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A fruitful venture

Joydeep Ray | August 23, 2003

No prizes for guessing which company has been venturing into anything that spells business. At its aggressive best is the Anand-based National Dairy Development Board.

And this time, the news has nothing to do with its neighbourhood marketing competitor, the Gujarat Co-operative Milk Marketing Federation, which markets the Amul brand of dairy products.

NDDB is all set to replicate the Amul cooperative model nationally for fruits and vegetables. And if all goes well, the latest venture of the government's apex body on dairy development could see India emerge as a major exporter of horticulture.

Beginning November, NDDB will establish, own and operate auction markets for horticulture produce in Bangalore. Now consider the figures, which are appalling.

According to industry estimates, of the total 150 million tonne production of fruits and vegetables, post-harvest losses account for one-third.

What's more, this is the first time that a state government -- Karnataka -- has invited a central organisation to run such an operation. What does this translate into?

The project, with an outlay of Rs 150 crore (Rs 1.50 billion), will cover 200 horticultural farmers associations with 50,000 grower members for wholesale marketing.

Their produce will be planned with production and supply assurance, providing both growers and buyers a common platform to negotiate better rates.

But to find out what could make this exercise interesting, just look at its previous avatar. All agricultural commodity operations, until now, were under the purview of state governments.

Result? Not only were they regulated, corruption reigned. Monopolistic practices ensured that there was no development of efficient and transparent agri-marketing.

As for the pre and post harvest technologies, forget it. And enforcement of quality standards was something that just didn't apply to the sector.

Also, interestingly, the ministry of agriculture hopes that NDDB can change things. And even as NDDB is yet another government agency, what clinched the deal was its track record of setting up a host of cooperatives across the nation.

"It was a recognition of the fact that efficient terminal markets for horticultural produce would stimulate productivity, raise quality standards, reduce losses and ensure consumer access to an increasing supply of fresh produce at reasonable prices. That's why we have initiated the project," said Karnataka chief minister, S M Krishna.

NDDB is believed to have submitted a detailed proposal recommending an alternate horticultural produce marketing system, which could be set up in four major metros -- Delhi, Mumbai, Bangalore and Kolkata.

It would operate as a parallel market to the current system of mandis. Its objective? To establish a marketing structure that sustained quality incentives and enhanced productivity for the farmers.

Farmers have always operated in a mandi system, which had its own downsides, the gravest being the power of the middleman. Unlike other products, fruit and vegetable marketing did not involve either the producer or the retailer.

"The main beneficiaries of the system have always been the middlemen. They are the commission agent and the wholesaler who drive the business," says a farmer.

Like commission for vegetable agents varies from 3 per cent to 6 per cent. It is a wider band for fruits -- 4 per cent to 12 per cent. That's not all.

Wastage has been the biggest problem of the mandi system. Inadequate infrastructure and lack of technology has meant poor storage, increasing damages and wastages.

Can NDDB bring a method to this madness? It has been instrumental in setting up milk co-operatives in conjunction with assorted state governments.

It's also ventured into fruits and vegetables with its Safal brand in the north. "Setting up a full auction market for horticulture is only a step away," says a consultant.

The terminal market in Bangalore will be operated by Mother Dairy Foods Processing, a wholly-owned subsidiary of Mother Dairy Fruit and Vegetable Ltd.

MDFVL in turn is a wholly-owned subsidiary of NDDB. "There will be greater transparency of transactions, reduced losses through handling and transportation by setting up collection centres at the farm level," says an NDDB manager.

He claims that with prior experience with its Safal brand, NDDB will emphasise the cleaning, sorting and grading of vegetables at these collection centres. Farmers are currently being trained to sort out their produce.

This project will mean a lot to NDDB. Its study has revealed that the existing structure has produced a vested interest in perpetuating the present system.

Therefore, on the basis of NDDB's experience, the only way to modernise horticulture marketing is to set up an alternative marketing system that offers certain advantages and operates parallel to, and in addition to the present market parameters.

NDDB will draw on its prior experience with milk and Safal co-operatives. It is putting systems in place to enhance farmers' bargaining power. Hence, it is looking at collective marketing through farmer associations and collection centres.

It will keep a check on the retail price through cash and carry stores at strategic locations to ensure transparency.

The information would then be disseminated throughout the system providing essential support to the market like training and giving inputs to farmers to enhance production.

These measures are all aimed towards reducing post-harvest losses. "It is anticipated that with sorting, packaging, assembly and storage at the collection centres, post-harvest losses will decrease substantially.

"Coupled with farmer and transporter education on post-harvest treatment of fresh produce, significant gains are expected," says the NDDB manager.

Food consultants are optimistic about this experiment. They say that these steps would reduce intermediary margins. Though collection centres will replace village-level commission agents, their service will be better and charges lower.

This will no doubt enhance price realisation for the farmer, feel managers. At the same time, it is likely to impact marketing costs, which will be reduced considerably.

With centralised transport, labour, packaging and utilities, the cost of producing the fruits and vegetables are expected to be more economical for the farmer.

NDDB is also talking of generating employment through this operation. The auction market complex is estimated to employ almost 200 skilled and semi-skilled manpower in all its units.

NDDB  is working at involving the farmer. For instance, it has formed self-help groups or 'associations'. "This is purely an initiative meant to energise the horticulture marketing in this country. Dairying is a different matter altogether," says a market expert with NDDB.

Clearly, Karnataka has set the ball rolling. It has taken the lead in amending the Agriculture Produce Marketing Act to facilitate NDDB's entry into the auction market.

But will the other governments pick up the gauntlet? "Agricultural marketing is a state subject. The Bangalore exercise has evoked considerable interest amongst corporate bodies, other state governments and enthused farmers," says a market expert. Only its success can ensure that the model can be replicated on a national scale.

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