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A-501, Merchants Centre, Sector 19, APMC Market, Vashi, Navi Mumbai 400705 State Mah, INDIA
M: 91 9822001165, 9029976300 E:

3rd Aug 2014

Dear Smt. Chandrika Venktesh,
Manager Agriculture and Food Processing Committee,
Bombay Chambers of Commerce and Industry,

First of all I would like to thank you for your invitation for the meet on discussions on Union Budget and its
Impact on Agriculture. Also I would like to thanks all the Hon. panellist and participants for giving me an
opportunity to interact and exchange views on the subject.

Through this note I wish to express my views on the subject broadly covering:

a) How we can innovate agro supply chain and introduce new marketing mechanisms for farm
b) Suggest some steps to link up farmers and urban consumer markets as well as with the Industry
which depends on agro produce as their source of primary raw materials.
c) Put forward views on pricing of agro produce from the point of view of farmers and end consumers
d) Elaborate on our present and future role as Service Provider in the agro value chain

As on date what we have is a long supply chain between fruits & vegetables produced at villages and the
urban end customers. This chain mainly comprises of village level brokers (or representatives of licensed
adtyas from big city APMCs or the transporter who carries the goods on behalf of the farmers) and adtya at
the APMC and further we have the retail traders who takes it to the end consumption point in the city
suburbs. This has been elaborated in many newspaper columns in details and is point of debate as to how
this chain affects end customer, farmers net income, wastage etc, so instead I would like to put up some
possible solutions to this issue based on my personal working experience (as entrepreneur working in the
area of primary agro produce supply chain management) and interaction with farmers, traders and the agro

I broadly see two major points where we can possibly innovate and intervene in the value chain: One is at
the farm gate level and other is at consumption point

Reforms at Farm-gate:

It is the point of production, which is actually the village level; here we should take lead and setup Farmer
Producer Organisations (FPOs) or farmer associations. Farmer, at present stage produces F&V, Foodgrains
etc as per his views on demand for his produce after say a period of 3 months and of-course irrigation and

his financial condition, to support the crop cycle, should now as a member of FPO, will have to plan
production in interaction with all other members and also do advance planning for rotation of crops/plots.
He can also fall back on financial support and may be subsidised seeds and fertilizers, from his FPO. He is
also assisted by a dedicated FPO back-offices fulltime staff to maintain cost records and all associated data
such as application of fertiliser and pesticides etc. This will enable the producer co to do projection of cost of
production as well as estimation of product quantities and timing of availability for each farmer member of
FPO. On the marketing side, we propose that we do this exercise over one or two crop cycles utilising the
existing infrastructure (village level packing, transportation and labour) and mandi infrastructure/network in
big cities, wherein FPO sells its produce at pre-determined price with Mandi trader (and not in as per the

In the next phase what we can work on is the development of dedicated farm-gate level infrastructure
covering say small scale cold storage, better packaging material ( to maintain quality of the produce over
transportation period) and separate pack and grading house. But the experience is that many farmers are
marginal farmers and very difficult to bring them under one roof, so we need to incentivise the farmer to be
the part of FPO and also setup scalable FPOs for various crops and regions in the long term. Also it can be
noted that FPO being stationed at his village (or at a centre of cluster of villages) is very close to the farming
community, so the default or not getting the produce back to FPO for marketing can be taken care of. Also
the focus should be to bring marginal or smallholder farmers into the FPO structures.

On the grains or non perishables side, e.g. maize, soybean & other oilseeds, wheat, rice , pulses like Tur etc
and cotton, we see fairly smooth scope for improvement in supply chain as these items are already being
consumed by Industry like Feed, Solvent Extraction , Flour making etc and the demand is quite known.
Here also we again propose to set up FPOs which can be linked to nearby processing Industry. We already
have fairly strong experience & knowledge base in managing linkage between farm level aggregators, traders
and Industry. We, although, have to factor in quality, grading issues and ensure standardisation as per
specific type of industry customer, to ensure smooth operations for FPOs in this area. It can noted that this (
Non perishables ) is equally important area , as it is ultimately affects end prices of spectrum of products
such as Poultry, Milk and edible oils.

Consumption Point

Further on the consumption side, we should do survey of major consumption points in the city areas which
are logistically located nearest to the production belt, and setup dedicated outlets managed by
professionals. (Who are paid by the producer organisation) Such centres can be located in large societies
who should be encouraged to provide space for such operations on concessional costs, rather than on
streets and shops where rentals are prohibitively high. Initially, this can be done in say in Govt societies,
defence establishments etc and then can be extended to private societies. It can also be proposed to set up
a centralised unloading facility near to the city and then take the produce to the consumption centres in
smaller vans. This centralised faculty can also be upgraded with cold storage etc once the operations
stabilises. It can be observed that these centres can also distribute other farmer produce non
perishables/food grains such as rice and wheat, millets etc to end consumers.

Pricing the farm produce:

At present the farmer generally takes rates information of nearby APMC market (big city markets, which is
generally a price range as per quality) and then takes decision to transport the produce to that market but
his produce is sold, as and when it arrives, as per that days price in that market. He is paid in cash by the
trader after deducting mainly transport, labour and commission. It can be noted here that as against any
other business, the farmer does not give his bill; it is as per market rates decided by mandi traders, he gets
his dues. Although, we see for some items like grapes, pomegranates etc farmer is pricing his produce at his
farm-gate, but still there are no organised selling and pricing mechanisms in the farm produce market at the
farm gate level. Now in case of the proposed FPO model where the production, logistics and sale is all by the
same entity, the price at which the produce is to be sold, can be arrived in systematic manner and taking
into account all the costs. In the first phase, the price at which FPO values its material will have to be linked
to the average market price for that day (or say avg. of last week) for that produce at the consumption
centre. Once we do this exercise practically over the period, and data is properly maintained at both
production and consumption centres, only then, we can see how much the profit or loss the FPO is making.

Further what we propose is that similar to cost of milk, sugar and MSP based commodities, a new govt
authority (or may a separate statutory body for Fruits and Vegetables) with representatives from all sectors,
can be set up to arrive at production cost basis, doing this on annual basis, so that both farmers and
consumers know the cost of perishables they produce and buy respectively. Further it can be also be
officially estimated (by say Tehsil level agriculture officers) about logistics cost of carrying the goods to major
nearby markets and announced on their websites. Technology can play important role here in terms of
collection, dissemination and presentation of information on national level FPOs production statistics etc on
a dedicated website, which both farmer and consumers can take as authentic reference.
On the point of consumption & physical distribution side: We need to look at setting up exclusive FPO
markets where FPOs can be allocated space for display and storage of their produce. Further there can be
govt owned centralised grading and packing facility next to major cities which will provide centralised
unloading and forwarding facility for FPOs at concessional costs. This can be setup on PPP basis. All this will
reduce cost in the supply chain, wastage etc and also ensure direct farmer sales to the end customer at
scientifically estimated produce cost, which will be win-win for both farmers and consumers. Such FPO
markets can be linked and work as outlets for Industry which required uses F&V as raw material for
procurement for their production/processing activities, along with retail urban customers, making sure that
everything which is brought to the FPO market is consumed.

Role of Service Provider:

We as service provider see a crucial role for us in the agro supply chain and playing a role of professional
intermediary and be catalyst in this whole process and part of this transformation.

1) Most important task of setting up an initial mechanism of communication with farmers in order to
motivate them to form group and FPOs and building up scalable FPOs structures and getting all the
stakeholders to come together with broad operational agreement.
2) Playing a role of key facilitator and initiate the process of incorporating FPO for important F&V and
cereals farmers group.

3) Developing operational manual and budgeting for smooth operation of FPOs.
4) Identification and skill development of core (from local community) staff for professional
management of FPO.
5) Infrastructure and logistics planning for operations of FPO.
6) Developing sustainable market linkages for FPO.
7) Ensuring transparency in financial operations of FPO.
8) Identification and understanding of such farmers markets from the international markets and
bringing best practices in our domestic FPO operations

We would again like to thank Bombay Chambers for giving us opportunity to present our thoughts and we
would be very happy to collaborate with members on this topic and take up model projects in coming

Views and feedback from fellow members is most welcome!

With best wishes

Sanket Kapadnis
Aishwari Agro Foods
Navi Mumbai
Aug 2014

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