing business techniques to the farmers so that in the long-run they may

adopt this practice for other crops and enterprises too.

HISTORY

The first Apni Mandi was started in Punjab by the Punjab Mandi Board at

Chandigarh in February, 1987. Punjab Mandi Board took the initiative with a view to

providing small farmers around cities a direct access to consumers. Similarly, in Haryana,

the first Apni Mandi was started at Kamal in 1988. In Rajasthan also, this scheme has

been introduced in several district towns.



The initiative is worth emulating.

FUNCTIONING

The market committee of the area where Apni Mandi is located provides space,

water, sheds, counters, balances and other facilities to the farmers in . Apni Mandis. The

Market Committee Staff need to work hard with dedication for the success of Apni

Mandis. The State Marketing Boards provide financial assistance to the Market

Committees for these services rendered by them to the Apni Mandi. This scheme is being

implemented with certain resistance from middlemen. Some farmers also have

reservations about the success of the scheme as it assumes adequate skills of retailing on

the part of farmers. However, farmers as well as consumers would benefit from the Apni

Mandi Scheme and its popularity may pick up after sometime.

(II) HADASPAR VEGETABLE MARKET

Hadaspar vegetable market is a model market for direct marketing of vegetables

in Pune city. This sub-market yard is situated nine kms away from Pune city. This

belongs to the Pune Municipal Corporation and the fee for using the space in the market

is collected by the municipal corporation from the farmers. This is one of the ideal

markets in the country for marketing of vegetables. In this market there are no

commission agents/middlemen. The market has modern weighing machines for weighing

the produce. Buyers purchase vegetables in lots of 100 kgs. or 100 numbers. The produce

is weighed in the presence of licensed weigh men of the market committee and sale bill is

prepared. The purchasers make payment of the value of produce directly to the farmer.

The purchaser is allowed to leave the market place along with the produce after showing

the sale bill at the gate of the market. Disputes, if any, arising between buyers and sellers

are settled by the supervisor of the market committee after calling the concerned parties.

The market committee collects one percent sale proceeds as market fee for the services

and facilities provided by the committee to the farmers and buyers.

(III) RYTHU BAZARS

Rythu bazars have been established in the major cities of. Andhra Pradesh state

with the prime objective to provide direct link between farmers and consumers in the



marketing activity of fruits, vegetables and other essential food items. Both producers and

consumers are benefited from Rythu Bazars as producer's share in the consumers rupee is

more by 15 to 40 percent and consumer's get fresh vegetables, fruits and food items at 20

to 35 percent less prices than the prevailing prices in nearby markets. Further, marketing

costs are at the minimum level as middlemen are completely eliminated from the

marketing activities in Rythu Bazars. The maintenance expenditure of Rythu Bazars is

being met from financial sources of Agricultural Production Market Committee (APMC)

nearer to the Rythu Bazars. Rythu Bazars started functioning in the Andhra Pradesh State

from January20, 1999. Presently there are 95 Rythu bazars operating in all the 23 districts

of the state. There is no government involvement in price fixation. This function is left to

farmers who organise themselves into committees and these committee are fixing sale

prices daily after taking into consideration the wholesale and retail prices prevailing in

the nearby towns. Generally, in the Rythu Bazar, prices are fixed20 percent over the

wholesale prices and 15 to 20percent less than local market prices. Prices fixed are

displayed at several places all over the Rythu Bazar for the benefit of the consumers. The

major highlights of Rythu bazars are: District collectors are making the land available for

the Rythu Bazars. Permanent infrastructure with all support system are being constructed

in the Rythu Bazars by the concerned Agricultural Produce Market Committee. The

vegetable cultivators in the identified villages are provided the photo identity cards and

only these cultivators are remitted to sell vegetables in these bazars. State Government

arranges special buses on most routes for transport of vegetables. Temporary storage

facilities are on anvil. Coordination exists between revenue, marketing and horticulture

departments for smooth functioning of these markets. A distinct and common identity of

such markets across the state is being established. Other essential commodities like

pulses and edible oils are also sold in these markets at reasonable prices. Vegetable

production programme in the area is also undertaken by the horticulture department of

the state to ensure regular supplies of vegetables to the consumers. Rythu Bazars have

generated a great deal of enthusiasm both among

farmers and consumers as farmers get better prices for their produce due to curtailment of

commission and overhead costs on account of the non-existence of middlemen and the

consumers get vegetables at low prices compared to the prices in other markets.



(IV)UZHAVAR SANDIES



Uzhavar Sandies (Farmers' Market)were established in selected municipal and

panchayat areas of the Tamil Nadu by thestate government. In these markets,farmers enjoy better marketinginfrastructure free of cost and also receiveconsiderably high prices for the productsthan what they use to receive frommiddlemen at village or primary marketsof towns. Farmers are additionally benefited in the form of interaction withother farmers and with departmental personnel. Farmers also get good quality

seeds and other inputs in the market yarditself. The consumers in these markets are benefited by getting fresh vegetables atrelatively lower prices. Farmer’s market /Uzhavar Sandie is an innovative scheme

introduced by the Government of Tamil Nadu, to help the farmers at large. It is thefirst of its kind in whole India. Such amarket was first started in Madurai on



14.10.1999 and the State Government proposes to establish totally 100 farmers

markets in the important centres coveringthe whole State.

Mode of Operation:

The farmer’s market provides the place for the growers of vegetables and fruits to

sell their produce directly to the people without recourse to the middlemen. These

markets are mainly started to establish a direct link between the farmers and the

consumers. There will be no place for the middlemen to the consumers. When the goods

are routed through middlemen, the farmers are not getting remunerative prices for their

produce. Likewise, as the middlemen at wholesale and retail levels add their respective

margins in the sale prices, the goods are sold at higher prices to the consumers. By

eliminating the middlemen, this scheme aims at benefiting both the farmers as well as the

consumers. The market place is established in the important centres to help the farmers

living in and around that centre. Every market has 80 to 100 small shops or sheds. Each

farmer is allotted a shop to sell his produce. The State Government appoints the

marketing Committee to regulate the marketing Centre. The committee will also havefarmers as its representatives. This Committee identifies the farmers and gives them a

permit card. Such farmers alone are being allotted the shops to market their produce. The

farmers need not pay any rent or Commission for selling their goods at the market.

Farmers can transport their produce to the marketing centres free of cost using State

Transport Corporation Buses. The market is open for the public from 7.00 A.M. to 7.00

P.M.daily. As and when the farmers bring their produce to the market, the committee will

fix the prices for the same. The same price will be ruling for that particular commodity

for the whole day. The prices are fixed for different commodities on the basis of previous

day prices of that commodity in the wholesale market.

Benefits to the farmers: In a short period of one month, since farmers’ market came into

existence, it was found that the income of the farmers, who are using the farmers market,



has doubled. This is made possible, as the farmers need not spend any amount towards

handling and marketing their produce. The rise in the farm income of the farmers is also

due to the direct marketing of their produce to the consumers. Wherever middlemen play

their role in distributing the farm produce, the farmers do not get remunerative prices.

The middlemen of a particular area usually form a cartel and accordingly fix low prices

for the agricultural goods. But, the scheme of farmers market enables the farmers to

realise just prices for their produce by eliminating all types of middlemen. As the sale at

the farmers market is only for cash, the farmers are getting money immediately. This is

absent when they sell their produce to the middlemen. Most of the traders make delayed

payments to the farmers.

(V) SHETKARI BAZAR On the lines of farmers' markets in other states viz., Apni Mandi in Punjab,

Haryana and Rajasthan since 1988, Rythu Bazar in Andhra Pradesh since January 26,

1999 and Uzhavar Sandies in Tamil Nadu, the Shetkari Bazars were established in the

state of Maharashtra for the marketing of fruits and vegetables. The Shetkari Bazar, by

eliminating intermediaries, links producers direct to the consumers, reduces price-spread

(marketing margin of intermediaries) and enhances producer's share in consumer's rupee.

Thus, these markets increase the farm income, well being of the farmers and bring

stability in prices of horticultural and plantation crops.

(VI) KRUSHAK BAZARS

On the lines of Rythu Bazars in Andhra Pradesh and Uzhavar Sandies in Tamil

Nadu, Government of Orissa has taken a programme of establishing Krushak Bazars in

the state of Orissa in the year 2000-01 with the purpose to empower farmer-producer to

compete effectively in the open market to get a remunerative price for his produce and to

ensure products at affordable prices to the consumers. The government provides

following incentives for opening of the Krushak Bazars in the state.

(a) Provides 1 to 2 acres of land at suitable place, free of cost, for establishing the bazar.

(b) A cluster/group of villages within the proximity of market area and farmers growing

vegetable are identified having the surplus produce for sale.



(c) The identified farmers are allowed to use marketing facilities so that there is no

intervention of middlemen and farmers get better prices for their produce.

(d) Public utility facilities viz., drinking water, electricity, toilet, canteen and rest house

are provided to farmers by the Krushak Bazars.

(e) Identified farmers are provided inputs like seeds and fertilizer at the reasonable prices

in the Krushak Bazars, and

(f) Storage facilities in the market area are also provided to the farmers in Krushak

Bazars.

(VII) MOTHER DAIRY BOOTHS: Mother Dairy, basically handling milk in Delhi,

was asked to try its hand in retail vegetable marketing by direct purchasing vegetables

from the farmers, Moving them in specially built vehicles, storing them in air conditionedgodowns and distribute them to the consumers through its retail outlets if 1989afterthe

notorious onion and potato price crisis. Mother Dairy management has opened retail

outlets in almost all important colonies of Delhi for providing vegetables to the

consumers at reasonable prices.

CO-OPERATIVE MARKETING SOCIETY

When producers of agricultural commodities or any other product form a society

with an objective of carrying out marketing of their produce, such society is called as co-

operative marketing society. The need for co-operative marketing arose due to many

defects observed and experienced in the private and open marketing system. Those are

several malpractices prevail in the marketing of agricultural produce. For example,

arbitrary deductions from the produce, manipulation of weights and measures and

cheating the farmers, collusion between the broker and the buyer while fixing the prices,

delay in payment of amounts due to farmers, etc. The result is the farmers are indebted to

trader - moneylender. In such circumstances co-operative marketing society can largely

help the farmers reduce the malpractices and offer honest and correct services.

There exists a chain of intermediaries between the producer and the final consumer. They

include village merchant, itinerant trader, wholesaler, commission agent, pre-harvest

contractor and retailer. They take their own margins for the services, they render. But

these margins are generally exorbitant, making the commodities costly for the consumers





3. To provide storage facilitates to their members by renting or owning the godowns

and thereby facilitate to grant advances against pledge of produce.

4. To protect members from all types of malpractices eliminates the middleman in

the chain of marketing.

5. Co-operative marketing society ensures grading, etc. and supply of good quality

material to consumers.

6. It teaches business methods to farmers and serves them as agency for supply

market information.

7. The society is able to stabilize prices over a long period by adjusting the supply

with the demand.

8. Marketing societies are also encouraged to undertake export trade so that they can

give better prices to their members.

Weak Co-op. Marketing: Although, many advantages are envisaged in the co-operative

marketing the structure has remained relatively weak as compared to credit co-operatives.

There are only about 1000 marketing societies as against 20,000 credit societies in

Maharashtra. The marketing is more difficult involving many technical and commercial

aspects. Marketing of perishable is still more different. Arranging quick transport,

arranging storage to avoid losses, to keep watch on demand – supply position to ensure

good prices to members are all matters need for good marketing. For want of these

managerial aspects, desired number of co-operative marketing societies have not come up

and those, which were started, could not succeed. Several marketing surveys/studies at

farmer's levels have revealed that among several marketing channels, co-operative

channel has offered greater share of consumer's prices to the producers. Whichever,

marketing is unorganized, farmer - producers have expressed that marketing co-operative

societies should be formed. This was particularly reported in the cases of marketing of

perishables.

Few Successes:

Inspite of the difficulties encountered in the marketing of perishables like fruits,

vegetables, milk, etc. there are few examples of good success viz. Maha-grape - co-

operative federation marketing grapes in Maharashtra, Co-operatives marketing



pomegranate, Co-operatives marketing banana in Jalgaon district, Vegetables co-

operatives in Thane District, Milk co-operatives in Maharashtra, HOPCOMS,Bangalore

and Gujarat and Co-operative cotton marketing society.

ORGANISED AND REGULATED MARKETS:

Organised marketing of agricultural commodities has been promoted in the

country through a network of regulated markets. Most of the State governments and

Union Territories have enacted legislations (APMC Act) to provide for regulation of

agricultural produce markets. While by the end of 1950, there were 286 regulated markets

in the country, today the number stands at 7,521 (31.3.2005). Besides, the country has

27,294 rural periodical markets, about 15 per cent of which function under the ambit of

regulation. Progress in the production of food grains, commercial crops and horticultural

products depends critically on the marketing infrastructure available to the farmers.

Efficient marketing with a dynamic supply chain is essential for the development of the

agriculture sector. The number of regulated agricultural markets stood at 7,566 as on

March 31, 2006. Besides, there were 21,780 rural primary/periodic agricultural markets,

of which about 15 percent functioned under the ambit of regulation. Ministry of

Agriculture had formulated a model law on agricultural marketing in consultation with

State/UT Governments to deal with emerging trends in agricultural marketing. This

model legislation enables establishment of private markets/ yards, direct purchase

centres, consumers/ farmers markets for direct sale, and promotion of public-private-

partnership (PPP) in the management and development of agricultural markets in the

country. It also provides for exclusive markets for onions, fruits, vegetables, and flowers.

Regulation and promotion of contract farming arrangement has also been a part of this

legislation. A provision has also been made for constitution of State Agricultural Produce

Standards Bureau for promotion of grading, standardization and quality certification of

agricultural produce. Several state/UT governments have initiated steps for amending the

Agricultural Produce Marketing Committee (APMC) Act. So far 15 States and 5 Union

Territories have amended their Agricultural Produce Marketing Committee (APMC) Act

to derive the benefits of market reforms.

The advent of regulated markets has helped in mitigating the market handicaps of

producers/ sellers at the wholesale assembling level. but, the rural periodic markets in



general, and the tribal markets in particular, remained out of its developmental ambit.

Agriculture sector needs well functioning markets to drive growth, employment and

economic prosperity in rural areas of the country. In order to provide dynamism and

efficiency into the marketing system, large investments are required for the development

of post harvest and cold chain infrastructure nearer to the farmers’ field. A major portion

of this investment is expected from the private sector, for which an appropriate regulatory

and policy environment is necessary. Alongside, enabling policies need to be put in place

to encourage procurement of agricultural commodities directly from farmers’ field and to

establish effective linkage between the farm production and the retail chain and food

processing industries. Accordingly, amendment to the State APMC Act for deregulation

of marketing system in the country is suggested to promote investment in marketing

infrastructure, motivating corporate sector to undertake direct marketing and to facilitate

a national integrated market. The Ministry of Agriculture formulated a model law on

agricultural marketing for guidance and adoption by State Governments. The model

legislation provides for establishment of Private Markets/Yards, Direct Purchase Centres,

Consumer/Farmers Markets for direct sale and promotion of Public Private Partnership in

the management and development of agricultural markets in the country. Provision has

also been made in the Act for constitution of State Agricultural Produce Marketing

Standards Bureau for promotion of Grading, Standardisation and Quality Certification of

agricultural produce. This would facilitate pledge financing, direct purchasing,

forward/future trading and exports. Several States have initiated steps for amending the

APMC Act.

CONTRACT FARMING/CONTRACT MARKETING

(Farmer-Processor Linkages)

Contract farming or marketing essentially is an arrangement between the farmer-

producers and the agri-business firms to produce certain pre-agreed quantity and quality

of the produce at a particular price and time. It can only be a pure procurement

transaction or can extend to the supply of inputs or even beyond. Contract farming is

emerging as an important mode of procurement of raw materials by agri-business firms in

India due to the developments in the field of agricultural marketing, changes in food



habits and in agricultural technology in the new economic environment. This is an

important initiative for reducing transaction costs by establishing farmer-processor

linkages in addition to the already existing methods of linking the farmers to the

consumers. The distinction between 'sales' and 'contract to sell' needs to be understood

clearly. In the case of sale, the title or ownership of goods is transferred at once whereas

in the 'contract to sell', the goods are transferred at a later date. A contract to sell is not in

the true sense of the word a sale, rather it is merely an arrangement to sell. A contract is

an agreement but an agreement is not necessarily a contract. In contract farming,

companies or organizations engaged in processing and marketing of agricultural products

are entering into contracts with the farmers. They provide inputs to the farmers and buy

back the product at a rate specified in advance.

Following type of inputs and services are normally provided by the company to the

farmers.

Seeds of the variety they need for processing/marketing

Guide lines to grow the crops

Pesticides which do not result in residual toxicity

Extension services

Fertilizers/hormones required for the crop

Other material if not locally available.

The contract may be entered into by parties anytime from the start of the sowing

or planting to the harvesting, processing, packaging and marketing stage of the crop.

Normally, the contract is entered before the start of the sowing or planting because the

buyer can then stipulate the conditions cultivation, use of the seed variety needed by

them, use of pesticides and insecticides, and requirement of on farm grading, sorting,

packaging and processing. The buyer of the product generally keeps the right to monitor

the crop at every stage of its growth.Following documents are obtained/given to selected farmers by the companies:

Application/Registration form

Contract farming agreement

Issue of pass book



Issue of ID Card

ADVANTAGES OF CONTRACT FARMING

Contract farming/marketing is beneficial both for the producer-farmers as well as to the

processing company in several ways:

To the farmer, contract farming -

(i) Reduces the risk of price/production

(ii) Ensures the price as market is assured

(iii) Increases the quality consciousness

(iv) Ensures higher production because of better quality seeds and pesticides.

(v) Reduces marketing costs

(vi) Provides financial support in cash or kind.

(vii) Ensures efficient/timely technical guidance almost free of cost.

To the company, contract farming-

(i) Ensures supply of quality agricultural produce at right time and at lesser cost to the

company

(ii) Canalizes direct private investment in agricultural activities.(iii) Ensures that the toxicity level is reduced as per requirement for export.

Government is increasingly looking towards the corporate sector to augment the

rural incomes and employment through agro-processing. In this context, policy makers

see the contract farming/marketing as an important avenue to ensure greater private

sector participation in agriculture.

FLIP SIDE OF CONTRACT FARMINGThe important weaknesses of contract farming are:

(i) Contract farming is involved mostly in cash crops which may lead to shift in area from

food

crops which, beyond a limit may endanger food security, biodiversity and agricultural

crops cycle of the country.



(ii) Contract farming may create the danger of imposition of undesirable seeds.

(iii) The temptation of getting commercial profits from cultivation of a variety of the crop

may cause permanent damage to the land.

(iv) Market making outside the country may cause market breaking inside the country.

However, contract farming is a welcome development. But the contract should be

made under high scrutiny possibly because of exploitation of the farmers. The terms of

the contract should be spelt out in advance and a consent letter is obtained both from the

farmer and the company. The government should establish a monitoring mechanism and a

dispute settlement

body to ensure that both parties adhere to the terms of contract.

EXPERIENCES IN CONTRACT FARMING

The following companies are presently under the tie-ups in India for contract farming

for the products specified:

1. Poultry- Contract farming of broilers between the hatchery with farmers in

Coimbatore

2. ITC/WIMCO/JK Papers and farmers in Andhra Pradesh, Orissa, Punjab and Uttar

Pradesh.

3. Organic dyes - Marigold farmers and extraction units in Coimbatore.

4. Dairy processing - Chitale of Pune and small farmers in Maharashtra and Gujarat.

5. Pepsi Company and farmers of Punjab and Rajasthan for tomato growing.

6. Exotic vegetables - Trikaya Foods NST and small farmers of Maharashtra and

Andhra Pradesh.

7. NAFED and Sonepat (Haryana) farmers.

8. Exporters with farmers of Bangalore.

9. ITC Agro-Tech and sunflower cultivators in Andhra Pradesh and Karnataka.

Other areas where farmer processor linkage (contract farming) is being practiced in India

are:

Baby corn cultivation



Tomatoes for manufacture of sauce and ketchup

Chillies for manufacture of chilly paste

Garlic and onion for manufacture of paste, powder and dehydrated

products

Special varieties of Banana

Potato for making chips and wafers

Barley in making of bears

Onions and Mandarin Oranges

Durum Wheat

Pulpwood

Tomato pulp

Mushrooms

Gherkins

Edible oils

Presently contract farming is confined to few selected crops in selected pockets.

However, here is enormous scope for contract farming/marketing because with the

increasing income, consumers are becoming more health and quality consciousness and

look for branded products.

INCENTIVES FOR PROMOTING CONTRACT FARMING

Contract farming is means of allocating/distribution of risk between processor and

the farmers. It will succeed if both the parties share the risks and rewards. The Ministry

of Food Processing Industries of Government of India has launched a scheme entitled

'Grant under Backward Linkages' to promote contract farming. Under this scheme, a

grant of 10 percent of value of raw material purchased from the contract farmers (subject

to a maximum of Rs. 10 lakhs per annum) is provided to food processing units upto three

years. The Ministry has also prescribed a model agreement form. The criteria for the

grant are:



(i) The processing unit should provide seed, insecticides, fertilizers and extension

services to contract farmers at reasonable charges.

(ii) The number of contract farmers should be atleast 25.

(iii) There should be an agreement prior to the period of contract farming for a maximum

period of one year.

(iv) The processing unit should give advance intimation about its contract with farmers to

the Ministry as well as State Nodal Authority (One Month before the contract comes into

operation).

(v) The claim for reimbursement should be recommended by the State Nodal Authority.

THE FRESH (RETAIL) REVOLUTION IN INDIA : Cause of concern or happiness

Organized retailing in Fresh Fruits and Vegetables (FFV) is gaining a lot of

momentum in India with huge investment by leading Indian corporations in this area. Modern

formats of supermarkets such as Reliance Fresh, Choupal Fresh, Food World, etc. promoted

by different companies are emerging very rapidly in small and large towns around the

country. Two of the major players in the supermarket sector in the country are Reliance

Industries and Bharti- Walmart tie up. Other key players include ITC, Food World (JV of

RPG Group of India and Dairy Farm International based in Hong Kong), Spencer, Godrej,

Pantaloon (Big Baazar and Food Baazar), Subhiksha and Aditya Birla Group. From thedevelopment perspective, literature review of the evolution of supermarkets in other

developing countries suggests that these changes have strong implications for the small and

marginal farmers. Experiences of these countries suggest that the development efforts in this

area are based on three grounds: First, farmers associated with the modern value chains earn

higher returns than selling to the traditional markets. Second, the modern supply chains have

specific quality requirements which are easier to meet by the large and medium farmers and

the small farmers tend to get left out of these markets. Third, there are several successful

examples of linking small farmers to these modern value chains with effort from government

agencies, NGOs and development agencies. The concept of organised retail has been

existing in India since early 80s with the existence of players like Mother Dairy and Safal

but it's only in past one year that the fever of retail in FFV has caught up fast. Bargaining

with the vendor to reduce price, moving out early in the morning for the mandi to get

http://retailindiatv.blogspot.com/2007/03/fresh-retail-revolution-in-india.html

http://retailindiatv.blogspot.com/2007/03/fresh-retail-revolution-in-india.html



fresh fruits and vegetables, sweating profusely and trying to find a way out in the hustle

bustle of the crowd, a nagging feeling of weighing machine not being correct and many

more. On the contrary, there is a fixed price shop with prices at par and sometimes even

less than your nearest vegetable vendor, getting fresh fruits and vegetables at any time of

the day and shopping in the luxury of ACs, paying for exactly 867gms of onion, etc.

That's exactly where retail in fresh fruits and vegetables (FFV) come into picture. India is

the second largest producer of fruits and vegetables, next only to China and the total

cultivated area of fruits and vegetables is around 12 million hectares, which is close to

7% of the total cultivated area. India produces around 90 million tonnes of vegetables and

40 million tonnes of fruit every year. This accounts for 13.7% of global production in

vegetables and around 10% in global production of fruits. The total market size for fresh

fruits and vegetables in India is Rs 145,000 crores and organised retail in this segment is

a miniscule 300 crores. Fruits and vegetables constitute about 22% of the average

monthly household consumption expenditure in urban areas of Rs 4,300. Food and

groceries as a whole accounts for about 50% of the monthly expenditure. This is the

rationale for setting up exclusive food and grocery stores, with at least 30% of space

reserved for fruits and vegetables. These figure reflects the huge untapped potential in

the Indian FFV market. The concept of organised retail has been existing in India since

early 80s with the existence of players like Mother Dairy and Safal but it's only in past

one year that the fever of retail in FFV has caught up really fast. In the past three months

60 new outlets have opened across various parts of the country. Earlier the marketing of

fruits and vegetables was undertaken by the farmer’s cooperatives only. Now a number of

big corporate houses like Reliance, ITC, Aditya Birla Group, Godrej, and Bharti have

entered into the retailing of fresh fruits and vegetables. Some of the retail and wholesale

stores area already under operations by the name of Reliance fresh, Choupal fresh,

Namdhari’s fresh etc. ITC, Metro and Adani fresh are also entering into wholesaling.

Exports of fresh fruits and vegetables are being done with EUREPGAP certification by

Namdhari fresh and Bharti Airtel. They have developed a supply chain with forward and

backward linkages operating in an efficient manner with heavy investments in

infrastructure and cold chain. These business houses have indicated that contract farming

may get them timely, consistent and adequate supply of produce of good quality.



Challenges and Opportunities The present agriculture supply chain has tremendous

amount of inefficiencies at the farm level, the intermediary level and at the marketing and

distribution level.

About 60% of the land is with small and medium farmers. These farmers are not left with

much of bargaining power and hence are left exploited at the hands of intermediaries.

Until recently, the private sector was restricted from directly purchasing agricultural

produce from farmers. The infrastructure of mandis is lacking and the mandis are mired

with inefficiencies. Another inefficiency existent in the structure is the large mark-ups

between the farmers' realization and the final consumers' price. Retail chain outlets

reduce these inefficiencies to a significant level. Efforts are seen from big retail players to

improve the efficiency of the agriculture supply chain helping both, the farmers, on onehand (by having fair prices for their produce) and the customer, on the other hand (by

giving them a fair price and a comfortable shopping experience). Better price for farmers

is the high point of the policy sales pitch of everybody, from the government to retail

chains. There is a great amount of wastage happening post harvest. This wastage is to the

tune of nearly 25-30 percent of the total produce. The reason for this loss is the shortages

of the cold storage facilities and refrigerated transport. Wastage will reduce when the

same company handles the produce from the farm to the fork, as against now, when farm

produce goes through several levels of wholesale and territory traders before reaching the

retailer. Losses would further reduce with investments in cold-storage. Add to this

difficulty of cold storage, the opposition that the retail outlets face is from the small

vendors. The recent protests in three major cities (Ranchi, Bhubaneswar and Lucknow)

against the opening of Reliance fresh are evidence to the opposition that comes from

small vendors. Whether this fear of small vendors is founded in reason or hype will be

discussed in the next section and is there a reason at all for these small vendors to be

afraid of? Effect on Small Players India has an estimated 12 million street vendors in its

cities-the 2004 National Policy for Urban Street Vendors pegs it at 10 million-and

roughly 2.5 per cent of each city's population is engaged in vending on streets. About

one-fourth of these vendors sell vegetables and fruits which brings their number close to

3 million.





still prefer the loose option. Most Indians still like to touch and feel the products. Some

customers are wary of packed products partly because they are seen to perish faster.

When the vegetables breathe, they cause humidity inside the pack that could lead to

fungal growth. But there are others who think fewer people would have touched the

packed stuff, so they prefer that. Besides, it’s very convenient for those like working

couples who are in a hurry. Reliance has thin plastic bag rolls around the store which

customers can pull out to put their vegetables or fruits into. There’s even a weighing scale

next to the racks for anybody who wants to check the weight before going to the cash

counter. Most are planning to offer the home delivery option, and even of taking orders

on the phone. But phone-ordering will require us to build a lot of confidence in people’s

minds about the quality. The prices in the newer stores are competitive with general

market prices. In some cases, it is actually lower, but whether these will be sustained

remains to be seen. Most of these players eliminate part of the ‘middle-men’ costs and

reduce wastage by handling the products better. But against these benefits are the

significantly higher infrastructure and retail costs, compared to those borne by the

roadside vendor. The cut vegetables are likely to offer higher margins. While shredded

carrots are sold by Reliance in a packed form at Rs 3.60 for 250 gms (or Rs 14.40 a kg),

the same carrot in its loose form is Rs 11.50 a kg. Part of this difference is on account of

greater wastage when a shredding machine is used. Farm connect Most players are

investing heavily in backend infrastructure and supply chain. There are collection centres

of different companies across the states , where farmers come and deliver the produce.

Spencer’s has its own huge farm in Hoskote. There are processing centres and

distribution centres closer to the store locations. The processing centres are where the

products get cut and cleaned, most of those operations untouched by human hands. Big

investments have gone into setting up cooling facilities — in every location and in the

transport vehicles — to minimise wastage and increase shelf-life. Normally, a lot of the

capsicum and tomato are broken in transport. But as companies provide crates to farmers,

which ensure proper handling.

SAFAL MARKET CASE STUDY:



The supply chains to run on their efficiency level need to build a long term

relation between the retailers and farmers for procurement and to provide extension

services regarding use of inputs, production technology, information on harvesting,

prices, precooling, grading, sorting, packaging and on-farm sorting. There is a strong

need of government initiative in removing the infrastructural constraints like setting up of

distribution centres, cold chains, roads to the markets are important. Ensuring quality and

quantity of the produce to the stores is another must requirement for smooth functioning

of the supply chain. If these constraints are removed then a regular and uninterrupted

supply of the produce is assured. Setting up of an alternate terminal market by SAFAL

Market is a move in this direction. The existing traditional system of wholesale market is

a set up where a commission agent procures the produce from the farmers at a price after

cutting for his charge and then sells the produce in the wholesale market to traders and

retailers. There might be more than one commission agent in between this chain. This

market has the problems of unorganised small farmers who lack market power, they have

low share in the final consumer price, the produce is distributed through the commission

agents that have no incentive for the quality and the wholesale markets are poorly

designed and congested (Coulter, 2004). The traditional Indian markets have a non-

existent infrastructure of packing, grading, sorting and cold storages. The commission

agents and traders dominate the supply chain and are the major price setters, thus most of

the times farmers are dependent on them for credit. Farmers are not aware of the price

setting mechanisms as the system is not transparent and thus don’t have any incentive to

produce efficiently. Wholesale markets are not clean, lack cold storage network and thus

huge wastage of fresh produce is observed, this wastage range between 20-40 per cent.

Institutions like cooperatives, contract farming and growers association are considered to

improve producers access to markets, minimise transaction costs and remove production

constraints. It is believed that a single gateway to the regulated markets would save time

and improve efficiency. Ever since the India’s National Agriculture Policy has envisaged

the participation of the private sector through contract farming and land leasing

arrangements to allow accelerated technology transfer, capital inflow and assured market

for crop production, especially of oilseeds, cotton and horticultural crops, investment in

food processing industry on part of the private sector is being encouraged. This would



help farmers of fruits and vegetables through backward linkages of such investment. It is

a much felt need that the role of private institutions is to be encourages as the

government’s ability to intervene is seriously constrained by resources

(Chengappa,2006). Vertical coordination of farmers with cooperatives, contract farming

and retail chains would facilitate them to deliver better output due to lower market risk,

better infrastructure, public investment, acquired extension services, created awareness to

prevailing and new technologies, better prices stable income etc. Its multiplier effect

helps in increasing incomes, output and employment (Birthal et.al, 2007).. National Dairy

Development Board (NDDB) started with a Fruit and Vegetable Unit of SAFAL at Delhi

which was one of the first fruit and vegetable retail chain set up as a unit of Mother Dairy

Foods Processing Ltd. The retail unit provided a direct link between fruit and vegetable

growers and consumers. The other initiative was a fruit processing Plant of SAFAL at

Mumbai, a 100 per cent export oriented unit, which capitalizes NDDB's food processing

strength. NDDB has set up an alternate system of wholesale markets in Bangalore as a

pilot project. The initiative is named as SAFAL Market and is initiated to fine-tune

horticultural growth in India, by a shift in their earlier retail chain model to a wholesale

market concept. This market is a move to introduce a transparent and efficient platform

for sale and purchase of horticultural produce by connecting growers through Growers’

Associations with farmers and wholesale buyers in various markets across the country.

The model involves establishment of an alternate marketing structure that provides

incentive for quality and productivity thereby improving farmer’s income. Through this

approach there is an expected increased integration between growers, wholesalers and

retailers into the market system. SAFAL Market operates outside the purview of the

APMC act and the Government of Karnataka is the first State government to amend the

Agricultural Produce Marketing (Regulation) Act to enable NDDB to own and operate

such a market. SAFAL Market is a government initiative and located near Bangalore,

Karnataka and emphasise on fresh fruits and vegetables only. Bangalore is a major

horticultural producing state with a total area under horticulture of 15.3 lakh hectares.

Bangalore has a huge floating population of around 8 per cent of the total Bangalore

population and the per capita demand of horticultural produce is very large, because the

city is fast growing with lot of information technology jobs. The state has a number of



horticultural satellite markets and four major wholesale markets. The existence of large

and diverse market functionaries like commission agents, pre-harvest contractors, push

cart vendors etc. indicate existence of competitive environment in the horticulture market

in Bangalore (Chengappa and Nagaraj, 2005). Bangalore has seen number of retail chains

and new models being initiated in last few years, but SAFAL market is the first one of its

kind to establish a terminal wholesale market. The impact of its operations are evident on

farmers, traders and retailers. The following sections would highlight on the structure and

functioning, supply chain, forward and backward linkages, constrains and achievements

in this terminal market. A traditional commission agent was charging them 8-10 per cent

while the handling charges at SAFAL market are only 4.25 per cent (Chengappa and

Nagaraj, 2005). Farmers selling their produce to SAFAL realize 10 to 15 per cent higher

profit as compared with traditional channel (Chengappa and Nagaraj, 2005). SAFAL

Market on large has been operating successfully in over coming the constraints that the

fresh fruits and vegetables marketing is facing in India. It has been able to establish an

efficient supply chain both in backward and forward linkages. An experiment of

backward and forward integration provided by NDDB- SAFAL has benefited the farmers

immensely (Chengappa, 2006). moving ahead, SAFAL has recently set up a National

Exchange of India, which is the country's first spot exchange for trading on perishable

agri-commodities including horticulture, floriculture, dairy products and other allied

commodities. This will provide on-line trading access to farmers, milk producer’s

organisations and traders across the country. The move to introduce high-tech farm

terminals will attempt to provide backward and forward linkages and is an outcome of

change in approach to agricultural marketing in India. Farmers are satisfied with the in

time payment, transparency, good price and quality of produce procured through SAFAL

market.

FUTURES MARKET

Revival of agricultural commodity futures market in India in early 2000 after the

ban in 1960s has helped in integrating the food grains and other agricultural goods



markets through price discovery and price risk management. Fruits and vegetables can

also become a part of futures trading through the national commodity exchanges. At the

moment due to their perishable nature, short shelf life, inefficient storage facilities and

low year long availability the horticulture products have not entered the futures trading.

The involvement of the private institution in this process will help in getting the

horticulture produce linked to markets through more private investment. Development of

the infrastructure, availability of new techniques in this process will further help in

growth of the horticulture sector. SAFAL Market is collaborating with Multi Commodity

Exchange (MCX) for creating a SAFAL National Exchange exclusively for horticulture

produce spot trading and the operations are expected to begin by March, 2008. This

would be an electronic p[platform for perishable commodities and thus would help in

integrating the producers and buyers from different parts of the country. The transparent

price system would be able to create price awareness, leading to a creating a better price

discovery. This would further lead to linking up of all the stake holders and also reduce

post harvest losses due to storage and transportation. The system would facilitate delivery

of the produce from the shortest possible production area, leading to further reduction in

transportation cost. This will be a step forward for the development of the horticulture

sector.

ONLINE /E- TRADING OF FRUITS & VEGETABLES

Overview:

Safal National Exchange of India Ltd. (SNX) provides a technology based

competitive market place with wide choice to farmers in Marketing of their perishables

and other allied produce in a fair and a transparent manner by using modern IT and

improved Logistic. It is a joint venture between Mother Dairy Foods Processing

Limited(MDFPL)- a wholly owned subsidiary of National Dairy Development Board of

India (NDDB), MCX and Financial Technologies Ltd It provides a platform, where seller

can sell at the best possible rate, buyers can buy at the most competitive rate and SNX

would provide counter party guarantee in respect of all trades.SNX facilitates provision

of services like quality certification, Warehousing and Logistics and other customized

value added services .Thus SNX offers Power of Exchange technology in combination



with the F & V Expertise under a single banner, for the good of producer & consumer, in

an electronic spot market

1. Empower farmer in price discovery; Growers will have option to conclude price

for their produce for sale prior to harvest

2. Minimal intermediation- better quality, lower transaction cost

3. Narrower price spread: Farmer-Consumer

4. Trading terminals all over the country, truly National

5. Payments are guaranteed

6. Quality certification protocol administered by SNX

7. Initially on a handful of crops, finally all F&V items with negative list

8. Improvement in post harvest practices for better shelf life and Quality of Grading,Packing & Overall delivery, match with rapidly raising expectations of quality by

average urbanite

Vision:

One India One Market: A national level transparent equal opportunity e- enabledmarket for all

Mission:

A seamless national electronic market an hour from every F & V farm enabled by

Transparent online trading and a rule based clearing system abd ensuring final settlement

Price discovery only by market forces enabling equal and fair opportunity to all Real time

market information dissemination availble to all Snx would derisk the farmer from price

fluctuations besides also maximising revenues Enable farmer on imrpoved post harvest

practices imrpoving shlef life and product presentation

Promoters:

(i) Mother Dairy: Mother Dairy, Delhi was set up in 1974 under the Operation Flood

Programme. It is now a subsidiary company of National Dairy Development Board

(NDDB). Mother Dairy sources its entire requirement of liquid milk from dairy

cooperatives. Similarly, Mother Dairy sources fruits and vegetables from farmers/

growers associations. It is Mother Dairy's constant endeavor to ensure that milk



producers and farmers regularly and continually receive market prices by offering quality

milk, milk products and other food products to consumers at competitive prices and

uphold institutional structures that empower milk producers and farmers through

processes that are equitable. Mother Dairy markets dairy products like Liquid Milk, Ice

Creams, Flavoured Milk, Dahi, Lassi, Mishti Doi, Ghee, Butter, Cheese, Dairy Whitener,

UHT Milk, Dhara range of edible oils and the Safal range of fresh fruits & vegetables,

frozen vegetables and fruit juices at a national level, through it's sales and distribution

networks, for marketing food items. In times to come, Mother Dairy shall strive to

become a leading player in the food industry in India.

(ii) National Dairy Development Board: The National Dairy Development Board

(NDDB) was founded in 1965 to replace exploitation with empowerment, tradition withmodernity, stagnation with growth, transforming dairying into an instrument for the

development of India's rural people. In addition, NDDB also promotes other commodity-

based cooperatives, allied industries and veterinary biologicals on an intensive and

nation-wide basis.NDDB’s established dairy cooperative movement and their expertise in

post harvest management including quality control and supply chain management will

give the exchange a leading edge in taking the electronic Horticulture spot market to the

India farmers.

(iii) Multi Commodity Exchange of India Limited: MCX is an independent and de-

mutualised multi commodity exchange. It was inaugurated on November 10, 2003 and

has permanent recognition from the Government of India for facilitating online trading,

clearing and settlement operations for commodities futures market across the country.

Today, MCX features amongst the world's top three bullion exchanges and top four

energy exchanges. MCX offers a wide spectrum of opportunities to a large cross section

of participants including producers/ processors, traders, corporate, regional trading

centre, importers, exporters, co-operatives and industry associations amongst others.

Headquartered in the financial capital of India, Mumbai, MCX is led by an expert

management team with deep domain knowledge of the commodities futures market.

Presently, the average daily turnover of MCX is around USD1.55 bn (Rs.7, 000 crore -

April 2006), with a record peak turnover of USD3.98 bn (Rs.17, 987 crore) on April 20,



2006. In the first calendar quarter of 2006, MCX holds more than 55% market share of

the total trading volume of all the domestic commodity exchanges. The exchange has also

affected large deliveries in domestic commodities, signifying the efficiency of price

discovery. Being a nation-wide commodity exchange having state-of-the-art

infrastructure, offering multiple commodities for trading with wide reach and penetration,

MCX is well placed to tap the vast potential poised by the commodities market.

(iv) Financial Technologies India Limited: FTIL proven mettle of End-To-End

exchange trading technologies addressing trading/ surveillance/ clearing and settlement

operations help enhance the SNX Trade Life Cycle operations (Pre-Trade, Trade and

Post-Trade). In addition to its technological capabilities, FTIL also brings to SNX its

associations with technology giants such as Microsoft/ Intel and HP. FTIL has promoted

India No 1 commodity exchange (Market share more than 62%) world’s 2nd largest

exchange in Silver & Natural Gas trading volumes and the world’s 3rd largest exchange

in gold trading volumes. MCX also is among the top ten commodity derivatives

exchanges in the world.

BENEFITS:

Direct Benefits to Farmers

1. Transparent pricing mechanism: real time price quote accessible

2. Accessibility to National Level Markets: as buyers from all over the nation is

connected in the system

3. Price manipulation is restricted to larger extent: since the system allows the

participation at national level there is no room for manipulation by any group of

traders. And the Maximum allowable open position imposed at member level will

restrict the volume handled by individual member

4. Distress selling avoided to larger extent: unlike in the existing mechanism

wherein farmer sells the produce after brining the produce to market place. In the

proposed mechanism farmer will first sell his produce and than delivers at later

stage

5. Assured and prompt payment: exchange will take the third party guarantee to all

the trade that takes place on the exchange platform



Indirect Benefits to Farmers

1. Increase in productivity

2. Reduction in cost of production

3. Reduction in post harvest losses

4. Increase in marketable yield

5. Increase in quality of the produce produced

6. Access to extension services

7. Increase in risk taking capabilities of farmers

8. Inspire co-operation

Benefits to Traders/Commission agents/Forwarders

1. Traders would get a bigger market, where they can sell huge quantity

2. 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

3. Since large number of investors from all across the country would be available at

SNX platform, they can realize better price for their product

4. They can expand their activities to multiple commodities, because of operational

ease, availability of finance and absence of counter party risk under SNX system

Benefits to Exporters/Processors

1. Buy certified quality material through a secured platform

2. Avoid hassles relating to procurement of material in physical market

3. Looking at the price available at SNX, they can make export commitment and

cover themselves immediately by buying at SNX

4. Customized services regarding logistics can be provided

ASSOCIATES & PARTNERS:

TRADING:

Trading Mechanism

http://www.utibank.com/



SNX follows the system of price-time priority for order matching. Members place

orders on their Trader Work Stations (TWS) and the orders get matched and executed

through the order book in the Trading engine. Members have a facility to download

various reports, by connecting FTP, through which they can access the reports such as

Bhav Copy, Contract Master, Trade Report, Margin Report at the end of trading.

Transparent trading mechanism and efficient risk management, combined with effective

surveillance, enhances the trust among the participants in SNX, for realizing reasonable

price for the produce of the farmers and other participants.

Risk Management:

Surveillance: The surveillance mechanism at SNX includes the monitoring of price

movement, volatility, through real-time alerts, etc. Surveillance is also carried out in

monitoring positions, granting limits, investigating, by adopting various techniques.

Exposure Limits: The Surveillance of SNX will fix the trading limits for each Member,

depending on the margin available to their credit and monitor their positions online.

Initial Margin (IM): SNX levies initial margin (IM) on open positions of Members and

their clients for both buy and sell. The percentage of IM varies depending on the

commodity and its volatility. IM is calculated and reduced from the total margin of a

Member available with SNX. Exposure is given to Members, based on the balance

amount available with SNX. When the Initial Margin increases, the exposure will

automatically decrease.

Mark-to-Market Margin (MTM): SNX has devised a mechanism of MTM margin to

prevent any potential loss due to price volatility, in which case the Members or their

clients may commit default. SNX will mark all trades and open positions for the day on

closing price, by which the notional gain or loss is calculated compared to the trade price.

Such gain / loss is credited / debited to the respective Member’s account on T+1 day. The

CnS software automatically calculates Mark to Market margins on a daily basis.





SAFAL National Exchange of India Ltd (SNX)” an online perishable commodity

Exchange, prompted by a joint venture of NDDB, Mother Dairy & FTIL-MCX.

Headquartered in Bangalore, SNX is led by an expert management team, with deep

knowledge of the horticulture markets.With the production estimated at around 140

million tonnes, one fourth of the global output, the Indian commodities market offers

unparalleled growth opportunities to a large section of the market.SNX has opened its

national membership, as Trading-cum-Clearing Member (TCM). Membership on SNX

offers benefits in more than one ways for market participants. It has sound technology

infrastructure through its association with market leaders such as Stratus for Fault

Tolerant Servers, Financial Technologies (India) Ltd. for Exchange Technologies, and a

panel of banks for funds transfer.

SNX V/S Existing Market

(i) Number of Buyers and Sellers: From every nook & corner of all producing centres

in the country simultaneously present, Limited to local participants

(ii) Bargaining Power: Faceless bid, price offer by seller based only on grade with no

other inputs such as profile of seller, body language, etc., Small lots by small farmers

would invariably be at a discount

(iii) Right to reject offered price : Absolute right to define price expectation and also

modify based on the farmer's judgement/need, Virtually not an option to reject as the

produce is out in the market, besides pressures of having to return to the same trader next

day

(iv) Dependence on Local Traders: Minimised as there are options of selling on the

exchange through Farmer Association, Perpetual dependence on local traders



(v) Trade system: Has the option to first conclude on the price and later delivers

produce at delivery center, Produce to be physically brought to the market for finding

out price

(vi) Grades standardization: Standardization with dispute redressal system, Informal

standardization without an effective grievance redressal system for the farmer

(vii) Price Quotation: Both buyers and seller can quote their price, Seller is the price

taker

(vii) Effect of supply- Demand balance: Based on demand and supply at national level,

Limited to local balance, impact of distant market situations leveraged by middlemen

(viii) Price dissemination: Multiple Channel- electronic-instantaneous-all key centres

Limited sources after a lag of a day often, more as data than as a

decision tool for the farmer

(ix) Payment: Immediately after the sale, Varies from 1 week to 1 month

PRODUCTS:

Mango,Banana,Onion,Tomato,Potato,Aplle,Citrus and Grapes

Fruits

Apple : Royal Delicious, J & K Delicious, Mango: Bangenpalli, Totapari

and

Banana : Dwarf Cavendish

Vegetables

Potato : Kufri Bahar , Onion: Nashik Red and Tomato:Hybrids

CONTACT :



Safal National Exchange of India Ltd. /SNX

Safalmarket

Whitefield-HoskoteHighway

Bangalore-560067

Ph:(080)25053000

Fax: (080) 28457382

Web:http::/www.snxindia.com or, safalindia.com

Email : [email protected]

FINDINGS

1. “India is a land of huge potential... and always will be.”

2. India’s own market for high quality fruit and vegetables is also growing stronglyas its middle-class expands

3. Snail-like progress of the country’s F & V industry: Lack of infrastructure,fragmented production and poor quality standards

4. Along with the desi-corporate houses big-hitters in the global fresh produce tradeare now taking the opportunity to capitalise on India’s vast procurement potential

RANDOM THOUGHTS…….(PRESUMPTIONS)

1. After 5 years, with the most optimistic estimate the organized retailing sector willstill not handle more than 20% of the produce

2. Most of the fresh produce will still be going to fresh market

3. Importance of traditional markets and the efforts to upgrade the traditional marketcannot be ignored

4. Need to avoid dichotomy in the agriculture sector – those selling to modern

chains and others caught up in the low value traditional chains

CONCLUSION: POLICY AND STRATEGIES

Development of agriculture in India needs some critical management inputs

particularly that of supply chain management- collaboration among various stake-holders

along with efficient vertical and horizontal integration. The horticulture sector in

mailto:[email protected]




particular has to prioritize development of research in the issues of genetics,

biotechnology, integrated and sustainable production systems, post harvest handling,

storage, marketing and consumer education. Government should create a policy

environment that will ensure a mutually beneficial relationship between farmers and

organised sector. Along with investment in infrastructure, development of extension

activities and linkages with farmers is also important areas where government can play

influential roles. After the successful trials of SAFAL Market in Bangalore, many state

governments have expressed their desire to establish similar markets after they have

amended their State APMC acts (NDDB, 2004-05).

The two golden rules for successful development of the horticulture sector are to

ensure

consistency in supply; and provide recorded and demonstrated traceability of products.

Thus, production and marketing strategies are the most crucial in strategy development.

The development strategy should be based on innovation. Production innovations initially

focused on efficiency and effectiveness in order to increase yields and lower costs.

India being a land of small and marginal farmers and studies have being

advocating the fact that small farmers are going to feed India, thus it is important to

mobilise them and help them to diversify to meet the increasing domestic demand of

horticulture products. Small farmers are key to initiate the horticultural revolution and

with technical change and increase in international competitiveness large scale operations

and vertical integration takes place. Linking small farmers with high value urban and

export markets would lead to development and growth of the rural sector. Horticultural

crop diversification should be encouraged by intercropping horticultural with non-

horticultural crops without being a threat to the nation’s food security and biodiversity.

This will yield more food, more income, and better soil health. There is a strong need to

strengthen research on horticultural crops to develop demand driven technology by

improved variety, pest management, etc. in both public and private sectors. These

technologies should be quickly disseminated through government institutions, NGOs and

even private participants by encouraging farmers’ participation and upgrading their

technical capabilities.



The horticultural development requires a minimum set of basic production

factors, and further requires an optimal crop management and developing a post-harvest

infrastructure; entrepreneurial management and horticultural expertise; logistical

infrastructure; and supporting financial infrastructure. Thus the production strategy

should target not only meeting domestic and export demand of fresh products but also of

the processed products. Improving post harvest operations related to handling, storage,

and marketing of fresh and processed produce. Volumes saved in post harvest losses are

actually the surpluses generated, without additional cost. Horticulture sector needs to be

developed as an organised industry and has to be run collectively by all the stake holders

with farmers as the entrepreneurs. The marketing cost of fruits and vegetables is almost

50 per cent of the total cost of production, thus, there is a need to set up institutionalagencies that can advance credit to farmer and motive them to market the produce

themselves.

Post harvest losses in horticultural crops range from 15-50 per cent. At micro

level these looses increase the marketing cost of the product and at macro level they also

reduce the per capita availability. Thus there is need to develop technologies, methods

and mechanics to reduce these losses. There is need to remove the distortions in the

present supply chain, create more integration between the different links of the supply

chain and reduce these losses. This will result in net gain to producers, consumers and to

the nation. Farmers usually procure inputs from the retail market and end up selling their

produce in the wholesale market. Buying at retail price and selling at wholesale price is

the most uneconomic way of business. Thus the involvement of an institutional structure

in coordinating the demand of individual farmers of the village can reduce the total cost

of inputs to them. The market needs to be demand driven rather than supply driven. The

price of the produce should not be based on the prevailing whole sale price but on the

basis of cost of cultivation of that produce. Farmers should be their own price setters

rather than price followers.

There is also an immediate need to integrate the production, marketing and

processing processes of the produce to get maximum benefits from fruits and vegetables



cultivation. There are problem with price structure in the marketing, the price offered by

them is not justifying the prevailing whole sale price or even the cost of production of the

produce. Further successful implementing of the core marketing strategies will help in

future expansion of the domestic and international markets. But the exports face certain

tariff and non-tariff barriers too. To enhance exports their is a need to develop air

transport cargo system specialised for fresh fruits and vegetables, along with the airports,

road and rail connectivity with the area of procurements. Countries capability to generate

surpluses for exports depend on its ability to tab the potential of small farmers. For this

assistance from APEDA and exporters association as well as training to the farmers is

necessary. Quality control, longer shelf life is crucial for exports. Organic production of

fresh fruits and vegetable is important to capture markets in Europe.

Several steps are required to improve the agricultural supply chain. Farmers

should start dealing with large corporate, which in-turn would reduce large mark-up due

to the large number of intermediaries coming into picture. Contract farming is likely to

start by large retail players who will start dealing with the farmers, providing them with

the right quantity and timely supply of inputs and ensuring the forward links upto the

disposal front. As competition by the private sector players increase, investment in

logistics and infrastructure would also increase which would lead to an increase in the

efficiency of complete agricultural chain.

One important measure would be to bring more markets under regulation and

supervision of a well-represented market committee. Another measure would be the

promotion and perhaps enforcement of open auctions in the markets. Yet another measure

could be efforts to bring more buyers and sellers into the markets, bringing them closer to

perfect markets. The direct participation of farmers should be increased. Market

infrastructure should be improved through storage (go-down) facilities, cold storages,

loading and weighing facilities. Improvement in the road network, and cold-chain

facilities are also of substantial importance. Greater transparency of the operations

through supervision and systems can also help substantially. The market integration and

efficiency can also be improved by making up-to-date market information available to all

participants through various means, including a good market information systems,



internet and good telecommunications facilities at the markets. Thus, efforts are needed

in the direction to capitalize on our strengths and remove constrains to meet the goal of

moving towards a horticulture lead agricultural growth in India.

ONLINE /E- MARKETING OF FRUITS & VEGETABLES

OVERVIEW:

Safal National Exchange of India Ltd. (SNX) provides a technology basedcompetitive market place with wide choice to farmers in Marketing of their perishablesand other allied produce in a fair and a transparent manner by using modern IT andimproved Logistic. It is a joint venture between Mother Dairy Foods Processing



Limited(MDFPL)- a wholly owned subsidiary of National Dairy Development Board of India (NDDB), MCX and Financial Technologies Ltd It provides a platform, where seller can sell at the best possible rate, buyers can buy at the most competitive rate and SNXwould provide counter party guarantee in respect of all trades.SNX facilitates provisionof services like quality certification, Warehousing and Logistics and other customized

value added services .Thus SNX offers Power of Exchange technology in combinationwith the F & V Expertise under a single banner, for the good of producer & consumer, inan electronic spot market

9. Empower farmer in price discovery; Growers will have option to conclude pricefor their produce for sale prior to harvest

10. Minimal intermediation- better quality, lower transaction cost11. Narrower price spread: Farmer-Consumer 12. Trading terminals all over the country, truly National13. Payments are guaranteed14. Quality certification protocol administered by SNX15. Initially on a handful of crops, finally all F&V items with negative list

16. Improvement in post harvest practices for better shelf life and Quality of Grading,Packing & Overall delivery, match with rapidly raising expectations of quality byaverage urbanite

VISION:

One India One Market: A national level transparent equal opportunity e- enabledmarket for all

MISSION:

A seamless national electronic market an hour from every F & V farm enabled byTransparent online trading and a rule based clearing system abd ensuring final settlementPrice discovery only by market forces enabling equal and fair opportunity to allReal time market information dissemination availble to all Snx would derisk the farmer from price fluctuations besides also maximising revenues Enable farmer on imrpoved post harvest practices imrpoving shlef life and product presentation

PROMOTERS:

(i) Mother Dairy: Mother Dairy, Delhi was set up in 1974 under the Operation FloodProgramme. It is now a subsidiary company of National Dairy Development Board(NDDB). Mother Dairy sources its entire requirement of liquid milk from dairycooperatives. Similarly, Mother Dairy sources fruits and vegetables from farmers/growers associations. It is Mother Dairy's constant endeavor to ensure that milk producers and farmers regularly and continually receive market prices by offering qualitymilk, milk products and other food products to consumers at competitive prices and;uphold institutional structures that empower milk producers and farmers through processes that are equitable. Mother Dairy markets dairy products like Liquid Milk, IceCreams, Flavoured Milk, Dahi, Lassi, Mishti Doi, Ghee, Butter, Cheese, Dairy Whitener,UHT Milk, Dhara range of edible oils and the Safal range of fresh fruits & vegetables,frozen vegetables and fruit juices at a national level, through it's sales and distribution



networks, for marketing food items. In times to come, Mother Dairy shall strive to become a leading player in the food industry in India. (ii) National Dairy Development Board: The National Dairy Development Board(NDDB) was founded in 1965 to replace exploitation with empowerment, tradition with

modernity, stagnation with growth, transforming dairying into an instrument for thedevelopment of India's rural people. NDDB began its operations with the mission of making dairying a vehicle to a better future for millions of grassroots milk producers. Themission achieved thrust and direction with the launching of ”Operation Flood", a programme extending over 26 years and which used World Bank loan to finance India'semergence as the world's largest milk producing nation. Operation Flood's third phasewas completed in 1996 and has to its credit a number of significant achievements.As onMarch 2006, India’s 1,17,575 village dairy cooperatives federated into 170 milk unionsand 15 federations procured on an average 21.5 million litres of milk every day. 12.4million farmers are presently members of village dairy cooperatives. Since its inception,the Dairy Board has planned and spearheaded India's dairy programmes by placing dairy

development in the hands of milk producers and the professionals they employ to managetheir cooperatives. In addition, NDDB also promotes other commodity-basedcooperatives, allied industries and veterinary biologicals on an intensive and nation-wide basis.NDDB’s established dairy cooperative movement and their expertise in post harvestmanagement including QC and supply chain management will give the exchange aleading edge in taking the electronic Horticulture spot market to the India farmers. (iii) Multi Commodity Exchange of India Limited: MCX is an independent and de-mutualised multi commodity exchange. It was inaugurated on November 10, 2003 by Mr.Mukesh Ambani, Chairman and Managing Director, Reliance Industries Ltd.; and has permanent recognition from the Government of India for facilitating online trading,clearing and settlement operations for commodities futures market across the country.Today, MCX features amongst the world's top three bullion exchanges and top four energy exchanges. MCX offers a wide spectrum of opportunities to a large cross sectionof participants including producers/ processors, traders, corporate, regional tradingcentre, importers, exporters, co-operatives and industry associations amongst others.Headquartered in the financial capital of India, Mumbai, MCX is led by an expertmanagement team with deep domain knowledge of the commodities futures market.Presently, the average daily turnover of MCX is around USD1.55 bn (Rs.7, 000 crore -April 2006), with a record peak turnover of USD3.98 bn (Rs.17, 987 crore) on April 20,2006. In the first calendar quarter of 2006, MCX holds more than 55% market share of the total trading volume of all the domestic commodity exchanges. The exchange has alsoaffected large deliveries in domestic commodities, signifying the efficiency of pricediscovery. Being a nation-wide commodity exchange having state-of-the-artinfrastructure, offering multiple commodities for trading with wide reach and penetration,MCX is well placed to tap the vast potential poised by the commodities market.

(iv) Financial Technologies India Limited: FTIL proven mettle of End-To-Endexchange trading technologies addressing trading/ surveillance/ clearing and settlementoperations help enhance the SNX Trade Life Cycle operations (Pre-Trade, Trade and



Post-Trade). In addition to its technological capabilities, FTIL also brings to SNX itsassociations with technology giants such as Microsoft/ Intel and HP. FTIL has promotedIndia No 1 commodity exchange (Market share more than 62%) world’s 2nd largestexchange in Silver & Natural Gas trading volumes and the world’s 3rd largest exchangein gold trading volumes. MCX also is among the top ten commodity derivatives

exchanges in the world.

BENEFITS:

Direct Benefits to Farmers

6. Transparent pricing mechanism: real time price quote accessible7. Accessibility to National Level Markets: as buyers from all over the nation is

connected in the system8. Price manipulation is restricted to larger extent: since the system allows the

participation at national level there is no room for manipulation by any group of traders. And the Maximum allowable open position imposed at member level willrestrict the volume handled by individual member

9. Distress selling avoided to larger extent: unlike in the existing mechanismwherein farmer sells the produce after brining the produce to market place. In the proposed mechanism farmer will first sell his produce and than delivers at later stage

10. Assured and prompt payment: exchange will take the third party guarantee to allthe trade that takes place on the exchange platform

Indirect Benefits to Farmers

9. Increase in productivity10. Reduction in cost of production11. Reduction in post harvest losses12. Increase in marketable yield13. Increase in quality of the produce produced14. Access to extension services15. Increase in risk taking capabilities of farmers16. Inspire co-operation

Benefits to Traders/Commission agents/Forwarders

5. Traders would get a bigger market, where they can sell huge quantity6. 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 bemaintained for this purpose

7. Since large number of investors from all across the country would be available atSNX platform, they can realize better price for their product

8. They can expand their activities to multiple commodities, because of operationalease, availability of finance and absence of counter party risk under SNX system

Benefits to Exporters/Processors

5. Buy certified quality material through a secured platform6. Avoid hassles relating to procurement of material in physical market7. Looking at the price available at SNX, they can make export commitment and

cover themselves immediately by buying at SNX8. Customized services regarding logistics can be provided



ASSOCIATES & PARTNERS:

TRADING:Trading Mechanism

SNX follows the system of price-time priority for order matching. Members placeorders on their Trader Work Stations (TWS) and the orders get matched and executedthrough the order book in the Trading engine. Members have a facility to downloadvarious reports, by connecting FTP, through which they can access the reports such asBhav Copy, Contract Master, Trade Report, Margin Report at the end of trading.Transparent trading mechanism and efficient risk management, combined with effectivesurveillance, enhances the trust among the participants in SNX, for realizing reasonable price for the produce of the farmers and other participants.Risk Management:

Surveillance: The surveillance mechanism at SNX includes the monitoring of pricemovement, volatility, through real-time alerts, etc. Surveillance is also carried out inmonitoring positions, granting limits, investigating, by adopting various techniques.

Exposure Limits: The Surveillance of SNX will fix the trading limits for each Member,depending on the margin available to their credit and monitor their positions online.

Initial Margin (IM): SNX levies initial margin (IM) on open positions of Members andtheir clients for both buy and sell. The percentage of IM varies depending on thecommodity and its volatility. IM is calculated and reduced from the total margin of aMember available with SNX. Exposure is given to Members, based on the balance

amount available with SNX. When the Initial Margin increases, the exposure willautomatically decrease.

Mark-to-Market Margin (MTM): SNX has devised a mechanism of MTM margin to prevent any potential loss due to price volatility, in which case the Members or their clients may commit default. SNX will mark all trades and open positions for the day onclosing price, by which the notional gain or loss is calculated compared to the trade price.Such gain / loss is credited / debited to the respective Member’s account on T+1 day. TheCnS software automatically calculates Mark to Market margins on a daily basis.Special Margin: Special Margin is levied by SNX whenever there is high volatility intrading in a specific commodity / contract. This margin is levied when price reaches a

particular level compared to previous day’s closing price.

Clearing & Settlement: SNX has efficient system of clearing & settlement (CnS) of trades. All open positions at the end of the trading day will be compulsorily settled bydelivery. CnS Dept. will receive the information about physical receipt of commodities atthe Buyer’s place through the concerned Delivery Centre. Thereafter CnS Dept. willrelease the funds pay-out to the Sellers. Settlement of all trades in SNX takes place on theSettlement Price. The members’ positions are computed on a daily basis, depending on

http://www.utibank.com/



the settlement cycle. The information regarding pay-in and pay-out of funds arising out of settlement of transactions is calculated and transferred electronically to the ClearingBanks, through FTP. MEMBERSHIP CATEGORIES:

SNX offers Three Categories of Membership:(i) Category " A "

The following are eligible to apply in this Category:Growers Association ,Co-Operative Society - (Agri or Consumer) ,SHG (self help group)- promoted by recognized institutions or SNX ,Producer company under Section 581 (a)to (z)(ii) Category " B "

The following are eligible to apply in this Category:State level apex co-operative societies, Marketing Federations, Marketing Boards,Similar bodies set up by the State Governments(iii) Category " C "

Any entity or individual desirous of membership in this category may submit duly filledin Membership Application as per the terms and conditions of the Exchange.

Advantages

Advantages of SNX over existing Market

SAFAL National Exchange of India Ltd (SNX)” an online perishable commodityExchange, prompted by a joint venture of NDDB, Mother Dairy & FTIL-MCX.Headquartered in Bangalore, SNX is led by an expert management team, with deepknowledge of the horticulture markets.With the production estimated at around 140million tonnes, one fourth of the global output, the Indian commodities market offersunparalleled growth opportunities to a large section of the market.SNX has opened itsnational membership, as Trading-cum-Clearing Member (TCM). Membership on SNXoffers benefits in more than one ways for market participants. It has sound technologyinfrastructure through its association with market leaders such as Stratus for FaultTolerant Servers, Financial Technologies (India) Ltd. for Exchange Technologies, and a panel of banks for funds transfer. SNX V/S Existing Market

Number of Buyers and Sellers: From every nook & corner of all producing centres inthe country simultaneously present, Limited to local participantsBargaining Power: Faceless bid, price offer by seller based only on grade with no other inputs such as profile of seller, body language, etc., Small lots by small farmers wouldinvariably be at a discountRight to reject offered price : Absolute right to define price expectation and alsomodify based on the farmer's judgement/need, Virtually not an option to reject as the produce is out in the market, besides pressures of having to return to the same trader nextdayDependence on Local Traders: Minimised as there are options of selling on theexchange through Farmer Association, Perpetual dependence on local traders



Trade system: Has the option to first conclude on the price and later delivers produce atdelivery center, Produce to be physically brought to the market for finding out priceGrades standardization: Standardization with dispute redressal system, Informalstandardization without an effective grievance redressal system for the farmer Price Quotation: Both buyers and seller can quote their price, Seller is the price taker

Effect of supply- Demand balance: Based on demand and supply at national level,Limited to local balance, impact of distant market situations leveraged by middlemenPrice dissemination: Multiple Channel- electronic-instantaneous-all key centres

Limited sources after a lag of a day often, more as data than as adecision tool for the farmer Payment: Immediately after the sale, Varies from 1 week to 1 month

PRODUCTS:

Mango,Banana,Onion,Tomato,Potato,Aplle,Citrus and GrapesFruits

Apple : Royal Delicious, J & K Delicious, Mango: Bangenpalli, Totapari and

Banana : Dwarf CavendishVegetables

Potato : Kufri Bahar , Onion: Nashik Red and Tomato:Hybrids

CONTACT :

Safal National Exchange of India Ltd. /SNX

SafalmarketWhitefield-HoskoteHighwayBangalore-560067Ph:(080)25053000Fax: (080) 28457382

Web:http;;/www.snxindia.com or, safalindia.com

Email : [email protected]

LITERATURES CITED

1. Chengappa, P.G. and N. Nagaraj (2005). Marketing of Major Fruits andVegetables in and around Bangalore. Report 2004-05. Department of AgriculturalEconomics. University of Agricultural Sciences. Bangalore.

2. Chengappa, P.G. (2006). Evolution of Food Retail Chains: Evidence from SouthIndia. Paper presented at IFPRI-IEG Workshop on From Plate to Plough:





Agricultural Diversification and its Implications for the smallholders. September 20-21, 2006. New Delhi.

3. Acharya, S. S. and Agarwal, N. L.2004.Agricultural marketing in India. Oxford &IBH Pub. New Delhi

4. Acharya, S.S. (2006). Agricultural Marketing Reforms: Status and Road Map. National Institute for Agricultural Marketing, Jaipur

5. Reddy, I.1995.Marketing of vegetables. Rupa Books Pvt. Ltd..Jaipur

6. Kumar, Praduman and Promod Kumar (2003). Demand, Supply and TradePerspective of Vegetables and Fruits in India”.Indian Journal of AgriculturalMarketing. Vol 17(3):121-130.

7. FRONTLINE (July 13,2007 – Fresh Retail special issue

8. BUSINESSWORLD (July 9,2007-Fresh Retail special edition )

9. SURVEY OF INDIAN AGRICULTURE-2007

10. Viswanadham, N (2006). Food and retail chains in India. ISAS Working Paper No15. 6October 2006, Singapore.

11. http://www.freshplaza.com

12. http://www.safalindia.com

13. http://www.snxindia.com

http://www.freshplaza.com/

http://www.safalindia.com/

http://www.snxindia.com/

http://www.freshplaza.com/

http://www.safalindia.com/

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