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EMPOWERING SMALL & MARGINAL FARMERS THROUGH TRANSPARENT MARKET MECHANISM

Umang B. Patel | National Spot Exchange Limited

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Efficient

PRINCIPAL OF THE TRANSPARENT MARKET MECHANISM

Providing equal opportunity to both buyers and sellers Leading to Efficient Price Discovery Electronic Screen providing Bid & Ask visible across the country Should be neutral to Buyer & Seller Shouldnt be tilted in the interest of Buyer

Transparent

Neutral

who are better Organized Have much more Information & Money power

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Enable Backward & Forward Linkages

PRINCIPAL OF THE TRANSPARENT MARKET MECHANISM

Well connected with large number of Buyers & Sellers

Providing Performance Guarantee to Counter Parties

Elimination of followings:

Credit Risk, Grade & Quality Risk Delivery & Payment Risk Making physical trade seamless

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MAJOR ISSUES FACED BY SMALL & MARGINAL FARMERS

Lack of Bargaining Power Lack of Holding Capacity Lack of Alternative Market Platform

Dependent upon Local APMC Traders only

Lack of Adequate Price Information Lack of Institutional Marketing Support Indian Farmers get 30%-40% of the price paid by the End User in a number of products

As against 60%-65% in Developed Countries Multiple Market Intermediaries

High Cost of Intermediation

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COMMODITY VALUE CHAIN

(FOR AGRICULTURAL PRODUCE IN INDIA)

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A SCHEMATIC REPRESENTATION OF

COMMODITY VALUE CHAIN

(IN INDIA & USA)

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HOW TO EMPOWER SMALL & MARGINAL FARMERS??

By providing better Price Realization of their Farm Produce By providing access to Pan India Electronic Spot Market

Where, he can sell his produce, even if it is just 1(one) bag

By providing better Bargaining & Negotiation Power

To prevent Distress Selling

By Providing latest Price Information ruling at various centers By providing Comparable & Actionable Price Information

Where, When & Whether to sell can be decided in advance

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MISSI ON

To develop a Common Indian Market, by setting up a national level electronic spot market and providing a state of art trading, delivery and settlement facilities in various commodities, which can be accessed from across the country.

PROMOT ERS

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CORE COMPETENCIES| NSEL

Electronic Spot Trading Facility

Multiple Commodities Specific Delivery Centers Scientific Sampling & Testing Grading & Quality Certification

Standardization of Commodities

Facilitating Collateral Financing & Borrowing against Warehouse Receipt Customized Service

Scientific Packaging & Storage Transportation Logistic Handling & Shipment

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Trade execution through Spot Exchange

NSEL BUSINESS PRACTICES FOR SMALL & MARGINAL FARMERS

Compulsory Delivery based on defined contracts No Futures or Speculative trading

The minimum trading lot is 1 bag, which helps the small farmers to sell their produce on this pan India market, even if he has marketable surplus of only 3-4 bags. Farmer is entitled to quote Selling Price

No such entitlement is allowed in APMC Auction Registration Cost Unloading & Weighing Charges Sampling, Testing & Grading cost

No further cost burden on Farmer regarding

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Get Cash Payment on the Same Day of Trading (T+0) If Current Price is unfavorable

NSEL BUSINESS PRACTICES FOR SMALL & MARGINAL FARMERS

Farmer can hold his Farm Produce in NSEL Warehouse Entitled to avail a Bank Loan against Warehouse Receipt By SMS Facility Intensity 2(two) times a day

Get informed about Current Market Rate

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NSEL - THE PROCESS

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TERMINAL OF NSEL

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WHY FARMER REALIZE BETTER PRICE ON NSEL THAN APMC

In APMC auction, farmer has to bear the expenses of Labor, Unloading and Weighing charges

In case of NSEL, no such expenses are payable by the Farmer Standardized Quality & Graded Commodity Saves Brokerage cost, Commission & other intermediary charges

Buyer pays higher price on NSEL

The net impact of all these saving is a benefit of at least 3%-6% increase in Farmers Price Realization

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NSEL - FARMERS CONTRACTS

State
Bihar Gujarat

Commodi Location ty
Maize Maheshkhoont Castor SeedChandisar, Jagana, Kadi, Palanpur, Panthawada , Patan, Sidhpur, Visnagar, Lakhani, Iqbalgadh, Dhanera, Bhabhar, Deesa Maliya Hatina Channagiri, Shimoga Gadag Ganj Basoda, Vidisha Osmanabad Jalgaon Jalgoan, Nandurbar Jalgaon Umarkote Chomu, Jaipur, Sikar, Srimadhopur Kota

Groundnut Karnataka Arecanut Chana MP Soyabean Maharasht Chana ra Maize Soyabean Raw Cotton Orissa Maize Rajasthan Barley Soyabean

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VOLUME CONTRIBUTION
Castor seed Platform NSEL* Respective APMC** January February March Volume (In MT) April May June Total

2771.48 5091.53 2370.60 3613.95 5516.93 2752.95 25472.85 16371.5 21120.8 29592.2 59857.4 58506.4 47738.4233186.70 0 0 0 0 0 0 8.01 6.04 9.43 5.77 10.92 NSEL Delivery Respective Centers* APMCs** Sidhpur Visnagar Deesa & Lakhani Kadi Panthawada Patan Iqbalgadh Dhanera Bhabhar Dhanera Bhabhar Sidhpur Visnagar Deesa

Contribution 16.93 24.11 NSEL Delivery Respective (%) Centers* APMCs** Palanpur Chandisar Jagana Kadi Panthawada Patan Palanpur

Sources: www.agmarknet.nic.in, www.nationalspotexchange

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FARMERS CONTRACT PERFORMANCECASTOR SEED

Sr. No. Year 2011 Month 1 2 3 4 5 6 7 8 9 January February March April May June July August September Total Volume (In MT) Turnover (In Cr.) 12.69 27.73 12.45 17.83 26.20 12.42 7.13 4.15 4.54 125.12 2771.48 5091.53 2370.60 3613.95 5516.93 2752.95 1543.95 837.60 973.88 25,472.85

Farmers Enrolled till now: 70,000 (approx.)

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IMPACT ANALYSIS

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IMPACT ANALYSIS

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NSEL WAREHOUSE RECEIPT FINANCING

Getting the Loan Submitting WR Issuing WR Commodity Prices can be visible and decision taken for the selling or hold

Depositing the commodity

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No More Price Taker, Enabled to Quote Selling Price Increase Holding Power due to Warehouse Receipt Finance Price Dissemination, Thoughtful Selling Decision Farmer able to drive Off Season Price Premium Get to know other centers prices easily on terminal Reduction in Intermediation Cost High Price Realization Standardized Quality Maintenance of Commodities

ADVANTAGES TO FARMERS BY TRANSPARENT MARKET MECHANISM

Sampling/Lab Testing, Grading, Quality

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