ACTION PLAN FOR DEVELOPMENT OF VALUE CHAIN OF LAKADONG

TURMERIC IN MEGHALAYA

In the pursuit of developing an action plan, our approach involved assessment of the various
aspects of the value chain, comprehending the challenges at each level and finding the possible
solutions to those challenges.

The entire value chain of any commodity can be segregated into the following aspects

1. Production
2. Logistics (connectivity to the consumers [either markets or processors])
3. Markets
4. Processing

In each of the above aspects, there may be issues pertaining to infrastructure, technology,
manpower and finance which need to be addressed in order to make a value chain highly efficient.

Through this paper, we have pursued the objective of capturing the key challenges faced in each
of the value chain aspects and suggested pragmatic interventions that can be addressed by the
Ministry of Food Processing Industries (MoFPI).

These suggested interventions are a result of :

 Secondary research (published papers and information available in the public domain)
 Interaction with technology providers
 Premier institute involved in technology solutions
 Major market players (potential and existing consumers of Lakadong Turmeric)

The limitations of the action plan

 No primary survey and no stakeholder meet was conducted (hence constraints appearing
through secondary research alone have been addressed)
 Only telephonic or email correspondence (conclusive rapport building could not be
possible)

Action Plan for Development of Value Chain of Lakadong Turmeric in Meghalaya

Production

In the year 2016-17, the total production of Turmeric was 16,386 MT. Out of the state’s total
production, 53 per cent, i.e., 8,666 MT is grown in the West Jantia Hills district, which is well
known for the production of Lakadong Turmeric. West Jantia Hills districts does not merely grow
the Lakadong variety, two other varieties viz., Lasyein and Lachein are also grown in the district.
This section of the report deals with the challenges faced in production of Lakadong Turmeric and
interventions suggested to overcome the same.

1. Farmers’ unawareness of the varietal differences:

Three varieties of Turmeric are grown in the West Jaintia Hills District of Meghalaya, viz.,
Lachein, Lasyein and Lakadong. While Lakadong variety has 7 per cent curcumin content,
the other two varieties yield only 4-5 per cent curcumin. The farmers are either unaware of
this information or are not incentivized by way of higher returns from the market, for
cultivating high curcumin content varieties. Because of this unawareness, the Lachein
variety, though having lower curcumin content, has the highest share in terms of area under
cultivation in the West Jaintia Hills district. At present, farmers do not take special interest
in comprehending the variety being cultivated and are unaware of the variety being
cultivated by them. For the market stakeholders who are aware of the varieties and
curcumin content, they face the problem of lower economies of scale as the Lakadong
variety is unavailable in large quantities. Also this variety cannot be cultivated elsewhere,
as the soil of the West Jaintia Hills is the most suitable to cultivate Lakadong turmeric with
a curcumin content of 7 per cent. It is for this very reason that Lakadong Turmeric has a
Geographic Indication tag linked to West Jaintia Hills district. In order to take advantage
of the high curcumin content, Lakadong turmeric it would be important that awareness is
created among farmers about the turmeric and its GI Status. Farmers should be given an
opportunity to take an informed decision on shifting to Lakadong cultivation, while
carrying out simultaneous efforts for providing the incentive of the same to the farmers, in
terms of price realisation. The planting material required for this major shift will also have
to be made available to farmers. Mass multiplication techniques such as tissue culture can
also be thought of.

Action Plan for Development of Value Chain of Lakadong Turmeric in Meghalaya

 Suggested Interventions:
Presently, besides the Operation Greens Scheme there is no other scheme under the
PMKSY scheme of MoFPI which provides for subsidy for Quality Input for “Quality
Production”. However, this scheme is applicable only to the TOP (Tomato, Onion and
Potato) crops and the clusters from North Eastern are not covered within these purview of
the scheme. Taking into account the fact that GI tagged produce is a brand in itself for easy
marketing, it may be promoted by the Ministry by covering the production of GI tagged
turmeric under the scheme/ subscheme.

2. Increase production through area expansion and constraints in production

Besides converting the present farmers and their acreages under cultivation of Lakadong
turmeric. It may also be required that more uncultivated lands should be brought under
Lakadong turmeric cultivation after assessing the suitability of soil and other factors such
as temperatures, humidity, etc., other factors such for logistics such as approach roads,
availability of proper handholding expert teams in the locality,etc., will also have to be
made. In addition, to further increasing the production, the constraints faced in present
production need to also be addressed to improve returns for farmers. According to a
research report, lack of knowledge about pest control has been reported as the major
constraint by 42 per cent of farmer respondents1. The respondents have also indicated that
there was no attempt by any institution/ source for control of pest in turmeric.

Suggested Interventions
In order to overcome these challenges, either MoFPI by itself or MoFPI may recommend
to the Ministry of Agriculture to engage services of certain organisations which make use
of Artificial Intelligence in mapping of agriculture lands, suitability for the activity, input
supply, etc., for various crops. These organization have used Artificial Intelligence to help
the farmers schedule their pest control activities and to schedule their harvest cycles, etc.,
Fasal, an organization based out of Bangalore has been successful in providing such
services.( https://fasal.co/)

1 Papang et al.: Economics of turmeric marketing in Jaintia Hills District of Meghalaya

Action Plan for Development of Value Chain of Lakadong Turmeric in Meghalaya

Challenges in the Logistics

1. Aggregation constrained by absence of approach road and lack of transportation

facilities
In general, the operational holding under turmeric cultivation are very small with majority
of the farmers cultivating less than 0.25 ha. Collection and aggregation is a tedious task
considering the small quantum produced at each farm level. Added to this issue of small
landholdings, is the lack of approach road2. As such the farmers do not invest their time in
carrying their own produce to the markets and discovering the market price themselves, as
the market is away from the sites. Due to the absence of approach roads, the bargaining
power is in the hands of the village traders who visit the farms to aggregate the produce.
Lack of approach road and unavailability of transport has been reported as a major
constraint in marketing of the produce by 26 per cent and 15 per cent of the farmer
respondents.3

2 Economics of Turmeric Marketing in Jaintia Hills District of Meghalaya.

3 Economics of Turmeric Marketing in Jaintia Hills District of Meghalaya.

Action Plan for Development of Value Chain of Lakadong Turmeric in Meghalaya

 Suggested Interventions
While a theoretical suggestion could include suggestion for development roadways,
ropeways, etc., in order to improve the accessibility between producer and market.
Development of transport would partially shift the bargaining power into the hands of the
farmers. However, farmers may not be capable of paying for the transportation costs and
require ready cash for immediate consumption requirement. We may therefore improve the
holding capacity of the farmers through innovative credit mechanism against their
harvested produce. Further, it will ensure regular supply of raw material throughout the
year.
Success story of gravity ropeways for agriculture produce in Nepal
“It could take two people over three hours to carry a 120kg load of apples 1.3 km down a
steep mountain path – and that’s just the first part of the grueling journey to market. Now,
with a gravity ropeway, the apples take less than five minutes to cover the same distance.
Depending solely on gravitational force – and using no external power – gravity ropeways
are simple, inexpensive to operate, and environmentally friendly.”4

4 https://practicalaction.org/gravity-ropeways

Action Plan for Development of Value Chain of Lakadong Turmeric in Meghalaya

 Gravity ropeways is a concept developed by an organization named Practical Action and
has offices in Delhi and Bhubaneshwar.

Similar technologies have been developed by IIT-Madras professor Dr Shankar

Krishnapillai.
NABCONS has established contact with both Dr Krishnapillai and Practical Action, Delhi.
To begin with on a pilot project basis the ropeway project can be can be implemented in
Thadlaskein block as maximum turmeric cultivation is done in this block.
The ropeways along with aggregation points may be considered as an eligible component
customized to the need of the food sector in the North East Region under the “Creation of
Backward and Forward Linkage Scheme of the Ministry of Food Processing Industries.”

Challenges in the Processing

The common lacuna observed when the aspect of processing of a commodity is usually assessed
is the unavailability of sufficient processing capacities to utilize the marketable surplus. However,
in the case of Lakadong turmeric the issue is that, the units for processing of turmeric have been
established but the supply chain is so weak that there is no backward linkage for a year round

Action Plan for Development of Value Chain of Lakadong Turmeric in Meghalaya

steady supply of raw material to these units. The reason for these and other constraints witnessed
in processing are discussed in the section.

1. No Sync between Industry Requirements and Present Value Addition: There are
around 40 mills in West Jaintia Hills district with an average processing capacity of 200
kg per day. There is also an Aggregation cum Processing Hub established by the
Directorate of Horticulture in Thadlaskein. However, the drying and grinding machines in
the unit are not in operation. The major reason is that Lakadong turmeric sold as an ordinary
culinary spice, after processing, does not fetch the premium price for its high curcumin
content. Consumers may not pay higher price for using turmeric as an ingredient despite
its higher curcumin content.

Action Plan for Development of Value Chain of Lakadong Turmeric in Meghalaya

It is the nutraceutical firms that extract curcumin from turmeric, which benefit from this
and are willing to pay a higher price for the same. These nutraceutical firms do not require
powdered Lakadong, they have a requirement for slice dried turmeric. Therefore, the
farmers and other stakeholders have to be oriented to avoid investing in powdering units
which would result in idle capacities and non-performing assets and should rather be
directed to establish sorting, grading, cleaning, slicing and drying units.
Suggested Interventions:
Presently, nutraceutical firms involved in Curcumin extraction and export of the same have
also made inroads into Meghalaya through aggregators who procure Lakadong Turmeric
from Farmers. In a recent interaction with Synthite Industries, a Kerala based nutraceutical
firm and one of the largest exporters of Curcumin from India, it was understood that they
have been procuring Lakadong since the last three years from Meghalaya and they have
shown interest in building up stronger association for procurement from the region.
Similarly, as we approached some other companies such as M/s Patel Phytochem, Mumbai
and Katraphytochem, Bangalore also have requested for samples and price quotations for
supply of Lakadong to their units as they would be interested in procuring raw and dried
turmeric from Meghalaya. This brings focus on two aspects:
 Instead of value addition by way of powdering the rhizome it is the sliced turmeric
that will find a better market value and hence units restricted to slicing of turmeric
may also be considered for providing subsidy under the CEFPPC. Units applying
for powdering units should be informed and encourage to restrict the processing to
the level of slicing and should be allowed to take an informed decision on
modifying their plans.
 Presently, these nutraceutical firms are based outside Meghalaya, as they feel that
investing in capital may not provide expected returns as the quantum of raw
material is very low and due to lack of economies of scale the unit may turn
unviable. However, with the Mission Lakadong expected to increase the turmeric
production by 2023 and through the establishment of suggested logistic solution
for aggregation of the produce, the prospect of establishing Curcumin extraction
unit may also be present to the existing players. Presently the Curcumin extraction

Action Plan for Development of Value Chain of Lakadong Turmeric in Meghalaya

 units procure from the traders who aggregate from the farmers. While farmers are
being paid Rs. 79 per kg of turmeric sold, the curcumin is being sold at a price of
Rs. 2,430 per kg. As the curcumin content is 7 per cent, we may consider that for
one kg of curcumin roughly 14 kg of turmeric is required. The cost of turmeric is
Rs. 1,128 Kg for producing one kg of curcumin and it is sold at almost double it
cost as an active ingredient in the export market. Establishment of a curcumin unit
in Meghalaya will help pass on benefits of this huge margin among farmers and
would help implement the concept of conscious capitalism. (practiced by Tata
Beverages where the profits are shared with the tea growers).

Here below, we have provided the prospective clientele for procurement of Lakadong Turmeric.
Alternatively, they can be considered as prospective investors for establishment of Curcumin Unit
in Meghalaya.

The global curcumin market is expected to reach USD1,30,671.7 thousand by the year 2025, while
registering a growth of 13.3 per cent CAGR during the forecast period5. It may be noted that India
alone contributes to 80 per cent of the global production of curcumin. Hence, the units in the
business of curcumin extraction would look out for greater opportunities to grab a major portion
of the growing market’s share. A variety such as Lakadong Turmeric would help these processors

5 www.grandviewresearch.com/press-release/curcumin-market

Action Plan for Development of Value Chain of Lakadong Turmeric in Meghalaya

with better yields of curcumin from comparatively lower quantum of raw material. Approximately,
42 per cent of the previous procurement will have to be made to extract the same quantum of
curcumin if Lakadong is procured.

It may be noted that some companies such as Synthite and Sabinsa are already procuring from the
producers in the region, but they hold the bargaining power to determine the price. It is a sort of
Oligopoly. However, when other competing organization are approached, there will be rise in
demand for Lakadong and with the limited supply; the negotiation power will shift to the farmers
resulting in higher price realization.

Correspondence made with some of these organizations by NABCONS have been appended in the
Annexures.

Challenges in the Marketing

The major issues faced in marketing of Lakadong turmeric are as under:

1. High price fluctuation and absence of regulated market-

The paper covers the various channels of marketing and it has been observed that the most
common channel of marketing which is followed is :
Producer- Commission Agent- Wholesaler-cum-Retailer-Consumer
The producers sell their produce immediately through commission agents in the weekly
markets of their respective villages. At the weekly market the turmeric is dried and sold to
the wholesaler-cum-retailer. The fresh turmeric when sold by farmers fetches Rs.17 per kg,
whereas dried turmeric would fetch them Rs.70-90 per kg. Secondly, it may be observed
that these are flat prices being paid to the farmers irrespective of the curcumin content. In
addition to the difference between fresh and dried turmeric, the price of the dried turmeric
when sold immediately fetches lower prices while the turmeric sold in the months of
November and December fetch a higher price. But the farmers, are not able to stock their
produce until the lean seasons, because of the financial requirements of the farmers in the
post-harvest season, where they require finance for sowing the next crop and for meeting
family expenditure especially the time for payment of their children’s school fee coincides
with the time of harvest of turmeric.

Action Plan for Development of Value Chain of Lakadong Turmeric in Meghalaya

Suggested Interventions
1. Development of a network of aggregation centres which serve as grading, analytical,
storage and credit centre for the farmers in the region. The intent is that the grading
facility along with analytical set up will help farmers to sort the turmeric as per the
variety and grade and as per the curcumin content. Upon grading, the farmer may store
the produce at the centre and may receive a credit against the turmeric stored at the
centre on similar lines of the warehouse receipt system. This credit would be adjusted
at the time of the final sale during the lean season. The centre will also work as a market
intelligence system which will study the price in the market and will also establish a
network of consumers (curcumin extractors, powdering units, exporters, etc.,) Such
units may be encouraged to be set up under the scheme of Creation of Backward and
Forward Linkage Scheme.

2. Modifications have to made in turmeric processing industry, i.e., instead of establishing

curing, drying and powdering unit, units which convert raw turmeric to slices and
drying of these slices may be set up.

Action Plan for Development of Value Chain of Lakadong Turmeric in Meghalaya

 3. A web portal, which details the real time stocks at each of these centres should be
created. The real time stocks with details of the quantum and curcumin content would
be mentioned on the portal. Each of these centres, would then be linked to the regulated
market, comprising an auction centre and will help in price determination for varieties
with different curcumin content.

The daily auction of turmeric at a market hall in Nasiyanur, Erode district.

Proposed Unit (Turmeric Processing Unit and Slice-cum-Drying Unit)

In order to retain the present turmeric powder market as well as to diversify into by production of
sliced and dried turmeric. We have proposed a turmeric powder cum sliced and dried turmeric
processing unit of 200 kg per hour capacity. The unit is expected to run for 6 months for the
production of turmeric powder and 6 months for production of slice and dried turmeric.

Action Plan for Development of Value Chain of Lakadong Turmeric in Meghalaya

Projected Financials
1. Name of the Product Turmeric Powder
Sliced and Dried Turmeric
2. Project Cost
a. Capital Expenditure
Land NA
Building Shed Rs. 30,00,000.00
Equipment: Rs. 55,50,000.00
Turmeric cleaning unit, Turmeric grading sorting line,
Cutting and Drying unit, Powdering unit, Weighing
Scales
Total Capital Expenditure Rs. 85,50,000.00
b. Working Capital Rs. 65,02,400.00
7 days of raw material, 7 days of finished goods, 15 days
of receivables
TOTAL PROJECT COST Rs. 1,50,52,400.00
3. Estimated Annual Production
a. Turmeric Powder (1,09,824 kg @ Rs. 100 per kg) Rs.1,09,82,400.00
b. Turmeric Sliced and Dried (99,840 kg @ Rs.750 per kg) Rs.7,48,80,000.00
4. Raw Material Procurement Cost (9,98,400 @ Rs. 20 per Rs. 1,99,68,000.00
kg)
5. Wages Rs. 18,00,000.00
6. Salaries Rs. 30,60,000.00
7. Fuel and Power Rs. 27,94,000.00
8. Cold Storage Rentals Rs. 5,99,000.00
9. Repair and Maintenance Rs. 1,07,000.00
10. Promotion and Marketing Rs. 8,59,000.00
11. Insurance Rs.23,000.00
12. Administrative Overheads Rs. 5,00,000.00
13. Depreciation (SLM Method) Rs. 7,08,000.00

Action Plan for Development of Value Chain of Lakadong Turmeric in Meghalaya

14. Interest on Term Loan Rs. 3,46,000.00
15. Interest on Working Capital Rs. 7,80,288.00
16. Total Interest Rs. 11,26,288.00
17. Working Capital Requirement
Fixed Cost Rs. 91,47,000.00
Variable Cost Rs.2,05,67,000.00
Requirement of WC per cycle Rs. 65,02,400.00

Estimated Cost Analysis

S.No. Particulars Capacity Utilisation (Rs. in Lakh)
50% 60% 65% 75%
1 Fixed Cost 27.26 69.10 72.21 77.83
2 Variable Cost 102.84 123.40 133.69 154.25
3 Cost of Production 130.10 192.50 205.89 232.09
4 Projected Sales 429.31 515.17 558.11 643.97
5 Gross Surplus 299.21 322.67 352.21 411.88
6 Expected Net Surplus 282.41 307.39 339.39 401.34

Action Plan for Development of Value Chain of Lakadong Turmeric in Meghalaya