Retail’s own private mandi house

RETAIL majors are warming up to the idea of setting up private mandis, a critical link to procurement, as they hungrily add shelf space. While several retailers and exporters are linking up to the backend supply chain through direct marketing and contract farming, they are now ready to roll up their sleeves to set up private mandis, a platform where farm produce is traded. India has about 7,500 mandis with about 10-12 per district. Some of the big mandis conduct business worth Rs 20 crore a day. Typically, mandis are platforms where farmers sell their produce directly or through intermediaries to buyers. With reforms in Agriculture Produce Marketing Act at the state level, transactions would be allowed outside the governmentowned mandis and the sector would be open for private players. Most states, which have amended APMC Act, including Andhra Pradesh, Madhya Pradesh, Tamil Nadu, Himachal Pradesh, West Bengal and Bihar allow companies to set up and operate mandis. Players like Subiksha, Field Fresh and Heritage Foods are drawing plans to set up private mandis while several others are bullish on this procurement channel. ITC’s commodity division had submitted its expression of interest to Centre’s terminal market scheme. In the next six months to a year, there is lot of action expected in this space. Talking to ET, Subiksha MD R Subramanian says, “setting up private mandis is part of our plans. Our commodity division is talking to potential partners to enter this space.” The Chennai-based discount retailer is also looking at investments in warehouses, sheds and cold chain to complement the mandi. Subiksha, which intends to have 750 stores by end of the fiscal, promises products 10% below MRP and is increasingly looking at enhancing its private label portfolio. Hyderabad-based Heritage Foods, in which former Andhra chief minister N Chandrababu Naidu’s immediate family owns over 30%, too is planning to set up private mandis in the state. According to a company official, it would help it for procuring commodities for its retail venture, Fresh@. “We need to shell out a lot of money to procure commodities from local mandis as they charge fee on volumes. By setting up private mandis we can save on procurement cost,” he said. Heritage is planning a store count of 45 this year. Typically, mandis charge a fee on transaction that could go up to 4% of the volume traded. In the case of private mandis, these companies would end up saving on the costs/fees and also get a fix on quality and reliable supply via the disintermediate route. Along with private mandis, retailers and large traders are expected to build warehouse and cold chain capabilities. Field Fresh, a joint venture between Bharti and N M Rothschild, CEO Rohtash Mal told ET, the company was looking at formalizing its plans of entering the private mandi space in the next three months. Field Fresh, which is looking at investing Rs 1,000 crore in the backend, will also supply fresh produce to the Bharti-Wal-Mart retail venture.

courtesy:economictimes

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