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Horti Produce - Role of Processing - NABARD Study
Horti Produce - Role of Processing - NABARD Study
Occasional Paper16
K.V. Subrahmanyam
P
\J/
National Bank for Agriculture and Rural Development
Mumbai
2000
Occasional Paper16
K.V. Subrahmanyam
I
^
Published by National Bank for Agriculture and Rural Development, Department of Economic
Analysis and Research, 4th Floor, "C" Wing, Plot No. C-24, "G" Block, P.O. No. 8121, BandraKurla Complex, Bandra (East), Mumbai - 400 051 and Printed at Karnatak Orion Press, Fort,
Mumbai -400 001.
CONTENTS
Page No.
List of Tables
List of Figures
xii
1
2
5
6
15
15
15
15
16
16
17
18
18
20
29
29
29
30
30
35
Page No.
Captive farming
a) Present Status
37
38
38
39
43
43
44
46
46
48
49
57
57
58
58
58
58
60
60
62
vi) Constraints
63
75
75
87
89
90
IV
Page No.
VII. Future Scope and Measures for Increasing Processing
of Horticultural Crops
95
96
97
97
98
v) Food Parks
vi) Government policies
98
99
99
101
105
PREFACE
"The Americans eat what they can and can what they can not" clearly
brings out the importance of processing of fruits and vegetables for better
health and wealth. Unfortunately this has been neglected for a long time In
India and hardly 2 per cent of the total production of Fruits and Vegetables
are processed as against more than 70% in countries like Malaysia,
Phillipines, Brazil and USA. The post harvest losses of fruits and vegetables
are estimated to be a staggering Rs. 30,000 crores. Of late, the importance
of Fruit and Vegetable Processing Industry was recognised and identified as
the 'Sunrise Sector' for economic growth amd attracted the 'EXTREME
FOCUS' area by the Ministry of Commerce, Govt, of India.
Recently, the Fruit and Vegetable Processing Industry (FVPI) has
realised the importance and need for establishing durable linkages between
farm and non farm sectw-lor ensuring availability of quality raw material at
a reasonable price for processing. It is in this context that the present
paper assumes great significance and NABARD should be congratulated for
taking a timely and very useful step in bringing out this paper.
To give an overall picture of FVPI, the occasional paper is divided into
nine sections. Section I covers impact of New Economic Policy on growth
of Horticultural sector. Of late. Govt, of India has taken a number of steps
to help the FVPI and this section broadly covers all the measures taken
such as creation of MFPI, Seed Policy etc., and their impact on growth of
horticulture sector. Section H deals with the linkages between Producers
and Processors, the earlier attempts and the factors to be considered for
establishing sound linkages. Section I I I deals with contract farming and its
role and captive farming and its scope for ensuring the supply of quality
raw material to Industry. In this section case studies of contract farming are
presented to give an In-depth view of the arrangements, problems etc. It
also provides information on the Fruit and Vegetable Processing Industry
where captive farrnihg has been successful and also its future scope.
Section IV deals with price risk and feasibility of establishing small scale
fruit and vegetable processing units in production areas. It covers the
VI
(K.V. Subrahmanyam)
VII
ACKNOWLEDGEMENT
I am highly grateful to National Bank for Agriculture and Rural
Development (NABARD), Mumbai and specially to Dr. A.K. Bandyopadhyay,
Chief General Manager, Department of Economic Analysis and Research,
NABARD for recognising my expertise and giving me this opportunity to
write an occasional paper on one of the most important aspects of
horticultural sector.
I also wish to thank the Director, Indian Institute of Horticultural
Research, Bangalore for his kind permission to undertake this assignment. I
am deeply indebted to my colleague Dr. T.M. Gajanana, Scientist (SS) of
Agril. Economics for his help in editing the manuscript on the computer. I
also wish to thank Mr. V. Dakshinamoorthy, Technical Officer, for data
collection and tabulation. The stenographical assistance provided by
Mrs. N.S. Nirmala is gratefully acknowledged.
I am highly thankful to the officers of the Sterling Agro Products
Processing Pvt. Ltd. and Hindusthan Lever Ltd., Bangalore, agents and
cultivators in the study area for providing the necessary information on
contract farming of gherkins and tomato.
I also wish to thank Dr. B.N. Kulkarni, Deputy General Manager,
NABARD, Mumbai for the keen interest he has taken and for the valuable
comments on the draft paper.
Bangalore
(K.V. Subrahmanyam)
VIM
Author
Dr. K.V. Subrahmanyam
Phncipal Scientist, (Agril. Econ.)
Central Research Institute for Dryland Agriculture (CRIDA)
Santoshnagar, Saidabad P.O.
Hyderabad - 500 059. (A.P.).
The usual disclaimer about the responsibility of the National Bank as to the facts
cited and views expressed in this paper is implied.
IX
LIST OF TABLES
S. No. Table No.
Title
Page No.
1.
1.1
2.
1.2
3.
1.3
4.
1.4
5.
1.5
6.
1.6
10
7.
1.7
10
8.
1.8
11
9.
1.9
11
10.
1.10
12
11.
1.11
13
12.
1.12
14
13.
2.1
22
14.
2.2
22
15.
2.3
23
16.
2.4
23
17.
2.5
24
18.
2.6
24
19.
2.7
25
20.
2.8
25
21.
2.9
26
22.
3.1
39
23.
3.2
40
24.
3.3
41
25.
3.4
41
Title
Page No.
26.
3.5
42
27.
4.1
Capital Requirements for Establishing a Small Scale Cooperative Tomato Processing Unit
50
28.
4.2
51
29.
4.3
51
30.
4.4
52
31.
4.5
52
32.
4.6
53
33.
4.7
53
34.
4.8
54
35.
4.9
55
36.
5.1
64
37.
5.2
64
38.
5.3
64
39.
5.4
65
40.
5.5
65
41.
5.6
66
42.
5.7
66
43.
5.8
67
44.
5.9
67
45.
5.10
68
46.
5.11
68
47.
7.1
99
XI
LIST OF FIGURES
S. No.
Title
Page No.
Fig. 1
27
Fig. 2
69
Fig. 3
70
Fig. 4
70
Fig. 5
71
Fig. 6
71
Fig. 7
72
Fig. 8
72
Fg. 9
73
Fig. 10
73
XII
SECTION - I
IMPACT OF NEW ECONOMIC POLICY ON GROWTH OF
HORTICULTURE SECTOR
I)
Introduction
Realising the vital role of horticultural sector, the Govt, of India has
substantially increased the allocation of funds during eighth plan period.
From hardly Rs. 232.1 million in seventh plan period (1985-90) the
allocation in the eighth five year plan has gone upto Rs. 10,000 million, a
significant jump of 4208 per cent. Besides increased allocation of 2094 per
cent for fruits and 742 per cent for vegetables in the ongoing programmes
of the eighth plan, funds are also allocated for new horticultural products
like floriculture, tuber crops, mushrooms and medicinal and aromatic crops
which were hitherto neglected. A sum of Rs. 975 million has also been
exclusively allotted for exports (Table 1.2) [23].
2.
The Govt, of India came up with a new seed policy in 1988, which
provides for liberalised import of seed/plant material by private growers by
fulfilling the prescribed quarantine procedures. This has helped in
overcoming the constraints of the Fruit and Vegetable Processing Industry
viz., high cost of raw material due to low productivity and more raw
material to finished product ratio due to lack of suitable processing varieties
and also lack of quality material and varieties in demand abroad.
With this, some of the private companies have come up with hybrid
seeds in crops like tomato and cabbage which has increased the
productivity from 20 tonnes per hectare to 68-80 tonnes per hectare, which
has not only brought down cost of production but also helped in reducing
the area for supply of raw material [59]. The new tomato hybrids released
are also having high brix content compared to local varieties (Table 1.3)
resulting in lowering the raw material to finished product ratio. Now the
processing industries are also supplying the seed of varieties which are
suitable for processing.
Figures in parenthesis are reference numbers.
Export
One of the bold and major steps taken by the Govt, of India in
implementing the economic reforms in India is the announcement of new
Industrial Policy during 1991. The new Industrial policy announced by Govt,
of India in 1991 has placed processed fruits and vegetables (F&V) in the
list of high priority areas and are eligible for automatic approval of foreign
technology agreements and for 51 per cent equity participation by foreign
firms. This combined with some tax concessions like abolition of excise duty
on processed foods to make them more competitive in the International
market and general economic policy programmes like adjustment in the
currency exchange rate has resulted in joint ventures with foreign
collaborators in FVPI, some of them with 100 per cent export commitment.
Seventy two proposals for setting up 100 percent export oriented units
(EOUs) involving an investment of Rs. 800 crores have been approved
since 1991. In addition, by the end of 1993, the Industrial Entrepreneur
Memorandum (lEM) involving investment of about Rs. 720 crores have been
filed. The Ministry of Food Processing has lined up projects worth Rs.
45000 crores for investment over the next four years. As many as 4000
MOUs have been signed and 15 per cent of the projects have already
been implemented. About Rs. 4000 crores worth of projects involving food
and agro processing have started commercial production [20a].
Besides, a number of domestic firms like Indo-Bhtain Agro Farms
Based on
production
Less 30%
PHL
121
209
330
85
146
231
-35
-154
-189
Based on 41.5 million tonnes of fruits and 71.6 million tonnes of vegetables during 1995-96 and
projected population of 937 million in 1995 based on 2.11 per cent CGR
Recommended at 120 g of fruits and 300 g of vegetables per capita per day.
Eightti Plan
Ongoing programmes
Fruits
38.80
Vegetables
17.70
150
Coconut
77. iO
1000
Spices
20.10
1500
Cashew
29.00
650
1.40
30
48.00
2000
232.10
6180
Cocoa
N.H.B.
Sub total
850
B. New programmes
Floriculture
100
Tubercrops
25
Mushroom
100
Arecanut
50
50
Betelvine
20
Plastics
2500
Exports
975
Sub total
3820
Grand total
232.1
10000
T.S.S. (%)
NAVEEN
57.50
6.20
RAJANI
72.25
5.35.5
RUPALI
79.50
5.65.8
RASHMI
67.50
5.50
IAHS-88-3
82.50
5.86.0
ROMA
31.20
4.0-5.0
1992
1993
1994
1995
1996
China
23102
31758
35923
42016
45462
India
30037
38274
38978
39197
39197
Brazil
32279
31807
31590
33689
35928
USA
29956
29022
28908
29216
28841
Italy
19820
18980
18288
16652
17182
Spain
14524
12976
11959
10826
12095
Others
291800
225935
226501
230124
235227
Total World
369518
388752
392147
401720
413932
1992
1993
1994
1995
1996
China
119786
12556
189870
201825
202155
India
59194
63460 .
64614
64671
64672
USA
30438
31371
35189
34162
34393
Turkey
19054
18533
19645
21731
20796
Japan
13737
13664
13419
13589
13589
Italy
14120
14090
13883
13555
13555
Spain
10106
10158
Others
189735
309775
208395
216834
216363
Total World
456170
473607
545015
566367
565523
Table 1.6
Item
1980
World
Apple
Banana
Grapes
Grape Fruit & Pomello
Lime & Lemons
Meingo
Oranges
Papaya
Pineapple
1996
India
India's
Share (%)
World
53672.00
55787.00
57410.00
5004.00
9104,00
19215.00
59558.00
5867.00
11757.00
1200F
9935F
600F
70F
1700F
10000F
2000F
490F
820F
2.24
17.81
1.05
1.40
18.67
52.04
3.36
8.35
6.97
413932.00
39197F
9.47
46656.00
12725.00
11981.00
5214.00
84873.00
294834.00
35644.00
10401.00
3300F
4800F
434*
270F
4800F
17942F
4058F
350F
7,07
37.72
3,60
5.18
5,66
6,09
11.35
3.37
565523.00
64672F
11.44
3376.00
40007.00
4470.00
A. Fruits
770.00
4830.00
20.00
2.28
12.06
0.45
13091.00
38463.00
1862.00
7843.00
8363.00
1160.00
265.00
549.00
63.88
3.02
14.23
7.00
Total Fruits
289462.00
Cabbage
Cauliflower
Brinjal
Peas
Tomato
Potato
Onion
Garlic
34539.00
4462.00
4531.00
2263.00
50998.00
230263.00
20349.00
18462.00
6,38
B. Vegetables
470.00
1.36
660.00
14.79
41.00
750.00
8327.00
2504.00
1.81
1.47
3.62
12.31
Total Vegetables
F - FAO Estimates.
India
India's
Share (%)
Production (IVI.T,)
1991-92
1995-96
% change
194561
383938
386929
32365
93977
49277
1077621
45239
57059
27248
526194
217146
433019
454062
35620
131625
48570
1283030
60921
71275
47735
574280
11.61
.12.78
17.35
10.06
40.06
-1.43
19.06
34.66
24.91
75.19
9.03
2874408
Total
Source : Ref. No. 29.
3357283
16.80
Fruits
Apple
Banana
(Citrus
Grapes
CGuava
Lltchi
'Mango
iRapaya
Pineapple
Sapota
Others
10
1991-92
1995-96
% change
1147743
7790030
2821740
668243
1095145
243811
8751622
805342
768513
396262
4143528
1214652
13095087
3798271
603596
1501296
364613
10810957
1329668
1071168
569651
7148052
5,83
68.10
34.61
-9.67
37.09
49.55
23.53
65.11
39.38
43.76
72.51
28631975
41507011
44.97
Production (M.T.)
Area (ha)
1991-92
1995-96
% change
N.A.
434202
Cabbage
177306
218381
Cauliflower
202787
Okra
1991-92
1995-96
% change
N.A.
6443062
23.17
2771204
3861684
39.35
220025
8.50
2998061
2473987
-17.48
221993
430525
93.94
1886486
4031811
113.72
Onion
331760
395500
19.21
4705827
4080000
-13.30
Peas
177680
223965
26.05
1296010
2341313
80.66
Potato
1135075
1109000
-2.30
18194976
18843300
3.56
Tomato
289077
355684
23.04
4243376
5441969
28.25
Others
2601051
1948165
-25.10
22436098
24077438
7.32
Total
5592632
5335447
-4.60
58532038
71594564
22.32
Brinjal
Production in
lakh tonnes
Average Value
(Rs./kg)
Average Tax
on inputs
Revenue
generated
(Rs. Crore)
1991
3.60
19.34
0.394
274.30
1992
4.69
20.36
0.394
376.20
1993:
5.59
21.43
0.394
472.00
1994
6.76
22.56
0.394
600.90
1I9K
8.50
23.75
0.394
795.40
1996
9.60
25.00
0.394
945.60
11
No. of units
(licenced)
installed capacity
(000 t)
Production1
(000 t)
Capacity utilisation
change
(%)
2026
275
69.60
1981
2394
275
90.00
29.31
32.70
1982
2611
300
136.10
51.78
45.50
1983
2809
330
119.80
-12.30
36.30
1984
3006
379
131.61
9.43
34.60
1985
3093
405
179.20
36.69
40.80
1986
3137
447
161.50
-9.88
36.10
1987
3213
556
186.50
15.48
33.50
1988
3367
599
210.00
12.60
35.10
1989
3629
708
240.00
14.28
33.90
1990
3846
894
260.00
8.33
29.10
Compound
Growth
Rate (%)
5.50
12.50
12.44
25.30
-0.06
3925
950
360
38.46
37.89
1992
4057
1108
469
23.24
42.33
1993
4132
1260
559
19.19
44.37
1994
4270
1402
676
20.93
48.22
1995
4368
1750
850
25.74
48.57
1996
4674
1910
960
12.94
50.26
1997
4932
2040
910
-5.21
44.61
Compound
Growth
3.72
14.17
18
Rate (%)
12
3.83
1982
1993
1997
% change
in 1997
over 1993
% change
in 1993
over 1982
% change
in 1997
over 1982
Andhra Pradesh
95
252
300
165.26
19.05
215.79
Assam
12
23
25
91.67
8.70
108.33
Bihar
16
53
58
231.25
9.43
262.50
Gujarat
109
224
260
105.50
16.07
138.53
Haryana
55
143
151
160.00
5.59
174.55
Himachal Pradesh
45
81
90
80.00
11.11
100.00
J & K
36
80
83
122.22
3.75
130.56
Karnataka
117
230
253
96.58
10.00
116.24
Kerala
161
327
387
103.11
18.35
140.37
40
93
104
132.50
11.83
160.00
904
817
934
-9.62
14.32
3.32
Meghaiaya
11
14
120.00
27.27
180.00
Manipur
133.33
28.57
200.00
Nagaland
33.33
25.00
66.67
Orissa
10
22
43
120.00
95.45
330.00
Punjab
135
175
309
29.63
76.57
128.89
44
90
110
104.55
22.22
150.00
100.00
50.00
200.00
215
385
452
79.07
17.40
110.23
33.33
33.33
Uttar Pradesh
218
415
494
90.37
19.04
126.61
West Bengal
192
260
298
35.42
14.62
55.21
A & N Islands
200.00
200.00
Amnachal Pradesh
100.00
50.00
200.00
18
29
54
61.11
86.21
200.00
200.00
16.67
250.00
Delhi
115
245
302
113.04
23.27
162.61
Goa
48
140
160
191.67
14,29
233.33
Mizoram
-33.37
50.00
Pondicherry
10
14
150.00
40.00
250.00
2611
4132
4932
58.25
19.36
88.89
Madhya Pradesh
Maharashtra
Rajasthan
Sil<l<im
Tamil Nadu
Tripura
Chandigarh
Dadra-Nagar Haveli
Total
13
No
1980
Large (>250)
1990
No
% change in
1990 over 1980
No
218
10.76
442
11.49
102.75
497
11.38
12.44
Medium (100-250)
236
11.65
331
8.61
40.25
343
7.85
3.63
Small (50-100)
163
8.05
323
8.4
98.16
371
8.49
14.86
Cottage (10-50)
398
19.64
768
19.97
92.96
854
19.55
11.2
Home (1-10)
763
37.66
1303
33.38
70.77
520
34.8
16.65
Re-labeller (<1)
248
12.24
676
17.65
172.58
783
17.63
15.83
2026
100
3846
100
89.83
4368
100
13.57
Total
14
1995
% change in
1995 over 1990
SECTION - 11
LINKAGES BETWEEN PRODUCERS AND PROCESSING
INDUSTRY
As early as 1974 the FAO expert Dr. Mittenndorf [25] had pointed
out that one of the problems faced by the Fruit and Vegetable Processing
Industry in Asia is the supply of raw material. Even at present the same
problem persists. In case of Fruit and Vegetable Processing Industry (FVPI)
in India, the main problems faced are :
(i) Non availability of right processing varieties of Fruits and Vegetables:
According to the Industry, because of the non-availability of suitable
varieties for processing, the raw material to finished product ratio is very
high in India as compared to abroad. As against 4 tonnes of tomato
required for one tonne of tomato paste concentrate of 28 Brix, abroad, in
India, 7 tonnes of tomatoes are needed for making one tonne of tomato
paste concentrate of 28 Brix, because of non-availability of suitable
processing varieties of tomato. Similar is the situation in the case of fruits
like orange and pineapple (Table 2.1).
(ii) High cost of raw material: The Industry also
raw material in India is also two to three times
International prices, which makes them difficult to
markets (Table 2.2). Besides, they also claim that
materials like sugar, are also increasing.
15
rather than from the producers directly. For example in case of mango,
most of the crop is procured by the preharvest contractors and then sold
through agents to the processing factories resulting in high price to
processing industries and low price to cultivators.
To overcome the above problems of both the producers who are the
suppliers of the raw material and the FVPI there is a need to develop
strong industry-agriculture linkages.
(iv) Earlier attempts and progress
As early as 1970's some attempts were made by the Government of
India to foster the linkages through operational projects with foreign
collaboration and one of them is the Indo-Bulgarian project.
a) Indo-Bulgarian project in Karnataka : The Indo-Bulgarian project
which was started as a follow-up of the protocol signed on March 7, 1974
between India and Bulgaria, was aimed at linking production, processing
and marketing. Both the countries felt that there was a considerable scope
for collaboration in the field of horticulture development and food processing
to the mutual advantage of both the countries. Consequently, a team of the
Bulgarian experts visited India from 13th January to 5th February, 1975 for
assisting Indian experts in the development of project reports for the
establishment of Agro-Industrial complexes. The team located two sites in
the states of Bihar and Karnataka for the establishment of the proposed
complexes.
Impressed by the concept and practical achievements of AgroIndustrial complexes in Bulgaria, the Indian Council of Agricultural Research
(ICAR) made a modest beginning by sanctioning a scheme costing Rs.
5,03,000 for Karnataka and Rs. 5,84,100 for Bihar. The total fund of these
schemes has been put under the direct disposal of the concerned state
Governments and under the technical supervision of ICAR. In Karnataka the
technical support was provided by the Indian Institute of Horticultural
Research (IIHR) Hessaraghatta, Bangalore in close collaboration with the
University of Agricultural Sciences, Hebbal, Bangalore.
The main concept behind this scheme was to follow the ideal of the
integration of production, processing and marketing.
The scheme was proposed to be implemented in three phases and
the important objectives of the phase I are :
i) to make the growers familiar with the concept of the Agro-Industrial
complex and ii) to arrange for processing the available produce along with
16
other objectives like laying demonstration plots to get higher yields and
testing of the promising varieties of Bulgaria and India for processing.
In Phase II, it is envisaged to have a main Agro Industrial Complex
to cover Bangalore and Kolar districts. In phase III the scheme is to be
extended to other districts in Karnataka viz.. South Kanara, North Kanara
and Coorg.
The programme realised the importance of rural participation and
hence proposed to involve rural communities viz., cultivators and encourage
them to grow vegetables and fruits for processing purposes by establishing
a processing unit.
As a beginning to fulfill the above objective, during kharif season,
1976 an arrangement was made with the Karnataka State Agro-Industries
Corporation (KSAIC) to process the tomatoes grown by the cultivators in
the 42 demonstration plots with the existing facilities. The growers were
asked to deliver the produce at their own cost to the factory and KSAIC
agreed to pay at the rate of 60 paise per kg for the produce (19).
Unfortunately, most of the cultivators failed to deliver the produce
and all the arrangements made by KSAIC for processing the tomatoes
resulted in wasteful expenditure. But, during the same year rabi season, the
same cultivators approached the KSAIC to sell their produce but the unit
was not ready to accept the same. The analysis of the main economic
reasons for this behaviour of the cultivators has shown that during 1976
Kharif season, the market prices were very high compared to 60 paise for
kilogram offered by KSAIC whereas the situation was reverse during 1976
rabi season (Table 2.3).
From the above it is clear that price plays an important role in
influencing the decision of the cultivators and hence it needs to be taken
care of.
b) Pepsi experience in Punjab: In Punjab a joint venture with Punjab
Agro Industries Corporation (PAIC), Pepsico, a U.S. based multinational and
Voltas, a company belonging to the Tata Group as a junior partner was
started during 1988, with the aim of processing 25 per cent of fruits and
vegetables grown in Punjab and help in diversification of agriculture and
shifting of the area in favour of fruits and vegetables. The company has
also tried to establish linkages with the cultivators by entering into contract
with 107 farmers covering an area of 1600 hectares of tomato. But this
arrangement has also run into troubles [17, 40].
17
The model showing the factor linkages that exist between production,
marketing and processing of Fruits and Vegetables is presented in Fig. 1.
a) Production Factors
There are six production factors which influence the processing
industry:
1) Variety: One of the main complaints even today by the FVPI is the nonavailability of suitable varieties for processing purposes, which makes the
ratio of raw material to finished product high and results in escalating the
cost of finished product. (Table 2.1).
Though the New Seed policy of 1988 has helped the processing
industry by allowing the import of germ plasm/seed of crops like tomato in
overcoming the problem to certain extent, still the problem exists, as finally
the cultivators have to be convinced to grow the crop and supply the
produce. Hence, it is necessary to influence the cultivators to take up
growing varieties suitable for processing with proper incentives. The farmers
will definitely respond and grow them. In this connection, the farmers
around Bangalore in Karnataka, taking up the cultivation of 'Gherkins' a
cucumber variety which is an imported variety, suitable for processing as a
pickle is a fine example as the crop is new and has no domestic market.
At present some 20 companies, mainly export oriented units, are engaged
in the 'Gherkins' trade. 'Gherkins' are cultivated in states of Karnataka,
Tamil Nadu and Andhra Pradesh with an estimated area of 6000 hectares
[9]. The variety of a crop also influences the cultivation practices and cost
of cultivation.
ii) Cultivation
some of the
may have a
cultivation of
staking which
case of local
18
The cost of hybrid seed of tomato is also very high compared to local
seed. Besides, for every crop season, new seed has to be purchased in
case of hybrids, whereas in case of local varieties, the seed from previous
crop can be used. Hence the cultivators have to spend more than three
times the amount in case of hybrid seed compared to local varieties of
tomato. Similarly the cultivators of hybrid seed crop need to spend more
towards plant protection because of their susceptability to disease and pests
and also require higher doses of fertilization. All these factors push up the
cultivation cost of these varieties compared to local variety. The cost of
cultivation (cost of inputs) is around Rs. 16,000/- in case of hyt>rid tomato
as against around Rs. 3,500/- in case of local variety which is nearly four
times the local variety cost (Table 2.4). In case of Gherkins, a cultivator
needs to spend around Rs. 70,000/- per hectare, compared to the
negligible amount he will be spending for local cucumbers (Table 2.5). The
processing Industry needs to keep the above factors in mind while
advocating the growth of new varieties suitable for processing and provide
financial assistance to the cultivators for taking them up.
iii) Yield. Cost of Production and Returns :
The ultimate aim of the cultivators in growing a crop is to make
profit and the cultivation of especially fruits and vegetables is for
commercial purposes. The returns obtained by a cultivator depend upon i)
yield, ii) price and iii) cost of cultivation/cost of production. This can be
symbolically expressed as :
NR = GR - C and GR = Y. Py where
NR = Net returns per unit area (Rs./ha.)
GR = Gross returns per unit area (Rs./ha.)
C = Cost of cultivation (Rs./ha.)
Y = Yield per unit area (t/ha.)
Py = Price of the produce (Rs./t)
So, for the cultivator to take up the new crop varieties, both the
yield and price play an important role.
Higher the yield of the variety it is better for the cultivator as well
as the Industry, as cost of Production will be less. For example, because
of higher yield of 45 t/ha of hybrid tomato, the cost of Production of
tomato was only Rs. 917/t as against Rs. 1032/t in case of local variety
(Table 2.4).
The higher yield also will make the area requirements for the
production of raw material and the number of cultivators required also less,
19
enabling the processing unit to enter into contract with less number of
cultivators.
Influence of Production Factors on Processing
The influence of above production factors and its implication can be
seen from Table 2.6 in case of tomato crop. The processing units can
save a substantial amount not only in case of raw material but in terms of
area to be cultivated for the raw material. The fact that hardly one third of
the cultivators need to be contracted, itself saves a lot of time, energy and
costs to the processing unit.
b) Marketing Factors
i) Marketing costs : The returns realised by the cultivator are also
influenced by the expenditure he incurs towards the marketing of the
produce. Hence, of late, it is felt that the marketing costs need to be
treated as a part of cost of production [45]. The marketing costs are
directly influenced by the marketing channels followed by the cultivators.
The most popular channel of marketing followed by the cultivators in case
of Vegetables is: Producer - Commission Agent - Retailer - Consumer
and in case of Fruits it is : Producer - Pre-harvest contractor Commission Agent/Wholesaler - Retailer - Consumer.
Both the cultivators and processing units will be benefited by
establishing a direct link between them. In case of cultivators, among the
important items of marketing cost, commission charges account for 40-60
per cent in case of fruits and vegetables followed by transport charges
which account for 40 per cent (Table 2.7). By establishing a direct link, the
cultivators will be able to save the commission charges and also transport
cost in some cases which is a substantial amount. The processing unit also
will be benefited, as they can get the produce at a cheaper rate than
procuring from the market or through agents.
ii) Fair Price: Price plays an important role for both the producers as
well as processing units. The price offered/prevailing will influence the
decision of the cultivators regarding the place of sale as well as the
agency to whom to sell. Hence, it is important that the price offered by the
processing unit should be reasonable and attractive to the cultivators. The
main problem faced by the processing units is how to determine the price
which will take care of their interest of getting the produce at a cheaper
rate as well as be sufficiently attractive for the cultivators.
20
commercial crops like fruits and vegetables. The processing industry has to
take this into consideration while offering procurement prices to the
cultivators. This was very clearly observed in case of 'Gherkins' industry.
According to the 'Gherkin' industry
"We have observed that there is a
clear cut link between the prices of other vegetables in the market and the
farmers' willingness to grow gherkins. If the prices of the vegetables in the
market are high, the farmer is not interested to grow gherkins for which
there is hardly any local demand. If the fresh vegetable market is down the
farmer is willing to grow more gherkins. In the latter, there are more,
farmers to grow gherkins than we are interested to purchase. They come
and que up before our agricultural extension officers' house in the village
and try to win over him to get a chance to cultivate gherkins for that
season" [34].
From the above it is clear that the procurement price fixation by the
processing units has to be done very carefully taking into consideration all
the above marketing factors.
So, the raw material supply and management which will affect the
costs and returns of fruit and vegetable processing units in the short as
well as long run needs to take into consideration both the production and
marketing factors and come up with a procurement price policy which will
establish an enduring linkage between the producers and processors and
the model developed will be very useful in this regard.
Table 2.1 : Ratio of Raw Material to Finished Product Requirements
in India and Abroad
(Tonnes)
Product
Orange juice
Concentrate (65 brix)
Pineapple juice
Concentrate (65 brix)
Tomato paste
Concentrate (28 brix)
14
10
(Brazil)
16
(Philippines, Hawaii)
(Italy)
India
Intemational
1000
1000-1500
1500-1800
300-600
250-400
400
22
Contract Price
(Rs./kg)
Market Price
(Rs./kg)
Cost of
production
(RsVkg)
Difference between
contract price
market price
Kharif 1976
0.60
(+13)
0.76
(+43)
0.53
0.16
(30)
Rabi 1976
0.60
(+46)
0.47
(+15)
0.41
0.13
(32)
Note
+
Source
1.
Seed
1848.40
511.10
2.
FYIVI
2205.00
2175.00
3.
Fertiliser
3994.23
396.00
300.00
4.
PPC
2728.00
5.
Staking*
5543.05
Irrigation
79.87
79.87
Sub-total
16398.55
3461.97
a) Family
2300.30
2250.00
b) Hired
3040.70
3100.00
LABOUR
1.
2.
Human
Bullock
Sub-total
C.
Local
MATERIAL COST
6.
B.
Hybrid
784.69
375.00
3125.69
5725.00
1576.69
643.09
D.
E.
COST 1 (A+B+C)
24100.93
9830.06
MARKETING COST
13658.85
7325.00
COST II (COST 1 + D)
37759.78
17155.06
FIXED COST
COST III (COST II + E)
F.
YIELD (T/HA)
G.
3500.00
3500.00
41259.78
20655.06
45.00
20.00
917.00
1032.00
* One fourth of the total cost, taking four seasons as the total life of stakes.
Source : Ref. No. 59.
23
Quantity
1.
1250 g
2.
FYM
75 CL
10000
3.
Fuiradon granules
7.5 kg
2500
4.
17.5 t
11250
5.
5000
6.
7500
7.
5000
8.
9.
PP measures
3750
13925
Total
73475
10.
112.5 kg
Rs/ha.
5550
9000
Local
Hybrid
1.
600
400
2.
)000
520000
3.
30
4.
67
20
1.
The raw material to finished product ratio is 4:1 in case of hybrid Ijecause of high brix content and
6:1 in case of local varieties.
2.
3.
Hybrid tomato yield is taken as 45 t/ha and local tomato yield as 20 t/ha.
4.
24
Loading &
unloading
Commission
Packing
Market entry
fee etc.
Tomato
6.87
(31.59)
1.52
(6.99)
11.71
(53.84)
1.33
(6.11)
0.32
(1.47)
21.75
(100)
French! beans
8.58
(37.81)
1.35
(5.95)
11.84
(52.18)
0.59
(2.60)
0.33
(1,46)
22.69
(100)
Brinjal
7.54
(38.10)
0.92
(4.65)
10.23
(51.69)
0.66
(3.34)
0.44
(2.22)
19.79
(100)
Cabbage
8.63
(40.21)
1.42
(6.62)
10.71
(49.91)
0.59
(2.75)
0.11
(0.51)
21.46
(100)
Bfiendi
5.66
(31.17)
0.64
(3.52)
10.82
(59.58)
0.67
(3.69)
0.37
(2.04)
18.16
(100)
Carrot
9.21
(45.24)
1.55
(7.61)
8.82
(43.32)
0.61
(3.00)
0.17
(0.83)
20.36
(100)
Cauliflower*
9.21
(38.60)
2.99
(12.53)
10.60
(44.43)
1.06
(4.44)
Mandarin
11.77
(39.06)
2.42
(8.03)
13.09
(43.45)
1.31
(4.35)
Banana#
0.68
(51.91)
0.43
(32.82)
0.20
(15.27)
1.31
(100)
Pineapple
30.00
(52.41)
24.24
(42.35)
1.00
(1.75)
57.24
(100)
Crops
Grading
Total
VEGETABLES
23.86
(100)
FRUITS
2.00
(3.49)
1.51
(5.11)
30.13
(100)
# : Per bunch
1
2
3
4
Month
February 1990
March 1990
April 1990
May 1990
166
167
181
185
110
100
100
97
56
67
81
88
% over
P.U. Price
MP.
P.U.
(%)
(%)
51
67
80
82
97
20
9
9
8
81
91
101
Tfie cost of production of tomato during ttiat period was Rs. 92/q based on survey worl<.
" Based on around 40 per cent of cost of production
Source : Ref. No. 59.
25
Fair
price"*
(Rs/q)
129
Grade I
>100
8.50
Grade II
60-100
6.50
Grade III
<60
1.50
Grade IV*
<60
0.50
26
CROP
VARIETY
CULTIVATION
PRACTICES
YIELD
COST OF
CULTIVATION
PRODUCTION
FACTORS
COST OF
PRODUCTION
RETURNS
-^^
PRICE BY
PROC. UNIT
MARKETING
COSTS
MARKET
PRICE
PRICE OF
COMP. CROPS
MARKETING
FACTORS
RAW MATERIAL
COST
INVESTMENT/
CAPACITY
UTIL
RAW MATERIAL
TO PROC.
PRODUCT RATIO
CROP AREA
REQUIRED
27
SECTION - III
CONTRACT FARMING AND ITS ROLE AND
CAPTIVE FARMING AND ITS SCOPE
Of late it has been realised that it is beneficial for both the
processing industries and the producers to have linkages. Out of the three
types/forms of linkages viz., contract farming, captive farming and cooperative farming, most of the processing industries feel that contract
growing of fruits and vegetables with farmers, needs to be promoted on a
large scale with Government help. It is in this context that the contract
farming has come into being as a Horti-Business proposition. The Ministry
of Food Processing has also formulated a scheme to encourage contract
farming. Under this scheme "a particular processing Industry should enter
into a contract with a group of farmers for purchase of their produce at a
specified price. The Government would provide financial assistance upto
Rs. 10 lakhs as a grane in aid for each of the project of contract farming.
An official release said.... 'State owned undertakings, co-operatives, joint
sector and private sector enterprises engaged in contract farming at least
with 25 farmers were eligible to avail the financial aid' [4].
Contract farming
I)
29
il) Supply of some inputs like seed and/or technical know how for
cultivation of a crop besides the purchase agreement.
Both the above types of contract arrangements are practiced in India
with varying degrees of success.
i) Purchase contract: This type of contract was tried in the beginning by
some of the processing firms. In this type of contract the firm only agrees
to purchase the produce at a pre fixed price. The risk of non-fulfillment of
the agreement is very high in this type of contract as was experienced in
case of Indo-Bulgarian project. The main reason for this is the large
difference between the contract price and the prevailing market price at the
time of supply of the produce. Similarly, as the processing units are not
giving any input needed by the cultivators, there is also no moral obligation
for supplying the produce.
ii) Supply of inputs: Most of the processing units which are now engaged
in contract farming are following this type of contract farming. In most of
the cases the processing units are supplying seed only. By supplying the
seed, the processing units will be assured of the quality of produce
required by them and in some cases, as in 'Gherkins', the crop itself is
cultivated exclusively by the cultivators for supplying to the processing units.
iii) Case studies
To know more about the system of working of contract farming, the
section of Economics and Statistics of Indian Institute of Horticulture
Research, Bangalore has undertaken in-depth case studies of the two
important vegetables viz., 'Gherkins' and 'tomato' for which contract farming
is practiced by the Processing firms located in and around Bangalore. The
cultivators growing tomato for Hindustan Lever Ltd. (Kissan) and gherkins
for Sterling Agro-product Processing Pvt. Ltd. in one of the taluks near
Bangalore were contracted during 1999 and brief findings of the case
studies are presented below.
a) 'GHERKINS' contract farming
Background: The 'Gherkin' which was recently imported to India belongs
to cucurbitacae family grown in the west for pickle purpose. Of late,
because of the rising cost of cultivation due to its labour intensive nature,
its cultivation has shifted to the third world. The 'Gherkin' cultivation was
initiated by Oceania Penisular Pvt. Ltd. in the nineties on experimental
basis. From 1992 onwards the commercial cultivation of 'Gherkin' was
started. At present some 20 companies, mainly export oriented units
30
31
required for processing, as they are used as a whole fruit. The grades
prescribed by the company are :
SI. No.
Grade
1.
2.
3.
4.
5.
S-1
S-2
S-3
S-4
S-5
No. of fruits/kg
200 +
160-200
100-160
60-100
30-60
<30 = crooks/nubbins
At present the first two grades (S-1 and S-2) and third and fourth
grades (S-3 & S-4) are combined making them into four grades including
crooks/nubbins.
The average yield obtained by the sample cultivators was around 11
tons, out of this 53 percent was of first grade, 22 per cent of second
grade, 19 percent of third grade and 6 per cent of last grade.
iii) Returns: The company fixes the rates for each of the above grades
and pays them accordingly. The rate fixed by the company for April-May
1999 season crop are
Grade-!
Grade-ll
Rs. 8.50/kg
Rs. 6.50/kg
Grade-Ill Grade-IV -
Rs. 1.50/kg
Rs. 0.50/kg
collects the produce from the cultivators from their fields and charges only
Rs. 250/- (flat rate) per crop. The vehicle goes to all the farmers with
weighing machines and collects the produce. Because of this arrangement
the cultivators save major portion of marketing costs viz., transport cost and
commission charges which account for more than 75 per cent of marketing
costs incurred by the vegetable cultivators as revealed by many studies [46,
50, 51, 52].
Mode of payment
Each farmer is given a pass book in which date wise grade and
quantity of the produce supplied is entered. The payment is made in the
field officers' office on 10th, 20th and 30th of each month by the
processing firm in the study area. The final payment is made after 15 days
from the date of submission of the pass book.
Problems
a) Faced by the cijltivators: Most of the sample cultivators have no major
problems in this contract arrangement. But 50 per cent of the farmers
expressed dissatisfaction regarding the price offered by this firm. The main
reason was that the earlier processing firm which stopped processing
gherkins due to its closure was paying higher prices. The present firm also
at present revised the prices offered for first grade and now Grade-I
fetches Rs. 10.50/kg instead of Rs. 8.50/kg.
b) Processing firm: According to the Industry persons [34] problems faced
by them are :
1) Mixing of low grades with higher grades: According to the Industry,
the farmers try to put bigger (size) grade fruit into smaller grade lot and it
is difficult to check and make sure of the grades as the quantity handled
is around 16000 kg per day. But the Industry has to give a receipt to the
farmer on whatever they pick up at his doorstep and that is treated as
final and cannot later go back and return.
2) Red farmers: Some farmers after the firm advances seeds,
chemicals, fertilizers, etc., failed to supply the produce and due to this, one
firm has lost about Rs. 8 lakhs during the first year of operation. This
situation was unfortunately due to the fact that not every firm in the
Industry is as ethical as it should be.
3) Holding up of vehicles: Some times, the farmers held up vehicles in
the villages demanding that they should be paid higher prices even though
34
the agreement does not say so and sometimes insist that whatever grade
of fruits they give has to be bought.
b) TOMATO
Among the vegetables tomato is the largest processed one and also
one of the important vegetables consumed in fresh form.
The contract farming for supply of tomato is practiced in Bangalore
by one of the most important fruit and vegetable processing factories viz.,
'Kissan' presently run by the Hindustan Lever Limited.
Method of contracting: Unlike in case of 'Gherkins' in case of
tomato, the processing factory is not entering into contract directly with
growers for supply of the produce. The channel followed is :
Processing firm - Agent - Cultivators
The firm identifies agents in each village for supply of the produce.
The agents in-turn contact the cultivators for growing the crop and procure
the produce and supply to the factory. Unlike the field officers in case of
'Gherkins' the agents are not employees of the Processing firm. Most of
the agents are local people (Big cultivators) and all of them have close
contact with the growers in the villages. To know the details from the
cultivators who are supplying tomato to agents of the factory, a survey was
conducted in Bagepalli taluk, the same taluk where gherkin cultivation is
also practised.
General profile: The general profile of sample tomato cultivators is
presented in Table 3.4. Most of the cultivators (73%) chosen by the agents
are literate farmers, as against large number of illiterate farmers chosen in
case of 'Gherkins'. Similarly most of the tomato cultivators are medium and
large farmers having more than one hectare of land.
Agreement: There is no written agreement between the agent and
the farmers.
Area : Majority of the sample cultivators have reported that area to
be put under the tomato crop was left to their discretion and only 33 per
cent of the cultivators reported that the agent had specified the area.
Supply of inputs: The factory supplies the seed to the agent who in
turn supplies either seed or seedlings to some of the selected cultivators.
35
b) Agents: The main problem the agents are facing with the factory is the
delay in unloading at the factory which increases their costs. During the
season sometimes they have to wait for 2 to 3 days to unload the
produce.
The second problem faced by the agents is that at the time of taking the
produce, the factory also rejects some produce which may vary from 1% to
9% also. This is the reason offered by agents for recording less weight at
farmers' level.
c) Processing firm: The firm claims that they are not facing any problem
with the agents in getting the Produce. The firm enters the quantity of
seed given to each agent in a register and accepts the produce from only
registered agents/farmers. The firm says it is operating through both agents
and farmers and at present there are 28 agents and 150 farmers
registered with the firm.
Conclusions
Froniilftftt'case studies the following conclusions can be drawn.
1. Only in casff <3f *Ghefkins' the real contract farming is practiced.
2. The contract;farming practiced through agents in case of tomato is
resulting in creatibh of a new set of middlemen.
3. The real benefit expected through contract farming viz. savings in
transport cost and commission charges will not accrue to the cultivators
unless the produce is picked up at the fields by the processing firms, even
if it means charging.
4. Though in case of 'Gherkins' there is no fresh market, it also faces the
'Red farmers' according to the industry. Hence the question of honouring
the contract is by developing good rapport with the cultivators by creating
an extension wing with officers employed by the company who can guide
them.
5. The supply of other inputs besides seed like pesticides, helps to prevent
the drop out of farmers due to crop failures.
Captive farming
Captive farming is a system in which the Industry itself tries to grow
the raw material required by it, by acquiring (leasing) large areas of land.
By this method, the Industry need not depend on others (cultivators) and
can get assured supply of requisite quantity and desired quality.
37
a) Present Status
At present this type of farming is successfully practiced only in case
of processing industry where (i) Uncultivated land can be made use of for
erecting structures, (il) Where there is very high intensive cultivation
requiring a small area of cultivated land.
Mushrooms
Among the Processed Vegetables, captive cultivation is highly
successful only in case of mushroom processing industry. Most of the 100%
Export Oriented Units (EOUs) which are started by big firms with foreign
collaboration are following captive farming rather than contract farming for
supply of mushrooms for processing. This was done mainly because the
cultivation of mushroom does not require large cultivated area and even
uncultivated area can be used for erecting structures required for their
cultivation. With liberalisation of import of mushroom spawn during 1993
most of the mushroom processing units are importing the spawn of varieties
popular in foreign markets and cultivating them on a large scale and using
the produce.
Seed and Flower cultivation
The other area where captive farming is successfully followed is
protected cultivation under polyhouses. The commercial poly houses are
around 5 to 10 hectares in area and are mainly used for cultivation of
flowers and production of seed of vegetables and flowers for export.
b) New Trends in captive farming
On late a new trend has emerged which is close to the concept of
captive farming. In this type of captive farming some Plantation firms like
Maxworth Orchards, Anubhav Plantations, Asra India Ltd., etc., are trying to
develop large areas under fruit crops. In this, the firms.advertise and sell
small areas (0.5 to 1 acre) to individuals as an investment proposal by
promising good returns/value in future as raisihg the plantations,
maintenance and management and disposal of produce etc., is by the
company itself. These plantation companies may not be directly using for
their own processing purposes but large areas are cultivated under a single
management and hence they are close to captive farming.
38
c) Future scope
With the existing land ceiling laws, it is not possible for the big
processing units to adopt captive farming for supply of raw material. It is
also not desirable to adopt in Indian conditions, where rural areas consist
of large number of small cultivators whose main occupation is cultivation.
But the small scale processing units which will be discussed in detail in the
next section, have a large scope for following captive farming for supply of
raw material, as area required is comparatively small and can be leased
without breaking the existing land ceiling laws.
The other area where modified captive farming can be tried with
some success is acqutring and developing fallow land or cultivable wastes.
For example Maxworth Orchards (India) is planning to develop two new fruit
orchards which will have 75 acres of fallow land in Raigad district and
Borda near Nagpur in Maharashtra [20b].
Table 3.1 : Profile of Gherkin Sample Cultivators, 1999
(Rs/ha)
Particulars
Percentage of Cultivators
1. Educational Status
I) Illiterates
64.29
35.71
50.00
21.43
28.57
35.71
ill) 100%
64.29
4. Type of Contract
i) Written
57.14
ii) Oral
42.86
7.14
85.72
7.14
6. Variety Grown
i) Not Known
64.29
ii) Known
35.71
39
Percentage of Cultivators
1. Source of Contract
i) Through neighbouring fanner who is already having contract
with the processing firm
7.14
50.00
42.86
14.28
7.14
14.29
42.86
21.43
3. Area Cultivated
i) Specified by the Proc. firm
100.00
100.00
100.00
100.00
100.00
8. Technical Advice
i) P.P. Measures
14.29
21.42
64.29
42.86
57.14
100.00
100.00
100.00
100.00
40
Item
Inputs
1. Seed
2. FYM
3. Cfiemical fertilisers
i) N
Ji) P
ill) K
4. P.P. Measures
5. Staking
i) Sticks*
il) Plastic wire
ill) Gunny thread
6. Human labour
7. Bullock labour
Total Cost
Yield
Gross Returns
I @Rs. 8.50/kg
Grade
Grade
II @Rs, 6.50/kg
Grade III @Rs 1.50/kg
0.50/kg
Grade IV
Total
IV. Net Returns
Unit
Quantity
grams
T. Load
996.50
12.59
2690.56
5384.62
Kg
Kg
Kg
No.
154.51
67.62
108.25
3.14
3336.57
1247.20
No.
Kg
Kg
M. days
P. days
Cost
2937.00
20.98
24.48
859.39
17.48
Kg
11366.08
Kg
Kg
Kg
kg
kg
Rs.
6003.50
2454.54
2178.32
729.72
11366.08
979.00
853.15
538.11
31407.67
1486.01
47922.89
51029.75
15954.51
3267.48
364.86
70616.60
22693.71
Particulars
1. Educational Status
26.67
73.33
i) Illiterates
ii) Literates (5th - 10th)
Size of the Farm
i) < 1.00 ha
ii) 1.00 - 2.00 ha
ill) > 2.00 ha
Percentages of Irrigated Land of the Farmer
i) < 50%
ii) > 50% and < 100%
iii) 100%
Type of Contract
i) Oral
AreaI under Gherkin Crop
i) 0.50 ac (100.00)
ii) 1.00 ac (50.00)
iii) 1.50 ac (75.00)
iv) 2.00 ac (34.78)
V) 3.00 ac (42.86)
vi) 5.00 ac (100.00)
Variety Grown
i) Known (Roma)
20.00
33.33
46.67
20.00
53.33
26.67
100.00
6.67
46.67
6.67
26.67
6.67
6.67
100.00
41
Percentage of Cultivators
1. Source of Contract
1) The agent approached the fanner
ii) The farmer approached the agent
2. Number of Years of Association with the Processing Firm
i) Since two years
ii) Since three years
ill) Since four years
iv) Since five years
v) Since six years
vi) Since seven years
vii) Since eight years
viij) Since nine years
Ix) Since ten years
3. Area Cultivated
I) Specified by the agent
II) No specified by the agent
4. Violation of Contract by the Cultivator
1) Not violated
5. Violation of Contract In Price by the Agent
1) Not violated
6. Inputs Supplied by the agent
I) Seedling
II) Seed
ill) Nil
7. Supplying Loans/Advance by the Agent
I) Nil
8. Technical Advice
i) Not needed
II) Nil
42
60.00
40.00
6.67
6.67
33.33
1.33
6.67
13.33
6.67
6.67
6.67
33.33
66.67
100.00
100.00
13.33
53.33
33.33
100.00
46.67
53.33
86.67
13.33
100.00
100.00
100.00
100.00
26.67
73.33
13.33
6.67
80.00
6.67
46.67
46.67
SECTION - IV
PRICE RISK AND PROCESSING: FEASIBILITY OF SMALL SCALE
PROCESSING OF FRUITS AND VEGETABLES
The price risk viz., the highly fluctuating prices associated with Fruits
and Vegetables is of great concern for both the Producers and Processors.
This risk mainly occurs because of the special characteristics of fruits and
vegetables which distinguishes them from other agricultural commodities viz.,
their highly seasonal, perishable and bulky nature. These special
characteristics have economic implications for both the producers and
processors.
i)
Most of the fruits and vegetables are available for a few months in
a year. For example the peak period of availability of mango is hardly for
a two month period i.e., May-June, oranges during November to January.
Similar is the case with respect to most of the vegetables. The economic
implications of this nature are :
The harvest of the crop in a short period results in glut in the
market during the main season resulting in low prices, which sometimes do
not cover even the harvesting and transport cost. For example the recent
experience of the Karnataka tomato growers (July/August 1997) who were
forced to throw their tomatoes on the roads due to the rock bottom prices
offered in the market speaks volumes of the neglect of this problem [67].
During the peak season the prices of tomato are as low as 50 paise per
kilogram where as during the offseason they will be as high as Rs. 11 to
12 per kilogram.
The seasonability also affects the processing industry as 1) the
availability of raw material will be for a short period and ii) it cannot take
advantage of the low priceis during the season. Because of this, a
paradoxical situation exists with the processors complaining of high raw
material cost and the producers complaining of unremunerative prices during
the season.
2) Perishability
Most of the fruits and vegetables cannot be stored for long at room
temperatures because of their biological activity even after harvest.
43
As the produce can not be stored for long, the producers are forced
to dispose of the produce at the prevailing prices, even though the price
may not be attractive.
The cultivators are also forced to use quick mode of transport to
prevent the spoilage, resulting in high transport cost. The studies on
marketing cost have clearly brought out that next to commission charges,
the transport cost accounts for major share of the marketing cost borne by
the producers [54]. Besides this, the transport and handling losses are also
high due to the perishability.
Because of the perishable nature, the processors also cannot take
advantage of seasonal gluts and low prices, by purchasing them when
prices are low and storing them. Because of this, the processors have to
purchase raw material at a high cost during the offseason to keep their
supplies in the market.
3) Bulky nature
The bulHy n i t u r e of the produce will result in high packing and
transport costs for pfoduoers and will push up the raw material cost due to
high volume.
ii)
44
The cold storage of fruits and vegetables also does not guarantee the full
prevention of losses. During 1994, potatoes worth Rs. 1.5 crores grown by
Karnataka growers stored in two private cold storages near the border town
Punganur in Chittor district of AP got spoiled because of power cut/
technical breakdown, dashing the hopes of 20 farmers of realising higher
prices by storing them in cold stores. Even otherwise, losses do occur in
cold storage due to lack of proper maintenance of temperature and
humidity which differs from commodity to commodity. In a DMI study on
cold storage of Nagpur oranges the extent of rotting varied from 10 to 27%
depending upon the number of days stored [14]. From this it is clear that
cold storing of produce may not be a viable proposition as a price risk
aversion strategy for most of the fruit and vegetable growers.
ii) Increasing Processing of Fruits and Vegetables: Establishing Small Scale
Units in Rural Areas:
The establishment of small scale processing units in production areas
is one of the best ways to strengthen the linkages between producers and
processors which will also help the cultivators to overcome the price risk
due to seasonal gluts. The producers can increase their income by diverting
at least a part of the produce towards processing.
With the limited processing capacity and prior contract commitments
the existing large scale units may not be able to absorb all the excess
produce to push up the prices to a remunerative level. Besides, it was also
observed from many studies that the location of fruit and vegetat)le
processing units bear no relation to raw materials and there is absolutely
no economic rationale in choosing the location and other factors like
availability of credit, transport facilities are the factors which have influence
on the location [32, 4 1 , 74]. Hence, it is necessary to establish these
processing units in production areas, which will help the cultivators in
realising better returns by avoiding the sale to middlemen like preharvest
contractors, and will also help reduce the cost of processing by avoiding
high transport cost of raw material to the factories located far away from
places of production.
The small scale units need not also manufacture the finished product
but can process into semi finished/intermediate product in bulk which can
be used by the large scale manufacturers in urban areas for conversion to
various product types and also for export market. This will help both the
cultivators as well as the processors in saving transport cost, supply and
price problems of raw materials.
45
Capital requirements:
packing charges and around Rs. 8800/- net profit can be expected. The
raw material cost itself accounts for 40 per cent followed by packing
accounting for 30 per cent of the total cost of processing.
ill) Break even output: The minimum quantity to be processed for the unit
was worked out by using the break even analysis.
AFC
Q =
P-VC
Where Q = Minimum output of processed product (tonnes)
AFC = Annual fixed cost of the unit (depreciation and interest on buildings,
machinery, equipments and recurring expenses for staff etc.)
P = Price of the finished product (Rs./t)
VC = Variable cost of production of the processed product (Rs/t).
Based on the above formula, 150 t/annum capacity unit, with an
investment of around Rs. 12 lakhs should produce at least 33 tonnes of
finished product per annum to run at no profit no loss stage (Table 4.3).
Raw material requirement and supply :
The raw material requirements based on finished product to raw
material ratio of 1:4 and 1:6 at various levels of utilisation of the
processing plant and the number of cultivators required to produce them is
presented in Table 4.4.
From the table it can be observed that hardly around 200 tonnes of
tomato are required based on the highest ratio of 1:6 for producing the
break-even output of 33 tonnes of finished product. This quantity can be
supplied from hardly 5 to 10 ha depending upon the variety i.e., local or
hybrid and about 10 to 20 cultivators can join hands and start the
processing plant very easily as a cooperative venture.
Fresh sales vs processing: To help the cultivators take a decision about
whether to go in for processing or to sell the produce as a fresh
vegetable, tha relative economics of fresh sale vs processing was worked
out and presented in Table 4.5. It can be seen from the table that the net
returns of the processing units can be increased atleast 4 times at around
Rs. 3,00,000/- from processing as against Rs. 1,00,000 from fresh sales
from 100 tonnes of tomatoes.
47
Based on the All India average yield of 8.5 t/ha, hardly 118 ha
would be required to supply the raw material. From this it is clear that a
mango pulping unit can be established at talul</district level in mango
growing areas where processing varieties like alphonso, totapuri etc., are
grown.
c) Grapes processing
Raisins, the processed form of seedless grapes have high
commercial value as dry fruits. India, inspite of the highest productivity level
in the world at 30 t/ha for grapes, depends on imports from countries like
Afganisthan and Iran for its domestic demand for raisins, as the domestic
production of raisin has been negligible. It is only since last few years, that
about 10% of the total production of seedless grapes is being diverted
towards raisin production as against more than 86% consumed in the fresh
form [10]. Though research efforts on raisin making are in progress for
more than a couple of decades towards standardising techniques for their
production [2], their successful adoption has been limited due to constraints
like high initial capital requirement. However, the grape growers from
Maharashtra have been successfully producing raisins on farm using a
technique which is both easy to adopt and requires very less capital.
The information on raisin making pertains to the agricultural year
1993-94 and has been collected from grape growers from Solapur District
of Maharashtra State.
Method of Raisin Production
The most commonly used methods for raisin making are i) Sun
drying and ii) Solar dehydration using specially designed dehydrators. In
both these methods Sulpher is used for fumigation purposes [37]. The
growers from Maharashtra also follow sun drying but using Australian
dipping oil, with Ethyl oleta as its main ingredient.
Costs and Returns
The costs and returns of raisin making from 10 tonnes of grapes
i.e., yield from an acre is presented in Table 4.8. Around Rs. 8,500/- is
required for erecting drying structures, which consists of shelves made from
casurina poles and polypropylene net and sheets for spreading and
covering the grapes for drying. One can expect around Rs. 80,000/additional income per acre from raisin making as compared to fresh sales
of grapes.
49
Value (Rs.)
FIXED CAPITAL
1.
400000
2.
62^100
Sub Total - I
1029100
RECURRING EXPENDITURE
1.
2.
Office Establisfiments
81000
2250
3.
Electricity/Diesel etc.
7500
Sub Total - II
90750
1119850
50
I.
Values
(Rs./t)*
Variable costs :
1.
7200
40.16
2980
16.62
820
4.57
2.
3.
Labour
1250
6.97
4.
5430
30.28
5.
Others (Miscellaneous)
250
1..39
17930
100.00
Total
II.
III.
% to total
cost
26788
8858
Amount (Rs.)
1.
2.
3.
292800
8858
33
51
33
40
60
80
100
120
140
132
198
160
240
240
360
320
480
400
600
480
720
560
840
1:4
1:6
2.88
4.40
3.56
5.30
5.33
8.00
7.11
10.70
8.89
13.30
10.67
16.00
12.44
18.70
1:4
1:6
6.60
9.90
8.00
12.00
12.00
18.00
18.00
24.00
20.00
30.00
24.00
36.00
28.00
42.00
1:4
1:6
7
10
8
12
12
18
16
24
20
30
25
36
29
42
1:4
1:6
15
22
18
27
28
40
37
53
46
67
55
80
64
93
No. of cultivators
required to join"
Breakeven output
Hybrid tomato yield is taken as 45 t/ha and the local tomato yield as 20 t/ha
Based on the average area of 0.45 ha/cultivator under tomato.
Source: Ref. No. 59.
Amount (Rs)
A. FRESH SALES :
I.
53600
30400
84000
200000
116000
B. PROCESSING :
I.
268250
40238
61000
369488
669700
300212
" ; Based on annual fixed cost of Rs. 292800 towards depreciation, interest on machinery, working capital
for salary etc., and on assumption of 120 tonnes of finished products per annum.
52
Table 4.6
Item
Quantity (Number)
Value (Rs.)
1
2
1
3
2
2
1
175000
130000
25000
90000
20000
50000
10000
20000
A. MACHINERY
1.
2.
3.
4.
5.
6.
7.
8.
Boiler
Pulpers
Electric hoise with beams
Steam jacketted kettles with tilting capacity
Retards (400 cans)
Rotopumps (for pumping products)
Fruit washing tank
Weighing Scales & Lab. Equipment
520000
52000
572000
B. WORKING EQUIPMENT
1. Trays, Spoons, S. Steel tanks, wooden ladles etc.
25000
TOTAL (A+B)
597000
C. OPTIONAL
1. Canning and refomning unil
250000
Value (Rs/t)*
% to total
A. INPUT COSTS
1. Raw materials" (fresh fruits)
3790.48
82.41
245.48
5.33
212.88
30.00
4.63
0.65
4278.89
93.02
320.89
6.98
4599.39
100
D. GROSS RETURNS
5095.67
496.28
3. Packing material
4. Latiour
1. upto pulping
2. canning
Total input cost
B. INTEREST ON WORKING CAPITAL
53
Quantity/Unit
Amount (Rs.)
6 No.
15 Kg.
30 feet
250
2700
500
800
4250
Total investment
2*
8500
22 litres
ms. 200
2. Packing Material
3. Labour charges
4. Transport and Cold storage
4400
1200
2400
4000
Total cost
12000
17750
2000 kg
@ 80/kg
1,60,000
2. Grade B
400 kg
@ 60/kg
24,000
3. Grade C
100 kg
@ 25/kg
2,500
Total
2500 kg
1,86,500
1,68,750
87,500
81,250
A minimum of two such structures are required for making raisins from an acre or 10 tonnes of
fresh grapes.
Fann gate price.
Source : Ref. No. 64.
54
Mumbai
Brand Name
1989
1991
1989
1991
Kissan
54
52
55
51
Maggi
28
30
27
32
Dippys
Noga
All seasons
Vol farm
NAFED
Others
11
10
11
55
SECTION - V
EXPORT OF PROCESSED HORTICULTURAL PRODUCTS
Though agricultural sector as a whole has been an important
contributor to the country's exports, of late Its contribution has come down.
From nearly 31 per cent during the year 1980, the contribution of
agricultural sector has come down to 20 per cent of total Indian exports by
the year 1996-97 (Table 5.1). This was mainly due to its losing ground in
traditional export crops like tea, cashew, spices etc., in which it used to
command virtual monopoly. For example, India used to command upto
1970's more than 90 per cent share of world trade in cashew kernels, now
accounts for hardly 64 per cent with the entry of Brazil [24]. Tea exports
also have faired badly due to stiff competition from Sri Lanka. India's share
in tea exports has come down from 33.4 per cent during the year 1970 to
13.6 per cent by the year 1994 in the world agricultural exports. Similarly
the share of spices has come down from 20.5 per cent to 9.1 per cent
during the same period (Table 5.2). Because of this situation along with
precarious position of balance of payments during early 1990's an urgent
need was felt for diversifying the agricultural produce basket for exports. In
this context, the horticultural crops viz.. Fruits, Vegetables and their products
are identified as the most suitable group of crops in view of our country's
prime position in the world production and fast growing demand in
international markets. However, India's share in total world export of fruits
and vegetables has registered a declining trend. From 1.2 per cent in
1970, it has come down to 0.8 per cent by 1990 and once again
increased to 1.7 per cent (Table 5.2).
It was also recognised that one of the main constraints for the low
exports of fruits and vegetables is the huge post-harvest losses. Hence it
was felt that value addition by processing them will not only result in
prevention of post-harvest losses but also help to realise better returns
through export of processed product. This was the reason why the New
Industrial Policy of 1991 of Government of India has placed Processed
Fruits and Vegetables (F&V) in the list of "High Priority Area" and lot of
encouragement was given to FVPI by way of duty concessions. The
Ministry of Commerce, Govt, of India has also identified Processed Foods
for "EXTREME FOCUS" area.
i)
with 5.85 per cent and the share at present is 4.4 per cent (Table 5.3).
Ii)
58
Y =
AB'
where
Y = Quantity/value of exports
A = constant
B = Regression coefficient showing the growth rate
t = time in years
The above equation was fitted by the method of least squares by
making appropriate log transformation.
The export data along with compound growth rate (CGR) for
processed fruits and vegetables is presented in Table 5.6 and for fresh
fruits and vegetables in Table 5.7 for the two phases.
a) Comparison of trend in Phiase i and Phase ii
During the Phase-!, i.e., Pre New Industrial Policy period, the
quantity of exports of processed fruits and vegetables (F&V) has grown at
a CGR of 5.13 per cent which was higher as compared to Fresh Fruits
and Vegetables at 3.92 per cent. But in value terms the CGR for fresh
fruits and vegetables was higher at 13.54 per cent as compared to
Processed F&V at 9.32 per cent.
During Phase II i.e.. Post New Industrial Policy period, the export of
Processed Fruits and Vegetables has grown at a very fast rate compared
to export of fresh fruits and vegetables. The export of processed fruits and
vegetables has registered a CGR of 22 and 28 per cent in terms of
quantity and value respectively as against 3.33 per cent and 13 per cent.
This clearly shows that the New Industrial Policy has a definite and positive
impact on the export growth of Processed fruits and vegetables.
b) Overaii growth
When we take the entire period of 18 years into consideration, the
growth rate was higher in case of export of processed fruits and vegetables
as compared to fresh fruits and vegetables. As against CGR of 7 and 17
per cent in terms of quantity and value exported in case of fresh fruits and
vegetables respectively, the CGR in case of Processed Fruits and
Vegetables was 12 and 20 per cent during the period 1980-81 to 1997-98.
59
From the above it is clear that the export of processed fruits and
vegetables is growing at a faster rate as compared to fresh fruits and
vegetables and Phase II i.e., post New Industrial Policy period is having a
definite and positive impact on processed fruits and vegetable exports.
Mi) Export projections
The growth equations fitted based on the model explained for the
export data of Processed and fresh fruits and vegetables for the three
periods i.e.. Phase I, Phase II and combined Phase I and Phase II is
presented in table 5.8. Except in case of a few variables viz., quantity of
vegetables in Phase I and II and overall quantity of fresh fruits and
vegetables, in the other cases all the growth coefficients are statistically
significant and the R^ is also high showing that time variables could explain
the changes over the years.
The export projections were made based on the Phase - II growth
equations, as it was felt that trend of export during this period is more
relevant for projection due to changes in policy carried out during this
period which are continued compared to Phase - I. The results of the
projections for the year 2000 and 2005 is presented in table 5.9.
From the present level, i.e., during 1997-98, the export earnings from
processed fruits and vegetables can be increased by more than 50 percent
by the year 2000 and we can reach a figure of Rs. 4000 crores by the
year 2005 if the same trend is continued. The export of total fruits and
vegetables can reach a level of Rs. 2000 crores by the year 2000 and Rs.
5600 crores by the year 2005, which is nearly 300 per cent more than the
earnings in 1997-98.
iv) Clianges in composition of export of processed fruits and
vegetables
i) Growth of different products: The export of Processed Fruits and
Vegetables is classified into four main categories viz.. Dried and Preserved
vegetables. Mango pulp, pickles and chutneys and other processed fruits
and vegetables and the share of each is presented in Fig. 2. Substantial
increase in export has taken place in the Dried and Preserved category
followed by mango pulp, pickles and chutneys and other processed fruits
and vegetables. The value of export of Dried and preserved vegetables has
increased from Rs. 64 crores during 1991-92 to Rs. 480 crores by 1997-98
registering a growth of 650 per cent whereas the export of mango pulp
has registered an increase of 230 per cent from Rs. 38 crores to Rs. 125
crores during the same period. Plckl6s and chutneys increased by 192 per
cent from Rs. 26 crores to Rs. 77 crores and the other processed fruits
60
and vegetables by 169 per cent from Rs. 30 crores to Rs. 80 crores (Fig.
3, 4, 5 & 6).
ii) Share of different products: During the year 1997-98, Dried and
Preserved vegetables group has accounted for nearly 67 per cent of
quantity and 63 per cent of value of the total processed fruits and
vegetables exported as against 38 and 40 per cent during 1991-92. The
share of mango pulp exports has come down from 29 per cent during
1991-92 to 15 per cent by 1997-98 in terms of quantity and 24 per cent
to 16 per cent by value. Similar trend of decreasing share was noticed in
case of pickles and chutneys and other fruits and vegetables (Table 5.10).
The increase in share of dried and preserved vegetables was mainly due
to increase in export of items like Gherkins, Dried Onions, Dried
Mushrooms etc.
The changes in the individual performance of some of the processed
fruits and vegetables which of late have got importance has been examined
below.
(a) Gherkins: A new and imported vegetable which was introduced during
1992 and became one of the important items of export under Dried and
Preserved vegetables is 'Gherkins'. The Gherkin belongs to the family
cucurbitaceae and it is mainly processed into pickles in the west. The
commercial cultivation of Gherkins was started in 1992 in South India and
now India has emerged as the second largest exporter. The Gherkins were
exported in fresh form in a small quantity of 80 metric tonnes,valued at
Rs. 9.88 lakhs during 1991-92 and at present it is exported both in fresh
as well as processed form. At present i.e., 1997-98 nearly 15962 tonnes of
processed Gherkins are exported valued at Rs. 3179 lakhs, which is more
than double the quantity and value of exports during 1994-95 (Fig. 7).
(b) Dried Mushrooms: The second important item under Dried and
Preserved Vegetable category whose exports, of late, has picked up is
'Dried Mushrooms'. With the increase in the production of mushroom from
hardly 100 tonnes during 1970's to around 25000 tonnes by 1995, there is
a tremendous increase in export of mushrooms. With the growing of oyster
and paddy straw mushrooms picking up in Southern states like Andhra
Pradesh, Karnataka and Tamil Nadu, the export of dried mushrooms has
picked up as they are most suited for this purpose. The export of dried
mushrooms during 1997-98 was nearly 148 tonnes valued at Rs. 3512
lakhs as compared to 44.5 tonnes valued at Rs. 74.53 lakhs exported
during 1990-91 (Fig. 9).
61
are the major importers of the new product produced vis., 'Gherkins' based
on value of exports during the year 1997-98 from India. Germany (27.97%),
U.K. (26.39%), Netherlands (8.98%) are the major markets for dehydrated
orvion (flakes/powder) based on the value of exports during 1997-98. USA
(84.71%) is the major importer of processed mushrooms, whereas
Switzerland (47.57%), France (27.50%) and Germany (17.50%) are the
important markets for dried mushrooms from India based on the value of
exports during the year 1997-98.
From this it is clear that to certain extent we are able to diversify
our export markets and catch new countries for exporting the processed
products of fruits and vegetables.
vi) Constraints
Besides the usual constraints of lack of infrastructural facilities, high
air freight charges, lack of refrigerated trucks etc., the Industry claims that
the reimposition of excise duty on Processed products in 1997 has resulted
in closure of some units thus reducing the installed capacity by 8.1 per
cent.
The anti dumping duty levied by U.S.A. for import of mushroom
products has resulted in low exports of this commodity.
The Europe levies a duty of 16.5 percent on Indian Gherkins as
compared to no duty at all on the Produce of Turkey (the largest exporter
of Gherkins in the world in bottled form). Similarly, the duty of 9.9 per cent
on Indian Produce by USA while no duty on the Mexican Produce (the
main competitor to India in the American market) have created problems for
the Gherkin Industry [9].
These and other problems like lack of infrastructural facilities, high
taxes etc., which are facing the processing industry of fruits and vegetables
need to be solved for increasing the exports of Processed Products of
Fruits and Vegetables from India.
63
Total Exports
Agrll Exports
6711.00
10895.00
32553.00
44042.00
53688.00
69547.00
82674.00
106353.00
117525.00
2057.00
3018.00
4879.00
8288.00
9457.00
12528.00
13712.00
21138.00
23988.00
% share of Agri. in
Total Exports
30.70
27.70
15.00
18.70
17.60
18.00
16.60
19.90
20.40
1970
1S80
1990
1994
Tea
Spices
Coffee & Its substitutes
Tobacco
Cereal & Cereal Preparations
Fruits & Vegetables
Sugar & its Preparations
Meat & its Preparations
Fish & Fish Products
33.4
20.5
1
27.7
14.5
2.1
4.4
0.5
1.1
0.3
0.4
2
22.1
7.7
1.7
13.6
9.1
2.4
0.4
0.9
1.7
0.2
0.3
2.7
3.5
0.1
1.2
1
0.1
0.8
0.6
0.8
0.1
0.2
1.6
Source : GOI, Economic Survey, 1996-97 (New Delhi, Ministry of Finance, 1997), Ref. No. 18.
1980-81
1985-86
1990-91
1991-92
1992-93
1993-94
1995-96
1996-97
Agril Exports
% share of Agri. in
Total Exports
64.42
137.76
283.36
452.26
553.00
653.93
1022.74
3.13
4.56
5.81
2057
3018
4879
8288
9457
12528
21138
23988
1056.11
64
5.46
5.85
5.23
4.84
4.40
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1nA
InB
R^
1991-92 to 1997-98
InA
InB
R^
10.4372 0.0500
3.3950 0.0891
0.46
0.30
11.0780
4.8335
0.2016
0.2498
0.94
0.97
10.0990
2.9040
0.1141
0.1859
0.85
0.88
10.1584
2.3598
0.0606
0.1636
0.56
0.79
11.1585
4.7115
0.0874
0.1323
0.94
0.96
9.9800
2.2200
0.0972
0.1957
0.90
0.94
12.1633
6.4751
0.0339NS
0.1104
0.21
0.80
12.9057
5.0574
0.0196NS 0.29
0.93
0.1146
12.0693
3.3320
0.0579
0.1412
0.71
0.95
13.0605
5.5891
0.0328
0.1228
0.64
0.97
12.1725
3.6095
0.0640
0.1598
0.81
0.96
1980-811 to 1997-98
InA
InB
R'
1. Processed fruits
and vegetables
Quantity
Value
II. Freshi fruits
and vegetables
a) Fruits
Quantity
Value
b) Vegetables
Quantity
Value
c) Total fresti
fruits and
Vegetables
Quantity
Value
Actual in
1997-98
2000
Projection
2005
298931
761.50
397281
1189.99
1088597
4149.32
32.90
56.27
264.16
448.89
135198
268.74
154060
365.84
238494
708.89
13.95
36.13
76.40
163.78
431698
316.53
480268
440.89
529718
781.96
11.25
39.29
2.71
147.05
566896
585.28
631403
807.79
743928
1492.64
11.38
38.02
31.23
155.03
865827
1346.78
1028684
1997.78
1832525
5641.96
18.81
48.33
111.65
318.92
1. Processed products
Quantity
Value
II. Fresh Fruits and Vegetables
a) Fruits
Quantity
Value
b) Vegetables
Quantity
Value
c) Total
Quantity
Value
III. Total Fruits and Vegetables
Quantity
Value
67
Table 5.10
Items
1991-92
Quantity
Value
1997-98
Quantity
Value
30474.83
63.98 200262.70 479.89
(38.12) (40.55)
(66.99) (63.02)
Mango pulp
23212.74
(29.03)
37.95
(24.05)
45874.54
(15.35)
11004.96
(13.76)
26.28
(16.66)
15259.58
(19.09)
29.57
(18.74)
79952.10 157.78
(100)
(100)
% change over
1991-92
Quantity
Value
557.16
650.06
125.31
(16.46)
97.63
230.20
24372.28
(8.15)
76.71
(10.07)
121.47
191.89
28421.80
(9.51)
79.59
(10.45)
86.26
169.16
273.89
382.63
298931.29
(100)
761.50
(100)
1991-92
1997-98
Mango Pulp
68
1997-98
10.4.S
Total : Rs I61.50
coy<za
SOURCE:
69
APBDA
48000-, Fig:3-Export
of Dried andpraeetvea
1991-92
to
Vegetables
ATseg
l097-9e
4./).000
4/0000.
36OO0
32OO0 .
03000
_
24-765
3AOOO
2^IOT
20CXD0_
I
?
I6000 _
Mcsa
nooo .
eooo .
loroe
e59S
39a
4000
-r
91-92
T
9^- OeS
3S-9^
92-93
(3790 Q500
<IOIE>0
i-iy.
tt- c >
/99/
Yizors)
r
9 5 - B6
96-97
souRce:
-r
97-98
APEOA
12531
050(
loooo _
6 7 SO
e^6\
eo7i
1
6
*<
(P
7500
eiBO
5834"
S79d
BOOO.
3750
2500
12 5 0
5795
"I
9<-92
1
93-93
1
T
93-d4
9^-06
f V<zar)
70
99-9
1
96-97
97-96
chutnztjs
to
1997-90
7STI
7500
67 60
6000
5K--*3
6ZVS
4^7S
j*eoo.
3613
97SO in
3000.
Z.ZSO
IBOO _
a63d
2.ees
7-50&-9Z-
S?93
93 0 4
94-95
0^-9S
96-97
iiaoo.
rSOhOSi.
97-98
and
I0677
to/997-98
loooo.
9000-
ei^s
90007000^
SOOO -
SOOO -
7/a3
6731
7959
4-000 _
3000
a95rr
3295
2000 _
fOOO _
T
9I-9X
-r
oa-93
si-S-f^
-r
94-9S
( y<2a f s )
71
9S-9e
SOURCE:
96-97
A, PB CV\
97- 96
F/g:7expor6 c^pfocaesad
cucumbar
one/
3300.
3<79
3ooo_J
/dO4-05 t o /097-9a
2.700 J
a^oo
2IOO _J
ioo _1
>
ioo _|
6
me
ooo-J
ffOO
3 0 0 _J
9<*-S5
T^
95-9<S
9ff-97
97-9S
Cyzari)
onions
(FloHas/pouudzr)
2500
X-b79
1903-9^
to
1997- 93
1781
lies
1
c!^'
S26-
93 94
91-95
5-96
T^
Stf-ST^
eoufice:
72
7'-9a
APEDA
3500
iooo-o(
330O
MuGhroom
to
35 ra
losr-99
3000
XTOO.
3JOO .
aO09
(996
la^s
leoo
I500-
I
9
.
900laoo-
/222
903
(fO
T^-B^
60030090'-9(
91-91
9i-93
93-9^
4-95
95-96
96-97
97-9
( years)
Fig:tO.BKpotb of proc<z&s(za
I9SO-31
Mushrooms
t o \92>7-S>B
29<?3-27
2500
a39
aaso .
aooo_
1932
I750I9l6
isooo
aso-
lOOO-
loei
TSO900 318
172
76
r1
90-l
91-92
92-93
93-S4
cyzara)
94--96
396
&DUPICE:
96-97
^^PBD^^
-r
97-36
SECTION - VI
INCENTIVES FOR PRODUCERS IN ESTABLISHING PROCESSING
UNITS AND STEPPING UP PROCESSING
With a view to developing the horticultural Industry, a number of
Govt, organisations viz. The Ministry of Food Processing Industry (MFPI),
National Horticulture Board (NHB), National Cooperative Development
Corporation (NCDC) and Agricultural and Processed Food Products Exports
Development Authority (APEDA) have formulated a number of schemes
under which, financial assistance is given as a grant in aid, and in some
cases as subsidy and in some cases as a soft loan. A brief outline of the
schemes is presented based on the information collected from these
organisations [1, 7, 28, 70].
a)
Objectives
(a) Provide/develop post harvest infrastructure like establishment of cold
storage and cold chain facilities etc. (b) Build up efficient post harvest
handling system right from the farm to retail marketing, (c) Develop setting
up pre-cooling facilities, refrigerated transportation system and refrigerated
retail outlets, (d) Develop cold storage system etc. (major ports and airports
for food products meant for export), (e) Establishment of infrastructural
facilities for mushroom cultivation and processing would consist of :
(i) Composed pasteurization units
(ii) spawn lab
(ill) Other processing facilities
(iv) marketing support etc.
(f) In the case of hops, establishment of infrastructural facilities would
include setting up hops processing plants, procurement of pipes and
supporting structures, support for cultivation practices etc.
Pattern of Assistance
PSUs/Joint Sector/NGOs/
Cooperatives
50% of the cost of capital equipment and technical civil works upto
Rs. 25 lakhs in general areas and
upto 50 lakhs in difficult areas.
Grant
Assisted/Private Sector
Loan
PSUs/Joint Sector
Loan
76
Grant
Loan
or
Joint Sector
Grant
Grant
or
77
Loan
Loan
NGOs/Cooperatives
Grant
Loan
78
Grant
Grant
Joint/Assisted/Private
Sector
Loan
79
Grant
Grant
80
Grant
Grant
Grant
Grant
NGOs/Cooperatives
Grant
Industry/Association
Grant
82
All Agencies
Grant
Grant
Pattern of Assistance
Assistance is extended to government or academic bodies, industry
associations, non-governmental organisations etc., in the following manner.
(i) The amount provided for studies/feasibility reports/surveys etc., shall not
exceed Rs. 3 lakhs.
(ii) The support for seminars/meetings/entrepreneurial
programmes etc., shall not exceed Rs. 1 lakh.
development
85
Pattern of Assistance
All Nodal Agencies
Grant
Description/
Component
Existing pattern
of assistance
Approved pattern of
assistance during 8th plan
Eligible
Organisations
No change
Pattern of
assistance
Component
Grading/packing centre
Retail outlet (Ordinary)
Transport vehicle
Short duration cool store
Retail outlet (Air-conditioned)
0.50
0.10
1.00
1.00
Refrigerated van
Maturity kits
Quality testing equipment
Improved packaging
Plastic crates
1.10
0.18
1.70
5.00
0.75
5.00
5.00
0.50
5.00
to be decided
on case to case
basis
Rs. 70/- per crate
89
Pattern of assistance
b) Assistance to exporters/cooperatives/
federations for :
(i) establishing pre-cooling facilities
with proper air handling system
(ii) Setting up of mechanised post
harvest handling facilities and
sheds for grading, sorting,
quality control and packaging
Activity component
Pattern of assistance
Pattern of assistance
Pattern of assistance
93
SECTION - VII
FUTURE SCOPE AND MEASURES FOR INCREASING
PROCESSING OF HORTICULTURAL CROPS
95
B. Infrastructure Development
1. Post harvest infrastructure
2. Food parks
3. Quality control labs
C. Man power development
D. R & D studies
Based on the discussions and material presented in the previous
section on some of the areas, the following suggestions are made.
i)
Capacity creation
l\/larketing
growers
4. The Processing firms should encourage the contract farmers to avail the
subsidiaries offered by NKB, NCDC etc., for purchasing plastic crates,
starting of grading centres, transport vehicles etc.
5. The Govt, should set up 'cold chains' in growing areas, so that more
number of farmers should be able to use them.
6. The private organisations should be encouraged for creating
infrastructural facilities. The expert group during the 8th Plan period has
suggested an investment of Rs. 185.50 crores out of which Rs. 68.90
crores should come from private investment for development of
infrastructural facilities for horticultural crops [61]. Already some foreign firms
like Mitsubishi have come forward to set up cold storage chains in India
[20a].
v)
Food parks
The state govt., should start establishing food parks, processing
98
1990
1991
1992
1993
1994
1995
1996
1997
1998
No. of Accounts
Outstanding Amount
(Rs. Crores)
41.39
71.27
66.44
77.47
102.44
178.56
201.21
270.54
278.56
0.97
1.45
1.25
1.29
1.56
2.28
1.98
2.35
2.23
683
810
989
1152
1414
1691
2089
2324
2403
99
SECTION - VIII
SUMMARY AND CONCLUSIONS
The key role the Fruit and Vegetable Processing Industry (FVPI) can
play in presenting the huge post harvest losses of furits and vegetables
was recognised of late by the Govt, of India. This sector has been
identified as the 'Sunrise Sector' of economic growth and has attracted the
"EXTREME FOCUS" area by the Ministry of Commerce, Govt, of India.
The need for establishing durable linkages between farm and nonfarm sector for supply of quality raw material at reasonable prices has
caught the attention of FVPI only recently. It is this context the present
paper assumes great significance and the study was taken up with the
following objectives which will give a comprehensive coverage of FVPI.
a)
b)
c)
d)
e)
f)
g)
Based on the above objectives, the paper has been divided into
seven sections, each section covering one objective.
A number of measures aimed at both strengthening the production
base which is a must for increased processing, exports etc., and also to
ensure the development of FVPI were initiated by the Govt, of India during
the end of Seventh Five Year Plan period and more so during the eighth
five year plan period. The increased allocation of Rs. 10,000 million for
horticultural development which is a wopping jump of 4208 per cent over
the seventh plan allocation, the liberalised seed and plant material import
policy, creation of separate Ministry of Food Processing Industry (MFPI),
establishing of National Horticulture Board (NHB) and Agricultural and
Processed Food Products Export Development Authority (APEDA) and the
New Industrial Policy of 1991 have given a real boost to horticultural sector
in general and FVPI in particular.
As many as 4000 MOUs have been signied and 15 per cent of the
projects have been implemented. About Rs. 4000 crore worth of projects
involving food and agro-processing have started commercial production.
101
projects. The new trends in captive farming by the private companies like
Maxworth orchards Ltd., Anubhav plantations etc., was also discussed.
The best way of establishing linkages between producers and
processors is to encourage establishment of small scale processing units in
production areas at farm/taluq or district levels. This will also help to
overcome the price risk faced by the cultivators. Hence, in this paper an
attempt was made to give information on feasibility of establishing small
scale processing units in case of two fruits viz., mango and grapes and
one vegetable viz., tomato. The analysis showed that an investment of
around Rs. 12 lakhs towards machinery etc., with a production base of 5
to 10 hectares in case of tomato and around 200 hectares in case of
mango is sufficient to successfully establish and run a small scale
processing unit. Similarly it was observed that converting grapes into raisins
at farm level was found to be more profitable compared to sale as fresh
grapes.
Most of the FVPIs are able to run profitably mainly through exports
rather than on domestic demand. Hence, the export performance of
Processed Products in the two periods i.e., before and after Industrial Policy
of 1991 i.e.. Phase I and Phase II was studied in detail by analysing the
time series data to know the impact of economic reforms on the export
performance. It was observed from the analysis that the volume of export
of processed fruits and vegetables has grown at a higher rate with a CGR
of 22 percent in Phase II as against 5.13 per cent during Phase I. The
export projections made for the year 2000 and 2005 have shown that the
export of processed fruits and vegetables can increase by more than 50
per cent by the year 2000 and can reach a figure of Rs. 4000 crores by
the year 2005 if the same trend is continued and that of total fruits and
vegetables can reach about Rs. 2000 crores by the year 2000 and Rs.
5600 crores by the year 2005 which is nearly 300 per cent more than
earnings during 1997-98. A marked change was also observed in
composition and destination of exports. New items like Gherkins, Dried and
Processed Mushroom and Dehydrated Onion etc,, have become the
important contributors to export of processed fruits and vegetables.
A number of financial assistance schemes were formulated in the
9th Plan by Govt. Organisation like Ministry of Food Processing Industries
(MFPI), NHB, APEDA, NCDC etc., for encouraging processing and also for
establishing linkages. These were presented in detail in this paper so that
they can be utilised by the concerned people.
The factors responsible identified by the working group of 9th plan
in the Ministry of Food Processing for low processing and high losses were
presented and steps to overcome them were discussed.
103
104
SECTION - IX
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