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Food Processing Industries in India: Opportunities

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Title: Food Processing Industries in India: Opportunities


1
Modern Terminal Markets for Fruits, vegetables
and other perishables
New Delhi 13-11-2006
2
CCEA Approved Component
  • A New Component, in the National Horticulture
    Mission for funding Modern Terminal Market
    projects for fruits, vegetables and other
    commodities in Public-Private-Partnership (PPP)
    mode, in the form of equity participation upto
    49 of the Project equity.

3
Background
  • General Council of the NHM approved the concept
    on 14.12.05
  • DPRs prepared for 8 Terminal Markets
  • Expression of Interest was invited for the
    Projects
  • National Conference on Terminal Markets held on
    20.02.2006 to discus with States and Private
    Enterprises
  • Honble FM announced in the Budget Speech of
    2006-07
  • CCEA approved TMs on 2nd November, 2006

4
Present Scenario in Value Chain
  • Cost Build Up For One Kg. Basket Of Fruit
  • (Farmers share will improve with Terminal
    Markets )

11.6
2.5
1.7
4.1
3.3
FARMER
TRADER
WHOLESALER
RETAILER
CONSUMER PRICE
Retail Markups
350
220
160
100
FARM GATE PRICES
MILK
FISH
FRUITS VEGETABLES
5
Domestic markets scenario
  • Infrastructure for marketing of perishables
  • Primary grading/ collection centers - non
    existent
  • Warehousing and cold storage - inadequate
  • Cold chain - non existent
  • Quality certification system - non existent
  • Transportation for perishables - non existent
  • Rural markets - complete lack of infrastructure
  • Wholesale markets - in government control, lack
    modern facilities
  • Private / direct markets - limited
  • Post harvest losses 25 to 30 in perishables

6
What is the way forward ?
  • Modern terminal markets
  • A professionally managed competitive structure
  • To provide market services
  • to farmers at their door step
  • Comprehensive solution to meet needs of
    stakeholders
  • Auction
  • Processing industry
  • Exports
  • Retail chain and Consumers
  • Requiring high investment and efficient
    management skills
  • Can be infused by private enterprise

7
Concept of Terminal market
  • Hub-and-Spoke Format Terminal Market (the hub)
    to be linked to number of collection centres (the
    spokes).
  • Collection centres to be conveniently located at
    key production centres to allow easy access to
    farmers
  • Provide state of art facilities for
  • Transparent price discovery (electronic auction),
  • Primary value addition( washing, grading, packing
    etc),
  • Sourcing for processing and exports,
  • Other services such as banking etc.
  • Commodities to be covered include
  • Fruits and vegetables, Flowers, aromatics and
    herbs
  • Meat Poultry
  • Other Commodities

8
Terminal market
  • Infrastructure
  • At Terminal Market
  • Electronic auction facility
  • Packhouse
  • Quality testing facility
  • Pallestisation
  • Material handling equipment
  • Cold storage, temperature controlled warehouse,
    ripening chamber etc.
  • e-trading
  • At Collection Centre
  • Washing, grading sorting facility for produce
  • Weighing
  • Plastic Crates

9
Terminal market
  • Services
  • At Terminal Market
  • Transport (including cool chain)
  • Warehousing and commodity exchange
  • Transactional Banking services
  • Dissemination of Market information
  • Settlement of payment
  • At Collection Centre
  • Collection Aggregation of produce
  • Spot payment to farmer at CC
  • Advisory on inputs, prices, quality
  • Multi-modal transport to TM

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11
Key expectation from the private enterprise
  • Provide envisaged infrastructure at the TM and
    the CC in the hub- and- spoke format
  • Establish backward linkage with growers in the
    catchment area of the TM through establishing the
    collection centers
  • Progressively involve farmers and their
    organizations in the operation and management of
    the collection centers
  • Facilitate direct supply to processing units,
    retail chains and exporters, in addition to
    auction facility via the collection centers and
    terminal market.

12
Key expectation from the private enterprise
  • Provide advisory services to farmers on inputs,
    prices, quality, multi modal transport and
    exports.
  • Project DPR only illustrative. Project should,
    however, be designed to handle the minimum
    quantity of peak throughput (MT/ day) and yearly
    handling capacity as prescribed.
  • Private enterprise at liberty to
  • Prepare own business model with regard to Size of
    market and Scale of operation
  • Set up additional facilities to provide
    complimentary services (input supply,
    processing, consumer goods etc.)
  • Collect user charges for the infrastructure and
    services provided

13
Expectation from the State Government
  • Reforms in APMC Act
  • To allow the private enterprise
  • Establish collection centres in the catchments
    area of the TM
  • Source material from farmers field directly in
    the catchment area of the TM
  • Organize supply to traders, retail chain,
    processing industry and to institutional buyers
    throughout the country
  • Cold storage/ warehouses of TM to act as delivery
    point for trading in perishables on the commodity
    exchanges
  • Pack house of the TM to act as exit point for
    exports

14
Expectation from the State Government
  • Regulatory clearances
  • Single license to operate in the entire State/
    adjoining States
  • Single point levy collection of market fee
  • Autonomy in commercial operations of TM
  • Clearance of land use for the TM/ CCs
  • Provision of Civic amenities (including drinking
    water, municipal waste disposal, police
    security, post office etc)
  • Statutory clearance from
  • Local authority
  • Town planning Urban development
  • Revenue department

15
Expectation from the State Government
  • Play a pro-active role
  • Appointment of a Nodal Officer/ Empowered
    Committee
  • to facilitate securing regulatory compliance
  • to remove difficulty in operation of the project
  • Identification of land for the TM / CC
  • Provision of Government land on long term lease,
    subject to availability and suitability
  • Infrastructure support to TM / CC
  • road connectivity, power and water supply etc.
  • States free to participate in the equity of
    Project
  • Direct funding
  • Land / infrastructure support/Covert existing
    market

16
Role of the Central Government
  • Support the project through participation in its
    equity capital
  • Terms for financing
  • Up to 49 of project equity, including
    contribution from State
  • State will have the option to allocate its
    equity to farmers organisations actively
    participating in the business of the project
  • Private enterprise to be selected through an
    open, transparent competitive bidding process.
  • Project to be awarded to bidder with the request
    for minimum Government equity participation.

17
Salient Features of the Terminal Markets
18
Outlay in 2006-07
  • Approved outlay for NHM
  • X Five Year Plan Rs.2300 crore
  • During 2006-07 Rs.1000 crore
  • Outlay for Terminal Markets
  • Participation in Equity Capital Rs.148.00
    crore
  • Project Development Assistance Rs. 1.00
    crore
  • General Awareness Publicity Rs. 1.00 crore
  • Total Rs. 150.00 crore

19
Expected Outcomes
20
Next Steps
  • Operational guidelines are under issue
  • Appointment of Nodal Officer
  • Selection of number and location of TMs by State
  • Freezing the basic infrastructure for TM
  • Draft RFQ/RFP and DOMA will be circulated
  • Two bid system-Technical Financial
  • Business plan to be appraised by FI
  • Global tenders
  • Short listing the technically qualified PEs

21
Next Steps
  • Evaluate Financial bids and submit to National
    Executive Committee for approval release equity
  • Entering Development Operation Management
    Agreement with selected PE
  • Project Execution
  • Monitoring the project through IC
  • Prescribe the infrastructure requirement for new
    locations
  • NIAM will be the nodal agency for training

22
  • Thanks

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Salient Features of the Terminal Markets
32
Comparison between two methods
  • In Rs. Crores
  • Total cost of the 8 Projects 556
  • Out flow with 25 back-ended subsidy 139
  • Out flow with 49 equity participation 136
  • (with 11debt equity ratio)
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