Commencing its operations in 2010, Origo Commodities at present operates over 350 warehouses across 16 states and handles close to 3 million tonne of agricultural commodities. Mayank Dhanuka, director, Origo Commodities, spoke to FE’s Sandip Das on challenges faced in marketing and storage of agricultural produce. Excerpts:
As you operate in many states, what are key grey areas in agricultural marketing and storage?
Across the states, the main issues are inefficient market linkages and inadequate storage infrastructure for farmers. The Agricultural Produce Marketing Committee (APMC) mandis are mostly too far for farmers to be able to take their goods. For the farmers who are close to an APMC, the structure of intermediaries that has been developed over the years, pose a barrier in price discovery. Online markets remain a distant dream for farmers, to be able to realise the prices that the commodities are trading at across the country. In terms of storage, some capacities have been developed by the private players, the capacity on the rural side is still very weak. The urban warehouse infrastructure mainly caters to the trading houses or the large individual traders.
What are the other challenges faced by the farmers in marketing their produce?
The inability of farmers to monetise 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. Distress sale leads to low price discovery on the harvest. While the APMC was structured to take care of this very requirement, their coverage has not been adequate. Also, APMCs are not able to provide other services, including financing on the stock which requires the services of collateral managers and financial institutions.
Another key factor that prevents farmers from realising the right value for their produce is the value addition. Preliminary processing adds 5-10% to the sale price. Farmers require a complete eco-system that includes scientific storage, warehouse receipt financing, market linkage and preliminary processing.
Explain the concept of collateral management, how it helps farmers in price discovery?
At the time of harvest, there is usually an oversupply of agriculture commodity in the mandis. The imbalance in supply-demand causes the seller’s prices to be low during the season. Warehouse Receipt Financing helps to monetise the produce without actually selling it. Farmers can deposit their goods in warehouses such as our facilities and obtain a receipt for the quantity/quality deposited. Against this receipt, farmers can get up to75% 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.
Given that high-level committee (HLC) for Food Corporation of India (FCI) restructuring has suggested participation of private players in storage and procurement of grain, would you be interested in handling grains on behalf of FCI or state governments?
We work with many government institutions in handling grains on behalf of FCI and various state governments. Currently, we are handling around 2.7 million tonne of rice, paddy and wheat for PUNGRAIN, a procurement arm of Punjab government. We are also working with the Punjab State Warehousing Corporation to manage grain handling at their warehouses. We are also in talks with many other state governments and state warehousing corporations to manage complete warehousing and grain handling operations for them.
We are associated with Nabard for transforming the Primary Agriculture Cooperative Societies (PACS) into Commodity Multi Services Centres. Our role is to empower the PACS to service farmers on the post harvest side helping farmers for storage, warehouse receipts financing and execute strategic market linkages. We have been executing this project for Nabard in Andhra Pradesh, Telangana and Rajasthan.