Harvesting a good Harvest
Part of India’s hunger problem is its inability to offer efficient storage facilities for its harvested food grains and fruits and vegetables. Existing storage facilities are woefully inadequate. Mayank Dhanuka, Director, Origo Commodities India Pvt Ltd, tells Smart AgriPost about post-harvest management scenario in India.
How are you helping in post harvest management?
In India, an average of nearly 15% of grains and close to 40% of perishables are wasted due to improper infrastructure and inefficiencies in the supply chain. Origo Commodities was created to direct efforts towards reducing these inefficiencies in the supply chain.
Origo’s business model extends all the way from procurement at the farm gate from farmers, transportation of that commodity to our warehouses, quality certification of the commodity, scientific storage, and to warehouse receipt financing so that farmers can monetize their produce and market linkage. The company helps enable farmers to sell their commodities at the right price to the end consumer without intermediaries.
Origo operates across three business verticals – Procurement, Warehouse Management and Collateral Management.
What are the key challenges in India in post harvest management?
A.Very often farmers deal with multiple challenges that include financing and market linkgages. In the existing supply chain, the major challenges for better price realization for farmers are the Produce Financing (Warehouse Receipt Financing), Direct Market Accessibility and Lack of Storage.
The inability of farmers to monetize the produce post harvest either through Warehouse Receipt Financing or having access to end consumer of his goods, forces them to sell their goods to the first intermediary that shows up at their doorstep, at very low prices. This sale of goods, termed “Distress Sale” leads to low price discovery on the harvest.
Another factor that prevents farmers from realizing the right value of their produce is the value addition. Preliminary processing adds approximately 5-10% to the sale price with minimal charges to the farmers.
What’s collateral management? How will it help farmers’ price discovery?
At the time of harvest, there is usually an oversupply of agriculture commodity in the mandis/markets. The imbalance in supply demand causes the seller’s prices to be low during the season time. As the season progresses and commodity consumption starts, the prices usually start to rise (barring any other factor impacting the price) due to increased demand and constant supply. Given that farmers are under financial obligations throughout the year, selling the commodity to them is the best solution and probably the only solution towards fulfilling those obligations.
Warehouse Receipt Financing helps to monetize the produce without actually selling it. Farmers can deposit their goods in warehouses such as Origo’s facilities and obtain a receipt for the quantity/quality deposited. Against this receipt, farmers can get obtain upto75% financing which can meet their financial obligations in the interim. Now, whenever the price is right, the farmer can sell his goods and be able to get the right price. In our experience this price differential can be as high as 20%, which is very positive for farmers.
Will a better post harvest management system enable farmers to get a good price for their produce, and how?
Yes, the average price that farmers realise in India is around 30-35% of consumer prices, as opposed to 50-65% in most of the developed countries. The main reason behind is a highly inefficient supply chain and the regional imbalances of storage and value-add infrastructure. The farmers produce moves through a long, inefficient supply chain including aggregators, commission agents, traders and processors to consumers, without much value-add in the system.
How do you grade quality standard of agriculture commodities?
Origo operates a network of five stationary labs mapped with a network of over 200 field level labs across 15 states in a hub and spoke model. All the labs are ISO 9001:2008 Certified and one of the labs is likely to attain the highest accreditation i.e. NABL (National Accreditation Board for Testing & Certification Laboratories) accreditation shortly. This robust network allows us to test and grade most of the agriculture commodities being stored in our warehouses across the country.
What do you say about government policies regarding post-harvest management?
A.While the Government seems to be keen on PPP projects in the fields of Warehousing, Silos, PMS (Preservation, Maintenance and Security of food grains), MSP procurement from farmers etc., we would like to highlight some very important policy issues that should be addressed as soon as possible in order to achieve these objectives. These are Recognition and policy level standing to Private WSP (Warehouse Services Providers), Multiplicity of licenses and laws for WSPs, Lack of clarity on service tax, Unacceptable Storage Loss Norms and Quality Testing and MOU (Measurement of uncertainties).
How are you different from the middlemen or private mandis who provide similar kind of services?
We believe that all the ecosystem partners including middlemen or private mandis are relevant, but making the supply chain inefficient. We suggest that the government should construct integrated supply chain centres (warehouse + value add infrastructure) and declare warehouse as a marketplace with certain value add infrastructure, physical and online auction platforms. Even the MSP procurement by FCI / State agencies can be undertaken at the warehouses which can save transaction, handling and transportation cost to the government. These integrated centres can bring farmers closer to buyers, with required value-adds for better price realisation.
There are more than 7,500 APMC mandis or yards across India, each with its own set of rules and regulations and covering an average area of 450 sq km. These mandis not only control the entire trade of agricultural goods but also have a significant bearing on the final price of the produce. However, due to insufficient coverage and inefficient price discovery, several states have done away with APMC mandis. In fact, the government has now allowed the creation of private mandis.