Modern Terminal Market Scheme – Status & Scope for Private

Participation

Agri Marketing Summit - 2006

New Delhi
September 28, 2006
About YES BANK

RBI grants license A1+ Rating by Successful listing FY2006

Incorporation of
to commence ICRA (Moody’s of the Yes Bank (first fully
the Bank
banking; affiliate) for the stock through an operational year)
(company
Board of pedigree Bank’s CD IPO of USD 72 mn PAT: INR 553 mn
limited by
Directors program (current (issue subscribed ROA: 2.0%
shares)
established size INR 12 bn) 30 times over) ROE: 14.0%

Mar 10, 2004 Aug 23- Oct 14, 2004 Feb 17, 2004 March 2006
Nov 21, 2003 May 24, 2004 Oct 2004 July 12, 2005 March 2006

High quality mgmt ‘Full-service’

Infusion of capital
team in place; ISO 9001:2000 commercial
by promoters,
Launch of C&IB, Certification for bank;
Rabobank and
business banking, back office Established
private equity
financial markets & processes and significant
investors (CVC,
transaction operations momentum in all
ChrysCapital & AIF)
banking businesses
 High Pedigree Investors
Original Private Equity Other Investors
Held by Citigroup Venture Capital, Key investors include Mirae AMC,
ChrysCapital II LLC and Asia Fidelity, Arisaig, NWI, UBS, ABN
Infrastructure Fund Amro, Norges Bank, Bear Sterns,
Investment at premium of 25-40% Original Private AXA, Morgan Stanley
prior to receipt of banking license Equity FIIs
Three year lock-in of entire holding 19% 10%
Employees
2%

Public / MFs
11%
Indian Promoters
38%
Rabobank
20%
Rabobank Promoters
AAA rated private bank and among Successful entrepreneurial track
top 15 banks in the world record at Rabo India
Lock-in of entire pre-IPO holding (15% Ashok Kapur – Over 25 years at
post dilution) for a five year period Grindlays Bank, First Asian to be
appointed “Country Manager”, ABN
Increasing stake to 20% through
Amro, India
market purchases – RBI approval
obtained for the same Rana Kapoor - 16 years at Bank of
America at various senior positions;
Shareholding pattern as at Mar 31, 06 Head of ANZ Grindlays’ Investment
Bank
Customer-focused Integrated Service Model

Infrastructure

Commodities
Food & Agri Lending,
Syndication
Equity Capital
Retailing
Markets Structured
Finance

Healthcare & Transaction

Life Sciences Banking
Customer Financial Textiles &
Markets Apparel

Retail
Private Banking
Manufacturing & Gems &
Advisory Services Jewellery
Engineering

Financial Media &

Services Entertainment

End to end banking needs of our clients satisfied with strong multiple product offerings
India is a leading producer of several agri
commodities
Milk
Banana
Fennel
Rice
Castor Beans
Sugarcane
Chick Peas Tea
Pulses
Beans
Spices
Cole Crops
Meat (Buffalo & Cashew
Goat)
Cocoons
Jute
Eggplants
Mangoes
Garlic Eggs
Okra
Ginger Chicken Meat
Peas
Groundnuts Coconuts
Lemons Condiments
Lentils Potatoes
Oilseeds Rapeseeds
Onions Sorghum
Sesame Seeds Tobacco
With positive demographic trends…

Growth Rate of 15-24 years and 25-59 years age group

India
China
Mexico
Russia
Netherlands

UK
Japan

US

-6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4%

15-24 yrs 25-59 yrs

…and increasing disposable incomes

Distribution of Households by Income Group (million households)

Income in US$ per year

(PPP) 2001-02 2006-07 2009-10 2014-15

< 1900 24 17 12 7

1900 – 2600 33 20 14 7

2600 – 5200 74 82 81 73

5200 – 25000 46 76 95 127

> 25000 2 5 9 20

Source: NCAER for 2001-02 and 2006-07 estimates, * 2009-10 and 2014-15 are estimates
… it is all set towards achieving a high value
food market status
Evolution of global food demand
Diet /
functional / Nortth America,
organic foods Japan, Western
Europe, Australia
Convenience
foods Eastern
Europe
Snacks /
prepared
meals India , China,
Dairy, meat, Latin America
fresh fruits

Carbohydrate Africa
staples (Sub
- Saharan)

Surviving Mass Food Service Quality High Tech

Market Convenience Hygiene
Snacking
Demand side factors are changing...

From licence to
produce towards ETHICS
licence to deliver Select products
CHAIN
QUALITY
From retail- quality
management is forced FOOD QUALITY
upon every single link
in the chain backwards All products
FOOD SAFETY
Autonomous control
upon control systems
AVAILABILITY
Government, laws, choice of suppliers
Inefficiencies due to redundant
intermediaries across the value chain

Cost build up for one kg. of an average basket of fruit

Retail Markups
350
220
160
100

FARM GATE PRICES MILK FISH

The present state of markets for
perishables…
Market infrastructure
Primary grading/ Collection centers - non existent
Warehousing and Cold storage - inadequate
Cold chain - non existent
Quality certification systems - non existent
Transportation for perishables - inadequate
Rural markets - complete lack of infrastructure
Wholesale markets - in government control, lack modern
facilities
Private / direct markets - not permitted
Post harvest losses - 25 to 30 % in perishables
The Way Forward…

Modern Terminal Markets

A professionally managed competitive alternate
marketing format to provide
Multiple choice to farmers for sale of produce
Comprehensive solution aimed at meeting emerging needs of
consumers
Processing industry
Exports
Retail chain

Involves high investment cost and efficient managerial

skills
Can be infused by private enterprise
Terminal Markets

1st state of art Terminal market complex for fruits and vegetables setup
at Bangalore, by NDDB
At Bangalore Conference of 19th Nov, 2004, several States desired
setting up of such markets in their respective states
On 24th March, 2005, MoA decided to formulate DPRs for following
places:
Nasik
Rai (Haryana)
Bhopal
Patna
Kolkata
Nagpur
Mumbai
Chandigarh
The Modern Terminal Markets Concept

Hub-and-Spoke Format: Terminal Market (the hub) to be linked to

number of collection centres (the spokes)

Collection centres (Spokes) would be conveniently located at key

production centres to allow easy farmer access

Provide state of art infrastructure facilities viz electronic auction,

grading, washing and packing lines, transactional banking services etc.

Commodities to be covered include Fruits, Vegetables, Flowers,

Aromatics, Herbs, Meat & Poultry

Alternate modern market system to be run by professional agencies,

independent of and parallel to existing regulated markets
Infrastructure

Terminal Market
Electronic Auction facility
Packhouse
Quality Testing Facility
Pallestisation
Material Handling Equipment
Cold Storage
Temperature Controlled Warehouses, Ripening Chambers

Collection Centre
Washing, Grading & Sorting facility
Weighment system
Plastic Crates
Services

Terminal Market
Transport (including cool chain)
Warehousing and commodity exchange
Transactional Banking services
Dissemination of Market information
Settlement of payment

Collection Centre
Collection & Aggregation of produce
Spot payments to farmer
Advisory on inputs, prices, quality
Multi-modal transportation to TM
Key features

Feature Mumbai Nasik Chandigarh Rai Patna Bhopal Kolkata Nagpur

Area of market (in 200 100 100 88 75 59 55 100

acre)

Yearly handling 6 3 2.25 3 2 2 5.47 2.4

capacity (lac MT)

No. of collection 60 20 20 30 26 25 12 25
centres

Peak throughput 3000 1500 800 1000 800 1000 1500 800
(MT/day)

Cold Store 15000 5000 3000 5000 2550 2000 10000 2000
Capacity (in MT)

Total cost of 120 59.96 53.68 65.64 59 49.62 93.42 54.54

project (Rs. Crore)
Expectation from the Private sector

Provide envisaged infrastructure at the TM and the CC in the

hub- and- spoke format
Establish backward linkage with growers in the catchments 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
as well as the terminal market
Expectation from the Private sector (cont’d)

Provide advisory services to farmers on inputs, production

planning, prices, quality, multi modal transport and exports
Infrastructure and services to be provided by the TM and CC to
conform to recognized national /international standards, if any
Private enterprise free to
Prepare their own business plans (decide scale of operation
based on financial viability and commercial considerations)
Set up additional facilities to provide complimentary services
to farmers ( input supply, processing, consumer goods etc.)
Expectation from the State Government

Reforms in the APMC Act

To allow the private enterprise to source material from collections
centers and/ or from farmers field directly in the catchments area of
the TM
Regulatory Concessions
Single license to operate in the entire State/ adjoining States
Allow single point levy & collection of market fee
Levy at the point of first transaction with the grower
Collection at the Terminal Market
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)
Facilitate Statutory clearances from
Local authorities
Town planning & Urban development
Revenue department
Role of the Central Government

Financial Support
Equity Assistance up to 49% of the project equity returnable at par on the
successful operation of the project and the repayment of the Term Loan of
the financing bank

Develop PPP framework

Provide framework for selection of Private Enterprise
Private enterprise to be selected through an open, transparent competitive bidding
process
Project appraisal to be undertaken by the Bank financing term loan
Progress so far…

Features of the Modern Terminal Market

Role of the Private Enterprise
Role of the State Government
Central Government Support

Selection of
National
Preparation Preparation Consultant for Submission
Conference EFC
of of Revised Development of OMDA &
on Modern Committee
Concept Concept of framework SSA to
Terminal Meeting
Note Note for selection States
Markets
of PE

February 3rd, February February May 26th, July 13th, August 31st,
2006 20th, 2006 23rd, 2006 2006 2006 2006
Progress so far
Chaired by Hon'ble Union Minister for Agriculture
Maharashtra, Madhya Pradesh, West Bengal, Andhra Pradesh, TamilNadu, Uttaranchal,
Chandigarh shortlisted for implementation
Concerns expressed include:
-Availability of contiguous land -Defined catchment area of TM & CC
-Stake holding of existing APMC traders in the TM -Prevention of TMC assuming role of trader
-Stipulation of basic fee chargeable to market users -Ensuring Quality control within the market
-Permission to set-up of CCs across States -Competitor to TM cannot assume role of regulator
-Provision of adequate infrastructure support to and within the TM

Selection of
National
Preparation Preparation Consultant for Submission
Conference EFC
of of Revised Development of OMDA &
on Modern Committee
Concept Concept of framework SSA to
Terminal Meeting
Note Note for selection States
Markets
of PE

February 3rd, February February May 26th, July 13th, August 31st,
2006 20th, 2006 23rd, 2006 2006 2006 2006
Progress so far

Revised Note in light of the discussions &

recommendations made during the
Consultative Meeting

Selection of
National
Preparation Preparation Consultant for Submission
Conference EFC
of of Revised Development of OMDA &
on Modern Committee
Concept Concept of framework SSA to
Terminal Meeting
Note Note for selection States
Markets
of PE

February 3rd, February February May 26th, July 13th, August 31st,
2006 20th, 2006 23rd, 2006 2006 2006 2006
Progress so far

Selection of National Consultant based on Technical & Financial criteria

NC to assist the Central Committee in laying down Framework for Selection of the PE.
Preparation of the Bid Documents & Development of the Bidding Process
Fix Milestones for monitoring progress of bids and selection

Selection of
National
Preparation Preparation Consultant for Submission
Conference EFC
of of Revised Development of OMDA &
on Modern Committee
Concept Concept of framework SSA to
Terminal Meeting
Note Note for selection States
Markets
of PE

February 3rd, February February May 26th, July 13th, August 31st,
2006 20th, 2006 23rd, 2006 2006 2006 2006
Progress so far

OMDA & SSA documents circulated to states for feedback

States feedback taken into consideration and modifications made

Selection of
National
Preparation Preparation Consultant for Submission
Conference EFC
of of Revised Development of OMDA &
on Modern Committee
Concept Concept of framework SSA to
Terminal Meeting
Note Note for selection States
Markets
of PE

February 3rd, February February May 26th, July 13th, August 31st,
2006 20th, 2006 23rd, 2006 2006 2006 2006
Progress so far

Approval obtained for Financial support

Number and Location of markets to be decided based on
interest from states
Debt: Equity ratio to be at 1:1
Market fee ceiling of 2% may not be rigid

Selection of
National
Preparation Preparation Consultant for Submission
Conference EFC
of of Revised Development of OMDA &
on Modern Committee
Concept Concept of framework SSA to
Terminal Meeting
Note Note for selection States
Markets
of PE

February 3rd, February February May 26th, July 13th, August 31st,
2006 20th, 2006 23rd, 2006 2006 2006 2006
Status

Phase I

Nearing completion

Developing
Drafting the
the technical Finalisation
Request for
Developing the / financial Drafting of Draft RFQ
Detailing Proposal
scope of work Evaluation OMDA
the (RFP)
for project parameters
Project
implementation and the
Concept
bidding criteria
Our Approach

Phase II

Developing
Framework
Designing the Establishing for
Bidding time-lines monitoring
Methodology the bidding
process`
Way Forward

Required Action Steps from State Governments

Amendment of APMC Act
Formal Communication from the State Govt. regarding
implementation of project on a pilot basis
Selection of site for project

States will need professional assistance for

Initiating Concession Agreement Preparation
Broad Structure of the bid documents prepared by NC shall remain
the same, Schedules will be detailed as per State specific
requirements
Fee Notification would require re-structuring based on the revenue-
sharing decision between State Marketing Board & Concessionaire
Thanks for your attention!