Indian Agriculture – Paradigm Shift in Supply Chain & Marketing Presentation By S K Sharma

1. Indian Agriculture – Paradigm Shift in Supply Chain & Marketing Presentation By S K Sharma

2. Indian Agriculture: The Paradox • Agriculture contributes 18% to the GDP • But over 60% population is dependent on it for livelihood • We are among the top few producers of many agricultural commodities in the world… • Yet our share in world food trade is about 2 % • The post-harvest losses of fruits and vegetables are estimated to be 25 to 40 %, amounting to more than Rs. 30,000 crores… • Yet less than 5 % is processed ! • We have a middle class of 300 million people with adequate purchasing power to buy manufactured goods… • Yet value addition to agricultural products is less than 10% Privileged and Strictly Confidential

3. Indian Agriculture: A Fact Sheet F&V: India’s comparison at World Level Privileged and Strictly Confidential

4. Current Supply Chain - Gaps • Farm Level • Shortage of quality seeds in sufficient quantity • Extension services needs to be strengthened • Lack of adequate crop insurance • Dependence on natural factors – erratic production • High price of hybrid seeds • Lack of standardization of farm practices • Interlinkages • Long chain of intermediaries resulting in huge losses > 40% • Cartel of middlemen implying decreased profits for farmers • Poor interlinkage between processors and farmers • Post Harvest • Poor infrastructure • Improper handling at APMCs • Improper handling at collection centers resulting in poor quality • Lack of post harvest technology adoption e.g. 25-30% mango is lost during canning Privileged and Strictly Confidential

5. Current Supply Chains: Challenges Farm Level Aggregation / Collection Centres Wholesale Markets Retail • Lack of grading, sorting, washing and packaging facilities; • Cold-storage, CA Stores, warehouse facility is not available; • Labeling of products is non-existent; • Non-availability of material handling equipments; • Lack of adequate infrastructure for Multi-commodity Transport facility with reefer trucks and vans to Wholesale Markets / Auction Centres / Terminal Markets • Quality testing facility etc • Adequate handling at the retail end • Non-availability of storage facility, freezers and other infrastructure • Absence of grading, sorting, washing facilities; • Non-transparent weighing; • Poor handling and in-adequate storage facility; • Absence of adequate transport facility • Lack of knowledge about quality control and Standards • Traditional harvesting storage facilities; • Poor infrastructure for handling • In-adequate transport from field to Primary Markets • Pre-cooling facility is non existant Privileged and Strictly Confidential

6. Consume r Retailer < 25% Sub-Wholesaler < 6% Wholesaler < 10% Market level commission agent < 8% Consolidator at Village level < 10% Small / marginal farmer Existing Supply Chain – Major Issues Total mark-up in the chain Total margin - 60 to 75 % Margin to wholesaler - 30-35% Wastage - 15-25% Transportation - 10% approx. Farmers get 25-30% of consumer price Privileged and Strictly Confidential

7. Need for a Holistic Approach • Restructure the Supply Chain to remove inefficiencies- enhanced income to the farmers, reduced consumer prices; • Reorganise the Agricultural Marketing System to ensure transparent price setting and facilitate value addition; • Clean up the regulatory bottlenecks to provide a hassle- free environment to processors; • Rationalise the Taxes and Levies on processed food products to make them affordable to average man on the street. Privileged and Strictly Confidential

8. Supply Chains- Desired Action Points • Increasing Direct Corporate Investment in and control of Supply Chains • E-services, input sale models • Procurement Models • Retail Back-End Operations • Rural Marketing Hubs • Export Sourcing • Increasing disintermediation through Contract Farming and use of IT as a means to unlock value • Growing role of national commodity exchanges in agri-trade as a parallel market Privileged and Strictly Confidential

9. Economics of Efficient Linkages original price level Consumer price anticipated price level Farmer price Trade-up Reduce intermediaries increase farmers’ realisation and lower consumer prices Privileged and Strictly Confidential

10. Recent Developments to lead Changes in SCM

11. Consumer: Shortest Possible Shopping & Preparation Time Privileged and Strictly Confidential

12. The Retail Revolution • Spread of Supermarkets • 70 to 80 % in US and Europe • 55 % in Latin America (up from 15% in 1990) • 50% in Central Europe ( up from 25% in 1999) • 6000 in China in 2002 (from a few in 1992) • Rapid consolidation everywhere • Top 5 chains in a given country: • 40% in the US (up from 25% five yrs ago) • 70% in France (2/3 global chains) • 65% in Latin America (3/4 global) • In India Food retailing accounts for 88% of sales and 80% of employment Privileged and Strictly Confidential

13. Organised Trade- India Vs China Privileged and Strictly Confidential

14. Major Private Players in Food Retail: • Reliance Fresh • ITC • Aditya Birla Retail Ltd. • Adani Fresh; • Bharti – Walmart • Field Fresh (Bharti Enterprises) • Subhiksa • Big Bazar • Tata Kisan Sansar • Premier Farm Frsh • Heritage Foods • Macro • Food Land • HyperCity Privileged and Strictly Confidential

15. Increasing Clout of Supermarkets –Paradigm shift in SCM • Consolidation of procurement • Shift to big Distribution Centers • Shift to specialised wholesalers / companies • Fewer, bigger suppliers • Tough “private standards” of quality and safety • EUREPGAP (reduction in pesticide residues by 2004) • Global Food Safety Initiative – to implement PRIVATE standards amongst top 250 retailers / top 250 suppliers (members’ sales=2.8 trillion $) • Converge of and increase in standards globally Privileged and Strictly Confidential

16. Recent Initiatives by Govt - Creating an Enabling Environment • Integrated Food Law (Food safety and Standard Bill, 2005) passed by Parliament; • Warehousing (Development and Regulation) Bill 2005 has been placed before the Parliament • The State Agricultural Produce Marketing [ Development & Regulation ] Act,2003 circulated • Modern Terminal Market scheme framed • Mega Food Park scheme on the anvil • Tax concessions and subsidy schemes Privileged and Strictly Confidential

17. Reforms in Agricultural Marketing • The State Agricultural Produce Marketing [ Development & Regulation ] Act,2003 - main features : • Direct Marketing by producers; • Establishment of markets by private bodies/ co-ops or PPP; • Separate markets for special commodities; • Promotion of Contract Farming; • Prohibition of commission agency in transactions with producers; • Role of APMC in promoting alternative marketing system, contract farming etc; • Wider role of State Marketing Boards in training & extension; • Constitution of Standards Bureau at State level • Cold Chain development initiative • Cold chain incentives – tax concession, subsidy for cols stores, CA stores, integrated pack houses • Setting up Cold Chain Institute is proposed Privileged and Strictly Confidential

18. Setting-up Modern Terminal Markets • To link Farmers to the Markets by shortening supply chains and enhance efficiency, thus increase Farmer’s income • Provide professionally managed competitive alternative marketing structures that provide multiple choices to farmers for sale of agricultural produce; • To drive reforms in agricultural marketing sector resulting in accelerated development of marketing and post harvest infrastructure including cool chain infrastructure in the country through private sector investment; • To bring transparency in the market transactions and price fixation for agricultural produce and through provision of backward linkages to enable farmers to realise higher price and thus higher income to the farmers. Privileged and Strictly Confidential

19. Our Wholesale Markets Privileged and Strictly Confidential

20. SAFAL Fruit & Vegetable Market

21. Electronic Auction Hall Privileged and Strictly Confidential

22. Grading of Produce by the Farmer • Collection centers set up near production areas • Extension and QC services provided • Transparent price setting mechanism • State Govt facilitated the project by amending APMC Act Privileged and Strictly Confidential

23. Mechanised Handling of Produce Privileged and Strictly Confidential

24. Developing Mega Food Parks (MFPs): • Provide state of the art infrastructure for Food Processing in the country; • Ensure value addition of agricultural commodities including poultry, meat, dairy, fisheries etc. • Establish a sustainable raw material supply chain for each cluster, Facilitate induction of latest technology, Foster interagency linkages for pooling of resources for activities complementary to food processing Quality assurance through better process control and capacity building; • Address issues of small farm size and small and medium nature of processing industries through a cluster approach with stakeholders managing the supply chain Privileged and Strictly Confidential

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