International Commodity Management, IIPMB

1. Commodity Management
The Indian Experience
Dr. M. Panduranga Vithal
Professor of Finance and Strategy
Indian Institute of Plantation Management

2. Critical Issues
• Production / Products
• Storage & Delivery
• Marketing
• Finance

3. =
E
V
A
?
In times of changing consumer behavioural
pattern
1963-2003
Gunny Bag to today’s 10 kg (Rice
Bags)/ 5 kg /1 kg Sachets

4. Land
Small
Holdings
Large
Holdings
Production
Influencing
Factor
Land Laws

5. Uneducated
Labour
Educated
Unskilled
Semi
Skilled
Skilled
Science
and
Technology
Green
Revolution
Influencing
Factor

6. Personal and Family Finance
Private finance (Localized)
Regional Rural
BanksOrganized Financing
Banks
Commercial Banks
NABARD / SIDBI
Policy Reforms Like
Nationalization
CAPITAL
Influencing Factor

7. Organisation
Small
Farmers
Farmers’/ Producers’ Cooperatives
(Success story of Anand in value
addition by the intermediary where
the investment came from outside)
Large
FarmersEntry of
Corporates
Influencing
Factor
Laws of Land

8. IMPACT
Productivity
of Land and
Labour
Labour
Capital
Cap?
Productivity of Land
and Labour
Promising
no value judgement

9. IMPACT
STORAGE
Inevitable
No significant investments made -
FCI, CWC + Innumerable storage
houses (with/without sophistication)
Godown QUANTITY & QUALITY
G
O
D
O
W
N

10. MARKETING
Commodity Based
Largely Public distribution system and
other Government managed framework
Product based
Brand based
Value based
Private initiative

11. Motivating suicides of producers
Product, Price,
Place, Person
Inadequate
infrastructure
Too much Emphasis on
1 or 2 Ps with little
references to other Ps
Railways, Roadways
•PDS >
•APM >
•MSP>
Public Disaster System
Administered Price Mechanism
Minimum Support Price
All
Pointing
to
Mayhem
4 Ps of Marketing

12. PC - Culture of Marketing
• From PRODUCT to study CONSUMER
wants and needs
• From PRICE to understand COST to
satisfy that wants or needs
• From PLACE to think the
CONVENIENCE to buy
• From PROMOTION to convey the
COMMUNICATION

13. •Hats - Mandis, at Village, Taluk, District and National
Level
•TMCO---> Tea -------> Disposal
•Administered Price Mechanism
•Pooled Marketing for Coffee ->ISQ ->75%FSQ->FSQ->Free
•Forward Contracts
•PDS ->FCI ->Procurement ->CACP ->Free Sugar ->Levy Sugar
•Commodity Options
•Commodity Futures
Alternative Marketing Systems

14. With the changing times price
discovery and Price dissemination
mechanisms did not maintain the
pace.
Policies need a change due to
DISCONTINUITY

15. Vicious Circle of Uncertainty
Uncertainty of
Certainty of Financial
Insecurity
Price
•Production
•Storage
•Transportation
•Value addition

16. CYCLE OF UNCERTAINTY
IINN DDIIAA NN
WWHHEEAA TT
TTRRAA DDEE
C
Y
C
L
E
OF
U
N
C
E
R
T
A
I
N
T
Y
F
I
N
A
N
C
I
A
L
I
N
S
E
C
U
R
I
T
Y

17. Commodity Derivatives
How to Hedge Risk?
How to Discover Price?
Source
Where?
Reliability Standards Frequency
Transaction
Cost

18. ROAD AHEAD
• (OUR DISCUSSIONS May FILL THIS
SLIDE WITH WORKING SOLUTIONS
……………….
• UNFINISHED AGENDA