Archive : JAN-DEC 2005

Andhra Bank MoU for finance to ryots

In a move which will provide a major relief to ryots in the State, Andhra Bank has signed an MoU with M/s National Collateral Management Services Limited, a risk management company, for providing finance to farmers against their produce.

In the wake of the MoU, the bank will extend loans to farmers based on the certification of quality, quantity, grading, valuation and against warehouse receipts issued by NCML.

This enables farmers to store their agricultural produce at warehouse enrolled by the company and sell their produce when the prices are remunerative.

The MoU was signed by A. L. Nageswar Rao (GM, Andhra Bank) and Mukund Annigeri ( Chief Business Officer, NCML).

Chairman and Managing Director of the bank, K. Ramakrishnan, expressed the hope that the agreement would benefit both partners and farming community.

Distress sale

Pointing out that distress sale was one of the reasons for the plight of farmers in the country, he said to mitigate their plight the bank had earlier introduced `Produce (Marketing) Loans Scheme' under which farmers were provided finance against their produce.

During the current financial year, the bank had set a target of extending agriculture credit to the tune of Rs.4,200 crores and Rs.3,473 crores was disbursed by September-end.

Managing director, NCML, A.Hari Prasad, said that a target of Rs.800 crores had been set by the company for lending by various banks to farmers in the country for the ensuing season.

(Source: Business Line; Hyderabad; October 21, 2005)

Food Corpn ropes in Ncdex arm for quality audits

The Food Corporation of India (FCI) has introduced third-party food-grain quality audit and certification to reduce its storage losses and eliminate complaints regarding supply of substandard rice and wheat.

The quality analysis will be conducted by the National Collateral Management Services (NCMSL), a company floated by the National Commodities and Derivatives Exchange of India (Ncdex). The FCI has already signed a memorandum of under standing with the Ncdex for this purpose.

This audit will be besides the arrangement the FCI already has for quality testing of its stocks by some state agricultural universities and non-governmental organisations.

“The Ncdex and its associated company has been involved for this purpose because they have experience in this field and qualified staff to undertake this job”, FCI managing director and chairman V K Malhotra said.

He said NCML would be allowed to use the spare capacity of existing quality testing laboratories of the FCI and other facilities in a commercial arrangement.

To begin with, this experiment would be tried out on a pilot project basis in Chhattisgarh, Orissa, Madhya Pradesh and West Bengal.

According to a NCML source, its quality audit would ensure that foodgrains not meeting the laid down quality norms were not procured at all.

Besides, it would prevent the dispatch of sub-standard foodgrains from food-surplus states where these were procured to consumption centres in food-deficient states. The stocks identified as substandard would be disposed of at the earliest to curb further damage.

Third-party quality audit by a neutral agency (not involved in foodgrain procurement and distribution) would, thus, help cut down the FCI’s financial losses arising out of procurement of grains not conforming to the specifications.

The stocks having high moisture content and high percentage of weevilled (insect damaged) grains tend to spoil early during storage. The quality audit would help curtail these losses.

In the case of rice, samples for quality testing would be drawn at the grain receiving points. In the case of older stocks, the samples would be drawn from the warehouses, these sources indicated.

Since foodgrains are perishable in nature and their chemical constitution keeps changing with the passage of time, the validity of the quality certification would be for a limited period. For this purpose, it is presumed that not much change, other than reduction in moisture level, will occur in about three months.

(Source: Business Standard / Surinder Sud / New Delhi; November 17, 2005)

NCMSL begins paddy procurement for FCI

In keeping with its objective of Commodity Risk Management, National Collateral Management Services Ltd (NCMSL) has, on behalf of Food Corporation of India (FCI) commenced procurement of paddy from farmers at Katangi Mandi in Balaghat District, Madhya Pradesh.

On the first day of procurement, NCML has procured roughly 50-60 tonnes of paddy directly from about 45-50 farmers, hailing from nearby villages. The farmers were paid their cheques on the same day.

“This is the first step towards the implementation of the MoU signed by NCML with FCI and NCDEX. We are hopeful that this is just the beginning of a much wider and far-reaching project between the two institutions. The farmer will turn out to be the winner ultimately,” said Mr Hariprasad, managing director, NCML.

The MoU between FCI and NCML had, among other things, envisaged co-operation between the two entities in the area of procurement of food-grains under the government’s minimum support programme.

The commencement of the procurement programme is the first step in that direction. Having established itself as an agency offering post harvest risk management services to farmers, NCML is now supplementing and fine-tuning the efforts of government agencies like FCI and other state marketing federations.

Going forward, NCML is planning to enable farmers to hold on to their produce by providing scientific storage facilities as also funding against the commodities, so as to ensure that all farmers do not rush to the procurement centre from day one.

In the process, over a 2-3 month period, if market prices for the commodities appreciate, the farmers would gain from such appreciation; otherwise, the farmers can offer the same to the procurement agency. In other words, while the farmer can have the benefit of the upside, the minimum support price would protect the downside, thus providing the much-needed comfort to the farmer community.

(Source: Financial Express;Mumbai; December 02, 2005)