Study of wholesale markets and missing markets in district ...nidan.in/nidanwp/Documents/Study of...
Transcript of Study of wholesale markets and missing markets in district ...nidan.in/nidanwp/Documents/Study of...
Study of missing markets in Bihar NIDAN, Patna (Bihar)
1
TABLE OF CONTENTS
1.1 Brief Profile of Bihar ---------------------------------------------------- 2-3
1.2 Fruit and vegetable mapping of the state ----------------------------- 3-8
2.1 Feasibility for modern market in Bihar -------------------------------- 8
2.2 Total availability in catchments area ---------------------------------- 9
2.3 Existing marketing mechanism --------------------------------------- 9-12
2.4 Mapping of Major market for modern market ----------------------- 12-16
2.5 Potential for modern market in Bihar -------------------------------- 16-17
2.6 Proposed modern market --------------------------------------------- 17-20
Study of missing markets in Bihar NIDAN, Patna (Bihar)
2
1.1 Brief Profile of Bihar Introduction to State
Bihar is located in the eastern part of India with an area of 94163 sq km
constituting 2.85% of the geographical area of India. Of this, 92257 sq km is rural
and 1096 sq. km is urban. It lies midway between west Bengal in east and Uttar
Pradesh in west and Nepal in north and Jharkhand in the south. The Bihar plains
divided in the two parts by the river Ganges that flows through the middle from
west to east. Administratively, the state is divided in nine divisions with 38 districts
with 101 subdivisions.
Bihar is amongst the most populous state in the country with the population of
about 83 million as per the 2001 census. The state is also one of the most densely
populated regions in India with the density of 880 people per sq km.
Economy
The state economy is predominantly agrarian. Agriculture contributes around 40%
to the states GDP. Around 70% of state’s population is depended on agriculture
for their livelihood. The net state domestic product was estimated to be Rs 46,732
crore in 2003-04. While the per capita net state domestic product stood at 5362 in
the same year.
The total primary sector contribution to the state GDP is 42%. The contribution of
secondary and tertiary sectors to the states GDP is 10% and 48% respectively.
Over last few years the tertiary sector, especially the service sector has grown
significantly. The per capita income Is highest in Patna (Rs 6958/-) followed by
Rohtas (Rs 4615/-) Munger (Rs 4321) Buxar (Rs.4285) Nalanda(Rs 3878), Bhabhua
Study of missing markets in Bihar NIDAN, Patna (Bihar)
3
(Rs.3894) & Bhojpur (Rs.3728). Districts with high per capita income except patna,
fall in the rice belt of Rohtas, Bhabhua, Buxar & Bhojpur, which have assured
irrigation from sone canal system. Outside this, Munger is second whereas Nalanda
is placed at forth.
Apart from agriculture, other major industries include jute, handloom, food
processing and refinery.
Agriculture
Bihar falls among largest states in terms of production of fruits and
vegetables and contributes around 19% of fruit production in the country. It is
seventh largest economy in India in terms of food production. It is also eighth
largest producer of food grains in the country. Major agricultural produce of Bihar
includes cereals, pulses & cash crops. The major cereals include rice, wheat &
maize and major pulses grown are gram, arahar, moong and masoor. In addition,
the major cash crops are potato, sugarcane, Tobacco & Spices. The total food grain
and cereal production is estimated to be 112 lakh mt. as per the estimates of 2005.
1.2. Fruit and Vegetable Mapping of the State
Bihar produces a large quantity of different kinds of vegetables. Bihar is largest
producer of Okra, Second largest producer of cabbage, third largest producer of
potato and Bringal and significant production of another vegetable like cucumber,
peas and cauliflower. Due to significant surplus in vegetable production Bihar is
prominent sourcing destination for neighboring states like west Bengal, Jharkhand
and eastern parts of Uttar Pradesh. The total vegetable production in the state is
Study of missing markets in Bihar NIDAN, Patna (Bihar)
4
estimated tube around 30 million MT. The production of major vegetable in the
state along with respective national ranking is provided below:
Vegetable
Vegetable Production2004-05 (‘000t)
% of National Production
All India Rank
Potato 5656.70 19.38 3rd
Brinjal 1074 12.33 3rd
Cauliflower 598.80 13.28 3rd
Okra 730.20 20.72 1st
Tomato 735.80 8.52 5th
Onion 975.20 12.98 3rd
Cabbage 955.00 15.49 2nd
Others 2620.00 - -
Total 13345.00 13.16 3rd
Source: NHB Database 2005
18%
16%
13%
8%
6%
5%
4%
4%
4%
22%
Leading Vegetable Producing States
West Bengal
Uttarpradesh
Bihar
orissa
Tamilnadu
Gujrat
Karnatka
Maharashtra
Andhra pradesh
Others
Source: NHB Database 2005 Overall, Bihar ranks third among major vegetable producing states after West
Bengal and Uttar Pradesh. However, the range of vegetables grown in the state is
bigger than the states having higher production. The major producing districts are
mapped below:
Study of missing markets in Bihar NIDAN, Patna (Bihar)
5
Major Production Cluster on the Map
Source: NHB Database 2005
Fruits
Bihar produces large quantities of a variety of fruits. It is the largest producer of
litichi, third largest producer of pineapple and fourth largest producer of mango in
India. The total fruit production in the state is estimated to be around 2.7 million
MT. The production of major fruits in Bihar along with respective national ranking in
production is provided below:
Major Fruit Production in Bihar vs. all India
Source: NHB Database 2005
Fruits Production2004-05 (‘000t)
Percentage of National Production
All India Rank Within Producing States
Mango 865.60 7.46 4th
Banana 920.00 5.67 6th
Guava 256.10 15.20 1st
Litchi 204.90 55.59 1st
Citrus 134.20 8.70 5th
Pineapple 122.50 9.96 3rd
Total 2503.3 5.6 7th
Study of missing markets in Bihar NIDAN, Patna (Bihar)
6
The major fruit producing districts mostly overlap with the vegetable producing
ones. Muzzafarpur and Vaishali districts lead in litchi and banana production.
Muzzafarpur, Darbhanga, Champaran(East & West), Vaishali lead in mango
production and Rohtas and Bhojpur lead in guava production. Out of the estimated
fruit production of 2.5 million MT Major Fruits like Mango, Banana, Litchi, Guava,
Pineapple and Citrus together contribute around 2.3 million MT.
L eading Veg etable P roduc ing S tates21%
16%
9%8%
8%
6%
6%
4%
3%
19%Maharashtra
Andhra
pradeshT amilnadu
K arnatka
G ujrat
Uttar P radesh
B ihar
Wes t B engal Source: NHB Database 2005
The retail prices with a couple of exceptions are at par with major fruits producing
states. Similarly, the prices at the production centers are much lower when
compared to the main wholesale markets.
Major Production Cluster on the Map
Study of missing markets in Bihar NIDAN, Patna (Bihar)
7
Source: NHB Database 2005
Spices
A variety of spices are produced in Bihar with Chilli and Turmeric occupying major
pie in the total production. Chilli accounts for 47.6 % of the area under spices and
39.5% of the production followed by turmeric, which occupies 26.3% of the area
under spices and accounts for 36.4% of the production in the state.
Area and Production of Major Spices in Bihar
Spices Crops Area (ha)
Area (% to total
prod)
Production (MT)
Production (% to total
spices production)
Turmeric 3968 26.31 7326 36.35
Ginger 942 6.36 1327 6.59
Garlic 2972 19.71 3533 17.53
Chili 7181 47.62 7967 39.53
Total Spices 15063 100 20153 100
Commercial Crops, Grains and Pulses
Apart from fruits and vegetables, the state also has high production of Food grains,
Pulses and oilseeds. The state records significant production in paddy, wheat, and
Maize, apart from a few of oilseeds and pulses. Below is snapshot of the production:
Crop Production (in Lakh MT)
Paddy 54.48
Wheat 36.89
Maize 14.74
Sugarcane 42.86
Potato 13.52
Pulses 5.57
Oilseeds 1.24
Total 169.3
Source: Bihar Annual Plan 2006-07
Study of missing markets in Bihar NIDAN, Patna (Bihar)
8
The southern parts of the state dominate in food grains and cereals production
especially Paddy, Wheat and Pulses. This is mainly due to presence of two rivers-
Son and Ganga-who are source of assured irrigation for the part. Districts like
Sasaram, Bhojpur, Rohtas, Buxar and Aurangabad are the most fertile belts of food
grain production in the state. Maize is largely produced in central and western part
of the state.
2.1 Feasibility for Modern Market in Bihar Backward Linkages –Modern Market
The catchments area of Modern Market has been assumed around100 km of radius
and shall include following districts - Nalanda, Bhojpur, Jehanabad, Samastipur,
Muzzafarpur and Vaishali. The catchments along with the proposed Modern Market
are mapped below:
Modern Market at Patna-Mapping of catchments Districts
1-Samastipur 2-Muzzafarpur 3-Vaishali 4-Nalanda 5-Jehanabad 6-Bhojpur 7-
Modern Market at Patna
The mapping of the Modern Market with its catchments has been done keeping in
view the transportation time. It is estimated that transit time of produce from the
farthest catchments district shall not take more than three hours once the
aggregation is complete at the respective collection centers. Below is the distance
matrix of TM with its catchments It is to be noted that the distances have been
mapped from district head quarters. Since the catchments are skewed towards the
TM, hence most of collection centers shall be en-route towards TM.
Study of missing markets in Bihar NIDAN, Patna (Bihar)
9
2.2. Total Availability in Catchments Areas
The total production of fruits and vegetables in the identified catchments of Patna
TM is estimated to be approximately 44 lakh MT. This amounts to around one third
of states total fruits and vegetable production. The summary of fruits and vegetable
production in the catchments of TM is provided below.
Patna TM’s Catchments Districts of Fruits / Vegetables
Production
Districts of production Production (MT)
Fruits Vegetables
Patna 70000 740000
Nalanda 54500 1206000
Vaishali 234000 475000
Bhojpur 54000 140000
Samastipur 196000 295000
Muzzafarpur 315000 444000
Jehanabad 11000 126000
Total 934500 3426000
2.3. Existing Marketing Mechanism
The existing marketing system is largely unorganized and manual. As a prevailing
practice in F&V trade, it is mostly middlemen driven. On an average the produce
changes at least six to seven hands before it reaches to the kitchen of the end
consumer. Given the perish ability of the produce, such multiple handling handlings
affect the quality and finally the retail prices of the produce. On an average, the
retailer sells 60-70% of his produce at market rate and rest 30-40% below the
market rate. Since he has the compulsion to sell the produce same day, such kind
of selling pattern is quite prevalent in fruit and vegetable retail.
Study of missing markets in Bihar NIDAN, Patna (Bihar)
10
In the value chain, the flow of information is restricted to certain levels only. The
produce do not have proper information about the demand supply situations in the
consumption market and hence are not able to capture the price arbitrage in the
distant market.
Since farmers typically borrow money from the traditional sources i.e. the buyers of
their produce, they have an obligation to sell the produce to them only. This limits
the alternatives to sell through other channel as farmers have the fear of not being
able to get the credit in next session. The marketing cost is approximately 50-60%
of the price realized by the farmer.
In view of the above facts, the proposed TM would be able to provide an alternate
market to the farmers for selling their produce. While above facts points out the
existing inefficiency in the value chain, at the same time they also offer an
opportunity for a PE to create value by setting up TM.
Forward Linkages- Modern Market
Out of the total production of more than 44 lakh MT of fruits and vegetables in the
major catchments districts of Patna Modern Market, it is estimated that around
55% is consumed within the state and rest 45% goes for interstate consumption
markets as mention earlier such markets are located in Jharkhand, West Bengal
parts of Orissa and eastern parts of Uttar Pradesh. Also, since Bihar has an
advantage in litchi and mango production, there are established linkages with major
metros like New Delhi, Mumbai, Hedrabad, Banglore, Lukhnow and Kanpur for
supply of litchi and mango.
Study of missing markets in Bihar NIDAN, Patna (Bihar)
11
The estimated annual consumption of fruits and vegetables in Bihar is
approximately 30 Lakh MT. Six catchments district of modern markets meet major
part of state demand. Since the surplus is still very high, a significant quantum of
produce from the six districts is also sent to neighboring states as mentioned
earlier. It is assumed that the proposed TM may be in the position to target 10% of
the produce from its catchments, which is estimated to be around 4.5 lakh MT.
though there is a huge existing potential market for TM. The annual handling
capacity in the beginning may be pegged at 2 lakh MT while keeping the provision
of capacity enhancement over a period of time. TM may mainly be tapping the
markets of Patna, Ranchi and Calcutta as the potential markets. The catchments
districts of TM are already feeding these markets.
Rail is the mode of transport to distant markets like Mumbai, Delhi, Kolkata,
Ranchi, Delhi, and Hyderabad Etc. During the season produce like lichi and
mangoes are sent via air transport also to major consumptions market in the
Country. The Distance Matrix to various consumption markets from the catchments
of Modern Market is soon below.
It can be observe from the above distance Matrix that most of the major
consumption markets are located at 250-350km away from proposed TM. Even the
distant markets like Kolkata, Durgapur, Silliguri etc are well connected by rail and
road network which can ensure smooth and timely supply of materials of these
Distance Matrix- Proposed Team to major consumption market(In Km)
Ranchi Jamshedpur Hazaribagh Bokaro Dhanbad Kolkata Durgapur Patna Silliguri
patna 359
335 180 285 225 454 320 x 356
Study of missing markets in Bihar NIDAN, Patna (Bihar)
12
markets .There fore, the Private enterprise (PE) can target such markets for supply
of fresh fruits and vegetables.
2.4. Mapping of major market for Modern Market.
Patna
Patna is the largest town and capital of Bihar State. Total population of the District
is 47.18lacs as per 2001 census with and urban population of approximately 30
lacs. the population density is 1132 per sq. K.M.
The City has connectivity Network with all parts of Country. It liaises on the main
line of the eastern railway and is well connected with road and Air Transport. Direct
rail links are available to major cities like New Delhi, Kolkata, Mumbai, Chennai,
Hyderabad, Trivendrum, Bhubneshwar, Ranchi, Lucknow and Guwahati. All most
daily trains connect to Patna to national Capital Delhi.
The Cities located close to national highway NH. 30, 31 & 28, which ensure strong
connectivity of the city with others parts of the country via road network. Apart
from rail and road connectivity the city has good air connectivity also. Daily direct
flights from Patna to cities like Delhi, Ranchi, Kolkata, Bhubneshwar (Via Ranchi)
and daily hoping flight to Mumbai via Delhi provides good air connectivity.
Market size for Fresh fruits & Vegetables in Patna.
Patna, Being the Capital of the State & a largest town, offers a big market for fresh
vegetables and fruits. As per the NSSO Survey for 2005, Bihar was second Highest
(65%) in terms of food expenditure in rural areas for the urban sector; the share of
food was highest in Bihar (51%).
Study of missing markets in Bihar NIDAN, Patna (Bihar)
13
Monthly Expenditure in Rs. on Fruits & Vegetables.
Urban
Monthly Expenditure in Rs. on Fruits & Vegetables.
Rural
Vegetables Fresh Fruits
Total Vegetables Fresh Fruits
Total
43.1 8.71 51.81 33.11 4.01 37.12
Source: NSSO Survey 2005
The per capita Income is Rs. 6958 & is highest in the State. The Share of
Vegetables & Fruits in the Total Food expenditure of Urban Consumer is around 10
% while the same for rural consumer is 12%. In view of the ongoing developments
and emerging opportunities in the capital and State as well, the over all life style
and income is expected to improve and these figures are likely to go up. On the
basis of above facts and figure, the estimated annual market size for fresh
vegetables & fruits in Patna (Urban) is estimated to be 2.5 lacs MT approximately
which is around 9% of the Total inflow in the State.
Modern Markets –An Innovative Market Mechanism
The marketing of agriculture produces in the country has mostly been regulated
over the years. This has happened with a two –fold objective. First, it has been to
ensure food security as the country was for long unable to produce sufficient
quantity of food grains to feed its millions and regulation was aimed at providing
remunerative prices which would encourage food production. Second, it has been
aimed at protecting the interests of farmers who, it was felt, would be deprived of
their just returns by traders. There has thus been a policy of minimum support
prices for major food grains like wheat, paddy etc.
Study of missing markets in Bihar NIDAN, Patna (Bihar)
14
To achieve the said objectives, state governments and union territories enacted
agriculture produce marketing committee act (APMC), which facilitated setting up of
network of physical markets across the country. These markets were aimed at
providing easy market access to the farmers and ensure a fair price realization for
them in a transparent manner.
However, over the years it was realized that these markets instead of protecting
the interests of farmers, often became restrictive as the farmers became compelled
to bring their produce to the market yard and were often at the mercy of traders
and commission agents for sale of their produces. The license system for traders
and commission agents further made the APMC markets function in a non
transparent manner and led to high marketing costs. As the food retail market
makes rapid progress and consumer s become more discerning, it has been found
that the APMC markets are coming in the way of free market play restricting
choices of both the farmers and consumers.
It is against this background that national horticulture mission came with the
concept of Modern Markets. The Modern Markets (TM) are envisaged to the
implemented in a Public Private Partnership (PPP) mode. To make these TM
sustainable, the model provides for modern post harvest infrastructure in these
markets along with backward linkages. These markets are proposed to operate on a
Hub-and-Spoke format wherein the Modern Market (the hub) would be linked to a
number of collection centers (the spoke). The Modern Markets are envisaged to
establish backward linkages with farmers through the collection centers and
forward linkages through wholesalers, distribution centers, retail cash and carry
Study of missing markets in Bihar NIDAN, Patna (Bihar)
15
stores, processing units and exporters. Collection centers and villages are supposed
to integrate producers and retailers, processing units and exporters into the market
system and electronic auction systems in this markets is to be provided in
transparency in price fixation and competition.
The Modern Markets can market all perishable communities including foods,
vegetables, flowers, aromatics, herbs, meat, poultry etc. although non perishable
can also be handled in these markets, their proportion is not to exceed 15% of the
total through put of the market. Similarly, the proportion of non horticulture
products within the perishable commodity is not to exceed 15% of the total through
put of the market.
The Modern Markets are to be built, owned and operated by the selected Private
Enterprise (PE) through competitive bidding process. PE may be individuals, group
of farmers/ Growers/ Consumers, Partnership/ proprietary firms, Companies,
marketing boards, corporations, co-operatives, producers, organizations and self
Help Group. It could also be consortium of entrepreneur firms, inter areas, agro
business, cold chain, logistics, warehousing, agri infrastructure and related
background.
To insure PPP framework, the state governments are allowed to participate in the
equity of the Modern Market projects either in the form of direct investment or by
offering the assets in the form of existing market / area etc. however, the
combined total equity of the state government NHM is not to exceed 49% Of the
project equity. PE is to be selected through a competitive bidding process and the
Study of missing markets in Bihar NIDAN, Patna (Bihar)
16
PE is , based on their business plan may seek the assistance in the form of equity
to the maximum extent of 49% of the project equity and the enterprise requiring
the list quantum of the equity participation will be selected for implementing the
project. Also, the PE has been given full freedom to fix the service charges based
on commercial and viability considerations however; PE has to meet the service
levels as prescribed in the Operation Management Development Agreement (OMDA)
for the Modern Markets.
2.5. Potential for Modern Market in Bihar There are several factors, which favor agriculture sector in Bihar. The state is
uniquely position to utilize its rich untapped natural resources such as fertile soil
and abandoned water. More importantly, it can avail of benefits of increasing stress
on policy reforms in the agriculture sectors in the state along with emphasis on food
processing sector both at state and national level.
Even the country faces the prospects of stagnation in agriculture, the state is been
topped about as a sleeping giant of Indian agriculture. National commission on
farmers has concluded that Bihar and eastern Indian present uncommon
opportunities for becoming another “Fertile crescent” even as the present Fertile
Crescent (Punjab, Haryana and western UP) has reached a state of economic and
ecological distress. Water, the lifeline of agriculture, is abandoned in Bihar and
issue is not availability but management. To realize the large potential in the
sector, the government of Bihar has further prepared a vision 2015 for food
processing sector in Bihar and a range of interventions are under implementation.
Study of missing markets in Bihar NIDAN, Patna (Bihar)
17
On the demand side, too, Bihar, with the population of 83 million growing at about
2.43% per annum, is a large and growing market for food products. Food is the
single largest component of private consumer expenditure, accounting for as much
as 59-65% of the total in the state. At conservative estimate, the current market
for food in Bihar is a whopping Rs 40, 000 crore. At the estimated national growth
rate of consumption of 7% of food consumption market to the Rs 56, 000 crore in
2010 and Rs 83, 000 crore in 2015. In view of the above facts and figures, it is
evident that the state of Bihar offers unique and tremendous opportunity in
horticulture sector for entrepreneurs.
The Modern Markets are proposed to be set up in those states that undertake
reforms in the laws dealing with the agriculture market to provide direct marketing
and permit the setting up of market in private and cooperative sectors. The
government of Bihar has taken a step ahead of another states in this direction and
abolished APMC act altogether. Combined with the fact that the state, in particular
the region adjoin the proposed location for TM, has a large volume and variety of
fruits and vegetables, the project would have access to sufficient raw material.
Further, in the absence of an alternate market a structure in place at present, the
time is appropriate to structure the agricultural marketing system in the state
aligned to the Modern Market.
2.6. Proposed Modern Market
To harness the potential of horticulture in the state, government of Bihar proposes
to establish and develop a modern modern Market near Patna. The proposed
Modern Market has been designed to address the infrastructure issue in the existing
Study of missing markets in Bihar NIDAN, Patna (Bihar)
18
agri produce value chain and aims to establish strong and seamless supply chain
mechanism under a hub and scope model. The objective of the proposed market is
to enable farmers to realize a higher value for their produce and ensure supply of
quality produce to the end consumer.
The proposed Modern Market offer significant opportunity for private investors, as it
is strategically located in close vicinity of state capital Patna with good road and rail
linkages. The Modern Market has a strong catchments area in the radius of 100 km
which is the hub of horticulture production in the state. Also, due to sound
connectivity through national highways and rail network and located close to Patna,
it offers an easy access to various consumption markets both in and outside the
state.
Features of the Proposed Modern Markets.
The Propose Modern Market at Patna would provide and aggregation network for
horticulture produce right from the center of production to major consumption
market. This market will be equipped with State- of -Art Facilities at par with
contemporary international standards to facilitate substantial growth in the
production of Horticulture Produce, export and modernization of trade. it will be
develop on the concept of complete supply chain management where entire
backward and forward linkages from farmers to consumers will be established. The
market will be equipped with cool chain , electronic grading, Central electronic
auction, ripening chambers colors vision system, quality Station, Spot commodity
training, Laboratory for testing and certification, Total Banking Support, Electronic
Display Board for Auction, cash spot payment through ATM to the Growers, one
Study of missing markets in Bihar NIDAN, Patna (Bihar)
19
stop shopping for the Inputs, agri. clinic and extension services, Information kiosk
with some free products on weather insurance , life insurance, Animal Health
Insurance and educational loan facilities etc that will benefit each of the stake
holder in the value chain.
Location of the Proposed Modern Market.
The Modern Markets has been proposed on Patna Gaya road and is located around
22k.m away from Patna. The land is located opposite to Pothahi Railway Station
along Patna Gaya rail route and has good road connectivity with Patna, Muzaffarpur
& Begusarai, Major production and centers. It also very close to national highway
NH-30 (Mohania in Kaimur District of Bihar to Bakhtiarpur in Bihar) & 31 (Barh in
Bihar to Guwahati in Assam). The Proposed site is an area of approximately
50acres. The site is linear peace of land, which is relatively flat, 5 feet below the
road level with very little vegetation. This site is suitable for Modern Market facility,
because of the following advantages.
Accessibility. The location of the site is junction of the different roads that
establishrs it’s connectivity and linkages to surrounding areas comma as this
highway connect Patna to Nalanda Hazipur Gaya etc. The proposed market will
there fore diaccessible for growing areas at all the times and will have fairly good
linkages. Produce from surrounding areas of Hazipur, Muzaffarpur, Nalanda Gaya
etc. i.e. north eastern part of Bihar can be brause here.
Site Conditions. The terrain of proposed site is relatively flat. Therefore the
construction will be economical. However under the Modern Market scheme, a PE
can also acquire land own it’s own and use it for setting of TM. However , it maybe