Archive : JAN-DEC 2009

DST inks deal with NCML


The Department of Science & Technology (DST) has entered into an arrangement with National Collateral Management Services (NCMSL) with an aim to help agriculture and its allied industries . The startegic arrangement will benefit various import-and-export organizations, food processing industries, farmers., who would receive real-time crop information, yield forecast, flood monitoring and assessing damage through the use of most economical technologies.

(Source: Financial Express ;Mumbai; March 10, 2009)

NCML ties up with IDBI Bank


NCMSL is a national level institution promoted by leading banks, cooperatives and NCDEX. National Collateral Management Services Limited (NCMSL) has recently entered into an agreement with IDBI Bank Ltd to provide comprehensive collateral management services to the commodities pledge to IDBI Bank Ltd, including ensuring quantity and quality of the commodities pledged.

NCMSL is a national level institution promoted by leading banks, cooperatives and NCDEX, to provide risk management solutions in the areas of commodities and inventories.

At present NCML manages over 3 lakh Mt of commodities spread over 2000 godowns across the country. Other services offered by NCML include Storage and Preservation, Testing & Certification, Market Intelligence, Procurement and Supply Chain solutions to individual, corporate and government entities.

(Source: India Infoline News Service; Mumbai; April 24, 2009)

NCML targets Rs 5,000-cr AUM


Leading risk manager for commodities and inventories, National Collateral Management Services Limited (NCML), has targeted to achieve Rs 5,000-crore assets under management (AUM) by the end of this financial year, a top official said.

NCML has plans to tie-up with 14 more banks in the current financial year to ensure the quality and quantity of collaterals, primarily pledged commodities against which loans are given, NCML's Manager, product planning and marketing, Mr Vivek Thoopal said.

“By the end of this financial year, we would be managing assets worth Rs 5,000-crore, from about 30 banks,” Mr Thoopal said.

Promoted by leading banks and organisations, NCML provides a bouquet of services to manage risks across various stages of commodity and inventory handling.

The company already have tie-ups with 16 banks across the country and manages assets worth Rs 2,000-crore at present. These banks include IDBI Bank, ICICI Bank, Axis Bank, HDFC Bank, Bank of India and Karur Vysya Bank amongst others. “We have specialised teams to provide commodity handling and risk management services to clients across the country. This encompass the procurement, storage, testing, market intelligence and collateral management services,” Mr Thoopal said. - PTI

(Source: Business Line, Economic times / Mumbai; April 26, 2009)

Food Testing Laboratory to be set up by NCML-CommGrade for NSADCL


Commodity exchange NCDEX & aposs warehousing arm National Collateral Management Services Ltd will set up a food testing laboratory at the Chhindwara food park, which is being developed by NSS Satpura Agro Development Company in Madhya Pradesh.

The food testing and phyto-sanitary laboratory will be established by NCML on build, operate and transfer (BOT) basis for a period of 18 years at a cost of Rs 12.5 crore, an official of NSS Satpura Agro Development Company said. NSS Satpura Agro Development Company has been promoted by Nafed, STC and STCL (formerly Spices Trading Corporation Ltd).

NSS Satpura Agro Development Company last week signed an agreement with National Collateral Management Services Ltd (NCMSL) to establish the food lab. Major part of the project cost of Rs 12.50 crore will be met from grant-in-aid under the National Horticulture Mission and interest free loan by STC, the official said. The project is likely to be operational by 2011. Nafed Managing Director U K S Chauhan said the laboratory would bring quality testing facilities at affordable price within the reach of farmers.

NSS Satpura Agro Development Company has already constructed 11 modern collection centres and two pack houses-cum- cold storage, which are expected to be operational by July-end.

(Source: Indopia .in / New Delhi; June 15, 2009)

Leader's Speak


NCMSL is a national level institution promoted by leading banks, cooperatives and NCDEX. National Collateral Management Services Limited (NCMSL) has recently entered into an agreement with IDBI Bank Ltd to provide comprehensive collateral management services to the commodities pledge to IDBI Bank Ltd, including ensuring quantity and quality of the commodities pledged.

NCMSL is a national level institution promoted by leading banks, cooperatives and NCDEX, to provide risk management solutions in the areas of commodities and inventories.

At present NCML manages over 3 lakh Mt of commodities spread over 2000 godowns across the country. Other services offered by NCML include Storage and Preservation, Testing & Certification, Market Intelligence, Procurement and Supply Chain solutions to individual, corporate and government entities.

(Source: India Infoline News Service; Mumbai; April 24, 2009)

NCMSL Head says in pact with 4 bks for farm-based svcs


National Collateral Management Services LTS has inked agreements with Union Bank of India, IDBI, Punjab National Bank, and Bank of India to reach out to farm-linked players, and offer credit and storage facilities, Sanjay Kaul, Managing Director and Chief Executive Officer of NCML said.

“

Till recently, we were concentrating on tie-ups with private banks, but now we are looking at increasing work with public sector banks, who have more exposure to farm-based participants, and have a government mandate to provide agricultural loans,” he told Newswire18 in an interview.

NCMSL is the warehousing, and collateral management service of National Commodity and Derivatives Exchange.

NCMSL is set to hold joint trade meets with these banks in October to attract market participants, and provide them more insight into the advantage of using NCMl’s, and bank’s services.

"Although public sector banks take slightly more time to provide credit, they also offer more aggressive lending rates, which is a key factor in attracting farm sector participants,” Kaul said.

NCMSL is also marketing heavily its 'Weather Intelligence Inputs' business, which it is presently providing to ICICI Lombard, and the Government of India to help them with their weather-linked crop insurance schemes.

"Using our localised inputs to determine the settlement of claims adds credibility to the state government’s effort to reach out to farmers hit by the vagaries of nature,” he said.

He said their inputs were being employed extensively in the state of Rajasthan, which he suffers from variable rainfall, which can have an adverse impact on crops.

DROUGHT - AN OPPORTUNITY

Kaul said although the country is likely to be faced by the effects of low rainfall, and even drought in various states, this was unlikely to have a negative impact on the company’s businesses. He said this might lead to greater demand for professional procurement, and warehousing services.

"Even the rising trading interest on NCDEX indicates that there is greater interest in the farm sector this year than last year, when the crops were good and need for hedging and sticking for the future was low,” he said.

Kaul said there might be a higher interest this year in stocking, hedging and even trading due to the uncertainties surrounding crop yields and acreage.

"Harvest being low does not mean a fall in need for our services. We are seeing a rise in demand for our services across the states. Futures trade volumes in most farm commodities are on the rise indicating greater market interest.” he said.

Interest in chana, guar, and mustard futures, especially from Rajasthan, were up, he said.

"There is also lots of interest emerging for soybean. We also expect a rise in interest in maize futures, which are low at the moment, “he said.

In maize, he said NCML was stocking on behalf of non-exchange participants such as poultry traders, and industrial consumers. Kaul expects demand in turmeric to stay high, while pepper volumes are likely to pick up sharply in the coming months.

He said the Food Corporation of India had shown interest in procuring through NCML in the light of the drought situation, and low crop availability."But, we are still unsure on buying on behalf of FCI as the payment they may make us free may not be remunerative enough. We are in touch with them and hope we can reach a deal with FCI on the issue and procure for them, “he said.

BUSINESS GROWTH PROSPECTS

"We are targeting an increase in our capacity to 1 mln tn for end-October from about 6,00,000 – 6,50,000 tn now. There may be need for further expansion during Mar-Apr and the capacity couls touch 1.2. mln tn by then,” he said.

Last year, NCML's storage capacity was around 350,000 tn in end-October.

NCMSL is currently present in 16 major states, and is also looking at providing services in Assam. “Assets under collateral management are likely to touch 3,500 crore (35 bln) rupees by March as against 2,000 crore (20 bln) rupees now," he said.

He said warehouse receipt financing, and even trading was likely to be a major growth potential once the government-appointed warehousing authority gets functional.

“Hopefully, the authority will be set up by October. If warehouse receipts become negotiable, it used for further trade, and financing with only the receipts changing hands, while the stocks remain safe in the warehouses, “Kaul said.

Kaul believes banks will also be more confident in providing financing against these receipts unlike now when they actually appoint collateral managers to ensure that the stock exist, and are of a certain quality.

NCMSL has upgraded its testing and certification business significantly over the last year and can now provide the mandatory certification for exports.

"We have bought the sophisticated equipment, and testing facilities needed to study beverages, soil, pesticide residue, oil, content, water in beverages, marine products,” he said.

(Source: Newswire18, Mumbai, September 14, 2009)

Better Ways to Fill up and empty stomach


With the drought looming large on the horizon, the country is considering the proposed Right to Food legislation with a sense of urgency. The Prime Minister has been quick to announce in his Independence Day speech from the ramparts of the Red Fort that no one will be allowed to go hungry.

The recent passage of the landmark Right to Education Bill in both Houses of Parliament should give an impetus to the demand for the right to food, which is in every sense as basic as the right to education. What is, however, disturbing, is the possibility that this right will be defined in a manner as to do little to improve the levels of malnutrition and hunger.

The draft legislation has proposed that each poor household would be entitled to receive 25 kg. foodgrains per month through ration shops at Rs. 3 per kg. This quantum is not insignificant. Many would argue that given the fiscal constraints this is a good beginning. We wish we could agree. The problem is not the lack of budgetary commitment; it is much more fundamental.

DYSFUNCTIONAL PDS

Successive official surveys have confirmed that the public distribution system is dysfunctional in most States. The key findings that emerged from the Evaluation of the Targeted Public Distribution System (TPDS) by the Planning Commission are revealing:

The system is plagued by targeting errors, prevalence of ghost cards and unidentified households;

Only 57% of poor (Below Poverty Line) households are covered;

Only 42% of subsidized grains reach the target group;

Over 32% of subsidies are siphoned off and another 21% reach Above Poverty Line households

The cost of income transfer to the poor through the TPDS is much higher than through other modes.

Leakages and diversion of food grains are as high as over 60 per cent in several States. A large number of "exclusion" errors leads to a significant percentage of poor households being left out of the system. For such households the right to food is hollow as they are not in the list.

NSSO surveys have also confirmed that the dependence of poor households on the PDS in several States for meeting their food requirements is minimal. In any case, the TPDS already ‘allocates’ the equivalent of 35 kg. per household per month to all "Antodaya" and BPL households at highly subsidized rates.

The UPA’s Manifesto commitment scarcely goes beyond what is already being allocated. Much of what is allocated is not distributed to the poor.

Therefore, the principal objection to the Right to Food proposal is that it depends on a crippled, dysfunctional TPDS infrastructure. But, in criticising the proposal are we being "obstructionist"? Is there a better "plan"? Isn’t something better than nothing?

An average sized poor rural household requires 65-70 kg food grains per month to meet their calorific requirement defined in terms of 2400 calories per day. Given the leakages, diversion and improper identification of households, in many States, poor households obtain close to 80 per cent of their requirement of food grains not from the TPDS but from the open market. In such a situation, it appears illogical to attempt to operationalise the Right to Food on the edifice of leaking TPDS.

The poor household’s ability to access food grains is circumscribed by two factors – its income, and the open market food prices. While the latter are a function of market availability, the former is a function of the wage rates and the number of days a person gets employment. Logically, therefore, the Right to Food must concern itself with these two fundamental factors – improving macro availability and enhancing employment (and, thus, increasing incomes).

What is the ground level situation? Per capita availability of food grains actually fell in the nineties and has improved only marginally since then. In fact in the years 2001, 2003 and 2005 the net availability went down to below 160 kg. per capita per year. Close to 80 per cent of the rural population have calorie consumption less than the norm of 2400 calories per day (NSSO 61st round). This means that food insecure households comprise a much larger set than the officially declared poverty line that covers only 28 per cent of the population. Within the household, successive surveys have shown that the levels of malnutrition are the highest amongst children, especially in the 0-6 age group. The percentage of children in the 0-3 year age group below the required weight is as high as 45.9 per cent (National Family Health Survey 2005-06). Any meaningful Right to Food legislation must focus on adequate reach to this most vulnerable age group.

There are only two ways of ensuring availability of food grains – increase in production or imports. The Right to Food must then be defined in terms of ensuring first, at a country level, the right to the supply of a pre defined quantum of food grains in the economy. In years of food grains shortfall (due to drought as may take place this year) the Government must make good the shortfall either through the release of food grains stock from its "buffer" holding or through imports. There can be no other way. In such a situation a right defined in terms of "allocation" (not even distribution) of 25 kg of food grains can only be a sure path to perpetuating hunger and malnutrition.

FOOD FOR WORK

The National Rural Employment Guarantee Act (NREGA) has already guaranteed 100 days of employment to each rural household. This may not be adequate to stave off hunger when there is an overall macro deficit. In such years, market prices would hit the roof.

The only tangible relief would be to add foodgrains component under NREGA to the wage either in addition or in lieu of cash as was being done in the erstwhile SGRY programme. Surveys show that leakage and diversion in wage employment programmes is less in comparison to the PDS; exclusion errors are also minimal as anyone can offer himself for employment, unlike in the PDS where the State determines the beneficiary household through a ‘list’.

In summary, if there is to be more than mere tokenism in the proposed Right to Food legislation, then the essential ingredients would have to include the following:

Ensuring adequate availability of food grains in the economy, say, to begin with 170 kg. per capita per person annually.

Stable prices of food grains ensured by Government release of additional stocks/imports whenever food grains prices reach beyond a pre-defined acceptable level of inflation of, say, 5 % on a year to year basis.

Universal coverage of supplementary nutrition through the ICDC programme for the 0-6 year age group;

Introduction of a food grains component in the NREGA in vulnerable and food insecure pockets of the country.

What happens to the PDS? Should it be disbanded? It can continue as a government programme and can undergo reform by progressively being replaced by an entitlement based ‘food coupons’ program. The Right to Food legislation can incorporate the Government’s commitment to the present proposal of fixed allocations to ‘poor’ identified households. But to limit the Right to such allocations would be perverse or at best amount to tokenism.

(Source: Business line, Mumbai, September 16, 2009; Indiainfoline, Mumbai, October 8, 2009)

NW18 INTERVIEW: Head Kaul says NCML focusing on spot market for growth


National Collateral Management Services Ltd has shifted its focus to spot markets in the country to grow in warehousing and allied activities, Sanjay Kaul, managing director and chief executive officer, NCML, told NewsWire18. "We see a huge potential in spot markets and has chalked out an ambitious growth plan in spot markets of farm commodities," Kaul said in an interview.

Currently, the company has been active in maize procurement in a few states on behalf of private companies, and off late it has also started dealing of mustard seed and jeera, Kaul said. NCML is the warehousing and collateral management service of National Commodity and Derivatives Exchange and was originally formed to provide services to the bourse. However, since futures market-related business is less than even 1% of the spot market size, the real growth is possible only in the spot segment, Kaul said.

MAIZE PROCUREMENT

Since last year, NCML has been working as a custodian of maize for large and medium size poultry units in Andhra Pradesh, Karnataka, Chhattisgarh, and Bihar, Kaul said. This includes poultry majors such as Suguna, he said. We have procured close to 45,000 tn maize on behalf of poultry units during the Oct-Mar period, Kaul said. It serves commercial purpose for NCML, as it gets more warehousing business since it holds the stocks on behalf of companies in its warehouses, and releases in a staggered manner as per their requirements, he said.

While poultry industry has been accusing futures trade as the main reason for maize price rise, NCML has been creating awareness among these units to use futures platform to hedge their price risks, Kaul said. The sector consumes around 8.9 mln tn maize out of 12-13 mln tn output which makes pertinent for the industry to hedge price risks, Kaul said. In the current season, NCML has targeted to procure 100,000 tn maize for clients, he added.

NSPOT PARTICIPATION

NCMSL has been closely working with NCDEX Spot Exchange Ltd, an electronic spot bourse subsidiary of NCDEX, Kaul said. Since we have a fairly good domain expertise in maize now, we has decided to work with NSpot to market their to-be-launched maize contract in Davangere in Karnataka in the next two weeks, Kaul said.

The state government has given a 70% concession in market cess—currently levies 1.5% of the transaction value--to encourage farmers sell their maize via NSpot platform, he said. NCML will be the warehouse service provider for the contract and the company hopes to leverage its expertise in maize buys in attracting farmers and users on NSpot platform, Kaul said.

Similar arrangement has also been planned for tur contract, to be launched soon by NSpot in Gulbarga, also known as the tur bowl of Asia, in Karnataka, Kaul said.

EXPANSION PLANS

NCMSL has so far almost doubled its warehousing capacity to 680,000-700,000 tn since October last year and hopes to reach 1-mln-tn mark by end of the current fiscal, Kaul said.

Assets under collateral management (third party warehouse) have touched 25 bln rupees, while the same in owned warehouses are close to 10 bln rupees, he said. Besides, the company has recently inked a pact with National Warehousing Corp, promoted by Dutch company Agricore, via which it will operate the latter's eight warehouses.

Each NWC unit will have capacity of 40,000 tn making nearly 320,000 tn addition under NCML in the next two years, Kaul said. NWC warehouses will not be mere warehouses, but it will provide integrated services such as sorting, grading, finance, and marketing, to farmers, precisely a privately-owned replica of existing Agricultural Produce Market Committee mandies, Kaul said. End

(Source: : Newswire18, Mumbai, December 10, 2009)