Benefits from the NCDEX Platform to Primary Markets … Study 2014 Benefits from the NCDEX...
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Impact Study 2014 Benefits from the NCDEX Platform to Primary Markets in Karnataka IMPACT STUDY Bidar Bijapur Gulbarga Yadgir Raichur
Transcript of Benefits from the NCDEX Platform to Primary Markets … Study 2014 Benefits from the NCDEX...
I m p a c t S t u d y 2 0 1 4
Benefits from the NCDEX Platform to Primary Markets in Karnataka
IMPACT STUDY
Bidar
Bijapur
Gulbarga
Yadgir
Raichur
“Indeed, it is tempting to suppose that it is self-evident that things should
be arranged so as to lead to the most good.”
- John Rawls / A Theory of Justice, 1971
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Acknowledgements
NCDEX gratefully acknowledges the co-operation and support received from officials in the Government of
Karnataka. Special thanks are due to Mr P. S. Vastrad, Director, Department of Agricultural Marketing &
Managing Director, Karnataka State Agricultural Marketing Board; Mr H. K. Chandramohan, Additional
Director & Secretary, APMC, Nehru Gunj, Gulbarga; Mr R. N. Chamaraju, Additional Director
(Administration), Department of Agricultural Marketing; Ms Priyanka Mary Francis, Managing Director,
Karnataka Food and Civil Supplies Corporation Ltd; Ms T. P. Gayathri, Deputy Director, Department of
Agriculture Marketing; and Mr S. M. Chincholi, Warehouse Manager, Central Warehouse, Gulbarga.
We are also grateful to Mr Baskar S.S., Head of Project, Vrutti, the nodal non-government agency working
for the Small Farmers Agri Business Consortium (SFAC), for sharing his insights.
We extend our heartfelt thanks to traders and farmers for sharing their stories with us.
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Benefits
Concerns and Recommendations
• Farmers and traders have become familiar with computers and online auctions.
• Farmers have greater bargaining power versus traders.
• Farmers are more aware of crop quality specifications. Quality consciousness among farmers has increased.
• Farmers have better understanding about banking. Literacy among farmers about bank transactions /
operations has increased.
• Direct electronic fund transfer from buyers to sellers.
• Maintenance of mandi trading records has become computerised.
• Greater transparency at every stage of transaction within a mandi.
• Electronic trading system allows buyers to bid in real time even when they are not physically present
at the mandi. E-auctioning system has enabled sellers to participate irrespective of proximity to the
mandi location.
• APMC revenues have increased due to online transactions. Transparency in registration process has
helped reduce evasion of market fee.
• Tender results are announced daily at 1 pm so farmers do not face uncertainty.
• Farmers and traders continue to face information asymmetry. The copy of e-tender receipt should be
given to the farmer to avoid any tampering by commission agent. Checks can be introduced to weed out
traders with unsatisfactory or bad credit history.
• Traders would like guaranteed uniformity in quality of stocks delivered by farmers. Warehouse-cum-
procurement centres are needed to reduce transport costs.
• Farmers should get easier access to credit. Self-help groups could also be encouraged in this context.
• Farmers lack awareness about novel initiatives undertaken by NCDEX.
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BACKDROP
NCDEX Initiatives
State of Spot Markets in the Country
There are 7,190 wholesale markets in India. There are 22,505
rural primary markets, of which 15% are regulated.
Regulated markets are governed by state APMC Acts and
trading is conducted exclusively by commission agents. The
system suffers from price opacity, long chain of middlemen,
multiple handling, lack of scientific assaying and grading
facilities, absence of quality specific premium/discounts,
apart from the rampant information asymmetry. The
farmers are often left with no bargaining power. There is no
automated record keeping system to create a transparent
trading platform and prevent cartelisation.
Development of efficient futures derivative market depends
on the growth and development of underlying primary
markets.
Rural Primary Markets in India - Structure
4,501
22,505
Regulated rural primarymarkets
NCDEX, through its subsidiary, NCDEX Spot Exchange Limited (NSPOT), has undertaken novel initiatives
to reform primary markets. NSPOT aims to build a pan-India spot commodities market, to use technology
to establish a modern eco-system for spot commodities trading, and to help businesses bring greater
efficiency in the value chain.
1. Mandi Modernisation to Unified Market Platform (UMP)
With an aim to enhance the efficiencies of the existing regulated markets and enable unlocking of supply
chain bottlenecks, NCDEX launched an ambitious programme (on May 09, 2009) to modernize regulated
markets (also known as APMC markets/ Mandis) in the country using its e-spot market platform. The
company sought support from various state governments including Karnataka and entrusted its
subsidiary, NCDEX Spot Exchange (NSPOT) with the responsibility of executing this ambitious programme.
After more than two years of work in Karnataka, the Mandi Modernization Programme (MMP) was initiated
in the district, Gulbarga on December 24, 2011. While we write this, MMP is active in 26 APMC markets in in
Karnataka and 2 APMC markets in Andhra Pradesh. The impact study covers some of the markets under
MMP.
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Process Flow of Online Mandi
Farmer Lot Wise Entry and Lot ID
Creation
Generation of Sale Receipt
Farmer Option Accept or Reject
Best Price
Weighing Of Lot - Authorized Personnel
Bidding ThroughScreens / Mobile
Based on Unique Lot ID
Best Price —WinnerSMS sent to winner
/ CA / Farmer
Update of Buyer Inventory
To Secondary Sales / Exit Process
Sample / Heap
Unloading atCommission Agent
/ CA InventoryUpdate
Generation ofFarmer Receipt
Cess PaybleBooking CA / Buyer
Account
Unified Market Platform (UMP)
After experiencing the benefits for such a unique platform, the Government of Karnataka worked with
NSPOT to develop a new trading platform, called Unified Market Platform (UMP) for modernising its more
than 300 APMC markets into a single marketplace for the state using NSPOT UMP.
The Government of Karnataka passed a landmark legislation named “New Agriculture Policy” in the state
to transform its state agricultural markets and address supply chain bottlenecks in November 2013. The
state government selected NSPOT led MMP to lead the transformation. Together with NSPOT, the state
government established a new entity - Rashtriya E-Market and Services Private Limited (ReMS) to
introduce UMP in Karnataka to create a state-wide marketplace. ReMS provides online access to all
participants in the APMC markets in the state holding the unified market license from the state
government.
The limitations of MMP are likely to be addressed in the UMP platform to transform Karnataka state into
“one state one market”. The first ever UMP was inaugurated by Shri Siddaramaiah, Honorable Chief
Minister of Government of Karnataka, on February 22, 2014 in Bengaluru. It is expected that using dynamic
UMP, the farmers would now get a choice to sell to an APMC market or store in a warehouse near him or to
sell directly to any other buyer using dynamic UMP.
UMP is likely to spread to 94 other important markets in the state. At present, UMP is functional for
turmeric (Chamarajnagar) and Kopra (Tiptur, Arsikere and Tumkur) and is expected to cover other
commodities soon.
2. Platform for e-Procurement
NSPOT provides unique e-Procurement platform for primary procurement activities. Availability of real-
time information and simple delivery process ensures that farmers are the direct beneficiaries of this
trading platform. The users in the value chain can have simultaneous access to the Exchange on the buy
side and procure at the best possible price.
Karnataka has been the first state to embrace NSPOT initiatives. NSPOT has facilitated the state
government agencies and farmer producer organisations (FPOs) to procure various agricultural
commodities in the last couple of years.
Process Flow of Procurement Operations
REGISTRATION PROCUREMENT PAYMENT
Farmer approaches
the Procurement Centre
along with documents
(Land Records,
Bank Pass Book,
Identity Proof)
Farmer gets a call
one day prior to the
procurement day
Sieving & Weighing
of the commodity
procured
Verification ofDocuments
Farmer brings his
produce to the
procurement centre
Preparing Pay Memo
Allotment of serial number and date of procurement
Assayer draws a sample
from each gunny bag
Transfer of Money to farmer's bank
account through RTGS
Commodity NOT satisfying quality norms is rejected
Commodity satisfyingquality norms is sent for sieving, weighing
1. Vrutti is a centre for sustainable livelihoods and people's well-being through knowledge, innovations and transformative action. Vrutti is working as a resource mobilising agency and is partnered to organise Farmers Produce Organisation (FPOs) for Gulbarga in Karnataka. Vrutti has been responsible for mobilizing farmers into groups at the village level and build their associations at an appropriate federating point to plan and implement product specific cluster/ commercial crop cycles; for strengthening farmer capacity through agricultural best practices for enhanced productivity; for ensuring access to and usage of quality inputs and services for intensive agriculture enhancing cluster competitiveness and for facilitating access to fair and remunerative markets including linking producer groups to marketing opportunities by market aggregators.
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SFAC is a society promoted by the Government for India to enhance the competitiveness of the small
farmers in the country with an aim to increase their income. One of the key projects undertaken by SFAC
includes organizing farmers into Farmer Producer Organizations (FPOs). SFAC is using FPOs to organize
farmers for procurement under price support scheme (PSS) of the government of India. SFAC is an agency
for procurement of pulses and oilseeds under PSS.
NSPOT is the key facilitating agency to support SFAC in ensuring smooth procurement operations. It works
with SFAC, FPOs and resource institutions (RIs) that support FPOs, warehouse service providers and
transporters. SFAC pays to farmers directly in to their accounts by NEFT/ RTGS or using cheques (where
banks do not have such facilities).
1In Karnataka, SFAC is procuring Sunflower seeds using FPO promoted by Vrutti – a local NGO.
Small Farmers' Agriculture-Business Consortium (SFAC) procurement through Farmer Producer Organization (FPOs) using NSPOT Trading Platform
KTAML was set up by the state government of Karnataka to ensure remunerative prices to Tur growers in
the state. KTAML and NSPOT have been working together since 2010 when NSPOT accepted the offer of
KTAML to facilitate Tur procurement using its dynamic electronic trading platform. KTAML procures Tur at
government announced price for Tur. This year, the state government has declared a price of Rs. 5000/
quintal, i.e., Rs. 700 more than the minimum Support price (MSP).
NSPOT facilitates tur procurement with the help of government officials including Director- Agricultural
Marketing, Government of Karnataka, Managing Director of KTAML, District Collector, Deputy Director
Agriculture, Agriculture Development Officers, APMC officials and the State Warehousing Corporation. It
appoints professional assayers to ensure the quality of the procured Tur and ensures complete
documentation. KTAML pays the farmers directly to their account using NSPOT platform through
NEFT/RTGS. Since its inception in 2010, the operations have become a benchmark in efficient
procurement. NSPOT also provides value added services like price information to KTAML and the state
government. Prices at Gulbarga Mandi are readily available owing to MMP and can be used as reference by
the government.
Karnataka Togari Abhivrudhi Mandali Limited (KTAML/ Tur Board) led Red Gram ( Tur/Arhar) Procurement
3. Platform for e-Auctioning
NSPOT facilitates procurement of agricultural commodities for state governments for various schemes
using its unique e-auctions-market. The key objective of the initiative is to provide an efficient e-spot
market platform spanning across the supply chain to revitalize supply management mechanism in the
country.
Karnataka Food and Civil Supplies Corporation Ltd. (KFCSC) has chosen the e-way to procure various
commodities in the state. NSPOT has conducted reverse auction for KFCSC where for a fixed quantity
(decided by KFCSC), sellers offer price quotes and the one who offers the lowest price wins the auction. The
online tendering system in this new model has enhanced transparency in tendering.
The State Food and Civil Supplies Department, Government of Karnataka has chosen the e-way to procure
tur dal under the mid-day meal scheme for students of government schools. The Govt. of Karnataka began
procuring tur dal from dal millers with the assistance of NSPOT in 2011-12. With the Government of
Karnataka entering into an agreement with NCDEX Spot Exchange for e-auctioning, procurement of tur
dal has been brought under the reverse auction platform. The online tendering system in the new model
has enhanced transparency in tendering and procurement.
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Tur Procurement in Karnataka –NSPOT Collaboration
with the Government of Karnataka
Area under Tur Cultivation in Karnataka (2012-13)
Andhra Pradesh 8%
Gujrat 9%
Karnataka 12%
Madhya Pradesh 12%
Maharashtra 32%
Uttar Pradesh 11%
Others 11%
Production of Tur in India in 2012-13
Source: Directorate of Economics and Statistics
Source: Karnataka State Agriculture Marketing Board,
Department of Agriculture Marketing, Government of Karnataka
11%
11%
32%
12%
12%
9%
8%
Bagalkot
Bangalore Rural
Bangalore Urban
Belgaum
Bellary
Bidar
Bijapur
Chamarajanagar
Chikkaballapur Chikkaballapur
Chitradurga
Dakshina Kannada
Davanagere
Dharwad Gadag
Gulbarga
Hassan
Haveri
Kodagu
Kolar
Koppal
Mandya
Mysore
Raichur
Ramanagara
Shimoga
Tumkur Udupi
Uttara Kannada
Yadgir
India is the world's largest producer of tur or arhar. Tur is grown as a kharif crop between June and October.
0 - 2,000
2,001 - 5,000
5,001 - 10,000
10,001 - 20,000
20,001 - 60,000
60,001 - 395,281
Hectares
0 - 1,000
1,001 - 2,500
2,501 - 5,000
5,001 - 10,000
10,001 - 50,000
50,001 - 257,075
Tonnes
Source: Karnataka State Agriculture Marketing Board, Department of Agriculture Marketing, Government of Karnataka
Bagalkot
Bangalore Rural
Bangalore Urban
Belgaum
Bellary
Bidar
Bijapur
Chamarajanagar
Chikkaballapur Chikkaballapur
Chitradurga
Dakshina Kannada
Davanagere
Dharwad
Gadag
Gulbarga
Hassan
Haveri
Kodagu
Kolar
Koppal
Mandya
Mysore
Raichur
Ramanagara
Shimoga
Tumkur Udupi
Uttara Kannada
Yadgir
Bidar
Bijapur
Gulbarga
Yadgir
Gulbarga Tur Contribution to
National Tur Output
Kharif 2013-14
NSPOT Procurement of
Tur Varieties for KTAML*
Districts where procured
*NSPOT has been providing its platform for Tur procurement to Karnataka
Togari Abhivrudhi Mandali (KTAML) since last three years.
15%
Maruti, Double Nose,
Guliyaal and Pink
Gulbarga, Bijapur, Bidar,
Yadgir and Raichur
Source: Karnataka State Agriculture Marketing Board,
Department of Agriculture Marketing,
Government of Karnataka
Raichur
Tur Production in Karnataka (2012-13)
Tur Procurement in Karnataka – Spread of NCDEX Operations
Gulbarga District
2012-13
2013-14 (As on 22 Feb 2014)
YearsProcured Quantity(Tonnes)
Cost of Procurement
(Rs Crore)Beneficiaries
No. of Districts Covered
DistrictsCovered
MSP(Rs/Tonne)
2,682 450 12.07 1,776 7
Afzalpur, Aland,
Chincholi, Chittapur,
Gulbarga,Jewargi, Sedam
Afzalpur, Aland,
Chincholi, Chittapur,
Gulbarga,Jewargi, Sedam
8,233 500 41.17 4,804 7
Tur Procurement in Karnataka as on February 22, 2014
Registered farmers
KarnatakaGulbarga
Centre
Aland (Centre with highest
procurement in Gulbarga District
Gulbarga District
34,710
9854
16,512.45
82.56
Farmers who sold produce in procurement operations
Procurement (tonnes)
Cost in Rs Crore
@( Rs 5000/quintal)
13,569
4,047
6,944.10
34.72
1,873
643
1,107.70
5.54
4,088
727
1,251.90
6.26
Tur Procurement in Karnataka (NSPOT Collaboration with KTML)
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Source: NCDEX Spot Exchange Ltd.
2011-12
2012-13
2013-14 (As on 22 Feb 2014)
YearsProcured Quantity(Tonnes)
Cost of Procurement
(Rs Crore)Beneficiaries
No. of Districts Covered
DistrictsCovered
MSP(Rs/Tonne)
5,511
5,349
19,945
400
450
500
22.05
24.07
99.72
1,796
4,004
11,936
3
3
5
Gulbarga, Yadgir, Bidar
Gulbarga, Yadgir, Bidar
Gulbarga, Yadgir, Bidar,
Bijapur, Raichur
Source: NCDEX Spot Exchange Ltd.
Source: Database of Gulbarga Mandi, Government of Karnataka.
Sieving of Tur Weighing of Tur
Sunflower Seeds Procurement in KarnatakaNCDEX Collaboration with Vrutti
NSPOT is engaged in procurement of sunflower seeds since January 2014 on behalf of SFAC. NSPOT has provided
marketing support to Nisarga Farmers Producer Company (Nisarga Utpadakara Mahasangha), an FPO promoted
by Vrutti.
NSPOT has opened a procurement centre at Munnahalli village of Aland Taluk in Gulbarga district of Karnataka
for procuring sunflower seeds. Vrutti facilitated registration of farmers under MSP procurement centre
established at Munnahalli village.
The process followed: As indicated in the flow chart on page no. 8.
Testing Quality of Tur using 'Weighing Balance' Machine
Assaying the moisture level in tur using Digital Moisture Meter
Sieving of Sunflower Seeds Testing Moisture Level and Grading of Sunflower Seeds
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Markets Online as on April 30, 2013
Source: Report of Agricultural Marketing Reforms Committee 2013,
Co-operation Department, Government of Karnataka
Gulbarga
Tiptur
Tumkur
Bijapur
Arsikere
Bagalkot
Bellary
Yadgir
Haveri
Challakere
Gadag
Chitradurga
Hubli-Amargol
Mysore
Raichur
Dharwad
Shimoga
Bailahongal
Bhadravathi
Yellapura
Koppal
Sagara
Name of the APMC Date activated
20 Dec. 2011
22 Jun. 2012
23 Jul. 2012
8 Aug. 2012
14 Aug. 2012
8 Oct. 2012
10 Oct. 2012
12 Oct. 2012
22 Oct. 2012
13 Nov. 2012
19 Nov. 2012
7 Dec. 2012
27 Dec. 2012
27 Dec. 2012
31 Dec. 2012
1 Feb. 2013
22 Feb. 2013
9 Mar. 2013
16 Mar. 2013
16 Mar. 2013
19 Mar. 2013
8 Apr . 2013
Status of Infrastructure in Gulbarga
Source: CCS National Institute of Agricultural Marketing Impact Assessment of
E-Tendering of Agricultural Commodities in Karnataka, 2012
Area of Market (Acres)
Sub-yards
Number of commodities
traded during last 3 years
Year of Establishment
No. of Traders
No. of Commission Agents
Commencement of e-Tendering
Service Provider (Earlier)
Service Provider (Current)
Arrival of Tur (Tonnes)
Market Fee (Rs)
General Characteristics of Gulbarga Market
62
3
15
1940
588
688
Nov. 2009
KEIONICS
NCDEX
160300
122840468
Status of Infrastructure in KarnatakaThere are 155 notified market areas/APMCs in the state with 353 sub market yards and 742 other kinds of market
yards (seasonal).
Karnataka State Warehousing Corporation (KSWC)
Central Warehousing Corporation (CWC)
Food Corporation of India
Warehouses/
Storage
centres
Storage Capacity
(Lakh MT)
Capacity Utilisation (%)
121
33
52
10.04
4.39
13.13
74
NA
NA
*: As on February 2012, NA: Not AvailableSource: Ministry of Food Processing Industries (MOFPI), Government of India, Karnataka State Profile
CASE STUDIES
IMPACT - AS OBSERVED FROM THE TESTIMONIES OF VARIOUS STAKEHOLDERS
1. Mr. Ashok Nasi
On Trading Transaction and Profit
“Prior to this year, I used to sell our produce to commission agents who picked up the produce from our
village. We did not sell our produce to the government or in the APMC mandis despite knowing that we would
get higher rates there, as transportation and storage costs involved are too high to earn any profit.
“This year, however, we sold our tur to the state government instead of selling it to traders. Procurement
price (Rs 5000/qtl) offered by the state government this year is far higher than the price prevailing in the local
market (Rs 4200/qtl).t is also higher by almost Rs 1000 /qtl over previous year. So, even if I incur a
transportation cost of Rs 40/ I am earning a decent profit. “My family sold 100 quintals of tur at procurement
centre in Gulbarga and has earned profits worth Rs 1 lakh during this season.”
On Key Features of NSPOT Logistical Support and Suggestions
Village
Primary source of income
Secondary source of income
Family size
Farm size
Crops
Fartabad, Gulbarga taluk, Gulbarga district
Farming
Nil
Ten members
40 acres
Tur, Jowar, Chana, Urad
Farmers
“Besides higher MSP, two more things have added to our benefits. First, government is not demanding
soot (loose grains given to commission agents as a part of commission). Soot reduces the real returns to
farmers. Farmers end up selling approximately 1.2 quintals, while they get the rate of one quintal only.
“Availability of scientific grading and assaying system is the second important feature. Samples are
assessed on the spot using standardised quality testing instruments, which brings in transparency and
eliminates the subjective element involved in deciding the prices.
Project: KTAML Tur Procurement
On e-Procurement
NCDEX team interviewed some farmers participating in tur and sunflower seeds procurement operations
at the Central Warehouse Corporation's procurement centre in Gulbarga and Munnahalli collection
centres respectively. The team also interacted with traders in Gulbarga mandi and officials of state
government of Karnataka. Excerpts of the views expressed during the conversations are as follows:
“I am satisfied with the procurement services provided by the Exchange at Central Warehouse procurement centre. NCDEX should continue with its initiatives and start procuring chana at the MSP rate in the ensuing marketing season.”
2. Mr. Rajshekar Kalburgi
Village
Primary source of income
Age
Secondary source of income
Family size
Farm size
Crops
Fartabad, Gulbarga taluk, Gulbarga district
Farming
40 years
Nil
Ten members
40 acres
Tur, Moong, Jowar, Chana, Urad.
On NCDEX Chana Futures
“I came to know about online trading in futures contracts of agricultural commodities through my friend working at 'AnandRathi Financial Services'. He suggested I should participate in futures trading. So I started trading in chana futures on NCDEX in 2009, as futures trading was not available in other crops that I cultivate. Trading in chana futures helped me hedge my price risk successfully and I also could book decent profits.”
On Tur Production in Gulbarga and its Procurement
“Gulbarga has recorded noticeable increase in production of tur this year. Market arrivals have been rising which has put downward pressure on the tur prices in the local mandi. However, procurement price offered by the state government (Rs 5000/Q) is reasonably higher and that is the reason I decided to sell tur to the government agency. Prior to this year, I used to sell it at the mandi when the mandi price was higher than the procurement price.”
On NSPOT Procurement Support
“I am happy at the systematic way NSPOT has conducted these operations. We are getting correct measurement of weight because of electronic weighing scale. Quality assessment carried out by NCMSL is also giving us fair idea about the quality of our produce.”
On Drawback of Government Tur Procurement Scheme for the Current Season
“The only thing that is bothering me is the upper limit of 20 quintals imposed on procurement quantity. I used to sell 150-200 quintals of tur in Gulbarga APMC mandi earlier when I used to get higher rates. But, at this centre, despite getting attractive rate, I am unable to sell more than 20 quintals and losing on opportunity to earn more profit.”
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Suggestions
“Government should raise the upper ceiling imposed on procurement quantity, so that farmers like me can maximise their earnings by selling higher quantum of tur to the state government.”
“I would like NSPOT to start procuring chana on behalf of the state government in the next chana marketing season.”
3. Mr. Allauddin Chittapur
On Selling Tur at Government Procurement Centre (KTAML)
“My family used to sell tur to commission agents in the village. I read in the local newspaper that the state government is procuring tur at Rs 5000/. We never fetched such a high price for our produce. So I decided to sell our produce to the state government this year and got registered at the procurement centre opened by NSPOT team at Gulbarga.
“After deducting the transport cost incurred in carrying the produce to Gulbarga, the net gain for us this season is around Rs 50,000.”
On Benefits
“I am extremely happy that we do not have to provide soot to the government. The government is taking under procurement only the quantity mentioned in the invoice and is not demanding any soot, whereas when we sell our produce to arhatias, they take away 4-5 kg of tur over and above for every quintal sold to them and don't pay us for this loose quantum.
“We have got the precise weight of tur that we sold here. Electronic weighing scale has eliminated the scope for human error or manipulation in the weighing our produce.”
Suggestions
“NSPOT should continue procuring tur next year as well so that farmers like me can earn more profit and will not have to sell our crop to arhatias in the village.”
Village
Primary source of income
Age
Secondary source of income
Family size
Farm size
Crops
Kiranagi, Gulbarga taluk,
Gulbarga district
Selling bangles
50 years
Farming
Three members
15 acres
Tur, Jowar, Kapas.
On Usual Practice of Selling Commodities
Munnahalli, Aland taluk,
Gulbarga district
Farming
Nil
Four members
40 acres
Moong, Urad, Soyabean, Sesamum, Tur, Chana and Sunflower
*: A member of Nisarga Farmers Producer Company.
“Till last year, I used to sell my produce (especially tur, chana and sunflower seed) to commission agents in mandis at Gulbargaand Latur in Maharashtra. Travelling to these mandis not only cost me more but there was no guarantee of the commission agent purchasing all my produce or giving me the desired rate. He, in fact, used to seize every opportunity of purchasing at lower rates, and ask for “soot” at every purchase.
“Sometimes I used to sell my produce to the traders who used to visit our village. However, they generally used to pay lower than the market rate saying my produce is not of a superior quality. They used to inspect the quality by seeing and touching and never followed any standard scientific method.”
On Procurement Facilities Provided by NSPOT and Vrutti
“I am thankful to NSPOT and our FPO for starting a procurement centre in our village. Because of their initiative, this year I have been able to sell sunflower seeds (Kargil 16 variety) to the government. There is no doubt that I have got a better rate for sunflower seed because MSP offered by the state government is much higher than the market rate. But had this collection centre not been opened in my village, I don't think I could have earned decent profits because transportation costs would have eaten into my earnings.”
On Benefits of Grading
“Quality analysis of my produce has helped me earn more this year. Scientific grading and assaying of agri produce has enhanced transparency and I am now assured that I will get the rate fixed by the state government if I bring in the crop as per the prescribed quality norms.”
On Payment Mechanism
Since NSPOT is paying me either by cheque or transferring money through RTGS system directly in my account, I am no more worried about receiving my payments.”
Suggestions
“NSPOT and Vrutti should continue procuring more and more agricultural commodities every year. In that case, not only myself but all the villagers would sell entire produce only at NSPOT procurement centre.”
4. Mr. Tatyarao Kulkarni*
Village
Primary source of income
Secondary source of income
Family size
Farm size
Crops
Project: SFAC Procurement
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On Previous Trading Practices
Munnahalli, Aland taluk,
Gulbarga district
Farming (for last 20 years)
Nil
Nine members
20 acres
Moong, Urad, Soyabean, Sesamum, Tur, Chana, and Sunflower
*: A member of Nisarga Farmers Producer Company.
“Till last year, I used to sell my produce to commission agents who used to come to our village. But I had to arrange for transportation of my goods to mandi. I also used to bear loading and unloading charges. And yet, I could not get the desired rate for my produce. I did not have any choice but to believe the commission agent and accept the price he quoted. There was no clarity on quality criteria that buyers used to apply while grading my goods.
“Last year I sold sunflower seeds to Tata Rallis which has started procurement operations in Gulbarga. I got a decent price for my goods but I had to bear the transport cost, which is not the case this year.”
On Current Year Trading Transaction and Profit
“This year I sold 75 bags (1 bag = 65-70 kg) of sunflower seeds as I got the highest-ever rate and it is even higher than the one prevailing in Gulbarga mandi. I earned profit of Rs 300/bag this year.“For the first time we had a procurement centre located in our village. This is another reason that I could sell more sunflower seed in the current season than the previous one. It not only saved my overhead costs but also my time and efforts.”
On NSPOT Procurement Facilities
“I appreciate the way the NSPOT team has arranged the procurement operations. Sequencing of the lots, assaying of samples, accurate weighing, everything has been done very systematically and transparently.”
Suggestions
“Government should procure other commodities, for example, chana, in this manner. In that case I will prefer selling all my produce to the government rather than to the traders.
“I would suggest that the maximum procurement quantity needs to be raised (from the current 15 to 20 quintals).”
5. Mr. Shankarrao Ingle*
Village
Primary source of income
Secondary source of income
Family size
Farm size
Crops
Mr. Baskar S. S. (Head of Project – Vrutti)
“NSPOT has demonstrated both excellence and concern. With efficient
operations and exceptional commitment, it has encouraged farmers to
welcome the reforms in the commodity market.”
APMC MARKET FUNCTIONARIES
1. Mr. Vijaykumar Biradar*Sreedevi Trading Company
Gulbarga, Karnataka
“I can trade more and in a much better way due to the advent of e – tendering. Initially, there would not be
any confirmation of the tender. Now I am assured of confirmation. Before e-auctioning was introduced, I
used to buy 200-300 quintals of pulses daily but there was no guarantee the trade would happen. Now I am
assured of 200-300 quintals daily.”
*: Trades exclusively in pulses
2. Mr. Gurumukka*S N Mukka General Merchants and Commission Agents
Gulbarga, Karnataka
“Due to e-auctioning, farmers are getting a good rate for their produce. They are also having their trades
confirmed. Further, quality differentiation is possible.
“In the open auction method, it was not possible to get the expected quantities of the produce to meet the
market demand. With e-auctioning, we are assured of getting the produce as per the market demand.
“However, there is one drawback in e-auctioning. A trader with unsatisfactory or bad credit history too
gets a tender.”
*: Trades exclusively in pulses
* Mr Gurumukka is known to be the greatest beneficiary of the e-auctioning system. When asked about
the impact of e-auctioning on his trade, he refused to give figures and the quantum of the rise in trade.
He did indicate that his trading volumes have doubled.
On MMP led e-auctioning based Price Discovery in Gulbarga APMC
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3. Mr. Deepak GildaHanumandas Bhagwandas & Company
Gulbarga, Karnataka
“In e-auctioning and the overall market modernization exercise, most of
the stocks to the APMC yards come from village aggregators and large
farmers. Hence, there is a tendency for the village rate to be equal to the
APMC rate, which is a good sign of moving towards efficient price
discovery.”
Concerns: On Quality and Delivery, the Two Major Issues
“In the e-auctioning system, quality and delivery are the two major issues. Here is mutual consent
between the buyer and the seller on the quality of the stock. A deal is done if the farmer shows to the
trader pulses/ grains of a quality satisfying the trader. However, there is no uniformity in the quality of the
farmer's stock. This is a shortcoming of the system and a risk faced by traders, which cannot be rectified
at least at this stage of market modernization.
“Another issue is of delivery. In e-auctioning, there is no guarantee of getting the stocks. It depends on the
farmer's will. Farmers can cancel the deal at any point of time. A farmer should be given an e - tender,
only if he is willing to sell his stock.”
On Transparency
“With NSPOT coming into picture, there is more transparency and accountability. Over the years,
commission agents used to cancel the deal and hoard the stocks if they anticipated a price rise in the
near future. This is not possible now.”
On Developing Futures
“First train people for trading in shorter period contracts and then for the longer ones. Tur contracts
should be launched as 10-day contracts initially.
“And access to transport facility should be made easier.
“In the current system, the e-tender receipt lies with the Commission agent. This should go to the farmer
too or should actually be attached to the documents while making payments to the farmers.”
Director, Department of Agricultural Marketing &
Managing Director, Karnataka State Agricultural Marketing Board,
Government of Karnataka
On KTAML Procurement
“This year, 95,000 quintals of tur worth Rs. 80 crore has been procured. This is a record so far. Hence, warehousing is likely to be a major issue in the years to come.
“Farmers are indeed very happy with the RTGS mode of payment. The government is trying to improve the plight of farmers and looks forward to such innovations.
“Before MSP was introduced, the rates were less. With MSP, the procurement led to losses worth Rs. 3-4 crore to the government. Still, this loss is evened out by the positive impact on farmers. “If agri credit is easier to access, then it is easier to distance farmers from commission agents. In this context, Stree Shakti Groups have been instrumental in raising finances for farmers.
“NSPOT and Vrutti should continue procuring more and more agricultural commodities every year. In that case, not only myself but all the villagers would sell entire produce only at NSPOT procurement centre.”
1. Mr. P. S. Vastrad
Government Officials
Additional Director & Secretary, APMC,
Nehru Gunj, Gulbarga
On E-auctioning
“Earlier, there existed the system of open auction. However, in Phase 1 of market modernization drive, e–tendering was introduced in Karnataka. Emphasis has been on transparency. All transactions are being recorded. In Gulbarga, it was introduced in 2009 with the government of Karnataka and signing an MoU. The current e-auctioning system on APMC for tur procurement has been very effective.
“In Phase 2 of market modernization, grading was introduced a couple of years back. This formed the basis for interlinking of markets in the district and state. During the first year, farmers went to APMC for grading, in the second year, APMC sent its graders to the farmers.”
“e-auctioning coupled with several primary market reforms has made a difference”
“Only e- tendering would not have helped. Sending SMS to farmers at every stage and keeping them informed about trade prices also has made a lot of difference. Cancellation of tenders, weigh outs have helped too. Through SMS, farmers are kept informed about the state of their lots. Scientific grading is a step ahead of the traditional sight and touch method. Payment system has improved. By RTGS mode of payment, delay is reduced by almost 10 days. “
2. Mr. H. K. Chandramohan
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On Procurement
“This year procurement took place in government warehouse premises in Gulbarga. We need to develop warehouse itself into a procurement centre. This can save a lot of money on transport.
“Now the tur lot size is reduced to 20 quintals so that small and marginal farmers can participate. Farmers are allowed to bring 4 quintals per acre as they have maximum 5 acres land. Big farmers are not allowed to sell above 20 quintals. Most importantly, traders are not allowed to sell at these procurement centres.
“Video shooting of the procurement process is done to keep check on the operations. This has enhanced the degree of transparency.
“One concern that needs to be addressed is about the gap between the farmers' and traders' access to information. Farmers are not getting real time information while traders are getting the same. This gap has to be reduced. “
Additional Director (Administration),
Department of Agricultural Marketing, Government of Karnataka
On Procurement
“True procurement will happen if there is true participation. Procurement in other states is different. Karnataka government gives extra incentives, and state bonus to farmers over and above the MSP. This helps in enhancing procurement in the state.
“Last year 55,000 quintals of tur was procured. This year the procurement is worth Rs. 580 crore. Generally, it amounts to only Rs. 200 crore, of which the government procures worth Rs. 100 crore and the rest is procured by APMCs.
“Out of the total tur production, all is not offered for procurement. Only 30-40% is procured. If you (NSPOT) start procuring, all the stakeholders will benefit. Three to four times more benefits will pass to farmers through better prices while incentives will attract traders.”
On Need for Lesser Changing of Hands
“If movement of commodities is faster, procurement is faster. For example, if copra from Kerala and Mangalore is channelized properly with lesser changing of hands it will reach across the country in a cost effective manner.”
3. Mr. R. N. Chamaraju
Deputy Director,
Department of Agriculture Marketing, Government of Karnataka
On developing the trust among farmers
“Infrastructure comes next; first develop trust among farmers. Take the intermediaries away. Change the mindset. When it comes to payments, farmers follow age -methods. Target marginal farmers and change their mind-set of looking up to the commission agents for everything.”
4. Ms. T. P. Gayathri
Warehouse Manager,
Central Warehouse Corporation (A Government of India Undertaking)
Gulbarga,
On Procurement
“With NSPOT in operations in Karnataka, there has come uniformity in rates. Initially, there used to be fluctuations in rates in the journey from procurement site to the region of actual distribution.
“We need to dig further. Spices also could be procured and copra, which is procured only by NAFED.”
5. Mr. S. M. Chincholi
Managing Director,
Karnataka Food and Civil Supplies Corporation Ltd.
Government of Karnataka
On NSPOT Marketing Support
NSPOT has guided procurement drive in the state systematically, facilitating procurement at a right time and at the right place. With its marketing support, government of Karnataka has been able to reduce its expenses on procurement activities.”
Recommendations
“e-Auctioning system can be further improved by making assaying agencies more accountable, and responsible. One way to do this by asking assaying agencies to upload photographs of the sample assayed or assaying certificate issued.
“We can also introduce custom-made auctions suiting the various requirements of the corporation, wherein sellers can put in their quotes for specific quantity as well as for specific price.”
6. Ms. Priyanka Mary Francis
On e-Auctioning
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Karnataka Agriculture Budget for 2012-13
“Government vide order SAI 149 MRE 2010, dated August 27, 2010 embarked upon a different approach. Concept of having an IT solution for each market individually, which made every market an island, connecting selected markets to the comprehensive auction system of the NCDEX Spot Exchange (“NSPOT”) was approved. The advanced design of the auction system of the Exchange could monitor every market on real time basis and had the following advantages over the earlier architecture.
Relative independence of each aspect of the architecture, namely, the Logical Architecture, the Platform Architecture and the Deployment Architecture. This implies that each market can control the commodities being traded, the transaction protocol used for each commodity and the participants in transactions. The need for software installation and maintenance at the market could thus be avoided. Further, deployment of a wide range of operating systems, browsers and handsets was made feasible. The number of servers required could be reduced due to centralized deployment, harnessing the potential of cloud technology, high availability, reduced costs, etc.
·Flexibility in re-engineering the market process. In practical terms, this implies making available multiple trading systems such as direct purchase, quote based purchase and real time competitive bidding, and sealed bid auctions, stock and inventory tracking of each commission agent and trader, funds settlement, etc.
·Scalability – the ability to handle increasing loads without affecting performance or service levels, resulting in hardware investments spread over a period of time, managing growing complexity of the transactions, etc.
The state of art trading platform is robust, offers adequate security and is amenable to integrate markets, provide virtual markets across the state, etc.
Any reform process will have to bear in mind this experiment of the Government and draw appropriate lessons and suggest the way ahead.”
– Report of Agricultural Marketing Reforms Committee 2013, Co-operation Department, Government of Karnataka
“In this background, in the Agriculture Budget 2012-13 emphasis has been given on the following points: …(7)Reforming market systems with assistance of NCDEX...”
As announced in 2010-11 Budget, agriculture produce marketing centers, through NCDEX have been set up in some marketing yards. Encouraged by this success, farmers are requesting for extension of this facility in an upgraded form throughout the State. These demands of farmers and advice of experts have been considered. New agreements will be entered with NCDEX and other expert bodies for modernization of agriculture produce markets.” – Karnataka Agriculture Budget for 2012-13
State Policy Canvas - Evolution of Policy
Karnataka Agricultural Produce Marketing (Regulation and Development) Act, 1966 came into force on May 1, 1968. It laid out a road map for improving regulation in agri prodice marketing and administration of of agri markets, developing an efficient marketing system, encouraging agri processing and export and and above all, development of the necessary infrastructure.
1966 Act was amended in 2007 to facilitate direct purchase centres, establishment of private markets, farmers – consumers market, contract farming, establishment of spot exchanges, etc. However, many of these proposed initiatives could not be accomplishes due to the lack of a comprehensive policy backing.
Draft Karnataka Agri Business Development Policy 2010 was deliberated by the government.
Integrated Agri Business Development Policy, 2011 of Government of Karnataka: The policy allows exemption of APMC Cess/fees in respect of procurement of agricultural produce. It also reduced the APMC cess/ fees in respect of procurement of agriculture produce directly from farmers for processing by new and existing MSME, Large and Mega agro based industries to 0.25%
2for a period of five years.
Realizing that the desired objectives are not met above, the Government to review policy and came up with Karnataka Agricultural Marketing Policy 2013. The policy focusses on addressing problems arising out of small land holdings resulting in small marketable surpluses, managing issues of seasonal supply and perennial demand, transport and postharvest losses. It also aims to
2. Integrated Agri Business Development Policy, 2011, Government of Karnataka
Objectives of Karnataka Agricultural Marketing Policy 2013
Creating a transparent and equitable market structure that distinguishes quality and variety and promotes disseminating relevant market information
Enhancing participation in markets and linking the state primary market to the national market
Addressing the risks associated with clearing and settlement
Promoting primary value addition through aggregation, grading and packaging at the village level and creating awareness on quality standards
Enhancing the skill levels of all stakeholders
Improving access to finance to all market participants, scientific storage and preservation of commodities, encouraging investment in infrastructure for market access
Setting up new institutions and strengthening of existing ones to provide state of the art facilities
Establishing progressive regulatory environment that encourages public – private initiatives
Leveraging technology at all levels for efficient operations
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Initiatives Proposed in Karnataka Agricultural Marketing Policy 2013
Regulated Markets – a) adopting technology for setting up a comprehensive electronic auction system; b) creating a state wide networked virtual market.
Increasing Competition— a) simplifying licensing procedures; b) conditions that restrict participation would be removed.
Private Markets – a) Farmers and other participants would have the choice to offer/ sell in any regulated or private market in the state; b) Private markets and regulated markets would compete to provide services to farmers and other participants.
Quality Standards for Demand Creation – a) Laying down quality standards; b)Creating awareness on quality standards amongst participants
Empowering Farmers—a) Enhancing the bargaining power of farmers to improve price realization and shorten the food value chain; b) Providing alternate and safe storage options; c) Facilitating pledge loans to farmers to avoid distress sale; d) Enabling effective dissemination to farmers; e) Simplifying processes and online timely payment to farmers; f) Enabling the farmers to decide when to sell the produce and at what price, with a right to reject the price offered.
Market Development – a) Encouraging public private partnership; b) Developing effective and reliable agricultural marketing information system, c) Establishing linkages with the secondary market in select commodities; d) Establishing linkages with financial institution to facilitate seamless clearing and settlement mechanism.
Contract Farming — a) Having a single point for registering contract-farming sponsors with procedures for timely settlement of disputes by the registering authority.
Infrastructure — a) Developing key agricultural marketing infrastructure; b) Fostering conducive for private sector and other stakeholders' investment through apt incentives
Regulatory and Legislative Environment – Reviewing the Karnataka Agricultural Produce Marketing (Regulation and Development) Act, 1966 to facilitate the aforesaid objectives and initiatives and to promote a regulatory environment facilitating transparent and efficient functioning of agricultural markets.
Karnataka is the first state in India to come out with a seperate budget for agriculture since 2012-13
Karnataka state budget 2010-11 and the state agri budget documents for 2012 -13 and 2014 -14 clearly lay out the government's policy towards market modernization and implementation of various schemes in collaboration with NCDEX and NSPOT among other stakeholders
Budget
The Karnataka Government has enacted The Karnataka Transparency in Public Procurement Act, 1999. While there is no public procurement policy/ law in India. The state of Karnataka (and also Tamil Nadu) has a policy in place though it may these may be regarded as rather rudimentary and lacking in teeth without any clearly laid down powers for penal action against violations by the
3procurers or the suppliers.
Policy Measure on Transparency in Procurement
3. Study on Government Procurement- Study for Evidence Based Competition Advocacy, January 2012, Devika Malhotra
Karnataka Togari Abhivrudhi Mandali Limited, GulbargaAbstract Of Daily Tur Procurement Details For 2013-14 Kharif Season - As On 9th Mar 2014
(As provided by NCDEX Spot Exchange Limited)
Appendix 1
Disclaimer
NCDEX does not represent or guarantee the accuracy or completeness of the Information even though NCDEX has taken efforts to ensure that the information provided as part of this report is as accurate as possible at the time of inclusion in the report.
NCDEX shall not be liable for any changes, including without limitation direct or indirect, special, incidental or consequential damages, losses or expenses that may arise on account of such investment decisions based on this report.
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Source: NCDEX Spot Exchange Ltd.
NATIONAL COMMODITY & DERIVATIVES EXCHANGE LIMITED
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