COMPARATIVE EVALUATION OF PARTICIPANTS
SATISFACTION AND PERCEPTION IN CASTOR TRADE:
                 NSEL VIZ A VIZ APMC

...
DECLARATION BY STUDENT




      I   hereby        declare    that   the    project      entitled
“COMPARATIVE EVALUATION ...
INSTITUTE OF AGRIBUSINESS MANAGEMENT
       NAVSARI AGRICULTURAL UNIVERSITY
                         NAVSARI-396 450




 ...
CERTIFICATE
                                              This is certify that
                            Mr. Karkar Hite...
ACKNOWLEDGEMENT


      A good project work requires sound knowledge of the subject
concerned and skilled to make proper u...
PREFACE


     MBA (Agribusiness) is the stepping stone to management career. In
order to achieve practical, positive and ...
CONTENTS

Sr. No.            Particulars              Page No.

Chapter 1          Industry Profile            1

        ...
List of Tables

Table No.                      Particulars                        Page No.


   4.1                     Ag...
4.14             Farmers Awareness about NSEL                62


4.15   Farmers awareness for Promotional Activity by NSE...
4.29   Business Opportunity available for NSEL as perceived   77
                            by farmers

4.30           Ar...
LIST OF FIGURES

Fig. No.                        Particulars                           Page No.

  2.1                   W...
4.9           Farmers group as per cropping pattern          56

4.10     Market preference by farmers for sale of produce...
4.27        Areas for Improvement in the system of NSEL          75

4.28                 Effects of NSEL to Farmers      ...
EXECUTIVE SUMMARY

   National Spot Exchange Ltd is electronic spot market. The foundation
stone for National Spot Exchang...
CHAPTER- 1

PROFILE OF COMMODITY
      MARKET




                       1
INDUSTRY PROFILE
       Agriculture is key sector occupying an important position in the
Indian Economy. The agriculture s...
set up mandi boards at the level of a district. It is the mandi board that
evaluates proposals to set up new mandis and pe...
commercial castor oil mainly to USA, Europe and Japan. Though the
 production of castor seed is concentrated in Gujarat an...
procurement and distribution of commodities; and Tea Board, Coffee Board,
Coir Board, Rubber Board, Tobacco Board, Spices ...
protect the interests of farmers. Barring a few, most of the states and union
territories have embarked upon a massive pro...
in more than 80% of the markets. Farmers’ rest houses exist in more than
half of the regulated markets. All this shows tha...
markets to enable farmers to undertake a market-driven production plan
   and adopt modern marketing practices.

         ...
CURRENT STATUS OF AGRICULTURAL
MARKETING




      Consequent upon Green Revolution, production has increased; India
has b...
transparent spot market, which can lead to development of structured
mechanism for marketing of agriculture produce.

WHY ...
discovery persist. Therefore, NCEL has taken up an initiative to launch a
National Spot Market. Such a national level plat...
towards the mandi tax. Secondary sales take place on the basis of bilateral
negotiations between known parties having an e...
participate in the spot exchanges only through members. Members in turn
may seek license from respective mandi Samities of...
margins will benefit farmers who can use both futures and spot platform to
avoid distress sales.

   Thus, commodity excha...
COMPANY PROFILE




                  15
NATIONAL SPOT EXCHANGE LTD
                              MUMBAI

BACKGROUND

   National Spot Exchange is poised to set up...
NAFED (National Agricultural Cooperative Marketing Federation of India
 Limited), the leading Government agency, engages i...
 To promote grading and standardization of agricultural produces and
  create a market, where banks and money lending age...
OPERATING SYSTEM OF NSEL




                           19
TRADING SYSTEM

     National Spot Exchange is providing an online screen based trading
system, which can be accessed thro...
In case the seller fails to give delivery, the position will be
auctioned/closed out at the risk and cost of the seller se...
2. Daily rates committee: decides the daily opening, high, low and close of
 the day.

 3. Survey committee: certify the q...
 Facilitating collateral financing and borrowing against warehouse
   receipts.

 Customized services relating to storag...
THE DIFFERENCE BETWEEN OPEN OUTCRY
       AUCTION AND ONLINE TRADING

           OPEN-OUTCRY                              ...
COMPARISION OF DIFFERENT MARKETS

 PARTICULARS            SPOT                  FUTURE          ELECTRONIC
               ...
 Guaranteed trade with weighment/Quality assurance.

 A new distribution channel with trade guarantee.

 A complimentar...
ADVANTAGES TO TRADERS

 Traders would get a bigger and liquid market, where they can sell huge
   quantity.

 Eliminatio...
 All these objectives are achieved without any load on the exchequer- no
          subsidy, no grant, no tax, no investme...
sell cotton bales on NSEL platform on the same terms.

Nov-09   Government of Orissa granted license. Commencement of
    ...
CHAPTER - 2

THE PROJECT




              30
A STUDY

                                   ON

         “COMPARATIVE EVALUTION OF
      PARTICIPANTS SATISFACTION AND
   ...
Gujarat

      Apart from the Southern areas, castor seed is produced in all parts of
Gujarat. During 2006-07, around 4.90...
other countries are also produces it but that fulfils only their domestic
demand.

      Total production in India was 7.8...
APPLICATIONS OF CASTOR SEED


            INDUSTRIES                         APPLICATION

Agriculture                     ...
WORLD CASTOR SEED PRODUCERS

                                                                          Fig. 2.1


        ...
CASTOR SEED PRODUCTION (INDIA & GUJARAT)

                                                                     Fig. 2.3

 ...
Average yield for the year 2009-10 is 1679 kg/hectare as against 1608
                             kg/hectare during the y...
ESTIMATED CASTOR SEED YIELD, INDIA (2009-10)

                                                                         Fig...
ESTIMATED AREA UNDER CASTOR SEED CROP,
                                                         GUJARAT (2009-10)

       ...
THE MAJOR FACTORS INFLUENCING CASTOR SEED
 MARKETS ARE…

 Variation in castor seed domestic acreage based on yield and pr...
making by participants. This study also focus to find out such criteria of
decision making by participants so as to base o...
LITERATURE REVIEW
Vandeveer (2006) in his study “Learning outcomes- Perception”

   It is the way people organize and inte...
CHAPTER - 3

RESEARCH METHODOLOGY




                       43
SOURCES OF INFORMATION

SOURCES OF PRIMARY DATA

 Data was collected using survey method by conducting personal
  intervi...
and, (2) Farmers not traded with NSEL. From these strata farmers were
        selected by convenience sampling.

        S...
LIMITATIONS OF PROJECT STUDY

    Following limitations may come while conducting the project.

   This survey is totally...
CHAPTER - 4

DATA PROCESSING & ANALYSIS




                             47
FARMER’SANALYSIS

1. Age Groups of Farmers


                      Table 4.1: Age Group of Farmers


    Sr. No.     Age (...
2. Education level of Farmers.


                  Table 4.2: Educational Level of Farmers


        Sr. No.     Education...
3. Income Source of Farmers


                          Table 4.3: Income sources of Farmers


                Sr. No.    ...
4. Farming as major Income source (Based on 562 Farmers)


                            Table 4.4 Farming as Income source
...
5. Annual Income of the Farmers

                              Table: 4.5 Annual Income


       Sr. No           Income R...
6. Distribution of Farmers as per Land Holding Size


      Table No. 4.6 Distribution of farmer as per land holding size
...
7. Irrigation pattern


                     Table: 4.7 Irrigation pattern


    Sr. No   Land Holding (Ha.)       Total a...
8.   Crops Cultivated by Farmers

                           Table 4.8 crops cultivated by Farmers


               Sr. No...
9. Cropping pattern followed by farmers


            Table 4.9 Cropping pattern followed by farmers


     Sr. No        ...
10.    Market Preference by Farmers



      Table 4.10 Markets preferred by the farmers for sell of produce


          S...
11.   Crop wise market preference by Farmers


      Table 4.11 Crop wise Market Preference by Farmers


      Sr. No     ...
12.        Factors considered for Market Preference by farmers


         Table 4.12 Factors considered by farmers for Mar...
Fig.4.12


        Factors considered by Farmers for Market
                       preference
                            ...
13.   Sources of Price Information for the farmers for various
  commodities at different market.


                 Table...
14.   Farmers awareness regarding NSEL


              Table 4.14 Farmers Awareness about NSEL


       Sr. No.     Awaren...
15.    Farmers awareness for Promotional Activity by NSEL



      Table 4.15 Farmers awareness for Promotional Activity b...
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc
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Comparative evaluation of participants satisfaction & perception in castor trade nsel viz a viz apmc

  1. 1. COMPARATIVE EVALUATION OF PARTICIPANTS SATISFACTION AND PERCEPTION IN CASTOR TRADE: NSEL VIZ A VIZ APMC PROJECT SUBMITTED TO THE INSTITUTE OF AGRIBUSINESS MANAGEMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION (AGRIBUSINESS MANAGEMENT) 2009-10 BY: KARKAR HITESHKUMAR KALUBHAI (04-0409-2008) INSTITUTE OF AGRIBUSINESS MANAGEMENT NAVSARI AGRICULTURAL UNIVERSITY NAVSARI – 396 450 1
  2. 2. DECLARATION BY STUDENT I hereby declare that the project entitled “COMPARATIVE EVALUATION OF PARTICIPANTS SATISFACTION AND PERCEPTION IN CASTOR TRADE: NSEL VIZ A VIZ APMC FOR NATIONAL SPOT EXCHANGE LTD.” submitted for the M.B.A.(Agribusiness) Degree is my original work and the dissertation has not formed the basis for the award of any degree, associate ship, fellowship or any other similar titles. Place: IABM, Navsari Date: 10th June, 2010 Karkar Hiteshkumar Kalubhai Rg. No. 04-0409-2008 2
  3. 3. INSTITUTE OF AGRIBUSINESS MANAGEMENT NAVSARI AGRICULTURAL UNIVERSITY NAVSARI-396 450 CERTIFICATE This is to certify that the project entitled “COMPARATIVE EVALUATION OF PARTICIPANTS SATISFACTION AND PERCEPTION IN CASTOR TRADE: NSEL VIZ A VIZ APMC FOR NATIONAL SPOT EXCHANGE LTD.” is the bonafide research work carried out by Karkar Hiteshkumar Kalubhai (04-0409-2008) student of M.B.A.(Agribusiness) during the year 2009 -2010, in partial fulfillment of the requirements for the award of the Degree of Master of Business Administration(Agribusiness) under my guidance and supervision and that the project has not formed the basis for the award previously of any degree, diploma, associate ship, fellowship or any other similar title. Place: Navsari Date: 10th June, 2010 Prof. Rahul Thakkar Asst. Professor IABM, Navsari 3
  4. 4. CERTIFICATE This is certify that Mr. Karkar Hiteshkumar Kalubhai, Student of MBA (Agribusiness management) 4th semester in the Institute Of Agribusiness Management, Navsari Agricultural University, Navsari has successfully completed his PROJECT WORK on “COMPARATIVE EVALUATION OF PARTICIPANTS SATISFACTION AND PERCEPTION IN CASTOR TRADE: NSEL VIZ A VIZ APMC” in National Spot Exchange Limited Mumbai, during February-April, 2010. Anjani Sinha MD & CEO (NSEL) National Spot Exchange Limited 102 A, Landmark, Suren Road, Chakala, Andheri(East), Mumbai 400 093, India. Tel:+91-22-6761 9900, Fax:+91-22-6761 9931 Email:info@nationalspotexchange.com www.nationalspotexchange.com 4
  5. 5. ACKNOWLEDGEMENT A good project work requires sound knowledge of the subject concerned and skilled to make proper use of this knowledge. I am very grateful to all who equipped me with the right frame of mind to make me still more receptive to such knowledge and skill. I am grateful to Mr. Amit Mukherjee, Asst. Manager, Business Development, National Spot Exchange Ltd. for giving me permission to undertake my summer project. I express my sincere thanks to Mr. Kiran Patel, Business Development, National Spot Exchange Ltd, Palanpur who helped me throughout my summer training period and instruct me regarding the methodology of carrying out the training. I am also thankful to staff of NSEL at Palanpur for their kind support during the entire period of my training. I am thankful to Dr. R. R. Shah, Dean, IABM, Navsari for his guidance, continuous support and cooperation throughout my training, without which the present work would not have been possible. I am greatly indebted to Mr. Rahul Thakkar, my institutional project guide for availing me of his competent guidance under which I was able to accomplish my project work successfully. I am also Thankful to faculty of my institute Dr. Ruchira Shukla and Dr. Alpesh Leua for their wholehearted support for the completion of the project. I am grateful to all the respondents (Farmers) without their kind cooperation it would not be possible for me to complete my project work. Also, I would like to thank to all my Friends. And my beloved Parents Karkar Hiteshkumar Kalubhai (04-0409-2008) 5
  6. 6. PREFACE MBA (Agribusiness) is the stepping stone to management career. In order to achieve practical, positive and concrete result, the classroom learning has to be effectively supplemented to relation of the situation existing outside the classroom for developing healthy managerial and administrative skills in a potential manager. It is necessary that the theoretical knowledge must be supplemented with exposure to the real environment. The report comprises all the important aspects of my training and all the aspects have been presented under different headings in the forthcoming pages. An attempt had been made to present a report covering different aspects of my training. This report would not have been possible in present form without the support and guidance that I received from various people at different stages of the project. 6
  7. 7. CONTENTS Sr. No. Particulars Page No. Chapter 1 Industry Profile 1 Company Profile 15 Chapter 2 The Project 30 Introduction 31 Objectives of the Study 40 Literature review 42 Chapter 3 Research Methodology 43 Chapter 4 Data Processing and Analysis 47 Farmers analysis 48 Chapter 5 Findings and Recommendations 80 Findings 81 Recommendations 84 Conclusion 88 Bibliography 89 Annexure 91 7
  8. 8. List of Tables Table No. Particulars Page No. 4.1 Age group of Farmers 48 4.2 Education Level of Farmers 49 4.3 Income source of farmers 50 4.4 Farming as major Income source 51 4.5 Annual Income of the farmers 52 4.6 Distribution of Farmers as per Land holding size 53 4.7 Irrigation Pattern 54 4.8 Crops cultivated by the farmers 55 4.9 Farmers group as per cropping pattern 56 4.10 Market preference by farmers for sale of produce 57 4.11 Crop wise Market Preference by Farmers 58 4.12 Factors considered for Market Preference by farmers 59 4.13 Sources of Price Information 61 8
  9. 9. 4.14 Farmers Awareness about NSEL 62 4.15 Farmers awareness for Promotional Activity by NSEL 63 4.16 Sources of Awareness about NSEL 64 4.17 Farmers ever Deal with NSEL 65 4.18 Reasons for why Farmers prefer to deal with NSEL 66 4.19 Reasons for why Farmers not deal with NSEL 67 4.20 Satisfaction Level of Farmers when dealt with NSEL 68 4.21 Farmers ready to deal with NSEL again in Future 69 4.22 Farmers who used other services of NSEL 70 4.23 Farmers Perception about NSEL 71 4.24 Impact of NSEL on the income of farmers linked with 72 NSEL 4.25 Does NSEL really follow what it said in marketing 73 campaign? 4.26 Farmer’s opinion about need for improvement in the 74 System of NSEL 4.27 Areas for Improvement in the system of NSEL 75 4.28 Effects of NSEL to Farmers 76 9
  10. 10. 4.29 Business Opportunity available for NSEL as perceived 77 by farmers 4.30 Are there any competitors for NSEL 78 4.31 Competitors of NSEL 79 10
  11. 11. LIST OF FIGURES Fig. No. Particulars Page No. 2.1 World castor seed Producers 35 2.2 Castor seed production Trend in India 35 2.3 Castor seed production (India & Gujarat) 36 2.4 Estimated area under castor seed crop, India (2009-10) 37 2.5 Estimated castor seed production, India (2009-10) 37 2.6 Estimated castor seed yield, India (2009-10) 38 2.7 Estimated castor seed production, Gujarat (2009-10) 38 2.8 Estimated area under castor seed crop, Gujarat (2009-10) 39 2.9 Estimated castor seed yield, Gujarat (2009-10) 39 4.1 Age group of Farmers 48 4.2 Education Level of Farmers 49 4.3 Income source of farmers 50 4.4 Farming as major Income source 51 4.5 Annual Income of the farmers 52 4.6 Distribution of Farmers as per Land holding size 53 4.7 Irrigation Pattern 54 4.8 Crops cultivated by the farmers 55 11
  12. 12. 4.9 Farmers group as per cropping pattern 56 4.10 Market preference by farmers for sale of produce 57 4.11 Crop wise Market Preference by Farmers 58 4.12 Factors considered for Market Preference by farmers 60 4.13 Sources of Price Information 61 4.14 Farmers Awareness about NSEL 62 4.15 Farmers awareness for Promotional Activity by NSEL 63 4.16 Sources of Awareness about NSEL 64 4.17 Farmers ever Deal with NSEL 65 4.18 Reasons for why Farmers prefer to deal with NSEL 66 4.19 Reasons for why Farmers not deal with NSEL 67 4.20 Satisfaction Level of Farmers when dealt with NSEL 68 4.21 Farmers ready to deal with NSEL again in Future 69 4.22 Farmers who used other services of NSEL 70 4.23 Farmers Perception about NSEL 71 4.24 Impact of NSEL on the income of farmers linked with 72 NSEL 4.25 Does NSEL really follow what it said in marketing 73 campaign? 4.26 Farmer’s opinion about need for improvement in the 74 System of NSEL 12
  13. 13. 4.27 Areas for Improvement in the system of NSEL 75 4.28 Effects of NSEL to Farmers 76 4.29 Business Opportunity available for NSEL as perceived by 77 farmers 4.30 Are there any competitors for NSEL 78 4.31 Competitors of NSEL 79 13
  14. 14. EXECUTIVE SUMMARY National Spot Exchange Ltd is electronic spot market. The foundation stone for National Spot Exchange was laid on 10th February, 2005 in New Delhi in a function presided over by Shri Sharad Pawar, Honorable Union Minister for Agriculture and Consumer Affairs, Food and Public Distribution. The project work on “A Study on the Comparative evaluation of Participants Satisfaction and Perception in Castor trade: NSEL viz a viz APMC” was carried out under the guidance of Project Guide Mr.Amit Mukherjee , Asstt. Manager NSEL, Palanpur, Gujarat and Faculty Guide Prof. Rahul Thakkar, IABM, Navsari. The objectives of the project were to study the satisfaction and perception of participants in castor trade and market share of NSEL in castor trade and the effectiveness of marketing strategies of NSEL. The Project also aimed to conduct strength, weakness, opportunity and Threats analysis for NSEL. A survey of 600 farmers was carried out to study the objectives stated above. For the collection of primary data questionnaire was used. Recent secondary data from internet, magazine, and internal record of NSEL was collected. The major finding which came out of my study are in Palanpur taluka majority of the farmers is highly satisfied with NSEL and perceive it as Government-Private partnership. Close competitor of NSEL are traders and APMC. Based on the above analysis NSEL should increase their promotional activities to create mass awareness among farmers in the other villages of Palanpur taluka. Also it should start multi-commodity trading in order to expand its operations in the North Gujarat. 14
  15. 15. CHAPTER- 1 PROFILE OF COMMODITY MARKET 1
  16. 16. INDUSTRY PROFILE Agriculture is key sector occupying an important position in the Indian Economy. The agriculture sector contributes almost 17% of India’s Gross Domestic Product (GDP). The effective contribution of agriculture to the national economy is far greater on account of its backward and forward linkage with other sectors. MICROSTRUCTURE OF PHYSICAL COMMODITY MARKETS All agricultural commodities in India trade in wholesale markets or mandis where the price of the commodity is set. If it is a principal commodity and the market determined price is below a threshold (MSP), the trader has to take delivery at the MSP. In return, the trader is compensated by the mandi which is in turn, compensated by the government. Some of the principal crops are rice, wheat, pulses, oilseeds, cotton and sugarcane. Today, there are approximately 25 agricultural commodities for which the government of India still sets a “minimum support price” (MSP). Agricultural commodity markets in India started as areas specific to limited geographical locations where producers and buyers collected to trade their goods. APMC or Mandis are official markets set up at a specific location to trade a set of agricultural commodities. They are sanctioned and “governed” by a mandi board which can be a committee or a trust. These are, in turn, governed by a state government state mandi board. Most mandis trade at least one primary commodity. The physical infrastructure of the mandi consists of a yard with platforms or open sheds where farmers bring their crops to sell to traders. Mandis are set up only with the permission of state governments. Each state has a state agriculture marketing boards (SAMB). These, in turn, 2
  17. 17. set up mandi boards at the level of a district. It is the mandi board that evaluates proposals to set up new mandis and permits the creation of a mandi. Initially, mandis were set up only at the level of a specific district. But their numbers have been rapidly increasing to allow trading at a more micro-level. Today there are several mandis to a district, with around 750 mandis that facilitate the trade of 140 crops and their different varieties, all across India. Most mandis in the same district trade a very similar set of commodities in the same district. This makes for a very fragmented market for any single agricultural commodities across the vast geographical reach of India India exports castor seed, oil and also meal. However the oil export has the largest share as it is a value added product from castor seed. There is a large scope for improving India’s earning from castor by converting the castor oil in various derivatives. However, India has confined itself to exporting only castor oil with little efforts to explore the possibilities of producing and exporting its derivatives. But in countries like Brazil and China, its derivatives are being produced and exported though to a limited quantity. Lately in view of high price volatility and stagnant world output of castor oil, its substitutes have been developed. India is the world’s largest Castor grower country dominating the global trade with a share of more than80%. Despite the dominance in the global trade platform, India does not enjoy role of a price-setter, but merely a price-taker. India has limited domestic consumption with less than 10% production going for a value addition. The main consuming segments are Paints (45%), Soaps (30%) and Lubricants (20%). In India castor seed is grown mainly in Mehsana, Banaskantha and Saurashtra-Kutch region of Gujarat and Nalgonda and Mahboobnagar districts of Andhra Pradesh. India exports around 3 lakhs tonne of 3
  18. 18. commercial castor oil mainly to USA, Europe and Japan. Though the production of castor seed is concentrated in Gujarat and Andhra Pradesh, its consumption is spread across the country. The major castor seed markets in Gujarat are Rajkot, Ahmedabad, Gondal, Gadwal, Bhabar, Disa and Kadi while in Andhra Pradesh they are Jedcheria and Yemignoor. REGULATORY FRAMEWORK OF PHYSICAL COMMODITY (SPOT) MARKETS Agriculture continues to be the mainstay of life for a majority of the Indian population even though its contribution as a percentage of the GDP has decreased to 17%. The agricultural sector employs more than 60% of the country's workforce. Significant strides have been made in agriculture production since Independence. The subject of agriculture and agricultural marketing is dealt with both by the states as well as the central government. Starting from 1951, the different Five-Year Plans laid stress on the development of physical markets, farm and off-farm storage structures, facilities for standardization and grading, packaging, transportation, etc. The development of horticulture marketing attracted attention of policy makers during the 3rd Five-Year Plan. In 1965, Central Warehousing Corporation, Food Corporation of India, Agricultural Prices Commission (later renamed as Commission for Agricultural Costs and Prices) and several other organizations came into existence. Besides, a number of organizations were set up in the form of commodity boards, cooperative federations, and export promotion councils for monitoring and boosting the production, consumption, marketing, and export of various agricultural commodities. The prominent among them included Cotton Corporation of India Ltd (CCI), Jute Corporation of India Ltd (JCI), National Cooperative Development Corporation Ltd (NCDC), National Agricultural Cooperative Marketing Federation ltd (NAFED), National Tobacco Growers Federation ltd (NTGF), Tribal Cooperative Marketing Development Federation ltd (TRIFED), National Consumers Cooperative Federation ltd (NCCF), etc for 4
  19. 19. procurement and distribution of commodities; and Tea Board, Coffee Board, Coir Board, Rubber Board, Tobacco Board, Spices Board, Coconut Board, Central Silk Board, National Dairy Development Board (NDDB), National Horticulture Board (NHB), State Trading Corporation (STC), Agricultural & Processed Foods Export Development Authority (APEDA), Marine Products Export Development Authority (MPEDA), Indian Silk Export Promotion Council, Cashew nuts Export Promotion Council of India (CEPC), etc. for promotion of production and export of specific commodities. Most agricultural commodity markets generally operate under the normal forces of demand and supply. However, as discussed earlier, with a view to protecting farmers' interest and to encourage them to increase production, the government also fixes minimum support/statutory prices for some crops and makes arrangements for their purchase on state account whenever their price falls below the support level. The role of the government normally is limited to protecting the interests of producers and consumers only in respect of wage goods, mass consumption goods, and essential goods. The role of the government is to promote organized marketing of agricultural commodities in the country through a network of regulated markets. To achieve an efficient system of buying and selling of agricultural commodities, most of the state governments and union territories have enacted legislations (Agriculture Produce Marketing Committee Act) to provide for regulation of agricultural-produce markets. The basic objective of setting up a network of physical markets is to ensure a reasonable gain for the farmers by creating a favourable environment for fair play of supply and demand forces, regulation of market practices, and transparency in transactions. With a view to coping with the increasing agricultural production, the number of regulated markets has also been increasing in the country. While by the end of 1950 there were 286 regulated markets in the country, today the number stands at 7521. The central government advised all the state governments to enact a marketing legislation to promote competitive and transparent transactional methods to 5
  20. 20. protect the interests of farmers. Barring a few, most of the states and union territories have embarked upon a massive programme of regulation of markets after enacting the legislation. Most of these regulated markets are wholesale markets. Besides, the country has 27,294 rural periodical markets, about 15% of which function under the ambit of the regulation. The advent of regulated markets has helped mitigate e market handicaps of producers/sellers at the wholesale assembling level. But, the rural periodic markets in general, and the tribal markets in particular, remained out of its developmental ambit. The area served by each market across the states reveals large variations. The area served per regulated market varies from 74 in Punjab to 2257 in Assam. On an average, a regulated market serves 459 in the country, which is quite high. Farmers have to travel long distances with their produce to avail the facility of regulated markets. The National Commission on Agriculture (1976) had recommended that the facility of a regulated market should be available to the farmers within a radius of 5 km and if this is considered a benchmark, the command area of a market should not exceed 80. However, in the existing scenario, except Delhi, Punjab, Chandigarh and Pondicherry, in no state is the density of regulated markets close to the norm. Auction platforms are needed in the market for price settlement of the produce in a congenial atmosphere between buyers and sellers. Both covered and open auction platforms exist in only two-thirds of the regulated markets. When some commodities that are brought for sale contain higher moisture than the desired level, there should be a space for drying. Present only one-fourth of the markets have common drying yards. Trader modules viz. shop go-down and platform in front of shop exist in 63% of the markets. Cold storage units are needed in the market where perishable commodities are brought for sale. They are brought for sale only in a few markets. The cold storage units exist only in 9% of the markets and grading facilities exist in less than one-third of the markets. The basic facilities such as internal roads, boundary walls, electric lights, loading-unloading facilities, and weighing equipment are available 6
  21. 21. in more than 80% of the markets. Farmers’ rest houses exist in more than half of the regulated markets. All this shows that there is considerable gap in the facilities available in the market yards. As mentioned earlier, agricultural markets in most parts of the country are established and regulated under the State APMC (Agriculture Produce Marketing Committee) Act. The whole geographical area in each state is divided and declared as a market area wherein the markets are managed by Market Committees constituted by the state government. Once a particular area is declared a ma _ area and falls under the jurisdiction of a Market Committee, no person or agency is allowed to free carry on wholesale marketing activities. The monopoly of government regulated wholesale market has prevented the development of a competitive marketing system in the country, providing no help to farmers in direct marketing, organizing retailing, smooth supply of raw materials to agro- process industries, and adoption of innovative marketing system and technologies. Efficient agricultural marketing is essential for the development of the agriculture sector as it provide outlets and incentives for increased production; the marketing system contributes significantly to the commercialization of subsistence farmers. Worldwide, governments have recognized the importance of liberalized agricultural markets. Ta Force on Agricultural Marketing Reforms, set up by the Ministry of Agriculture, has suggested promotion of new and competitive agricultural markets in private and cooperative sectors to encourage dire marketing and contract farming programme, facilitate industries and large trading companies undertake procurement of agricultural commodities directly from the farmer's fields, and establish effective linkages between the farm production and retail chains. There is a necessity to integrate farm production with national and international 7
  22. 22. markets to enable farmers to undertake a market-driven production plan and adopt modern marketing practices. If agricultural markets are to be developed in private and cooperative sectors and provided competitive environment as compared to regulated markets, the existing framework of the APMC will have to undergo a change. The state has to facilitate varying models of ownership of markets accelerate investment in the area and enable private investment in owning, establishing, and opera markets. Working of existing government regulated markets also needs to be professionalized promoting public-private partnership in their management. An appropriate legal framework is a required to promote direct marketing and contract farming arrangements as alternative marketing mechanism. Therefore, there is a need to formulate a new model law for the agricultural market. THE COMMODITY MARKETS ECOSYSTEM INCLUDES THE FOLLOWING COMPONENTS: 1. Buyers/Sellers or Consumers/Producers: Farmers, manufacturers, wholesalers, distributors, farmers’ co-operatives, APMC mandis, traders, state civil supplies corporations, importers, exporters, merchandisers, oil refining companies, oil producing companies, etc. 2. Logistics Companies: Storage and transport companies/operators, quality testing and certifying companies, valuers, etc. 3. Markets and Exchanges: Spot markets (mandis, bazaars, etc.) and commodity exchanges (national level and regional level) 4. Support agencies: Depositories/de-materializing agencies, central and state warehousing corporations, and private sector warehousing companies 5. Lending Agencies: Banks, financial institutions 8
  23. 23. CURRENT STATUS OF AGRICULTURAL MARKETING Consequent upon Green Revolution, production has increased; India has become largest producer or exporter in a number of commodities, but still farmers were committing suicide. APMC laws were created to ensure good prices for the farmers through open auction system, but on contrary, it has created monopolistic scenario i.e. only Government can create APMCs, private mandis are not allowed. Only APMC license-holders can buy from farmers, end users cannot buy from the farmers directly. Markets were designed to be regionalized and fragmented which is against the basics of a structured market place. There is a need to create a national level electronic 9
  24. 24. transparent spot market, which can lead to development of structured mechanism for marketing of agriculture produce. WHY ELECTRONIC SPOT EXCHANGE? Economic liberalization and emphasis on Public Private Partnership are already revolutionizing agriculture market and agriculture marketing. India is looking forward to having a double digit growth rate which can only be achieved if the income disparity between farmers and other sectors of the economy is narrowed through a market centric approach. There is a need to improve purchasing power of farmers through income from their farm and non-farm economic activities. Currently, farmers sell their produce through mandies (agricultural markets) which are controlled and regulated by respective state governments. Out of 28090 rural markets (Whole sale 6359; Rural Primary 21731) only 7557 markets (Principal 2428; Sub markets 5129) are regulated by Agriculture Produce Marketing Regulation Acts of various states. In regulated markets, produce can only be sold in government recognized locations and only to authorized agents. It is a known fact that the farmer gets only a small fraction of what ultimate consumer pays for agriculture commodities and 8-20% of their income is consumed in servicing intermediaries in the form of commission, interest burden, transportation and warehousing charges etc. The chain of intermediaries in Indian agriculture market is one of the longest in the world. A major portion of the loss in value of commodities due to wastages, pest attack, transportation, storage, handling etc. is again borne by the farmer. Despite efforts made by the governments these mandies are marred by inefficiencies, dominance of commission agents etc. Therefore, the focus of growth in rural economy has to shift from production to processing and marketing of agriculture produce. Although, some of the governments have given permission to agencies (e.g. ITC, Cargill etc,) to operate as private mandies, problems related to transparency and fair price 10
  25. 25. discovery persist. Therefore, NCEL has taken up an initiative to launch a National Spot Market. Such a national level platform would help transcend regional and state boundaries and pave the way for participation by concerned entities irrespective of geographical locations. The farmer would stand empowered by virtue of the electronic platform which would extend the reach to buyers across the length and breadth of the country. A mandi typically serves 100 to 1000 square kilometer area. Mandi is the delivery point where farmers bring their produce directly or through village agents for sale to traders. Trading in mandies is conducted and controlled by commission agents called Adatiyas who have extensive personal network and financial influence on farmers. ADATIYAS ARE OF TWO TYPES: • Kachha Adatiya: They are purchasing agents who buy only on behalf of others. • Pakka Adatiyas: They finance trade as representatives of distant buyers or procure crop on their own account for trading. Farmers sell their agriculture produce in primary sale through an open outcry auction which is fraught with the following inadequacies / shortcomings; • The clientele for purchase (Adatiyas) is restricted to local traders. • Cartelization among local traders is an often observed phenomenon working to disadvantage of farmers. • The end users of the commodity are very often not in a position to participate directly in the auction owing to geographical distance. The primary sale attracts mandi tax which is paid by the buyer. Tax paid goods can then be freely traded within the state with no further liability 11
  26. 26. towards the mandi tax. Secondary sales take place on the basis of bilateral negotiations between known parties having an established relationship. Although transactions in the secondary market are very often based on informed decisions, and result in smooth delivery and settlement, extended chain of intermediaries precludes possibility of a higher price realization for the seller and lower acquisition price for the end users. Another feature observed in the current system is the financial assistance extended by commission agents. These agents also provide storage facilities to the farmers and offer to dispose off the produce at an appropriate time, ostensibly with the objective of realizing a better price for the farmers’ produce. The commission agents, are by law, (as per the respective State APMC act) entitled to charge a commission ranging from 1-2% of the sale proceeds. Given the high cost of intermediation, there is scope for a more efficient platform with better price dissemination capability at lower costs. The solution lies in the establishment of an electronic exchange for spot market. The national spot markets can be established with following objectives: a) To empower farmers by enhancing their decision making capabilities b) To ensure fair price realization by farmers c) To address inefficiencies of current spot commodity markets d) To provide an effective alternative to current delivery systems by bringing in cutting edge technology, efficiency, transparency and modernization benefiting larger number of market participants Electronic spot markets can be established for standard and non- standard products and can conduct auctions or continuous day trading with trade to trade settlements. Spot exchanges, with the permission of the State Governments can function as private mandies and/or provide electronic auction platform to existing mandi participants. Buyer and sellers would 12
  27. 27. participate in the spot exchanges only through members. Members in turn may seek license from respective mandi Samities of the state or get license through exchanges for handling agricultural produce in the state. Electronic spot exchanges need to be accompanied with sufficient warehousing and assaying facilities as conduct of auction and trading for standard products would require pre-assaying and storage at accredited warehouses. Introduction of electronic spot markets would bring transparency of operations and price discovery in physical commodities market and would benefit farmers who can be assured that there has been no manipulation in the sale procedure. Market access to large number of buyers and sellers would enhance liquidity in the market and enable participation by entities located away from the physical markets. These entities can be assured of the quality of produce by standardized grading, storage and handling systems. Assurance of delivery of quality produce will also attract large industrial players who may pass on the benefits from quality assurance to farmers through reverse auctions. Electronic exchange can maintain flexibility of current market systems besides complementing futures market where farmer, traders and mill owners can benefit from arbitrage possibilities in the futures and spot markets. Futures market will also benefit from availability of online and accurate information on spot market which would substitute for polling of prices required for arriving at final settlement price. Electronic spot markets would enhance employment opportunities for existing participants through diversification of economic activities and value addition. While Pakka Adatiyas can become members of the spot exchange Kachha Adatiyas can work as promotion agents of exchanges, operate information kiosks, organize farmer clubs, bring synergies in rural institution such as NGOs, SHGs, KVKs etc. and function as aggregators. While exporters will be able to take deliveries over the electronic spot exchanges, Government will benefit from better collection of mandi taxes. Reduced number of intermediaries and intermediary 13
  28. 28. margins will benefit farmers who can use both futures and spot platform to avoid distress sales. Thus, commodity exchanges can bring about substantial qualitative and positive changes in current spot markets through use of their technological and institutional resources. 14
  29. 29. COMPANY PROFILE 15
  30. 30. NATIONAL SPOT EXCHANGE LTD MUMBAI BACKGROUND National Spot Exchange is poised to set up a delivery based e-market (a national level institutionalized, electronic, transparent spot Exchange). National Spot Exchange is a state-of the-art unique market place providing customized solutions to various problems faced by the farmers, traders, processors, exporters, importers, arbitrageurs, investors and the general mass. The foundation stone for National Spot Exchange was laid on 10th February, 2005 in New Delhi in a function presided over by Shri Sharad Pawar, Honorable Union Minister for Agriculture and Consumer Affairs, Food and Public Distribution. NSEL provides a place, where farmers can sell at the best possible rate, end users can buy at the most competitive rate and NSEL provides counter party guarantee in respect of all trades. NSEL also provides services like Quality certification, storage of goods and other customized value added services. It also strengthens the future market by creating a delivery platform, which can be used by the buyers-sellers to procure/dispose of deliveries. After the launch of NSEL, the canvass of commodity trading would be complete. India has now both spot and future market available on electronic platform with national reach. PROMOTORS FTIL (Financial Technologies India Limited) is among the very few companies globally that offers exhaustive solutions library for Exchanges, provides technology solutions to financial markets and facilitates expansion of stock broking terminals. 16
  31. 31. NAFED (National Agricultural Cooperative Marketing Federation of India Limited), the leading Government agency, engages in food procurement, distribution and storage activities. MISSION “To develop a pan India, institutionalized, electronic, transparent Common Indian Market offering compulsory delivery based spot contracts in various agricultural and non-agricultural commodities, with a view to reduce the cost of intermediation by improving marketing efficiency and thereby improving producers’ realization coupled with reduction in consumer paid price.” OBJECTIVES  To provide an effective method of spot price discovery in various commodities, in a transparent manner from across the country.  To create a market where farmers can sell their produce and realize sale proceeds at the best prevailing price.  To create a market where the processors, end users, exporters, corporates (both private and government) and other upcountry traders can procure agricultural produces at the most competitive price, without any counter party and quality risk.  To create a transparent market where financiers, investors and arbitrageurs can invest money in buying various commodities across the country without going through the hassles of physical market.  To provide authentic spot price of various commodities that can be used by the futures market as the benchmark price for settlement of their contracts on the date of expiry.  To help the futures exchanges, Forward Markets Commission (FMC) and the Government in achieving the target of compulsory delivery in all agricultural produces by way of creating a structured and standardized spot market. 17
  32. 32.  To promote grading and standardization of agricultural produces and create a market, where banks and money lending agencies can provide warehouse receipt financing to farmers and traders. BOARD OF DIRECTORS  Shri Shankarlal Guru – Chairman  Noted Agriculture activist.  Chairman of Guru Committee formed by Govt of India, which drafted Model APMC Act.  Shri Jignesh Shah – Vice Chairman  Founder, CMD of Financial Technologies Group.  Over 17 years of experience in the Securities and Commodities Exchange Industry.  Shri Anjani Sinha – Managing Director and Chief Executive Officer  Director of MCX.  18 years of experience of Stock and Commodity Exchanges.  Shri B.D Pawar – Director  Editor of CITA.  40 years’ experience in Agriculture Marketing.  Shri Joseph Massey – Director  Managing Director and Chief Executive Officer of MCX.  18 years of experience with LIC, RBI, SHCIL and Stock Exchanges.  Shri V. Hariharan – Director  Director-Technology of FTIL and Director of MCX.  25 years of experience in Business Enterprise Technology Solutions and Strategy. 18
  33. 33. OPERATING SYSTEM OF NSEL 19
  34. 34. TRADING SYSTEM National Spot Exchange is providing an online screen based trading system, which can be accessed through VSAT, leased line or internet. Exchange has launched daily expiry contracts for various agri- commodities, which can be traded from 10 am to 4 pm for farmer’s contract and 6 pm for trader contract. The positions outstanding at the end of the day will result into compulsory delivery. But during the day, the transactions of offsetting nature will be netted off and delivery will be executed only with respect to the net quantity outstanding at the end of the day. All the terms relating to quality specifications, place of delivery, date of delivery and other conditions will be specified by the Exchange in advance and all contracts executed on the system would be on the basis of such terms only. The price band is 2% up or down on a daily price for a 20 kg, set by the FMC, and are said to be rarely binding. The exchange charges Rs.500 per one lacks transaction in farmer contract, out of which Rs.75 is brokerage that has to be paid to the trading member at the end of the month and Rs.500 per lot (150 bags x 75kg) &Rs. 20 per lacks for transaction charge and warehouse receipts transfer in trader contract and member charge their brokerage as per their policy. DELIVERY, CLEARING AND SETTLEMENT All trades executed on a day will be netted off at the end of the day as per the weighted average price of last 30 minutes. The profit / loss arising would be settled on the basis of MTM on the next day. The net sellers have to give delivery by way of depositing goods in the Exchange designated warehouses / storage tanks as specified in the Circular. The buyer's account will be debited by the Exchange and delivery order will be handed over to them after ensuring that payment is through and Payout will be credited to the seller's account. 20
  35. 35. In case the seller fails to give delivery, the position will be auctioned/closed out at the risk and cost of the seller separately. In case the buyer fails to make payment, the buying position would be auctioned by the Exchange at the risk and cost of the buyer. RISK MANAGEMENT, MARGINING AND SURVEILLANCE The Exchange is using various tools for risk management, margining and surveillance to ensure market integrity. All positions outstanding in the market would be subject to margin payable by both buyers and sellers. However, if the sellers have deposited goods in the Exchange designated warehouses, margin will not be applicable on such positions. SETTLEMENT GUARANTEE FUND The Exchange will guarantee performance of all contracts executed on the Exchange platform. For this purpose, the Exchange will maintain a settlement guarantee fund. Notwithstanding default of any member, the payout will be declared as per the Exchange schedule. GOVERNANCE The exchange is governed by a board of directors, SAMB and FMC. The board is in charge of taking important decisions like how a bankruptcy is to be “dealt with”. The day to day management of the exchange operations is carried out by the exchange staff, partner firm and members. None of the management staff can take positions or trade themselves. There are several trading member committees to deal with specific problems at the exchange, such as: 1. Clearing house committee: decisions on disputes at the clearing house. 21
  36. 36. 2. Daily rates committee: decides the daily opening, high, low and close of the day. 3. Survey committee: certify the quality of the goods transferred from buyers to sellers. 4. Arbitrators: Every dispute is handled by two designated arbitrators, one appointed by each of the two conflicting parties. 5. Vigilance committee: investigates any violation of the exchange bye- laws, rules, regulations and the FCRA, 1952. REGULATION The Forwards Markets Commission (FMC) is the regulatory body for commodity spot markets. Daily reports of the prices, positions and margins of each of the trading members are passed onto the FMC at the end of every trading day. Position limits, margin rules, fees and charges have also to be approved by the FMC. The FMC and SAMB or mandis both plays an important regulatory role in the running of the electronic spot markets. SERVICES OFFERED BY NATIONAL SPOT EXCHANGE  Common National level platform for buying selling commodities with efficient price discovery.  Integrate the fragmented market electronically.  Electronic spot trading facility in multiple commodities with specific delivery centres.  Grading, quality certification and standardization of commodities.  Efficient spot price discovery, price dissemination small producers and traders get equated with large consumers or traders. 22
  37. 37.  Facilitating collateral financing and borrowing against warehouse receipts.  Customized services relating to storage, transportation, logistics handling and shipment  Trade and payment guarantee.  Procurement and disposal of commodities through online trading system.  Market Intelligence Reports. NSEL NETWORK PLATFORM: 23
  38. 38. THE DIFFERENCE BETWEEN OPEN OUTCRY AUCTION AND ONLINE TRADING OPEN-OUTCRY ONLINE TRADING Participants congregate in a “ring” to Participants put orders on-line to discover discover prices prices Physical presence in exchange premises Orders routed through electronic networks required Price quotations/ traded prices not Quotations and traded prices available on-line transparent Cannot facilitate on-line real time price Real time price dissemination possible dissemination Monitoring of member’s positions and risk On-line monitoring of member positions management practices cumbersome 24
  39. 39. COMPARISION OF DIFFERENT MARKETS PARTICULARS SPOT FUTURE ELECTRONIC MARKETS MARKET SPOT EXCHANGE (MANDI) OPERATES More than 9000 3 national online NSEL & NCDEX THROUGH APMCs exchanges (MCX, Spot NCDEX, NMCE), 24 regional exchanges REACH Confined to Across the country Across the country particular through online trade through online trade market place DELIVERY Immediate At expiry 2-8 Days LEVERAGE No Yes Partial RISK Less High Average RETURNS Less High Average TRANSPORTATION Required Required Required TRADING Mandis/physical Electronic platform Electronic platform THROUGH market QUALITY Varied Standardized Standardized REGULATION State APMC FMC FMC & State APMC Acts Acts WHY OF NSEL PLATFORM  Lesser dependency on commission Agents.  Negligible Brokerage/commission.  Efficient Warehousing and Logistics support.  Time saving.  Complete end to end solution. 25
  40. 40.  Guaranteed trade with weighment/Quality assurance.  A new distribution channel with trade guarantee.  A complimentary market to derivative traders.  Timely disbursement of commodities and funds.  Transparency in transaction and settlement. ADVANTAGES TO THE FARMERS  Current prices available on real time basis.  Loan against warehouse receipt.  Increase in holding and bargaining capacity.  Access to a national level market.  Counter party guarantee provided by the Exchange.  It will educate the farmers about grading at the farm level and it will help market led production and consumers will be able to get standardized quality produce.  It can help in realizing the better prices for harvested crop during off season.  Since the end users would be connected to the NSEL trading system and the highest buy price offered by lacs of buyers would be visible on the trading screen, he will get the best possible price available at the moment. 26
  41. 41. ADVANTAGES TO TRADERS  Traders would get a bigger and liquid market, where they can sell huge quantity.  Elimination of counter party risk, credit risk, rejection at buyer’s go- down at the time of delivery. Once they sell on NSEL and deliver in NSEL warehouse, they are free from all post trade risks.  Since large number of investors from all across the country would be available at NSEL platform, they can realise better price for their product.  Access to bank finance against warehouse receipts.  They can expand their activities to multiple commodities, because of operational ease, availability of finance and absence of counter party risk under NSEL system. ADVANTAGES TO STATE GOVERNMENT & APMCs  Better price realization of cess, because all derivatives can be tracked. National spot exchange will provide a statement of all physical deliveries along with name of traders every month.  It promotes economic activity in the state.  Better realization for the farmers, which accelerates the pace of economic development in the state.  It promotes industrial activity, processing and export due to assurance of uninterrupted supply of raw materials through National Spot Exchange.  Various centres in the state emerge as important trading hubs, which generates lot of direct and indirect employment. 27
  42. 42.  All these objectives are achieved without any load on the exchequer- no subsidy, no grant, no tax, no investment, no land allotment, no loss of revenue, no loss of APMC cess. SIGNIFICANT MILESTONES FOR NSEL Feb-05 MoU signed between NAFED, Financial Technologies and MCX May-05 Company Incorporated on 18th May, 2005 Jun-07  Gazette Notification issued by Government of India  Ministry of Agriculture, Govt. of India recommended NSEL Project. Oct-07 Gujarat Government issued E-Trading License. Nov-07  Signed MoU with Govt. of Rajasthan  Signed MoU with IL % FS for common service centers being set-up under National E-Government Project to be connected to NSEL Project. Jan-08 Maharashtra Government issued E-Trading License. May-08 Karnataka Government issued license. Jun-08  NSEL signed MoU with the Gujarat Agro-Industries Corporation Ltd (GAIC) to create strategic alliance for development of agri-business and, providing an electronic market platform in the state.  NSEL starts its Membership drive. Jul-08 Commencement of Mock operations. Oct-08 Commencement of Live Operations on 15th October, 2008. Dec-08 NAFED Board approves sale of cotton through NSEL and contract was launched by NSEL as approved by NAFED Board to help exporters, mills and merchants across the country. Jan-09 Commenced cotton procurement in AP under PSS on behalf of NAFED Jul-09 CCI follows the steps of NAFED and becomes member of NSEL to 28
  43. 43. sell cotton bales on NSEL platform on the same terms. Nov-09 Government of Orissa granted license. Commencement of operation in Orissa. Dec-09 Government of Rajasthan granted license. 29
  44. 44. CHAPTER - 2 THE PROJECT 30
  45. 45. A STUDY ON “COMPARATIVE EVALUTION OF PARTICIPANTS SATISFACTION AND PERCEPTION IN CASTOR TRADE: NSEL viz a viz APMC” INTRODUCTION CASTOR SEED Castor (Ricinuscommunis L.) is cultivated around the world because of the commercial importance of its oil. India is the largest producer of castor seed in the world while Gujarat is the largest castor seed producing state in India. Because of its unlimited industrial applications, castor oil enjoys tremendous demand world-wide. Castor is an important non-edible oilseed crop and is grown especially in arid and semi-arid region. It is originated in the tropical belt of both India and Africa. The Indian variety of castor seed has 48% oil content of which 42% can be extracted. India’s castor seed production fluctuates between 6 to 9 lakhs tonne per annum. Castor seed is produced mainly in 3 states in India - Gujarat, Rajasthan and Andhra Pradesh. Gujarat accounts for more than 80% of castor seed production followed by Andhra Pradesh, Karnataka and Rajasthan. In common trading parlance, the most commonly traded Castor varieties are the Gujarat small seed and Andhra big seed. 31
  46. 46. Gujarat Apart from the Southern areas, castor seed is produced in all parts of Gujarat. During 2006-07, around 4.90 lakhs ton castor seed was produced here which increased to 6.50 lakhs ton in 2007-08. As per latest estimates, production is expected to remain higher than this figure (at ~ 8 lakhs tons) as farmers are getting remunerative price for their produce. This encouraged them to take more interest for its cultivation. Castor seed is cultivated in July to August and arrivals start during December. However, its arrival continues the whole year as its cycle is of nearly 8 months period. Rajasthan Rajasthan is the second largest castor seed producing state in India. During 2006-07, nearly 1.40 lakhs ton castor was produced here which remained same during 2007-08. However, the sowing area has moved up this year as per reports. The production this year is expected higher at 1.70 lakhs tons. Castor seed is cultivated in July to August and arrivals start during December. Andhra Pradesh Andhra Pradesh is the third largest castor seed producing state in India. During 2006-07, around 1.10 lakhs ton castor seed was produced here which reduced to nearly 90 thousand ton in 2007-08. In 2008-09, production figure is expected to decrease (to ~70000 tons). This is mainly attributed to insufficient rains. Here, arrival starts in September. And the sowing time is May – June. It is an 8 month cycle crop. Other States Around 30,000 tons castor seed is also produced in Maharashtra and some other states. India is the only exporter of castor oil. However, some 32
  47. 47. other countries are also produces it but that fulfils only their domestic demand. Total production in India was 7.80 lakhs ton during 2006-07 which increased to nearly 9.10 lakhs ton during 2007-08. As per sources, total Indian production in 2008-09 is expected to touch 10.70 lakhs ton. Moreover, export figure is also likely to remain high this year. Trading activities are expected to increase in castor oil in the near future. The export demand is expected to pick up. CROP CALENDAR OF CASTOR SEED Traditionally, castor is a kharif season crop. Sowing of castor with onset of monsoon is found most beneficial in rained condition. Castor grows under tropical conditions. It loves heat and humidity and does best in regions where both are ample. India is gifted with an ideal climatic condition for castor seed. 33
  48. 48. APPLICATIONS OF CASTOR SEED INDUSTRIES APPLICATION Agriculture Organic Manure Paper Water proofing Additive Cosmetic Emulsifier and Deodorant Paint, Ink and Adhesive Wetting and Dispersing Additive Food Viscosity reducing additive Plastic & Rubber Coupling agent Electronics & Telecommunication Capacitor fluid Lubricant Corrosion inhibitor Textile Pigment wetting agent Pharmaceutical Castor oil 34
  49. 49. WORLD CASTOR SEED PRODUCERS Fig. 2.1 World Castor seed Producer Others Brazil 7% 8% China 21% India 64% CASTOR SEED PRODUCTION TREND IN INDIA Fig. 2.2 Castor seed Production Trend in India 1000 910 855 880 900 850 780 800 Production (in '000 tonnes) 700 655 590 600 500 400 300 200 100 0 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Year 35
  50. 50. CASTOR SEED PRODUCTION (INDIA & GUJARAT) Fig. 2.3 Castor seed Production (India & Gujarat) 1200 990.7 1011 1000 Production ('000 Tonnes) 796.7 793.4 762.3 800 680 652.7 665 541.1 563.3 533 600 465.1 Gujarat 427.5 India 400 283.1 200 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Year Total area under Castor crop in India for the year 2009-10 is 7.40 lakhs hectares. It has decreased by 10% as compared to previous year. Estimated total production of Castor Seeds in India for the year 2009-10 is 9.34 lakhs tonnes. It has decreased by 4% as compared to previous year. Average yield for the year 2009-10 is 1261 kg/hectare as against 1180 kg/hectare during the year 2008-09. It has increased by 7% as compared to previous year. Total area under Castor crop in Gujarat for the year 2009-10 is 4.37 lakh hectares. It has decreased by 3% as compared to previous year. Area under Castor crop has increased in all the major castor growing districts except Ahmedabad, Patan, Rajkot, Surendranagar and Vadodara. Estimated total production of Castor Seeds in Gujarat for the year 2009-10 is 7.34 lakhs tonnes, it has increased by merely 1% as compared to previous year. However this growth is mainly in the districts such as Vadodara (28%), Ahmedabad (24%), Rajkot (19%), Patan (16%) and Sabarkantha (8%). 36
  51. 51. Average yield for the year 2009-10 is 1679 kg/hectare as against 1608 kg/hectare during the year 2008-09. ESTIMATED AREA UNDER CASTOR SEED CROP, INDIA (2009-10) Fig. 2.4 Estimated Castor seed crop Area ('000 Ha), India 500 450 Castor seed Area ('000 Ha) 400 350 300 250 200 2008-09 150 2009-10 100 50 0 Gujarat Rajasthan Andhra Pradesh Other States States ESTIMATED CASTOR SEED PRODUCTION, INDIA (2009-10) Fig. 2.5 Estimated Castor seed Production ('000 tonnes), India 800 700 Production ('000 tonnes) 600 500 400 2008-09 300 200 2009-10 100 0 Gujarat Rajasthan Andhra Pradesh Other States States 37
  52. 52. ESTIMATED CASTOR SEED YIELD, INDIA (2009-10) Fig. 2.6 Estimated Castor seed yield (Kg/Ha), India 1800 1600 1400 Estimated Yield (KgHa) 1200 1000 800 2008-09 600 2009-10 400 200 0 Gujarat Rajasthan Andhra Pradesh Other States States ESTIMATED CASTOR SEED PRODUCTION, GUJARAT (2009-10) Fig. 2.7 Estimated Castor seed Production (in '000 tonnes), Gujarat 200 Castor seed production ('000 tonnes) 180 160 140 120 100 80 60 40 2008-09 20 0 2009-10 District 38
  53. 53. ESTIMATED AREA UNDER CASTOR SEED CROP, GUJARAT (2009-10) Fig. 2.8 Estimated Castor seed crop area ('000 Ha), Gujarat 120 Area Under Crop (in '000 ha) 100 80 60 40 2008-09 20 2009-10 0 District ESTIMATED CASTOR SEED YIELD (KG/HA), GUJARAT (2009-10) Fig.2.9 Estimated Yield (Kg/Ha) 2000 1800 1600 1400 Yield (Kg/Ha) 1200 1000 800 600 2008-09 400 200 2009-10 0 District 39
  54. 54. THE MAJOR FACTORS INFLUENCING CASTOR SEED MARKETS ARE…  Variation in castor seed domestic acreage based on yield and price realization.  Crop development based on progress of monsoon in key growing areas.  Chinese and Brazilian crop size.  Comparative price of other vegetable oils in domestic market.  Carryover stocks.  Development of new applications and substitutes of castor oil. OBJECTIVES OF THE STUDY  To study the Perception & Satisfaction level of Participants of NSEL.  To know the market share of NSEL in castor trade.  To do the comparative evaluation of NSEL viz a viz APMC.  To assess the effectiveness of marketing strategies of NSEL in castor trade.  To assess the opportunities, strengths, weaknesses and threats of NSEL. PURPOSE AND SCOPE OF STUDY This study will help to formulate the suitable strategies for more effective penetration in the castor trade for NSEL. As the study involves the measuring satisfaction level and perception of participants in castor trade at NSEL as compare to APMC so it will help to study the preference to NSEL/APMC by participants. Majority of farmers prefer to deal with known traders and to this is affected by certain factors while decision 40
  55. 55. making by participants. This study also focus to find out such criteria of decision making by participants so as to base on this effective action plan can be prepared which may help to increase the customer base and also strengthen the relationship with participants. 41
  56. 56. LITERATURE REVIEW Vandeveer (2006) in his study “Learning outcomes- Perception” It is the way people organize and interpret the world around them in order to give meaning to their surroundings. People’s behaviour is based on how they interpret reality, not reality itself. Perceptions affect awareness of problems, analysis of problems, interpretations of data, judgment of potential outcomes. Susan Thomas (2003) in his report Agricultural commodity markets in India: Policy for Growth Every mandi becomes a monopoly to the local producers, especially once they come to the market. Farmers typically face a short period between the time that they harvest and the time that they can sell the crop. In addition, the cost of transportation of commodities is typically significant, given the lack of good transportation alternatives. If they do not have access to reliable sources of price information, they become hostage to the closest source, i.e. the local mandi. Farmers should have access to prices not just at the local, but also the national level. Patel Kirankumar K. (2009) in his report Building Up Of An Efficient Marketing System To Obviate The Need For Better Agricultural Market Option In Palanpur, Gujarat: A Case Of Castor Seed In day-to-day reality of the business, Supply chain formation, value addition and efficient market are creating equality between trade partners. The sustainable and professional relationships between them play a vital role. The government as well as private sectors is having two fold responsibilities in cross border trading. On one hand a good climate in Agri-value chain and market is required to develop and on other hand to create better environment for small and marginal farmers by proving them a holistic platform. 42
  57. 57. CHAPTER - 3 RESEARCH METHODOLOGY 43
  58. 58. SOURCES OF INFORMATION SOURCES OF PRIMARY DATA  Data was collected using survey method by conducting personal interviews with Castor seed growers in the villages of Palanpur taluka of Gujarat.  Questionnaire was used for collection of primary data for the study. SOURCES OF SECONDARY DATA Secondary data was collected through various sources like company website, magazines, internet, company leaflet and other sources. Various reports and article from the internet provides the information regarding the Castor seed trade and data about area, production, productivity of Castor seed in Gujarat state. INSTRUMENT OF DATA COLLECTION Questionnaire was used for the collection of primary data. Both open ended question and multiple choice questions were involved in questionnaire. In open ended questions respondents were free to answer as per their perception and in multiple choice questions respondents were offered various options to choose from. SAMPLE DESIGN FOR SURVEY LOCATION OF THE SURVEY In Palanpur taluka, six villages namely Changwada, Tokriya, Bhagal, Jagana, Malan and Sundha were selected for the Study. SAMPLING METHOD Stratified sampling method. Under this method six villages were selected and farmers were stratified in two (1) farmers traded with NSEL 44
  59. 59. and, (2) Farmers not traded with NSEL. From these strata farmers were selected by convenience sampling. SAMPLE UNIT: - Castor seed growing farmers. SR. NO. NAME OF FARMERS FARMERS TOTAL VILLAGES TRADED NOT TRADED FARMERS WITH NSEL WITH NSEL 1 Changwada 91 9 100 2 Tokriya 88 12 100 3 Bhagal 89 11 100 4 Jagana 84 16 100 5 Malan 90 10 100 6 Sundha 86 14 100 Total 528 72 600 DATA ANALYSIS TECHNIQUES Simple tools of analysis were used for study. Quantitative method such as Percentage, Averages, Weighted Average method was used to analyse data. Scaling technique that is ranking scale was used to study attitude and perception of respondents. THE TECHNIQUES THAT ARE USED FOR ANALYSIS OF DATA ARE 1. Tabulation of data. 2. Pie charts 3. Bar graphs 45
  60. 60. LIMITATIONS OF PROJECT STUDY Following limitations may come while conducting the project.  This survey is totally dependent on response of farmers.  Limited time was available for survey. 46
  61. 61. CHAPTER - 4 DATA PROCESSING & ANALYSIS 47
  62. 62. FARMER’SANALYSIS 1. Age Groups of Farmers Table 4.1: Age Group of Farmers Sr. No. Age (Yrs.) No. of Farmers Percentage 26-30 25 4 1 2 31-35 140 23 3 36-40 144 24 4 41-45 177 30 5 46-50 58 10 6 51-55 36 6 7 56-60 20 3 Fig: 4.1 Age Group (Years) 56-60 3% 51-55 26-30 46-50 6% 4% 31-35 10% 23% 41-45 30% 36-40 24% 48
  63. 63. 2. Education level of Farmers. Table 4.2: Educational Level of Farmers Sr. No. Education No. of Farmers Percentage 1 Illiterate 35 6 2 Below SSC 277 46 3 SSC 188 31 4 HSC 82 14 5 Graduate 18 3 Fig. 4.2 Education Level of Farmers 18, Graduate 35, Illiterate 3% 6% 82, HSC 14% 227, Below SSC 188, SSC 46% 31% 49
  64. 64. 3. Income Source of Farmers Table 4.3: Income sources of Farmers Sr. No. Income Source No. of Farmers 1 Only Farming 562 2 Farming and Alternative 38 Occupation Fig. 4.3 Income Source 600 562 500 400 Farmers 300 200 100 38 0 Only Farming Alternative occupation Income Source 50
  65. 65. 4. Farming as major Income source (Based on 562 Farmers) Table 4.4 Farming as Income source Sr. No. Farming No. of Farmers 1 Only Agriculture 490 2 Agriculture + Poultry 0 3 Agriculture + Dairy 72 Fig. 4.4 Income source: Farming 600 500 400 Farmers 300 490 200 100 72 0 0 Agriculture Poultry Dairy Income Source 51
  66. 66. 5. Annual Income of the Farmers Table: 4.5 Annual Income Sr. No Income Range Farmers Percentage 1 Upto 50,000 16 3 2 50,000 -100,000 90 15 3 100,000-200,000 184 31 4 200,000-500,000 240 40 5 Above 500,000 70 11 Fig. 4.5 Annual Income Upto 50. 000 3% Above 500, 000 11% 50, 000 - 100, 000 15% 200, 000 - 500. 000 100, 000 - 200, 000 40% 31% 52
  67. 67. 6. Distribution of Farmers as per Land Holding Size Table No. 4.6 Distribution of farmer as per land holding size Sr. No Particulars Farmers Percentage 1 Marginal farmer (Up to 1 ha) 80 13 2 Small farmer (1-2 ha) 323 54 3 Medium farmer (2-5 ha) 110 18 4 Large farmer (more than 5 ha) 87 15 Fig. 4.6 Land Holding Size Large Farmers Marginal Farmer 15% 13% Medium Farmers 18% Small Farmers 54% 53
  68. 68. 7. Irrigation pattern Table: 4.7 Irrigation pattern Sr. No Land Holding (Ha.) Total area (Ha.) Percentage Irrigated 1147.89 46 1 2 Rainfed 1342.11 54 Total Land 2490.00 100 Fig. 4.7 Irrigation pattern Irrigated 46% Rainfed 54% 54
  69. 69. 8. Crops Cultivated by Farmers Table 4.8 crops cultivated by Farmers Sr. No Crops Farmers 1 Castor seed 600 2 Bajra 287 3 Funnel 173 4 Cumin 448 5 Til 78 6 Mustard 578 7 Mung 209 Fig. 4.8 Crops cultivated by Farmers Farmers 600 578 448 287 209 173 78 Castor seed Bajra Funnel Cumin Til Mustard Mung 55
  70. 70. 9. Cropping pattern followed by farmers Table 4.9 Cropping pattern followed by farmers Sr. No Crops Farmers Percentage 1 Castor seed, Mustard, Bajra 264 34 2 Castor seed & Funnel 138 66 Fig. 4.9 Cropping Pattern Castor seed, Funnel 34% Castor seed, Mustard, Bajra 66% 56
  71. 71. 10. Market Preference by Farmers Table 4.10 Markets preferred by the farmers for sell of produce Sr. No Preferred Market Farmers Percentage 1 Cooperatives 12 2 2 Wholesalers 77 13 3 Commission Agent 90 15 4 APMC 121 25 5 NSEL 290 48 6 Millers 10 2 7 Consumers 0 0 Fig. 4.10 Market Preference by Farmers Consumers Co-operative Millers 0% 2% 2% Wholesaler 13% Commission Agent NSEL 15% 48% APMC 20% 57
  72. 72. 11. Crop wise market preference by Farmers Table 4.11 Crop wise Market Preference by Farmers Sr. No Crops Preferred Market 1 Castor seed NSEL & APMC 2 Bajra APMC 3 Funnel Commission Agent 4 Cumin Co-operatives 5 Til Wholesalers 6 Mustard APMC & Millers 7 Mung APMC & Commission Agent Fig. 4.11 58
  73. 73. 12. Factors considered for Market Preference by farmers Table 4.12 Factors considered by farmers for Market Preference Note: 1= Never, 2=Rarely, 3= Often, 4= Mostly, 5=Always Note:-Max. Rating: (Maximum scale 5x600 farmer) = 3000 (Max.) Individual scores and No. of farmers Cumulative Mean score score (based on 600 Particulars Always Mostly Often Rarely Never farmers) 2962 4.93 Higher 566 30 4 Price (2830) (120) (12) -- -- Familiar 120 126 123 71 160 1775 2.95 Traders (600) (504) (369) (142) (160) Less 2970 4.95 Quality 570 30 -- -- -- Deduction (2850) (120) Past 70 100 11 172 137 1576 2.62 Experience (350) (400) (345) (344) (137) Promotional 86 92 70 112 258 1400 2.33 Strategy (340) (368) (120) (224) (258) Company 56 40 116 196 192 1372 2.28 Reputation (280) (160) (348) (392) (192) Good 1574 2.62 Employee 80 79 120 177 144 relations (400) (316) (2360) (354) (144) 2.86 No Fear of 434 112 34 20 Cheating (2170) (448) (102) (44) -- 1716 Timely 488 112 4.81 Payment (2440) (448) -- -- -- 2888 59
  74. 74. Fig.4.12 Factors considered by Farmers for Market preference Mean score 4.93 4.95 4.81 2.95 2.86 2.62 2.62 2.33 2.28 Figures in parenthesis suggest individual score. 60
  75. 75. 13. Sources of Price Information for the farmers for various commodities at different market. Table 4.13 Sources of Price Information Sr. No Source Farmers Percentage 1 Other Farmers 115 19 2 Discussion at Choupal 30 5 3 Sarpanch 0 0 4 Middlemen 80 14 5 Radio 80 13 6 Television 140 23 7 NEWS Paper 155 26 Fig. 4.13 Sources of Price Information Other Farmers Discussion at Choupal News Paper 19% 5% 26% Sarpanch 0% Middlemen 14% Television 23% Radio 13% 61
  76. 76. 14. Farmers awareness regarding NSEL Table 4.14 Farmers Awareness about NSEL Sr. No. Awareness Farmers Percentage 1 Yes 545 91 2 No 55 9 Fig. 4.14 Percentage of Farmers aware of NSEL No 9% Yes 91% 62
  77. 77. 15. Farmers awareness for Promotional Activity by NSEL Table 4.15 Farmers awareness for Promotional Activity by NSEL Sr. No. Particulars No. of Farmers Percentage 1 Yes 523 87 2 No 77 13 Fig.4.15 Farmers awareness for Promotional Activity by NSEL No 13% Yes 87% 63

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