Electronic Markets Concept for Agricultural Commodities By Dr. J.S Yadav-CEO PFF, New Delhi Cum Director World Union of Wholesale Market Netherland COSAM Conference at Darjeeling 3-5 April 2016

System of Sale-Options  e-Auctions  Traditional bids in market  Direct supply to exports, processors, retailers  Opening Sales Outlets all across country  Spot Exchange Trading  International e-Markets’ integration  Smart/Intelligent/Online Wholesale Markets

e Auction versus e Trading e Auction All buyers are aware of quality and quantity of produce on sale The buyer must compete or bid to buy Price discovered is market driven e Trading VSAT based Internet based Intranet based Platform based o Spot exchange o Futures

e Markets concept 1. Spot Exchange Trading 2. International e-Markets’ integration 3. e-Auctions

1. Spot Exchange Trading Technology based competitive market place using modern IT and improved Logistics Follows the system of price-time priority for order matching Members place order on TWS

Provide counter party guarantee (Quality certification, Warehousing, Logistics, Payments, other value added services) Offers Power of Exchange Technology to farmers, consolidators, traders, buyers Minimal intermediation-better quality, low transaction cost, narrower price spread Transparent, efficient risk management, effective surveillance

Features Members ensure quality, specifications Members maintain settlement account Connectivity through internet only Membership renewable every year Membership non transferable Multiple membership not allowed Sub-member not allowed Maximum three user Ids per member

Farmer SHG/Farmer Association Cold Storage Owner Transporter Institution Traders & Commission agent Exchange Member Trader Cold Storage Owner Transporter Processor Retail Chain Exporter Settlement Goods Inspection & Delivery Electronic Payment Member Sellers Member Buyers Trading (Bid/ask) Matching Clearing House Clearing Bank Exchange Platform

Benefits to Farmers Access to online price information and arrivals Prices can be fixed even before harvest and delivery Contract note issued to farmers Extra realization for standardize/graded produce Real time prices vailable online-improved efficiency For storable items, sell at the best time farmer decides

Benefits to Traders/Exporters/Processors Risk minimized Expand activities to multiple commodities-operational ease, availability of finance, absence of counter party risk Buy quality inspected material No hassles relating to procurement Lower brokerage to procurement agents Contracts can be customized-in case of large volumes of specific quality, logistics

2. International E-Markets’ Integration Wider opportunities to farmers, importer-exporter, consolidators, traders, cargo handling agents Farmer/exporter/importer-sell anywhere in the world Buyer/exporter/importer-buy from anywhere (FOB or CIF basis)

Basic Building Blocks Seller Management Module Buyer Management Module Pre-Auction Module Auction Module Post Auction Module Internet Hosting Module

3. E-Auction Electronic Auction Systems are sophisticated solutions to address the growing need for an efficient trading method EAS help networking of domestic and global markets

Possible Options Linking by scheduling a number of markets to take place sequentially, so that buyers can “attend”, at least electronically, each of the auctions in turn, buying through the use of a computer console Have number of markets operating through the same central computer system

PHYSICAL CUM REMOTE ACUTION MODEL BIDDERS IN AUCTION GALLERY REMOTE BIDDERS EAS

Exporter model for linking EXPORTERS/AGGREGATORS/ CONSOLIDATORS MARKET CLOSED GROUP OF REGISTERED BUYERS REMOTE BIDDING DOMESTIC MARKETS REJECTS/ UNSOLD LOTS

Examples: a. Sydney Fish Market: auctions over 100 species daily February installation of a new electronic selling system faster and more efficient selling system based on the Dutch (falling price) model about 1,000 boxes of fish are sold per hour, an average of 2,800 crates per sale, comprising about 58 tonnes of seafood daily

b. Iceland Probably the first country to adopt networked solutions Link fourteen port markets Operator at each market inputs Information is then transmitted to the central computer. Each species of fish is sold sequentially Each buyer has a hand-held paddle Operator at each bidding room is linked to the auctioneer on a single computer network

Identified Important Processes Search Pricing Logistics Payment & Settlement Authentication Product representation Regulation Risk management Dispute resolution Communications

Recommendations for Action Product representation to be very specific- audio, video text Chat room for the buyers - an option for overcoming the social interaction inability. Amount of information to be divulged to the bidders –lesser the information about the fellow bidders, the more the chances of better value realization and smooth auctions.

Revealing the historical information and other market related information - no informational disadvantage ( Without a chance of any chances of manipulating the auctions) Pre bids, offline bidding, the time of revolution of clock, the increment in English auction, the combinational auction implementation- market authority has to decide as they are very important to avoid glitches

Payments are proposed through involving Banks in the process. The buyers and the sellers both will have registered banks which will be their representatives in the auctions Market can choose to provide specialized logistic support of its own to deliver the commodity sold to the buyer, or let the option of logistic be with the buyer, and recommend logistic service providers equipped with bar coding and RFID

Clear profiling of each bidder is needed - help the managers to analyze their bidding behavior and predict demand and consequently in floor price setting or ceiling price setting Strategies of overcome Resistance to changes

Convincing buyers and sellers of the benefits of the system Device ways of collecting, interpreting and disseminating over the network

Electronic Inspection System concept to take inspection services into the electronic age. aid the electronic auctions potent aid in assuring the bidders of the quality of the lot. Fresh inspection results reported electronically commodity will be inspected as per the requirements and real time documentation will be done to make the results instantly available

"Coming together is a beginning. Keeping together is progress. Working together is success." Henry Ford