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NBHC sees regulations, consumer demand and exports driving food standards certification


Warehousing service provider National Bulk Handling Corporation (NBHC), owned by private equity firm True North, recently forayed into third party inspection and testing services of agri-commodities and food products through its service offering PROCOMM. With over 2,200 warehouses across the country, NBHC — which mainly serves corporates such as ITC and Britannia among food processors — sees a big opportunity for third party testing services. As the Indian farm sector gets more integrated globally, the growth in demand for quality certification will be driven by the rising food exports and compliance of food safety norms, says Ramesh Doraiswami, MD and CEO, in an interaction with BusinessLine. Excerpts:

What prompted NBHC to get into third party inspection and testing services?

NBHC primarily offers warehousing, collateral management services to banks and commodity exchanges and financing through NBFC. We also offer value-added services such as pest management, fumigation and quality certification. These services, which were more of internal functions, are now being offered as third-party services. The testing, inspection and certification business is largely dominated by few international players such as SGS, Intertec and BVQI Bureau Veritas and Indian firms like Vimta Labs. We have around 40 locations across the country and five of our labs are accredited by NABL. Recently, we upgraded our lab at Vashi to provide comprehensive NABL services and got accredited under FSSAI to offer quality certification for food processors, who can carry out regular testing for their raw materials and finished products.

What kind of opportunity do you see for value-added services being provided by warehouse service providers?

The biggest opportunity is the lack of professional warehousing services across agri -commodities. The organised service provider market is only 6-7 per cent of the total storage capacity of around 130 million tonnes in the country. Not only the physical storage infrastructure is inadequate, but the maintenance process and documentation are highly underdeveloped as it is seen as not so important.

There are two kinds of losses to the farmer or consumer and either of them has to pay for it. One is the physical loss due to poor storage and the second is possibly due to the opacity in stock information and price discovery due to the way the value chain is managed by the unorganised trade intermediaries. There is a need for correction by creating more infrastructure and more importantly better processes for managing those infrastructures. With the Government announcing ₹1-lakh crore Agri Infra Fund, there is a growing recognition for creation of post-harvest value chain. Also, the pandemic has created, may be, a greater realisation as well that it is not just the loss alone, but also the potential quality impact on the remnant food which is consumed. At one level, the quality standards from a consumer standpoint I believe will change and that can prompt better quality infra and processes in the post-harvest value chain.

The second area is disintermediation. We know that the intermediaries are valuable to some extent. They do add value, but if they are not managed professionally and if they don’t manage the value chain professionally, it certainly tends to add costs at the minimum and more importantly it creates opacity in the value chain. The buyer doesn’t know the real price at which the farmer is selling, and the farmer doesn’t know the real price at which the potential processor or buyer is buying. And all those inefficiencies are trapped in some form because the farmer doesn’t have access to funding and the person who is buying doesn’t have access to quality storage. The government’s ability to monitor food shortage and prices of essential commodities is also constrained due to lack of information on such unorganised storage. This, again, could be a big opportunity for a professional service provider like us, once the dust settles down on the agri-reforms.

Besides the hygiene standards and compliance, there is an increased focus on exports. And exports require certification standards. Europe has its own standards for food imports and so also West Asia. They need certifiers who would certify the quality of food imported by them. As India is becoming more food surplus and exports become more important and strategic, thereby creating more opportunity for quality certification as well as for us.

Also, we believe that the Tier II and Tier III segment, which is where the opportunity of growth is higher as the new food producers and consumers are coming in these locations, which is where we in NBHC are predominant. That gives us a natural advantage to grow as well. The level of digitisation that we have done in the past three four years will give us an advantage. NBHC handled commodities worth ₹15,000 crore in FY20.

How are you gearing up to tap these opportunities?

We are creating a comprehensive trading app/portal/marketplace branded as KRISHI SETU, which we expect to be ready by June. Our aspiration is to create an Amazon-like platform for agri-commodities. Our solution will not just create a transaction digitally, but will be backed by an operations engine, which is our physical warehouse and collection centres. The product, in addition to being transacted, will also store and move the stocks across potential buyers and sellers in various locations. We see this as an opportunity over a period of time. Trading in agri-commodities is a huge market in India and even if a very small percentage of that market shifts to the e-marketplace, it could be a significant opportunity for us. We have started connecting with a network of Farmer Producer Organisations (FPOs) and buyers so that we create liquidity on our platform.

What is the potential opportunity around quality certification?

The food standards in India are increasing in scope and in compliance. Consumers are becoming more discerning. The proportion of packaged and processed commodities in the food basket is increasing. Today all packaged commodities are regulated. As consumers become conscious about quality and the quantity assurance, and as the shift happens towards packaged commodities, the need for quality assurance becomes important. That’s where the standards become important. Both from compliance and market demand, we believe the certification opportunities would increase significantly. We estimate the certification market to be around ₹300 crore. As more and more agri-commodities get processed into packaged foods, and get exported more and more, certification is going to be an important enabler. We are very small part of the market and we expect our Testing, Inspection & Certification business to grow by three times in the next two years to around ₹18 crore. The market itself will grow significantly in high double digit. Also, there’s significant tightening of regulations happening everywhere. This is an international phenomenon. Organic for instance, needs certificate – and there’s a need to certify the entire value chain. The certification has to be done by independent agencies and that’s where we become more relevant.

Is NBHC offering organic certification?

We have already started organic farm certification business and are working with at least six States & UTs. We are working in Ladakh, Odisha, Karnataka, Uttarakhand, Delhi, Goa, Daman and one another location. We are an integral part of Union Agriculture Ministry’s Participatory Guarantee Scheme (PGS) to incentivise more farmers to grow organic food, certification scheme launched by PM in 2018. Under this scheme, farmers register their land via regional councils (appointed by Govt. as training & monitoring agencies). It’s scientifically proven that any land needs three years complete crop cycle to convert into “Organic Land”. From 2nd year onwards with regional council, we draw samples from farm level and analyse them for pesticides. We believe that organised stocking of products is going to increase. Organised, I mean at the producers end the stocking is going to increase and the buyers are going to be organised. Today the seller is disaggregated, and the buyers are badly disaggregated. There will be aggregation on both side and that will create more organised warehousing.


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