Study of missing markets in Bihar. Submitted by NIDAN, Patna (Bihar)

Transcription

1 2010 Study of missing markets in Bihar Submitted by NIDAN, Patna (Bihar)

2 TABLE OF CONTENTS 1.1 Brief Profile of Bihar Fruit and vegetable mapping of the state Feasibility for modern market in Bihar Total availability in catchments area Existing marketing mechanism Mapping of Major market for modern market Potential for modern market in Bihar Proposed modern market Study of missing markets in Bihar NIDAN, Patna (Bihar) 1

3 1.1 Brief Profile of Bihar Introduction to State Bihar is located in the eastern part of India with an area of sq km constituting 2.85% of the geographical area of India. Of this, sq km is rural and 1096 sq. km is urban. It lies midway between west Bengal in east and Uttar Pradesh in west and Nepal in north and Jharkhand in the south. The Bihar plains divided in the two parts by the river Ganges that flows through the middle from west to east. Administratively, the state is divided in nine divisions with 38 districts with 101 subdivisions. Bihar is amongst the most populous state in the country with the population of about 83 million as per the 2001 census. The state is also one of the most densely populated regions in India with the density of 880 people per sq km. Economy The state economy is predominantly agrarian. Agriculture contributes around 40% to the states GDP. Around 70% of state s population is depended on agriculture for their livelihood. The net state domestic product was estimated to be Rs 46,732 crore in While the per capita net state domestic product stood at 5362 in the same year. The total primary sector contribution to the state GDP is 42%. The contribution of secondary and tertiary sectors to the states GDP is 10% and 48% respectively. Over last few years the tertiary sector, especially the service sector has grown significantly. The per capita income Is highest in Patna (Rs 6958/-) followed by Rohtas (Rs 4615/-) Munger (Rs 4321) Buxar (Rs.4285) Nalanda(Rs 3878), Bhabhua Study of missing markets in Bihar NIDAN, Patna (Bihar) 2

4 (Rs.3894) & Bhojpur (Rs.3728). Districts with high per capita income except patna, fall in the rice belt of Rohtas, Bhabhua, Buxar & Bhojpur, which have assured irrigation from sone canal system. Outside this, Munger is second whereas Nalanda is placed at forth. Apart from agriculture, other major industries include jute, handloom, food processing and refinery. Agriculture Bihar falls among largest states in terms of production of fruits and vegetables and contributes around 19% of fruit production in the country. It is seventh largest economy in India in terms of food production. It is also eighth largest producer of food grains in the country. Major agricultural produce of Bihar includes cereals, pulses & cash crops. The major cereals include rice, wheat & maize and major pulses grown are gram, arahar, moong and masoor. In addition, the major cash crops are potato, sugarcane, Tobacco & Spices. The total food grain and cereal production is estimated to be 112 lakh mt. as per the estimates of Fruit and Vegetable Mapping of the State Bihar produces a large quantity of different kinds of vegetables. Bihar is largest producer of Okra, Second largest producer of cabbage, third largest producer of potato and Bringal and significant production of another vegetable like cucumber, peas and cauliflower. Due to significant surplus in vegetable production Bihar is prominent sourcing destination for neighboring states like west Bengal, Jharkhand and eastern parts of Uttar Pradesh. The total vegetable production in the state is Study of missing markets in Bihar NIDAN, Patna (Bihar) 3

5 estimated tube around 30 million MT. The production of major vegetable in the state along with respective national ranking is provided below: Vegetable Vegetable Production ( 000t) % of National Production Potato rd Brinjal rd Cauliflower rd Okra st Tomato th Onion rd Cabbage nd Others Total rd Source: NHB Database 2005 All India Rank Leading Vegetable Producing States 4% 4% 4% 5% 22% 6% 8% 18% 13% 16% West Bengal Uttarpradesh Bihar orissa Tamilnadu Gujrat Karnatka Maharashtra Andhra pradesh Others Source: NHB Database 2005 Overall, Bihar ranks third among major vegetable producing states after West Bengal and Uttar Pradesh. However, the range of vegetables grown in the state is bigger than the states having higher production. The major producing districts are mapped below: Study of missing markets in Bihar NIDAN, Patna (Bihar) 4

6 Major Production Cluster on the Map Source: NHB Database 2005 Fruits Bihar produces large quantities of a variety of fruits. It is the largest producer of litichi, third largest producer of pineapple and fourth largest producer of mango in India. The total fruit production in the state is estimated to be around 2.7 million MT. The production of major fruits in Bihar along with respective national ranking in production is provided below: Major Fruit Production in Bihar vs. all India Fruits Production2004- Percentage of All India Rank 05 ( 000t) National Production Within Producing States Mango th Banana th Guava st Litchi st Citrus th Pineapple rd Total th Source: NHB Database 2005 Study of missing markets in Bihar NIDAN, Patna (Bihar) 5

7 The major fruit producing districts mostly overlap with the vegetable producing ones. Muzzafarpur and Vaishali districts lead in litchi and banana production. Muzzafarpur, Darbhanga, Champaran(East & West), Vaishali lead in mango production and Rohtas and Bhojpur lead in guava production. Out of the estimated fruit production of 2.5 million MT Major Fruits like Mango, Banana, Litchi, Guava, Pineapple and Citrus together contribute around 2.3 million MT. Leading Vegetable Producing States 3% 4% 6% 6% 19% 8% Source: NHB Database % 21% 9% 16% Maharas htra Andhra prades h Tamilnadu Karnatka Gujrat Uttar Pradesh The retail prices with a couple of exceptions are at par with major fruits producing states. Similarly, the prices at the production centers are much lower when compared to the main wholesale markets. Bihar Major Production Cluster on the Map Study of missing markets in Bihar NIDAN, Patna (Bihar) 6

8 Source: NHB Database 2005 Spices A variety of spices are produced in Bihar with Chilli and Turmeric occupying major pie in the total production. Chilli accounts for 47.6 % of the area under spices and 39.5% of the production followed by turmeric, which occupies 26.3% of the area under spices and accounts for 36.4% of the production in the state. Area and Production of Major Spices in Bihar Spices Crops Area (ha) Area (% to total prod) Production (MT) Turmeric Ginger Garlic Chili Total Spices Commercial Crops, Grains and Pulses Production (% to total spices production) Apart from fruits and vegetables, the state also has high production of Food grains, Pulses and oilseeds. The state records significant production in paddy, wheat, and Maize, apart from a few of oilseeds and pulses. Below is snapshot of the production: Crop Production (in Lakh MT) Paddy Wheat Maize Sugarcane Potato Pulses 5.57 Oilseeds 1.24 Total Source: Bihar Annual Plan Study of missing markets in Bihar NIDAN, Patna (Bihar) 7

9 The southern parts of the state dominate in food grains and cereals production especially Paddy, Wheat and Pulses. This is mainly due to presence of two rivers- Son and Ganga-who are source of assured irrigation for the part. Districts like Sasaram, Bhojpur, Rohtas, Buxar and Aurangabad are the most fertile belts of food grain production in the state. Maize is largely produced in central and western part of the state. 2.1 Feasibility for Modern Market in Bihar Backward Linkages Modern Market The catchments area of Modern Market has been assumed around100 km of radius and shall include following districts - Nalanda, Bhojpur, Jehanabad, Samastipur, Muzzafarpur and Vaishali. The catchments along with the proposed Modern Market are mapped below: Modern Market at Patna-Mapping of catchments Districts 1-Samastipur 2-Muzzafarpur 3-Vaishali 4-Nalanda 5-Jehanabad 6-Bhojpur 7- Modern Market at Patna The mapping of the Modern Market with its catchments has been done keeping in view the transportation time. It is estimated that transit time of produce from the farthest catchments district shall not take more than three hours once the aggregation is complete at the respective collection centers. Below is the distance matrix of TM with its catchments It is to be noted that the distances have been mapped from district head quarters. Since the catchments are skewed towards the TM, hence most of collection centers shall be en-route towards TM. Study of missing markets in Bihar NIDAN, Patna (Bihar) 8

10 2.2. Total Availability in Catchments Areas The total production of fruits and vegetables in the identified catchments of Patna TM is estimated to be approximately 44 lakh MT. This amounts to around one third of states total fruits and vegetable production. The summary of fruits and vegetable production in the catchments of TM is provided below. Patna TM s Catchments Districts of Fruits / Vegetables Production Districts of production Production (MT) Fruits Vegetables Patna Nalanda Vaishali Bhojpur Samastipur Muzzafarpur Jehanabad Total Existing Marketing Mechanism The existing marketing system is largely unorganized and manual. As a prevailing practice in F&V trade, it is mostly middlemen driven. On an average the produce changes at least six to seven hands before it reaches to the kitchen of the end consumer. Given the perish ability of the produce, such multiple handling handlings affect the quality and finally the retail prices of the produce. On an average, the retailer sells 60-70% of his produce at market rate and rest 30-40% below the market rate. Since he has the compulsion to sell the produce same day, such kind of selling pattern is quite prevalent in fruit and vegetable retail. Study of missing markets in Bihar NIDAN, Patna (Bihar) 9

11 In the value chain, the flow of information is restricted to certain levels only. The produce do not have proper information about the demand supply situations in the consumption market and hence are not able to capture the price arbitrage in the distant market. Since farmers typically borrow money from the traditional sources i.e. the buyers of their produce, they have an obligation to sell the produce to them only. This limits the alternatives to sell through other channel as farmers have the fear of not being able to get the credit in next session. The marketing cost is approximately 50-60% of the price realized by the farmer. In view of the above facts, the proposed TM would be able to provide an alternate market to the farmers for selling their produce. While above facts points out the existing inefficiency in the value chain, at the same time they also offer an opportunity for a PE to create value by setting up TM. Forward Linkages- Modern Market Out of the total production of more than 44 lakh MT of fruits and vegetables in the major catchments districts of Patna Modern Market, it is estimated that around 55% is consumed within the state and rest 45% goes for interstate consumption markets as mention earlier such markets are located in Jharkhand, West Bengal parts of Orissa and eastern parts of Uttar Pradesh. Also, since Bihar has an advantage in litchi and mango production, there are established linkages with major metros like New Delhi, Mumbai, Hedrabad, Banglore, Lukhnow and Kanpur for supply of litchi and mango. Study of missing markets in Bihar NIDAN, Patna (Bihar) 10

12 The estimated annual consumption of fruits and vegetables in Bihar is approximately 30 Lakh MT. Six catchments district of modern markets meet major part of state demand. Since the surplus is still very high, a significant quantum of produce from the six districts is also sent to neighboring states as mentioned earlier. It is assumed that the proposed TM may be in the position to target 10% of the produce from its catchments, which is estimated to be around 4.5 lakh MT. though there is a huge existing potential market for TM. The annual handling capacity in the beginning may be pegged at 2 lakh MT while keeping the provision of capacity enhancement over a period of time. TM may mainly be tapping the markets of Patna, Ranchi and Calcutta as the potential markets. The catchments districts of TM are already feeding these markets. Rail is the mode of transport to distant markets like Mumbai, Delhi, Kolkata, Ranchi, Delhi, and Hyderabad Etc. During the season produce like lichi and mangoes are sent via air transport also to major consumptions market in the Distance Matrix- Proposed Team to major consumption market(in Km) Ranchi Jamshedpur Hazaribagh Bokaro Dhanbad Kolkata Durgapur Patna Silliguri patna x 356 Country. The Distance Matrix to various consumption markets from the catchments of Modern Market is soon below. It can be observe from the above distance Matrix that most of the major consumption markets are located at km away from proposed TM. Even the distant markets like Kolkata, Durgapur, Silliguri etc are well connected by rail and road network which can ensure smooth and timely supply of materials of these Study of missing markets in Bihar NIDAN, Patna (Bihar) 11

13 markets.there fore, the Private enterprise (PE) can target such markets for supply of fresh fruits and vegetables Mapping of major market for Modern Market. Patna Patna is the largest town and capital of Bihar State. Total population of the District is 47.18lacs as per 2001 census with and urban population of approximately 30 lacs. the population density is 1132 per sq. K.M. The City has connectivity Network with all parts of Country. It liaises on the main line of the eastern railway and is well connected with road and Air Transport. Direct rail links are available to major cities like New Delhi, Kolkata, Mumbai, Chennai, Hyderabad, Trivendrum, Bhubneshwar, Ranchi, Lucknow and Guwahati. All most daily trains connect to Patna to national Capital Delhi. The Cities located close to national highway NH. 30, 31 & 28, which ensure strong connectivity of the city with others parts of the country via road network. Apart from rail and road connectivity the city has good air connectivity also. Daily direct flights from Patna to cities like Delhi, Ranchi, Kolkata, Bhubneshwar (Via Ranchi) and daily hoping flight to Mumbai via Delhi provides good air connectivity. Market size for Fresh fruits & Vegetables in Patna. Patna, Being the Capital of the State & a largest town, offers a big market for fresh vegetables and fruits. As per the NSSO Survey for 2005, Bihar was second Highest (65%) in terms of food expenditure in rural areas for the urban sector; the share of food was highest in Bihar (51%). Study of missing markets in Bihar NIDAN, Patna (Bihar) 12

14 Monthly Expenditure in Rs. on Fruits & Vegetables. Urban Monthly Expenditure in Rs. on Fruits & Vegetables. Rural Vegetables Fresh Fruits Total Vegetables Fresh Fruits Total Source: NSSO Survey 2005 The per capita Income is Rs & is highest in the State. The Share of Vegetables & Fruits in the Total Food expenditure of Urban Consumer is around 10 % while the same for rural consumer is 12%. In view of the ongoing developments and emerging opportunities in the capital and State as well, the over all life style and income is expected to improve and these figures are likely to go up. On the basis of above facts and figure, the estimated annual market size for fresh vegetables & fruits in Patna (Urban) is estimated to be 2.5 lacs MT approximately which is around 9% of the Total inflow in the State. Modern Markets An Innovative Market Mechanism The marketing of agriculture produces in the country has mostly been regulated over the years. This has happened with a two fold objective. First, it has been to ensure food security as the country was for long unable to produce sufficient quantity of food grains to feed its millions and regulation was aimed at providing remunerative prices which would encourage food production. Second, it has been aimed at protecting the interests of farmers who, it was felt, would be deprived of their just returns by traders. There has thus been a policy of minimum support prices for major food grains like wheat, paddy etc. Study of missing markets in Bihar NIDAN, Patna (Bihar) 13

15 To achieve the said objectives, state governments and union territories enacted agriculture produce marketing committee act (APMC), which facilitated setting up of network of physical markets across the country. These markets were aimed at providing easy market access to the farmers and ensure a fair price realization for them in a transparent manner. However, over the years it was realized that these markets instead of protecting the interests of farmers, often became restrictive as the farmers became compelled to bring their produce to the market yard and were often at the mercy of traders and commission agents for sale of their produces. The license system for traders and commission agents further made the APMC markets function in a non transparent manner and led to high marketing costs. As the food retail market makes rapid progress and consumer s become more discerning, it has been found that the APMC markets are coming in the way of free market play restricting choices of both the farmers and consumers. It is against this background that national horticulture mission came with the concept of Modern Markets. The Modern Markets (TM) are envisaged to the implemented in a Public Private Partnership (PPP) mode. To make these TM sustainable, the model provides for modern post harvest infrastructure in these markets along with backward linkages. These markets are proposed to operate on a Hub-and-Spoke format wherein the Modern Market (the hub) would be linked to a number of collection centers (the spoke). The Modern Markets are envisaged to establish backward linkages with farmers through the collection centers and forward linkages through wholesalers, distribution centers, retail cash and carry Study of missing markets in Bihar NIDAN, Patna (Bihar) 14

16 stores, processing units and exporters. Collection centers and villages are supposed to integrate producers and retailers, processing units and exporters into the market system and electronic auction systems in this markets is to be provided in transparency in price fixation and competition. The Modern Markets can market all perishable communities including foods, vegetables, flowers, aromatics, herbs, meat, poultry etc. although non perishable can also be handled in these markets, their proportion is not to exceed 15% of the total through put of the market. Similarly, the proportion of non horticulture products within the perishable commodity is not to exceed 15% of the total through put of the market. The Modern Markets are to be built, owned and operated by the selected Private Enterprise (PE) through competitive bidding process. PE may be individuals, group of farmers/ Growers/ Consumers, Partnership/ proprietary firms, Companies, marketing boards, corporations, co-operatives, producers, organizations and self Help Group. It could also be consortium of entrepreneur firms, inter areas, agro business, cold chain, logistics, warehousing, agri infrastructure and related background. To insure PPP framework, the state governments are allowed to participate in the equity of the Modern Market projects either in the form of direct investment or by offering the assets in the form of existing market / area etc. however, the combined total equity of the state government NHM is not to exceed 49% Of the project equity. PE is to be selected through a competitive bidding process and the Study of missing markets in Bihar NIDAN, Patna (Bihar) 15

17 PE is, based on their business plan may seek the assistance in the form of equity to the maximum extent of 49% of the project equity and the enterprise requiring the list quantum of the equity participation will be selected for implementing the project. Also, the PE has been given full freedom to fix the service charges based on commercial and viability considerations however; PE has to meet the service levels as prescribed in the Operation Management Development Agreement (OMDA) for the Modern Markets Potential for Modern Market in Bihar There are several factors, which favor agriculture sector in Bihar. The state is uniquely position to utilize its rich untapped natural resources such as fertile soil and abandoned water. More importantly, it can avail of benefits of increasing stress on policy reforms in the agriculture sectors in the state along with emphasis on food processing sector both at state and national level. Even the country faces the prospects of stagnation in agriculture, the state is been topped about as a sleeping giant of Indian agriculture. National commission on farmers has concluded that Bihar and eastern Indian present uncommon opportunities for becoming another Fertile crescent even as the present Fertile Crescent (Punjab, Haryana and western UP) has reached a state of economic and ecological distress. Water, the lifeline of agriculture, is abandoned in Bihar and issue is not availability but management. To realize the large potential in the sector, the government of Bihar has further prepared a vision 2015 for food processing sector in Bihar and a range of interventions are under implementation. Study of missing markets in Bihar NIDAN, Patna (Bihar) 16

18 On the demand side, too, Bihar, with the population of 83 million growing at about 2.43% per annum, is a large and growing market for food products. Food is the single largest component of private consumer expenditure, accounting for as much as 59-65% of the total in the state. At conservative estimate, the current market for food in Bihar is a whopping Rs 40, 000 crore. At the estimated national growth rate of consumption of 7% of food consumption market to the Rs 56, 000 crore in 2010 and Rs 83, 000 crore in In view of the above facts and figures, it is evident that the state of Bihar offers unique and tremendous opportunity in horticulture sector for entrepreneurs. The Modern Markets are proposed to be set up in those states that undertake reforms in the laws dealing with the agriculture market to provide direct marketing and permit the setting up of market in private and cooperative sectors. The government of Bihar has taken a step ahead of another states in this direction and abolished APMC act altogether. Combined with the fact that the state, in particular the region adjoin the proposed location for TM, has a large volume and variety of fruits and vegetables, the project would have access to sufficient raw material. Further, in the absence of an alternate market a structure in place at present, the time is appropriate to structure the agricultural marketing system in the state aligned to the Modern Market Proposed Modern Market To harness the potential of horticulture in the state, government of Bihar proposes to establish and develop a modern modern Market near Patna. The proposed Modern Market has been designed to address the infrastructure issue in the existing Study of missing markets in Bihar NIDAN, Patna (Bihar) 17

19 agri produce value chain and aims to establish strong and seamless supply chain mechanism under a hub and scope model. The objective of the proposed market is to enable farmers to realize a higher value for their produce and ensure supply of quality produce to the end consumer. The proposed Modern Market offer significant opportunity for private investors, as it is strategically located in close vicinity of state capital Patna with good road and rail linkages. The Modern Market has a strong catchments area in the radius of 100 km which is the hub of horticulture production in the state. Also, due to sound connectivity through national highways and rail network and located close to Patna, it offers an easy access to various consumption markets both in and outside the state. Features of the Proposed Modern Markets. The Propose Modern Market at Patna would provide and aggregation network for horticulture produce right from the center of production to major consumption market. This market will be equipped with State- of -Art Facilities at par with contemporary international standards to facilitate substantial growth in the production of Horticulture Produce, export and modernization of trade. it will be develop on the concept of complete supply chain management where entire backward and forward linkages from farmers to consumers will be established. The market will be equipped with cool chain, electronic grading, Central electronic auction, ripening chambers colors vision system, quality Station, Spot commodity training, Laboratory for testing and certification, Total Banking Support, Electronic Display Board for Auction, cash spot payment through ATM to the Growers, one Study of missing markets in Bihar NIDAN, Patna (Bihar) 18

20 stop shopping for the Inputs, agri. clinic and extension services, Information kiosk with some free products on weather insurance, life insurance, Animal Health Insurance and educational loan facilities etc that will benefit each of the stake holder in the value chain. Location of the Proposed Modern Market. The Modern Markets has been proposed on Patna Gaya road and is located around 22k.m away from Patna. The land is located opposite to Pothahi Railway Station along Patna Gaya rail route and has good road connectivity with Patna, Muzaffarpur & Begusarai, Major production and centers. It also very close to national highway NH-30 (Mohania in Kaimur District of Bihar to Bakhtiarpur in Bihar) & 31 (Barh in Bihar to Guwahati in Assam). The Proposed site is an area of approximately 50acres. The site is linear peace of land, which is relatively flat, 5 feet below the road level with very little vegetation. This site is suitable for Modern Market facility, because of the following advantages. Accessibility. The location of the site is junction of the different roads that establishrs it s connectivity and linkages to surrounding areas comma as this highway connect Patna to Nalanda Hazipur Gaya etc. The proposed market will there fore diaccessible for growing areas at all the times and will have fairly good linkages. Produce from surrounding areas of Hazipur, Muzaffarpur, Nalanda Gaya etc. i.e. north eastern part of Bihar can be brause here. Site Conditions. The terrain of proposed site is relatively flat. Therefore the construction will be economical. However under the Modern Market scheme, a PE can also acquire land own it s own and use it for setting of TM. However, it maybe Study of missing markets in Bihar NIDAN, Patna (Bihar) 19

21 a time consuming process and because of well connected and suitable site is all ready available with the govt. of Bihar for the purpose, it maybe advisable to use the said site for setting of TM. Study of missing markets in Bihar NIDAN, Patna (Bihar) 20