Social Benefit Analysis of Modern Wholesale Markets

SOCIAL BENEFIT ANALYSIS OF PRIVATE WHOLESALE MARKETS IN

INDIA

Submitted to- Dr. J. S. Yadav(COO)Premium Farm Fresh Produce Limited,New Delhi

Submitted by-

Komal FulzeleSymbiosis Institute of International Business (SIIB), Pune.

Why Social Benefit Analysis?

To reflect the real value of the project to the society

It is important as the private investments are to be approved by various governmental & quasi-governmental agencies.

The impact of the project on the distribution of income in the society

The contribution of the project towards the fulfillment of certain merit wants( self-sufficiency, employment etc.)

Cont.…

To highlight the need of such private wholesale markets in India

To avail subsidies for such projects from the government

Involvement of private parties to take up such projects

Objectives of the Project-

To identify and categorize the socio-economic benefits offered by private wholesale markets to the society

To quantify the benefits on the basis of volume and value generated by such markets with particular reference to Private Wholesale Market Nasik.

To suggest the activities enhancing the value proposition of PWM from the social perspective.

To prepare a presentable document to State Gov. Ministry of Agriculture and Ministry of Commerce etc. to convince the need for reversal and matching investment pattern.

Research Methodology

Exploratory Research Design

In-depth Survey Of Respondents

Structured Questionnaire (Open Ended As Well As Close Ended Questions)

Data Source

Primary Data• Survey of the respondents

Secondary data

• Detailed Project Report on Modern Wholesale Market at Nasik, background studies conducted by PFFPL

• Company’s Annual Report• Books : Project Appraisal and Planning For Developing Countries by

I.M.D. Little and J.A. Mirrlees, Cost benefit Analysis by Ajit K. Dasgupta and D.W. Pearce and Marketing Research by Naresh K. Malhotra and Satyabhusan Dash

• Internet

Classification of Respondents Total- 150

• Farmers• Traders• Commission agents• Exporters• Labours• Cold storage

management/service provider• Ripening chamber

manager/service provider• Food testing lab

manager/service provider• Grading/sorting

management/service provider

• Banker• Warehousing manager/service

provider• Processing unit

management/service provider• PWM employee• APMC security officer• Waste management plant

manager/service provider• APMC Official• Retail trader• NMC Official• Packaging unit

Survey Sample Sources

Nasik fruit and vegetable market including nearby villages

Pimplegaon tomato market

Jaolgaon

Pune

Division of the Project

• Tangible and Intangible Benefits• Beneficiary wise benefits classification

Identification of the Benefits envisaged

• Facility Wise Quantification (Macro Analysis)• Respondent/Beneficiary Wise Quantification

(Micro Analysis)

Quantification of the benefits

Findings and Recommendations

Benefits Offered Through the MWM to the Beneficiaries

• Hub and spoke format• Electronic auction• Online spot commodity trading• Cold Storage & Refer Vans• Ripening Chamber• Pre-Cooling Unit• Processing Units• Material Handling Equipment• Labelling• Electronic Grading and Sorting

Line• Food Testing Lab• Banking services

• General Retail Shops• Movement and Parking Facility• Waste Treatment Plant• Rain Water Harvesting• Solar Panels• Wind Mill• Sanitary and Phyto-sanitary

Measures• IT enabled Operations• SMS services• Security• Employment generation• Packing unit management

MACRO ANALYSIS

Assumptions for Analysis

Present average price of the commodity

Market Price (a) Rs./Kg

Export Price (b) Rs./Kg

Difference (b-a) Rs./Kg

Price Per Vehicle (m)* Rs./Truckload

Export Price Per Vehicle (n) Rs./Truckload

Difference (m-n) Rs./Truckload

Tomato 12 40 28 45000 150000 105000

Grapes 43 70 27 161250 262500 101250

Pomegranate 40 65 25 150000 243750 93750

Onion 13 35 22 48750 131250 82500

Banana 40 - - 150000 - -

Average 27 52.5 25.5 101250 196875 95625

*Price per Vehicle= 150crates/vehicle * 25kg/crate * Price per kg

Breakup of the Various Losses in Total Loss

Losses/ Spoilage

Present losses due to spoilage 10%

Present losses due to no ripening chamber

Present losses due to lack of cold storage facility

Present losses due to lack of pre cooling facility

Present losses due to improper transportation

Total losses

Percentage 10% 22% 30% 23% 15% 28%

average 2835 8505 6520.5 4252.5 28350

*The percentages in the above table are as per the average of percentages given by the respondents

Average number of customers visiting PWM in a year.

FARMERS TRADERS COMMISSION AGENTS

EXPORTERS/SUPPLIERS LABORS

5000 250 20 10 350

HUB AND SPOKE FORMAT

Benefit Per unit beneficiary Total per year

Average reduction in distance to be travelled by farmers for selling their produce by introducing 'hub and spoke format'

Rs.155 Rs.7.5 lakh.

Percentage increase in interaction between buyers and sellers Rs.1083 Rs.21.36 crores

Percentage increase in farmers value realization due to elimination of intermediaries Rs.7634 Rs.3.82 crores

Percentage increase in the bargaining power of farmer Rs.28958 Rs.14.48 crores

Datasheet-1Datasheet-2

ELECTRONIC AUCTION


Percentage increase in the transparency in auctions due to introduction of electronic auction facility

Rs.21425 Rs.11.25 crores

Percentage increase in the farmer's value realization due to electronic auction facility Rs.7924 Rs.23.72 crores

Percentage reduction in incidences of retractment by electronic auctions


Percentage discrepancy in weighment of produce at present Rs.21425 Rs.10.71 crores


ONLINE SPOT COMMODITY TRADING

Benefit Per unit beneficiary Total per yearIncrease in farmer's value realization through online spot commodity trading


Percentage increase in the price of a produce given by a buyer for better quality

Rs.27844 Rs.14 crores


COLD STORAGE FACILITY


Percentage reduction in spoilage by introducing a cold store in market Rs.2143 Rs.1 crores

Percentage increase in the value of produce by maintaining its quality Rs.45743 Rs.22.87 crores

Better price fetched by farmer if he chooses to sell his produce at a later stage of the season Rs.63473 Rs.31.74 crores

Percentages of transportation losses in total losses to produce saved by refer vans



PRE- COOLING FACILITY


Percentage reduction in spoilage by introducing a pre-cooling unit in market Rs.3286 Rs.1.64 crores

Percentage increase in the value of produce by maintaining its quality through PCU Rs.2530 Rs.1.3 crores

Percentage of after harvest losses that can be saved by PCU Rs.28710 Rs.14.4 crores

Percentage of value of produce realized by maintaining the nutritional value of the produce Rs.61050 Rs.30 crores


RIPENING CHAMBER


Percentage reduction in spoilage by introducing a ripening chamber in market


Percentage better price realized by commodity if kept in a ripening chamber



MATERIAL HANDLING

Benefit Per unit beneficiary Total per yearPercentage reduction in spoilage by using material handling equipment’s in market



ELECTRONIC GRADING & SORTING


Grading & Sorting Rs.27485 Rs.13.80 crores


FOOD TESTING

Benefit Per unit beneficiary Total per yearpercentage of better price a commodity realizes if quality is assured along with safe and hygienic condition


percentage exports boosted by establishing a food testing laboratory in the market



WAREHOUSE


Percentage increase in value of the commodity due to storage in warehouses



MOVEMENT AND PARKING FACILITY


Percentage improvement in the general efficiency of the markets by providing proper parking and circulation space

Rs.643 Rs.32 lakh


EMPLOYMENT GENERATION


Benefit to the unskilled Labour Rs.26704 Rs.9.35 crores


PACKING UNIT MANAGEMENT


Due to proper packaging of commodities Rs.13669 Rs.6.85 crores


Quantification Of Benefits Envisaged For One Year

Facilities/Services Value In Crores (Rs.)

Hub & Spoke Format 39.73Electronic Grading and Sorting Line 71.50Online Spot Commodity Trading 17.34Cold Storage 55.68Ripening Chamber 17.37Pre-Cooling Unit 47.79Material Handling Equipment (Crates, pallets, etc.) 14.73Electronic Grading and Sorting Line 13.77Food Testing Lab 29.14Movement and Parking Facility 0.32Refer Vans 7.08

Employment generation 0.93Packaging unit management 6.85Warehouse management 9.30

Total Benefit from all the facilities - Rs. 331.53 crores

Total benefit of all facilities provided through PWM over 15 years

Years Total In Crores

First Year 331.5

Increase @10% for 2nd year 364.68

Increase @10% for 3rd year 401.15

Increase @10% for 4th year 441.27

Increase @10% for 5th year 485.4

Increase @5% for 6th years 533.94










Total 8739.9

The total benefit to the society over a span of 15years is Rs.8740 Crores.

The total benefit derived by the beneficiaries in a year through various facilities provided by PWM

Beneficiaries Farmers TradersCommission Agents

Exporters /Suppliers

Labors

Total No 5000 250 20 10 350

Value In Crores 323.43 5.3 0.14 0.082 0.93

12%

22%

5%17%5%

14%

4%

4% 9%0%

2%

0%2% 3%

Percentage Breakup of Total Benefit Realized From All The Facili-ties

Hub & Spoke Format

Electronic Grading and Sorting Line

Online Spot Commodity Trading

Cold Storage

Ripening Chamber

Pre-Cooling Unit

Material Handling Equipment (Crates, pallets, etc.)

Electronic Grading and Sorting Line

Food Testing Lab

Movement and Parking Facility

Refer Vans

Employment generation

Packaging unit management

Warehouse management

MICRO ANALYSIS OF THE PROJECT: RESPONDENT WISE ANALYSIS

Micro analysis of this project gives the social benefits of PWM in terms of percentage gain or loss by the projected introduction of the above mentioned modern technologies in the market yard.For this 30 categories of respondents and in total 150 respondents in number are taken.The categories are:

CATEGORIES OF RESPONDENTS1 Farmers

-Farmer using Hub & Spoke format2 Traders3 Commission Agent4 Labour5 Exporter6 PWM Employee7 Cold Storage Management8 Farmer using cold storage9 Warehouse Management10 Farmer using warehouse11 Food Testing Lab12 Farmer using food testing lab13 Ripening Chamber14 Farmer using ripening chamber15 Grading & Sorting Management

16 Farmer using grading & sorting facility17 Material Handling Equipment Unit18 Packaging Unit Management19 APMC Security guard20 APMC Official21 NMC Official22 Retail trader23 IT Official24 Bank25 Farmer using banking services26 Windmill Management27 Solar Panel Management28 Recycling / Waste Management29 Processing Unit Management30 Farmer using Processing unit

FARMER

Increase in transparency by electronic auction

Total benefit per farmer in Rs.

79,240

Farmer's value realisation due to removal of intermediaries.

Reduction in incidences of retractment by e -auction

Discrepancy in weighment of produce saved

Farmer's value realisation due to spot trading

Efficiency increased by providing parking facility

FARMER

HUB & SPOKE FORMAT

Reduction in distance due to 'Hub and Spoke Format'

Total benefit per farmer using hub & spoke in Rs. 77,377

Increased interaction between buyer and seller

Farmer's value realisation due to do removal of intermediaries through said format

Increased bargaining power of farmers

BENEFITS OF HUB & SPOKE FORMAT

TRADER

TRADER

Increase in Transparency through Electronic Auction

Total benefit per trader in Rs.

1,57,384

Reduction in Retractment by E- auction

Increase in Price by trader For Better Quality

Reduction in spoilage by using Material Handling Equipment’s

Increase in Price Realised Through Electronic Sorting / Grading

Increase in Efficiency Through Better Parking & Circulation Space

COMMISSION AGENT

COMMISSION AGENT

Transparency increased by introducing electronic auction

Total benefit per

commission agent in Rs.

82,864

Reduction in incidences of retreatment

EXPORTER

Increase in Price Due to Electronic Grading & Sorting

Total benefit per exporter in Rs.

97,369

Increase in Price Due to Quality assurance through Safe & Hygienic Conditions

Boost in Exports Due to Food Testing Lab

EXPORTER

RETAIL TRADER

Retail traders will be benefitted if the stakeholder like farmers satisfies their input requirement of the crop from the retail traders inside the PWM premises rather than the retail traders outside the PWM.

For this the inputs available at the retail traders should be of high quality. Farmers will be at ease because they will get all their requirements

fulfilled at one place and thus save on fuel expenses.

This will be an equally profitable business for the retail traders since they will get huge number of buyers

One of the major social benefits of the PWM to the society is the amount of employment generated. Rural unskilled labour is the major beneficiary of this system. They will be provided with training at PWM for doing commodity specific work like material handling, manual grading in some fruits like grapes

LABOUR

Employment generated through PWM in a year.

Total benefit per labour in Rs. 26,704

Wage received per day

LABOUR

PWM EMPLOYEE

PWM EMPLOYEE

The reduction in distance to be travelled by farmers for selling their produce by introducing 'Hub and Spoke Format'

Total benefit per farmer according to PWM employee in

Rs. 84,452

Hub & Spoke format facilitating interaction between buyer and seller

Farmer's value realization through the said format eliminating intermediaries

Reduction in spoilage by using material handling equipment’s in market

Increase in the bargaining power of farmers

Employment generated through PWM

COLD STORAGE MANAGEMENT

COLD STORAGE MGT

Reduction in Spoilage Due to Cold Store

Total benefit per farmer according to cold storage mgt. in

Rs. 4,21,308

Increase in Value of Produce by Maintaining QualityChange in price fetched by selling later in season through CS

Transportation losses in total LossesPre Cooling UnitReduction in Spoilage Due to Pre cooling unitIncrease in Value of Produce by Maintaining Quality through PCUHarvest losses saved through PCU

Value of produce realized by maintaining Nutritional value

COLD STORAGE FARMER

COLD STORAGE USING FARMER

Reduction in Spoilage Due to Cold Store

Total benefit per farmer using cold

storage in Rs. 41,59,452

Increase in Value of Produce by Maintaining QualityChange in price fetched by selling later in season through CSTransportation losses in total LossesPre Cooling UnitReduction in Spoilage Due to Pre cooling unitIncrease in Value of Produce by Maintaining Quality through PCUharvest losses saved through PCU

Value of produce realized by maintaining Nutritional value

WAREHOUSE MANAGEMENT AND FARMER USING WAREHOUSE

WAREHOUSE MGT.

Increase in value due to storage total benefit per

farmer according to warehouse mgt.in

Rs. 17863Decrease in distance due to Hub & Spoke Model

WAREHOUSE FARMER

Increase in value due to storage total benefit per

farmer according to farmer using

warehouse mgt.in Rs. 17859

Decrease in distance due to Hub & Spoke Model

FOOD TESTING LAB & FARMER USING FOOD TESTING LAB

FOOD TESTING LAB

Better price a commodity realize if quality assured, safe and hygienic total benefit per

farmer according to food testing labs in

Rs. 57445Exports boosted by establishing a food testing laboratory in the market

FOOD TESTING LAB FARMER

Better price can a commodity realize if quality assured, safe and hygienic

total benefit per farmer according to farmer using food testing lab in Rs.

141975Exports can be boosted by establishing a food testing laboratory in the market

BANK & FARMER USING BANKING FACILITY

Banks will offer a very safe payment settlement solution to both traders and farmers for settlement of money after the trade. Banks are still in the process of identifying and formulating a method for settlement of money in the wholesale markets.

The benefit derived by the farmers and traders that are going to use banking facility for payment settlement will be in intangible terms like up to what extent are they willing to take bank credit for trading, would they like it to be settled through cheque or cash or online money transfer

RIPENING CHAMBER

RIPENING CHAMBER

Reduction in spoilage by introducing ripening chamber in market total benefit per

farmer according to ripening

chamber in Rs. 132760

Better price of commodity realised by introducing ripening chamber in market

RIPENING CHAMBER FARMER

Reduction in spoilage by introducing ripening chamber in market

total benefit per farmer using

ripening chamber in Rs.

109403better price realised by the commodity if kept in a ripening chamber

Grading sorting facility makes the commodities more standardized for trading. PWM operates via electronic auctions where the grade of the product determines its price. So grading and sorting is a necessity for export products as well as domestic products

GRADING SORTING

MGT.

Better price can a commodity realizes if it is electronically sorted and graded

total benefit per farmer according to grading sorting mgt.

in Rs. 15188

GRADING &

SORTING FARMER

Better price can a commodity realize if it is electronically sorted and graded

total benefit per farmer according to

farmer using grading & sorting unit in

Rs.48094

GRADING SORTING MGT. & FARMER USING THE FACILITY

Material handling equipment reduces the post-harvest losses from the field to the market yard. The plastic crate reduces the mechanical shock to the agricultural commodities as compared to gunny bags. Packaging adds value to the product and results in considerable increase in the prices of the product. Setting up a packaging unit inside the PWM market yard has been envisaged keeping the below mentioned benefit in focus.

FARMER USING MATERIAL HANDLING EQUIPMENT

Reduction in spoilage by using material handling equipment’s in market

total benefit per farmer by using

material handling equipment in Rs.

27844

PACKAGING UNIT MANAGEMENT

Increase in value due to Packaging total benefit per farmer by using packaging unit

mgt. in Rs. 13844Decrease in distance due to Hub & Spoke Model

MATERIAL HANDLING & PACKAGING UNIT MGT.

WASTE MANAGEMENT UNIT:Waste management unit takes up the charge of collecting all the waste from the market yard every day and convert the biodegradable waste into compost or organic manure. This organic manure can be sold in the market earning revenue.

APMC SECURITY GUARD:APMC security guard provided the information regarding the probable increase in the efficiency of market yard operations by proper parking and circulation facility in percentage. The total benefit availed by the increased security is Rs. 357 per farmer. Incidences of theft are greatly reduced in the private wholesale market due to security and also due to the maintained databases of every stakeholder

APMC OFFICIAL:APMC official provided information regarding the various facilities available in the market like percentage of market that has been computerised, increase in the efficiency of market operation by introducing IT enabled operations, percentage increase in data accuracy and percentage decrease in labour requirement due to IT enabled operation

NMC OFFICIAL:NMC official provided information regarding the various facilities available in the market like percentage of market that has been computerised, increase in the efficiency of market operation by introducing IT enabled operations, percentage increase in data accuracy and percentage decrease in labour requirement due to IT enabled operation

WIND MILL MANAGEMENTWind mill will provide electricity to the PWM. The initial cost of establishing the wind mill inside the PWM premises is high but the maintenance cost is comparatively much less making it a viable source of electricity in the market yard. It will reduce the market dependency on the government source of electricity making the system self-dependent. SOLAR PANEL MANAGEMENT: Solar panel also will be providing electricity to the market yard. Similar to the wind mill its initial cost will be high but in later years its maintenance cost will be much less

PROCESSING UNIT MANAGEMENT:Processing unit adds value to the produce and also reduces its perishability to a large extent. Processing unit present inside the PWM premise increases the number of farmers using the facility and thereby their profit. Processing unit does not require a very high quality product and fetches huge profits.

FARMER USING PROCESSING UNIT:Farmers can add value to their produce by processing it. Processed food does not always require high quality produce and fetch huge profits on processing of low grade material. This way farmer can be benefitted by able to sell their low grade produce.

BENEFIT TO RESPONDENT FOR ONE YEAR

S.No

Name Of Stakeholders

Per Unit Benefit

Farmers (Cr.)

Traders (Cr.)

Commission Agents (Cr.)

Exporters (Cr.)

Laborers (Cr.)

Total Benefit In (Cr.)

5000 250 20 10 350

1 Farmers 0.54 Cr

2702.2 2702.2

2 Traders 0.02 Cr 4.98 4.98

3 Commission Agents

82,864 0.17 0.17

4 Exporters 0.02 Cr 1.55 1.55

5 Laborers 26,703 0.93 0.93

Total 2708.4

BENEFIT TO RESPONDENTS FOR FIFTEEN YEARS

S.No Respondents

Total Projected

Benefit After 15

Years In crores

Total Benefit

Including All

The

Respondents In

Crores

1 Farmers 6751.3

6766.9

2 Traders 12.4

3 Commission Agents 0.4

4 Exporters 0.4

5 Laborers 2.3

RECOMMENDATIONS

The activities enhancing the value proposition of PWM from the social perspective have been classified as follows:

Electronic Grading and Sorting Line Cold Storage Pre-cooling Unit Hub & Spoke Format Food Testing Lab

Learning

REFERENCES

Detailed Project Report on Modern Wholesale Market at Nasik- This DPR of Premium Farm Fresh Produce Ltd. has all the financial analysis, background studies and various outcomes of the company.

I.M.D. Little and J.A. Mirrlees 1974, ‘Project Appraisal and Planning for Developing Countries’ – the knowledge and application method of appraisal is understood from this book

Ajit K. Dasgupta and D.W. Pearce, 1978 ‘Cost-benefit Analysis, Theory and Practice’ – Case study ‘The siting of London’s Third Airport’ containing the application of social cost analysis was referred from this book.

Marketing Research by Naresh K. Malhotra and Satyabhusan Dash- this book was used for reference purpose for gaining better understanding of research methodology.

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http://agmarknet.nic.in/reforms.htm

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http://mofpi.nic.in/

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Social Benefit Analysis of Modern Wholesale Markets

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