Sunday, 9 August 2020

Technologies, Markets And Price Discovery

Updated: May 7, 2011 1:27 pm

Next week (April 25, 2011), the state Agriculture Marketing Ministers will have yet another meeting to review the status of Marketing sector reforms which have been recommended time and again by the Planning Commission and the Union Agriculture Ministry. While progress has been made, and several states in the country have accepted the reforms Punjab, Haryana, UP and Rajasthan and NCT of Delhi are among the states which continue to have reservations about the ‘change in the offing’. This time there are four additional ‘drivers of change’ that recalcitrant states will have to face.

                The first is that during the recent price spike in vegetables, the existing ‘market players’ did not come to the rescue of the governments. Rather they extracted their pound of flesh by resorting to ‘go slow’ in several markets, and refusing to transact on crucial days. Thus even when PSUs had imported onions from Pakistan to arrest the tide of rising prices in January this year, the traders refused to ‘trade’ for three to four days at a stretch, thereby compelling the PSUs to incur a heavy loss, without any concomitant benefit to the consumers.

                Second, from the point of view of health, unless a ‘traceability’ system can be incorporated at the point of the arrival, there is no way in which the MRLs (minimum residue levels) can be measured and corrective actions taken. The only way this can happen is for aggregators to undertake a self certification (GAP), or for a random third party check with clear parameters. It is possible today to ensure

                Third, the argument about revenue loss on account of a liberal Act will not stand much ground. The figures from the Azadpur Mandi (the vegetable and fruits market of NCT of Delhi) suggest that the annual trade in fruits and vegetables is less than Rs 8000 crore annually. Given the fact that this caters not just to Delhi, but is also the secondary market for several fruits (including apple) for the entire country, the implication is that the daily trade is in the range of Rs 20—25 crore only! Back of the envelope calculations (based on transactions recorded by Safal and Nafed alone) suggest the figure would be at least two to three times the recorded figure. A modern market, with every transaction being recorded would increase the revenues for the state government which introduced these reforms.

                The icing on the cake is that the states can get paid for undertaking these reforms. The National Horticulture Mission is willing to fund modern terminal Markets to the extent of Rs 50 crore, if the state government agrees to establish it as a ‘hub and spoke’ model with collection centres at the production clusters. Support is also available for primary level aggregation and transport from the production centre to the terminal market.

                Thus, when it comes to a logical discourse, there is not much that the state governments can possibly say, except that the existing players will lose their monopoly. Again, the point to note is that the existing players will not lose their livelihoods, nay, if they were to be the harbingers of change, they could gain by providing additional value, both to the producer and the consumer. As the needs of the domestic consumer change, there is scope for increasing the range, the variety, the packing and the delivery service. Rather than market vegetables as vegetables, they can be marketed as ‘nutrition supplements’, quantity lots can be made at the ‘wholesale points’ to ensure that the customer is assured of the right measure and price, and bar coding can be done to track the produce to the point of origin.

Last Mile Technology—Modern vending carts

Last but not the least is the possible integration of a modern market system with the vegetable vendors who actually offer the last mile service in this value chain. For even in states where organised retail has started offering fruits and vegetables at its counters, the predominant market share is that of the vegetable vendor who moves from street to street or from one housing colony to the other. He operates the most primitive system, and does not have any protection from the elements of nature – or those of the market. There is no way in which the vendor knows how the aggregator from whom he takes his supplies has fixed the rate. When advertisements are published in local dailies by various market committees indicating the rates prevalent in the wholesale markets, and the customer finds his vendor charging more than double, the onus of bearing the customer’s wrath is on the vendor, who is more a victim of the ‘value chain’ rather than an agent of collusion. Moreover, the vendor has to factor the losses on account of ‘decay’ and ‘delay’ and these have to be passed on to the consumer. Therefore a reform in the vending system was long overdue.

                Fortunately, modern vending carts with a facility to keeping temperatures between four to ten degrees is now available, and have also been approved under the Jawaharlal Nehru Urban renewal Mission. If larger chains can establish a network of modern mobile vending units in which the fruits and vegetables do not lose their ‘quality’ for eight to ten hours, the vendor can avoid the distress sale that he has to undertake towards the later part of the day. It will also insulate them from the arbitrary checks of municipal, health and police authorities.

                Is this possible at all? Is this too visionary…. Can the vendors upgrade their skills? The answer is Yes, and a very positive Yes. It has been done in Patna and Lucknow by a young entrepreneur from IIM Ahmadabad. More about him in the next week’s column.

By Sanjeev Chopra

(The author is Joint Secretary, Ministry of Agriculture, Government of India. The views expressed are personal)

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