Documente Academic
Documente Profesional
Documente Cultură
p
Linkages Between Farm and Non Farm Sector
- Role of Processing of Horticultural
Products
K.V. Subrahmanyam
P
\J/
National Bank for Agriculture and Rural Development
Mumbai
2000
Occasional Paper—16
K.V. Subrahmanyam
2000
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, Bandra-
Kurla Complex, Bandra (East), Mumbai - 400 051 and Printed at Karnatak Orion Press, Fort,
Mumbai -400 001.
CONTENTS
Page No.
List of Tables x
List of Figures xii
i) Introduction 1
ii) Measures/Govt. policies to boost Horticultural Sector 2
ill) Impact of Govt, policies/measures
a) Production of Fruits and Vegetables 5
b) Fruit and Vegetable Processing Sector 6
Captive farming 37
a) Present Status 38
b) New Trends in Captive Farming 38
c) Future Scope 39
IV
Page No.
VII. Future Scope and Measures for Increasing Processing 95
of Horticultural Crops
i) Strengthening of Backward linkages 96
ii) Capacity creation 97
iii) Marketing 97
iv) Buiiding up Infrastructural Facilities 98
v) Food Parks 98
vi) Government policies 99
vii) Credit flow from financial institutions 99
"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.
VI
results of feasibility studies on crops like tomato, mango and grapes.
Section V deals with the export of Processed Fruits and Vegetables and
their growth before and after the economic reforms. It also focuses on the
emerging new products for exports like gherkins, mushrooms etc. Section
VI deals with various financial assistance schemes offered by organisations
like Ministry of Food Processing Industry (MFPI), National Horticulture Board
(NHB), National Cooperative Development Corporation (NCDC) and
Agriculture and Processed Food Products Export Development Authority
(APEDA) for encouraging processing and export of Fruits and Vegetables.
Section V I I suggests measures for increasing processing of horticultural
crops followed by summary and conclusions (Section V I I I ) and list of
reference (Section IX).
I am sure that this occasional paper will prove to be very useful for
those who are interested in overall development of Fruit and Vegetable
Processing Industry and also for those who are planning to enter this
Industry.
VII
ACKNOWLEDGEMENT
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
15. 2.3 Comparison of Contract Price with Market Price and Cost of 23
Production in Different Seasons
16. 2.4 Cost of Cultivation of Tomato 23
29. 4.3 Break Even Output for Running a Tomato Processing Plant - 51
44. 5.9 Export Projections for Fruits and Vegetables based on Trend 67
during 1991-92 to 1997-98 ,
XI
LIST OF FIGURES
XII
SECTION - I
I) Introduction
Not much attention was also paid to develop the Fruit and
Vegetable Processing Industry (FVPI), to properly utilise the domestic
production and prevent the post harvest losses due to perishability and
seasonal glut. Even today hardly 2 percent of the total fruits and
vegetables are used for processing in our country as against 70 per cent
in Brazil, 78 per cent in Philippines, 83 per cent in Malaysia and 60-70
percent in USA.
The Govt, of India and policy makers, of late, have realised the
importance of horticultural crops i.e., fruits, vegetables and flowers in Indian
economy especially as export earners with India losing its monopoly position
in traditional agricultural export crops like tea, coffee, spices etc. Even in
domestic agricultural economy, the need for developing sustainable
agricultural systems and crop diversification was realised and the horticultural
crops have been identified as most remunerative crops for replacing
subsistence crops because of their high productivity per unit area, high
returns and higher employment potential. The share of these crops in the
total net area and gross cultivable areas is increasing in the country. The
rate of coverage is expected to go from hardly seven per cent of the
cropped area to around 10.5 per cent of the net cropped area in 1996-97.
1
ii) Measures/government policies to boost horticultural sector
Only during the end of seventh five year plan and more so during
eighth plan period, some concrete measures were initiated by the Govt, of
India to boost the horticultural sector. These measures are aimed at both
strengthening the production base which is a must for increased processing,
exports etc., and to encouraging the development of Fruit and Vegetable
Processing Industries (FVPI). Some of the measures are discussed briefly
below : [61]*
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].
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.
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].
The F&V processing industries are also classified based on the scale
of operation and there are six categories viz., large scale, (>250 tonnes per
annum), medium (100-250 tonnes per annum) small (50-100 tonnes per
annum), cottage scale (10-50 tonnes per annum) home scale (1-10 tonnes
per annum) and re-labellers (<1 tonne per annum). The re-labelling category,
strictly speaking, are not manufacturers of F&V products. The licence
holders of the units are authorised to market F&V products under his own
brand name after purchasing the consignment from licenced manufacturers.
The small, cottage and home scale units still dominate the F&V
processing industry. Though their share has come down marginally from 65
per cent during 1980 to 63 per cent by 1995, a tremendous growth of re-
labelling units has taken place between 1980 and 1990 and they are
accounting for nearly 16 per cent of F&V industry during 1995 (Table 1.12).
From the above discussion it is clear that the economic reforms and
the development programmes undertaken by Govt, of India during the
eighth plan period had a tremendous impact on the production of fruits and
vegetables which form the raw material for the fruit and vegetable
processing sector and also on the growth of Fruit and Vegetable
Processing Industry (FVPI) as evidenced by the growth of FPO licences,
production and capacity utilisation.
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.
Table 1.2 : Plan Allocations of Horticulture during
Seventh and Eighth Plans
(Rs. millions)
Item Seventh Plan (actual) Eightti Plan
Ongoing programmes
Fruits 38.80 850
Vegetables 17.70 150
Coconut 77. iO 1000
Spices 20.10 1500
Cashew 29.00 650
Cocoa 1.40 30
N.H.B. 48.00 2000
Sub total 232.10 6180
B. New programmes
Floriculture 100
Tubercrops 25
Mushroom 100
Arecanut 50
Medicinal & Aromatic plants 50
Betelvine 20
Plastics 2500
Exports 975
Sub total 3820
Grand total 232.1 10000
A. Fruits
Apple 3376.00 770.00 2.28 53672.00 1200F 2.24
Banana 40007.00 4830.00 12.06 55787.00 9935F 17.81
Grapes 4470.00 20.00 0.45 57410.00 600F 1.05
Grape Fruit & Pomello 5004.00 70F 1.40
Lime & Lemons 9104,00 1700F 18.67
Meingo 13091.00 8363.00 63.88 19215.00 10000F 52.04
Oranges 38463.00 1160.00 3.02 59558.00 2000F 3.36
Papaya 1862.00 265.00 14.23 5867.00 490F 8.35
Pineapple 7843.00 549.00 7.00 11757.00 820F 6.97
Total Fruits 289462.00 18462.00 6,38 413932.00 39197F 9.47
B. Vegetables
Cabbage 34539.00 470.00 1.36 46656.00 3300F 7,07
Cauliflower 4462.00 660.00 14.79 12725.00 4800F 37.72
Brinjal 4531.00 11981.00 434* 3,60
Peas 2263.00 41.00 1.81 5214.00 270F 5.18
Tomato 50998.00 750.00 1.47 84873.00 4800F 5,66
Potato 230263.00 8327.00 3.62 294834.00 17942F 6,09
Onion 20349.00 2504.00 12.31 35644.00 4058F 11.35
Garlic 10401.00 350F 3.37
Total Vegetables 565523.00 64672F 11.44
F - FAO Estimates. - Based on NHB Statistics.
10
Table 1.8 : Changes in Area and Production of Different Vegetables
in India during 1991-92 to 1995-96
Vegetable Area (ha) Production (M.T.)
11
Table 1.10 : Growth of Fruit and Vegetable Processing
Industry in India
12
Table 1.11 : Statewise Distribution of FVPI and Percentage Change in
FPO Licences in India
State/UT 1982 1993 1997 % change % change % change
in 1993 in 1997 in 1997
over 1982 over 1993 over 1982
13
Table 1.12 : Growth of Fruit and Vegetable FPO Licences -
By Category
Category Scale 1980 1990 % change in 1995 % change in
(t/annum) No % No % 1990 over 1980 No % 1995 over 1990
Large (>250) 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
14
SECTION - 11
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 :
(ii) High cost of raw material: The Industry also claims that the cost of
raw material in India is also two to three times higher as compared to
International prices, which makes them difficult to compete in International
markets (Table 2.2). Besides, they also claim that the prices of other raw
materials like sugar, are also increasing.
Regarding the high cost of raw material, if one looks at the price
situation of fruits and vegetables there is a very wide price fluctuation
because of the seasonality of these crops. During the peak season, the
prices of these commodities dips so low that the cultivators sometimes feel
that it is not even worth harvesting and sending the produce to the market.
For example the price of tomato in Bangalore market during the peak
season is as low as Rs. 50-60 per quintal which makes harvesting and
transporting the produce uneconomical. On the other hand the same tomato
price goes up to as high as Rs. 1000 to 1200/- per quintal during the off
season. But the processing industries are unable to take this seasonal
advantage and complain of high raw material cost.
The second reason why the processing industry has to pay a high
price is due to the procurement of raw material from market intermediaries
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.
The main concept behind this scheme was to follow the ideal of the
integration of production, processing and marketing.
16
other objectives like laying demonstration plots to get higher yields and
testing of the promising varieties of Bulgaria and India for processing.
17
The main reason for failure of the above attempts to establish
linkages between Producers and Processors is lack of understanding of the
importance of various factors that are involved in the linkages which will
have an effect on the decision making process of the players. In view of
this, a model which explicitly brings out the various factors, their
interdependence and their role is discussed below.
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
1) Variety: One of the main complaints even today by the FVPI is the non-
availability 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 practices and cost of cultivation: Depending upon the variety,
some of the cultivation practices also need modification which ultimately
may have a bearing on the cost of cultivation. For example take the
cultivation of local and hybria tomatoes. The hybrid tomato crop requires
staking which will be a major item of expenditure, which is not required in
case of local varieties.
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.
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.
b) Marketing Factors
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
In this context, the results of economic analysis of a case study of
tomato crop is presented in Table 2.8 which has taken into account the
three important factors viz., prevailing market price, the price offered by the
processing units and cost of production and come up with fair price
determination. Between Feb. 90 to May 90, the period when tomatoes were
processed by one of the processing units studied in Bangalore, the price
offered by the processing unit (P.U.) was lower by 51 to 91 per cent as
compared to the prevailing wholesale price in the Bangalore market. The
same when compared to the cost of production incurred by the cultivators
was hardly 8 to 20 per cent higher whereas the market price was higher
by 80 to 101 per cent. This clearly indicates the reason why the cultivators
are not enthusiastic for supply to the processing units. Considering that the
cultivators have to pay commission charges ranging from 10 to 15 per cent
and also incur loading and unloading charges etc., it was felt that around
20 to 30 per cent less than the prevailing market price, which will result in
around 40 per cent more than the cost of production, was considered
reasonable procurement price. The earlier case study under Indo-Bulgarian
project has also recommended a fair price of 40 per cent over cost of
production, which will meet the profit expectation of the cultivators [43].
Thus, Rs. 129/q was considered a fair price during that period.
iii) Price fixation based on quality: The price offered by the Industry
should also take into consideration the quality of produce and vary the
price offered based on quality parameters required for processing like TSS,
tenderness etc., as is done in case of sugar industry. This type of fixing
prices seems to be working very well, as evidenced by the 'Gherkin'
Industry in Bangalore. The Gherkins (the pickle cucumber for exports) are
graded based on tenderness and small size. Generally cucumbers are
graded into four sizes at the time of procurement at farmers' field and the
processing units are offering different prices for different grades. The price
ranges from Rs. 8.50/kg in case of first grade which gives more than 100
fruits/kg to Rs. 0.50/kg in case of 4th grade which contains crooks and
Nibbins (Table 2.9).
This type of grading and accepting all the produce and paying them
based on quality will not only satisfy the cultivators, but also make them
take utmost care and produce quality material for processing purposes.
21
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.
22
Table 2.3 : Comparison of Contract Price with l\/larket
Price and Cost of Production in Different Seasons
Season Contract Price Market Price Cost of Difference between
(Rs./kg) (Rs./kg) production contract price
(RsVkg) market price
Kharif 1976 0.60 0.76 0.53 0.16
(+13) (+43) (30)
Rabi 1976 0.60 0.47 0.41 0.13
(+46) (+15) (32)
Note Figures in parentheses indicate differences expressed as compared to cost of production.
+ Indicates higher than cost of production.
Source Ref. No. 43.
A. MATERIAL COST
1. Seed 1848.40 511.10
2. FYIVI 2205.00 2175.00
3. Fertiliser 3994.23 396.00
4. PPC 2728.00 300.00
5. Staking* 5543.05
6. Irrigation 79.87 79.87
Sub-total 16398.55 3461.97
B. LABOUR
1. Human
a) Family 2300.30 2250.00
b) Hired 3040.70 3100.00
2. Bullock 784.69 375.00
Sub-total 3125.69 5725.00
C. INTEREST ON WORKING CAPITAL 1576.69 643.09
©14% p.a. for 6 months
COST 1 (A+B+C) 24100.93 9830.06
D. MARKETING COST 13658.85 7325.00
COST II (COST 1 + D) 37759.78 17155.06
E. FIXED COST 3500.00 3500.00
COST III (COST II + E) 41259.78 20655.06
F. YIELD (T/HA) 45.00 20.00
G. COST OF PRODUCTION (based on Cost III) 917.00 1032.00
* One fourth of the total cost, taking four seasons as the total life of stakes.
Source : Ref. No. 59.
23
Table 2.5 : Estimated Cost of Cultivation of Gherkins with
l\/lodern Technology
items Quantity Rs/ha.
2. FYM 75 CL 10000
9. PP measures 3750
Total 73475
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.
3. Hybrid tomato yield is taken as 45 t/ha and local tomato yield as 20 t/ha.
24
Table 2.7 : Cost incurred by the Cultivators for marketing
the Horticultural Crops In Karnataka
(Rs/q)
Crops Transport Loading & Commission Packing Market entry Grading Total
unloading fee etc.
VEGETABLES
FRUITS
25
Tabie 2.9 : Grading of Glierkins and Price Offered by
Processing Industry
Grade No. of fruits per kg Price offered by the industry (Rs/kg)
26
Fig. 1 : iVIodel Shiowing Linl(ages of Processing witli
Production and Marl(eting Factors
PRODUCER
• CROP •
VARIETY CULTIVATION
PRACTICES
PRODUCTION
FACTORS
YIELD COST OF
CULTIVATION
COST OF
PRODUCTION
RETURNS
-^^
PRICE BY MARKETING MARKET PRICE OF
PROC. UNIT COSTS PRICE COMP. CROPS
MARKETING
FACTORS
RAW MATERIAL
COST
CROP AREA
REQUIRED
27
SECTION - III
Contract farming
29
il) Supply of some inputs like seed and/or technical know how for
cultivation of a crop besides the purchase agreement.
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.
30
(EOU's) are engaged in cultivation of 'Gherkins'. Most of the companies are
located in Bangalore. It is cultivated mainly in southern states of Karnataka,
Tamil Nadu and Andhra Pradesh and the present area is estimated to be
around 6000 hectares. India has emerged as the largest bulk supplier of
'Gherkins'.
Selection of the farmers: The field officers employed by the firm who are
mostly local people contract the farmers in the villages and make them
enter into contract for growing the 'Gherkins'. In the surveyed taluk viz.,
Bagepalli near Bangalore, 50% of the cultivators have been approached by
the firm and about 43 per cent of sample cultivators themselves have
approached the firm for growing 'Gherkins'. The criteria for selecting the
farmers are i) Irrigation facilities ii) Suitability of the soil iii) Size of the
family (generally more than 3) as it is a very labour intensive crop, the
number of adult members in the household is an important criteria for
selecting the cultivators.
General Profile
The general profile of the selected sample cultivators for the study is
presented in table 3.1. It can be observed that nearly 65 per cent of the
cultivators are illiterates and 50 per cent of them are having less than one
hectare of land. But majority of the farmers are having 100 per cent
irrigated area and there are none having no irrigated area. Of course this
is expected as one of the criteria for selection for growing 'Gherkins' by the
Processing unit is the availability of irrigation facilities.
Agreement
31
Area under 'Gherkins'
Supply of inputs
The firm also supplies sieves for grading the produce on cost basis
(Rs. 240/- per set) which is refunded after returning the same.
ii) Yield: The produce is separated into different grades using the sieves
supplied by the company. There are four grades based on the number of
fruits per kg. Higher the number of fruits, they are considered as best
grade as it shows the smallness and tenderness of the fruits, which is
32
required for processing, as they are used as a whole fruit. The grades
prescribed by the company are :
1. S-1 200 +
2. S-2 160-200
3. S-3 100-160
4. S-4 60-100
5. S-5 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.
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
Marketing
33
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
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 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.
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
The factory also supplies wooden crates at a subsidised rate of
Rs. 14/- to the agents and also sometimes plastic crates free for the
produce.
In the study area, the sample cultivators were growing 'Roma' variety
of tomato which is one of the oldest processing variety used by the
factory. The details of costs and return is briefly discussed below.
Returns: The cultivators are getting less price than offered by the
processing firm as they have no direct dealing with firm. The agent acts as
a middleman and keeps a margin and pays a lower price to the cultivators.
Marketing
The cultivators sell their produce at the field itself to the agents and
hence do not incur any marketing cost. The agent himself arranges the
transport and takes to the factory. Avoiding the trouble of taking to the
market seems to be one of the important reasons why cultivators are
preferring to sell to the agents and the other being the assured price
(Table 3.5).
Problems
Hence some of the sample cultivators feel that balances should be brought
to the field and the produce should be weighed instead of filling them in
crates.
36
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
5. The supply of other inputs besides seed like pesticides, helps to prevent
the drop out of farmers due to crop failures.
Captive farming
37
a) Present Status
Mushrooms
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)
39
Table 3.2 : Details (opinion) of Contract by Gherkin Cultivators
1. Source of Contract
i) Through neighbouring fanner who is already having contract 7.14
with the processing firm
ii) Processing firm approached the farmer 50.00
ill) Farmer approached the processing firm 42.86
3. Area Cultivated
i) Specified by the Proc. firm 100.00
8. Technical Advice
i) P.P. Measures 14.29
ii) P.P. Measures, harvesting and grading 21.42
iii) Not needed 64.29
40
Table 3.3 : Cost of Cultivation of Gherkins, 1999
(Rs/ha)
Item Unit Quantity Cost
Inputs
1. Seed grams 996.50 2690.56
2. FYM T. Load 12.59 5384.62
3. Cfiemical fertilisers
i) N Kg 154.51
Ji) P Kg 67.62
ill) K Kg 108.25 3336.57
4. P.P. Measures No. 3.14 1247.20
5. Staking
i) Sticks* No. 2937.00 979.00
il) Plastic wire Kg 20.98 853.15
ill) Gunny thread Kg 24.48 538.11
6. Human labour M. days 859.39 31407.67
7. Bullock labour P. days 17.48 1486.01
Total Cost 47922.89
Yield Kg 11366.08
Gross Returns
Grade I @Rs. 8.50/kg Kg 6003.50 51029.75
Grade II @Rs, 6.50/kg Kg 2454.54 15954.51
Grade III @Rs 1.50/kg Kg 2178.32 3267.48
Grade IV 0.50/kg kg 729.72 364.86
Total kg 11366.08 70616.60
IV. Net Returns Rs. 22693.71
As the life span is three seasons, the total cost is divided by 3.
1. Educational Status
i) Illiterates 26.67
ii) Literates (5th - 10th) 73.33
Size of the Farm
i) < 1.00 ha 20.00
ii) 1.00 - 2.00 ha 33.33
ill) > 2.00 ha 46.67
Percentages of Irrigated Land of the Farmer
i) < 50% 20.00
ii) > 50% and < 100% 53.33
iii) 100% 26.67
Type of Contract
i) Oral 100.00
AreaI under Gherkin Crop
i) 0.50 ac (100.00) 6.67
ii) 1.00 ac (50.00) 46.67
iii) 1.50 ac (75.00) 6.67
iv) 2.00 ac (34.78) 26.67
V) 3.00 ac (42.86) 6.67
vi) 5.00 ac (100.00) 6.67
Variety Grown
i) Known (Roma) 100.00
Figures in parenthesis shows the % of total inigated area of the fanrt.
41
Table 3.5 : Details (opinion) of Contract by Tomato Cultivators
Particulars Percentage of Cultivators
1. Source of Contract
1) The agent approached the fanner 60.00
ii) The farmer approached the agent 40.00
2. Number of Years of Association with the Processing Firm
i) Since two years 6.67
ii) Since three years 6.67
ill) Since four years 33.33
iv) Since five years 1.33
v) Since six years 6.67
vi) Since seven years 13.33
vii) Since eight years 6.67
viij) Since nine years 6.67
Ix) Since ten years 6.67
3. Area Cultivated
I) Specified by the agent 33.33
II) No specified by the agent 66.67
4. Violation of Contract by the Cultivator
1) Not violated 100.00
5. Violation of Contract In Price by the Agent
1) Not violated 100.00
6. Inputs Supplied by the agent
I) Seedling 13.33
II) Seed 53.33
ill) Nil 33.33
7. Supplying Loans/Advance by the Agent
I) Nil 100.00
8. Technical Advice
i) Not needed 46.67
II) Nil 53.33
9. Price Offered by the Processing firm
1) Satisfied 86.67
ii) Not satisfied 13.33
10. Rejection of Produce by the Agent
1) Nil 100.00
11. Fanner Stopped Supplying to Agent
I) Nil 100.00
12. Packing and Transport
i) Arranged by the agent 100.00
13. Problem in Payment for the Produce
i) Nil 100.00
14. Problem with the Agent
I) Weighing is not proper 26.67
II) Nil 73.33
15. Suggestions
i) Minimum price of Rs. 2.00/kg 13.33
ii) Balance should be brought to field 6.67
ill) Nil 80.00
16. Advantages in having contract
i) Price Is less In the market 6.67
ii) Avoiding the trouble of going to the market 46.67
ill) Assured price/sale of produce 46.67
42
SECTION - IV
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.
1) Seasonal nature
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 :
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.
3) Bulky nature
1) Cold storing of the produce: To extend the shelf life of fruits and
vegetables and create time and space utility the cold storing of fruits and
vegetables is recommended. As a matter fact, this is one of the most
important infrastructural facilities which people consider highly essential and
lacking for preventing post harvest loss and increasing the exports. There is
also an ambitious plan by Govt, of India to set up 'Cold chains' in the
country to give access to the small food processors to preserve their raw
material so that they could process the food continuously round the year
and store the finished product to sell at an appropriate time.
At the national level, Potato is the single largest vegetable stored In the
cold stores accounting for more than 60 percent of the capacity. Very
negligible quantity of other fruits and vegetables are cold stored and at
regional level only a few fruits like apples and grapes/raisins are stored in
cold stores in some states [26, 71].
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.
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
iii) Economic feasibility of establishing the small scale units
a) Tomato processing
Economic feasibility
i) Capital requirements:
46
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
AFC = Annual fixed cost of the unit (depreciation and interest on buildings,
machinery, equipments and recurring expenses for staff etc.)
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.
47
From the above it is clear that :
b) Mango processing
With a net return of around Rs. 500/t for making pulp (Table 4.7),
the break-even output was estimated to be around 500 tonnes of finished
product i.e., pulp arid the raw material requirement would be around 1000
tonnes of mangoes.
48
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
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.
49
Constraints and suggestions
Marketing is the main problem faced by most of the small scale fruit
and vegetable processing units. Besides the main constraints of low
domestic demand, these units have to face stiff competition for marketing
their produce from established big manufacturers whose brand names are
familiar with common household consumers. The results of the survey
conducted during 1981 and 1991 in two metropolitan cities of Mumbai and
Delhi is presented in Table 4.9 which clearly shows that big brand names
like Kissan, Maggi etc., are the preferred ones. The recent studies
conducted in three towns/cities i.e., Pantnagar, Rudrapur and Haldwani and
three villages Jawahar Nagar, Shantipuri and Haldi in U.P. also have
confirmed the above findings viz., Kissan brand is most preferred for jam
and squash and Maggi for sauce [36].
The units can also take the help of government organisations like
Khadi and Gramodyog Fair price shops etc., as market outlets.
(150t/annum)
I. FIXED CAPITAL
1. Land and Buildings 400000
2. Machinery & Equipments 62^100
RECURRING EXPENDITURE
1. Payment to permanent staff 81000
2. Office Establisfiments 2250
3. Electricity/Diesel etc. 7500
50
Table 4.2 : Cost and Returns of Processing of Tomato (Ketchup)
I. Variable costs :
1. Raw material cost :
51
Table 4.4 : Raw Material Requirements and Supply at
Different Levels of Utilisation/Processing
1. Raw material required 1:4 132 160 240 320 400 480 560
(tonnes) 1:6 198 240 360 480 600 720 840
(a) Based on hybrid" 1:4 2.88 3.56 5.33 7.11 8.89 10.67 12.44
1:6 4.40 5.30 8.00 10.70 13.30 16.00 18.70
(b) Based on local 1:4 6.60 8.00 12.00 18.00 20.00 24.00 28.00
1:6 9.90 12.00 18.00 24.00 30.00 36.00 42.00
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.
52
Table 4.6 Important Machinery and Equipment Required for a
Mango Pulping Unit
Item Quantity (Number) Value (Rs.)
A. MACHINERY
1. Boiler 1 175000
2. Pulpers 2 130000
3. Electric hoise with beams 1 25000
4. Steam jacketted kettles with tilting capacity 3 90000
5. Retards (400 cans) 2 20000
6. Rotopumps (for pumping products) 2 50000
7. Fruit washing tank 1 10000
8. Weighing Scales & Lab. Equipment 20000
520000
Installation charges @10% of total cost 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
Source : Re* jJo. 58.
A. INPUT COSTS
1. Raw materials" (fresh fruits) 3790.48 82.41
3. Packing material
4. Latiour
1. upto pulping 212.88 4.63
2. canning 30.00 0.65
53
Table 4.8 : Costs and Returns of Raisin making on Farm
(10 tonnes of fresh Grapes)
4250
Total processing costs (t. cost + fixed & marketing costs) 17750
A minimum of two such structures are required for making raisins from an acre or 10 tonnes of
fresh grapes.
54
Table 4.9 : Brandwise Consumption Pattern of Tomato Ketchup/Sauce
Percentage Consumption in
Mumbai Delhi
55
SECTION - V
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.
57
with 5.85 per cent and the share at present is 4.4 per cent (Table 5.3).
II. Phase - II : Post-New Industrial Policy period i.e., from the year 1991-
92 to 1997-98.
The growth trend was worked out by fitting the equation of the following
type.
58
Y = AB'
where
Y = Quantity/value of exports
A = constant
t = time in years
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.
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
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.
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.
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.
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.
(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
(c) Dehydrated onions: India, though'^the second largest producer of onion,
could not fully exploit its potential for export of dehydrated onions which is
in great demand in European countries. The world trade in dehydrated
onion and garlic is estimated at around 100,000 tonnes per annum. The
total use of dehydrated onions and garlic in Western Europe amounts upto
50,000 tonnes per year, of which 35,000 to 40,000 tonnes are imported.
The demand is still increasing. During the last five years, the export of
dehydrated onion has picked up and at present 4941 metric tonnes of
dehydrate.d onion valued at around Rs. 24 crores is exported, which is
nearly 4 times the value of exports during 1993-94 (Fig. 8).
(d) Processed mushrooms: Along with the New Industrial Policy of 1991 of
Govt, of India which allowed foreign collaborations, the relaxation of rules
for import of mushroom spawn culture by the Ministry of Commerce, Govt,
of India for the 100% Export Oriented Units during the year 1993, a
number of joint ventures have come into existence. Most of them are
having more than 2000 t/annum capacity with around Rs. 20 crores
investment each. At present there are about 30 EOUs with a capacity of
85000 metric tonnes. Most of these units are producing button mushrooms
and exporting them in processed form [31, 39, 65]. Hence, the export of
processed mushrooms has increased from hardly 126 tonnes valued at Rs.
76 lakhs in 1990-91 to 6883 tonnes valued at Rs. 2593 lakhs by 1995-96,
though there is a set back in export of processed mushrooms in
subsequent years (Fig. 10). The reason for drastic fall in exports of
processed mushrooms during the year 1997-98 was due to the levy of anti
dumping duty by USA, which is the major importer of processed
mushrooms and also the increase of exports by China.
62
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.
vi) Constraints
63
Table 5.1 : Share of Agricultural Exports In India's Total Exports
(Rs. crores)
Year Total Exports Agrll Exports % share of Agri. in
Total Exports
(Percentage)
64
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Table 5.8 : Export Growth Equations of Fruits and Vegetables
item 1980-81 to 1990-91 1991-92 to 1997-98 1980-811 to 1997-98
1nA InB R^ InA InB R^ InA InB R'
1. Processed fruits
and vegetables
Quantity 10.4372 0.0500 0.46 11.0780 0.2016 0.94 10.0990 0.1141 0.85
Value 3.3950 0.0891 0.30 4.8335 0.2498 0.97 2.9040 0.1859 0.88
II. Freshi fruits
and vegetables
a) Fruits
Quantity 10.1584 0.0606 0.56 11.1585 0.0874 0.94 9.9800 0.0972 0.90
Value 2.3598 0.1636 0.79 4.7115 0.1323 0.96 2.2200 0.1957 0.94
b) Vegetables
Quantity 12.1633 0.0339NS 0.21 12.9057 0.0196NS 0.29 12.0693 0.0579 0.71
Value 6.4751 0.1104 0.80 5.0574 0.1146 0.93 3.3320 0.1412 0.95
c) Total fresti
fruits and
Vegetables
Quantity 12.2889 0.03842NS 0.23 13.0605 0.0328 0.64 12.1725 0.0640 0.81
Value 3.7593 0.1270 0.86 5.5891 0.1228 0.97 3.6095 0.1598 0.96
NS = Non significant and rest are significant at 1% or 5% level.
1. Processed products
Quantity 298931 397281 1088597 32.90 264.16
Value 761.50 1189.99 4149.32 56.27 448.89
II. Fresh Fruits and Vegetables
a) Fruits
Quantity 135198 154060 238494 13.95 76.40
Value 268.74 365.84 708.89 36.13 163.78
b) Vegetables
Quantity 431698 480268 529718 11.25 2.71
Value 316.53 440.89 781.96 39.29 147.05
c) Total
Quantity 566896 631403 743928 11.38 31.23
Value 585.28 807.79 1492.64 38.02 155.03
III. Total Fruits and Vegetables
Quantity 865827 1028684 1832525 18.81 111.65
Value 1346.78 1997.78 5641.96 48.33 318.92
67
Table 5.10 Composition of Export of Processed
Fruits and Vegetables
Quantity in M.T.
Value in Rs. Crores
Dried and Preserved Vegetables 30474.83 63.98 200262.70 479.89 557.16 650.06
(38.12) (40.55) (66.99) (63.02)
Other processed fruits & vegetables 15259.58 29.57 28421.80 79.59 86.26 169.16
(19.09) (18.74) (9.51) (10.45)
Total processed fruits & vegetables 79952.10 157.78 298931.29 761.50 273.89 382.63
(100) (100) (100) (100)
Dried and Preserved UAE, Switzerland. USA, UK, Egypt (21.09), Sri Lanka (20.3)
Vegetables Germany UAE (10.63), USA (9.9) Turkey (5.45)
UK (4.99)
Mango Pulp S. Arabia (17.05), Yemen (16.53), S. Arabia (18.2), USA (17.27)
USSR (11.98), Netherlands (11.16) Netherlands (9.87), Kuwait (9.29)
UAE (8.86), UK (5.6), Kuwait (3.72) Germany (6.76), UK (5.97),
USA (4.57).
Pickles & Chutneys UK (22.1), USA (14.41), UK (17.57), USA (10.51), UAE (9.35),
S. Arabia (12.47), UAE (12.02) Spain (7.71), S. Arabia (6.71)
Germany (4.75), Netherlands (4.16), Netherlands (5.42), Kuwait (5.34),
Canada (4.08), France (4.13) Germany (5.33), France (4.76).
Other processed fruits & USSR, USA, UAE, UK, Netherlands (15.66), Indonesia (12.65),
Vegetables S. Arabia UK (10.42), USA (9.7), UAE (8.44)
Germany (5.32), Russia (4.88).
68
Fig: 2.Composition of Bxpot-t of ptocdssQd Ftuits ond
VagQtoblaS - 1997-98
(Petcantoga bosza on Yo/UQ cf £xpofts)
63 oz'A
10.4.S
SOURCE: APBDA
69
48000-, Fig:3-Export of Dried andpraeetvea Vegetables ATseg
1991-92 to l097-9e
4./).000
4/0000.
36OO0
32OO0 .
03000 _
24-765
•3AOOO 2^IOT
20CXD0_
I
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nooo .
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4000
-r T— —r -r
92-93 3S-9^ 9^- OeS 9 5 - B6 96-97 97-98
91-92
( Yizors) souRce: APEOA
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f V<zar«)
70
Fiq: 5- Export ofpicH/as and chutnztjs
1991-OS to 1997-90 7STI
7500
67 60
6000
5K--*3
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97SO - 3613
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( y<2a f s ) SOURCE: A, PB CV\
71
F/g:7expor6 c^pfocaesad cucumbar one/
3300.
3<79
3ooo_J /dO4-05 t o /097-9a
2.700 J
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72
3500 Fiq:9- Export of DHad MuGhroom 35 ra
3000
XTOO.
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(996
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172
76
r—1 T T ± T -r
90-©l 91-92 92-93 93-S4 94--96 ©396 96-97
97-36
cyzara) &DUPICE: ^^PBD^^
SECTION - VI
75
Objectives
Pattern of Assistance
76
Establishment of food processing industrial estates/food parks
Objectives
Pattern of Assistance
Objectives
Pattern of Assistance
or
50% of cost of capital equipment Grant
and technical civil works upto
Rs. 50 lakhs in difficult areas
or
77
50% of cost of capital equip- Loan
ment and technical civil works
upto Rs. 150 lakhs in general
areas and upto Rs. 200 lakhs
in difficult areas
Objectives
Pattern of Assistance
78
Dissemination of low cost preservation technology
Objectives
Pattern of Assistance
(i) Processing of cereals, coarse grains and millets and also for
improving traditional/regional foods made from them.
(ill) Study prevailing post-harvest technology of millets like ragi, jowar and
bajra and devise improvements thereto and develop technologies for the
purpose suited to our conditions.
79
3. Financial assistance would be available for setting up of Quality Control
Laboratory for all processed foods. Such assistance will be limited to the
entire cost of capital equipment required for setting up such laboratories.
The facilities thus created will be common and may be availed of by other
food processing units in and around the area. All implementing agencies
would be eligible for such assistance.
Eligibility
(iii) Private, Public and Joint Sector Companies taking up Research and
Development projects individually or jointly with government laboratories, NTs,
Universities or on the basis of a consortium of companies.
Pattern of assistance
1) It will be one of the pre-conditions for sanction of any R&D Project that
80
2) In cases where assistance for R&D activities is sought by commercial
companies of any type - public, joint or private or by an entrepreneur,
MFPI will reserve the right to license the know-how developed under the
project to other companies, after a mutually negotiated period of exclusive
right of product and sale by the company which undertook the project.
Objectives
Eligibility
Pattern of Assistance
Single Product Line Centre (for Rs. 2.00 lakhs for fixed Grant
any one group of processing Capital Cost and Rs. 1.00
activities) lakh as revolving seed
capital.
81
Mult! Product Line Centre Rs. 7.50 lakhs for Fixed Grant
(For more than one group Capital cost and Rs. 2.00
of processing activities): lakhs as revolving seed
capital.
For training the trainers Upto Rs. 0.50 lakhs one Grant
at recognised institutes such time assistance, subject to
as CFTRI, Mysore actuals on TA/DA etc.
Objectives
Pattern of Assistance
82
All Agencies 50% of the cost towards Grant
implementing Total Quality
Management (TQM) includ-
ing obtaining ISO-9000
certification HACCP
etc. upto Rs. 10 lakhs.
Objectives
Pattern of Assistance
83
(ii) Participation in National/International Exhibition/Fairs.
Objectives
Pattern of Assistance
Objectives
Pattern of Assistance
Objectives
84
Pattern of Assistance
(i) The amount provided for studies/feasibility reports/surveys etc., shall not
exceed Rs. 3 lakhs.
(iv) Maximum assistance of Rs. 1 lakh for EDP which should be atleast for
a period of 2 weeks and the number of trainees should not be less than
15.
Performance award
Objectives
Pattern of Assistance
The National Productivity Council (NPC) has been the designated Agency
for the purpose of implementation of this Scheme Component. Assistance in
the form of grant-in-aid will be provided to them.
Objectives
Strengthen the State level Nodal Agencies for food processing industries,
designated by the State Governments, by providing financial support for
installation of basic office hardware including computer system and internet
for collection of detailed field information, preparation of data base,
monitoring of assisted projects, coordination of agro food business etc.
85
Pattern of Assistance
Explanations
1. General and Difficult Areas: The scheme provides for differential scale of
assistance for projects to be setup in general and difficult areas of the
country. It envisages enhanced rate of assistance for difficult areas, i.e.,
Jammu and Kashmir, Himachal Pradesh, Sikkim, North Eastern States,
Andaman and Nicobar Islands, Lakshadweep and integrated Tribal
Development Project (ITDP) areas.
86
recommendations. In case of areas under autonomous bodies such as
Gorkha Hill Development Council, Jharkhand Autonomous Area Development
Council and Bodo Development/Council, such recommendations can be
made by their competent Authority.
Soft loan upto Rs. 1.00 crore per beneficiary at a service charge of
4 per cent is given by the Board. The loan is given with a moratorium of
upto 3 years and repayment in another 5 years. The main components of
the scheme are :
(i) grading and packing centre, (il) retail outlets, (ill) specialised transport
vehicles, (iv) pre-cooling units and cold storage, (v) auction platform, (vi)
ripening/curing chamber, (vii) maturity kits, (viii) rigid plastic container
(subsidy @Rs. 70/crate or 50 per cent of the actual cost whichever is
less).
87
Description/ Existing pattern Approved pattern of
Component of assistance assistance during 8th plan
88
projects to cooperatives, public sector organisations, NGOs and corporate
sector. The 8th plan outlay is Rs. 50 crore.
The 8th plan outlay is Rs. 1.35 crore. So far 20 beneficiaries have availed
of the assistance and a total of 1023 machines have been installed.
The NCDC has been the main agency for financing the F&V
Marketing cooperatives under different schemes.
89
societies. Under the corporation sponsored scheme, the NCDC provides
financial assistance for purchase of transport vehicles and construction of
godowns. Under NCDC III, loan is given for expansion of F&V marketing
activities.
"The corporations have availed of the World Bank assistance under NCDC-
II IDA Project for expanding the network of cooperative cold storages and
marketing of potatoes. In order to make the cooperative units Viable and
help the cooperatives to create additional cold storage capacity, the NCDC
has liberalised the pattern of assistance. Under this pattern, 90% of the
project cost is financed. This consists of 40% term loan to cooperatives
and 50% investment loan to be provided by the state government as share
capital and the remaining 10% to be borne by the beneficiary society. With
a view to accelerate the pace of development relating to the establishment
of cold storage and ice plants and their rehabilitation, modernisation and
modification by the weaker sectioins in the cooperatively underdeveloped/
least developed states/UTs the pattern of assistance has further been
liberalised during 1994-95. Under this pattern, cooperatives in the
underdeveloped states/UTs are provided 40% loan, 35% share capital and
17.5% to 20% subsidy of the block cost of a cold storage/ice plant.
90
1. Scheme for development of infrastructure: Under this scheme financial
assistance is given to cooperatives, government and private organisations
for establishing infrastructural and post harvest facilities. The scheme has
the following components.
(a) Financial assistance upto 25 per cent of the capital cost subject to
a ceiling of Rs. 1.5 lakh per beneficiary is given for purchase of specialised
transport unit for horticulture.
(b) Financial assistance upto 50 per cent of the capital cost subject to
a ceiling of Rs. 5 lakh is given to exporters/cooperatives organisations and
federations for (i) establishing pre-cooling facilities (ii) setting up mechanised
post harvest handling facilities and sheds for grading, sorting, quality control
and packaging, (iii) establishing Vapour Heat Treatment/Fumigation/Screening
machines for exports, (iv) establishing cold stores at ports/sea ports for
export purposes. The activity components and the pattern of assistance
under the scheme are presented below :
b) Assistance to exporters/cooperatives/
federations for :
91
Activity component Pattern of assistance
92
export production and marketing techniques specialised training programmes
can be organised by the exporters/grower's associations with the help of
financial assistance from APEDA. The scope of activities and the funding
under this scheme are as follows :
93
SECTION - VII
I) Capacity creation
ii) Backward linakges
95
B. Infrastructure Development
D. R & D studies
3. As the price is the most important factor there is a need to declare the
procurement price in advance and also keep a price adjusting clause in
agreements.
96
7. There is a need to institutionalisation of contract farming by bringing
some accountability to the system so that the mutuality of benefits between
the processor and the farmer is ensured.
It was also observed that one of the reasons for high cost of
production of processed products is starting of Processed Food Plants
based on foreign technology including imported Plant and equipment. There
often are over capitalised because of the high cost of the foreign inputs
[30].
From the above it is clear that the future Fruits and Vegetables
Processing Plants should be started in growing areas and on a small scale
with the minimum capital. It is in this context that the feasibility studies
reported in this paper assume significance.
This has been recognised by the State Government and they are
planning to set up fruit processing plants. Recently, the Tamil Nadu Chief
Minister has announced that Tamil Nadu Industrial Development Corporation
(TIDC) was considering the possibility of setting up a mango pulping unit at
Krishnagiri or Dharmapuri in Tamil Nadu. This district has an area under
mango of around 23,270 ha and produces 2,32,530 tonnes [20c]. A
number of states are also planning to set up fruit processing plants [20a].
iii) l\/larketing
97
Some of the steps/suggestions to overcome this problem are :
1) The big processing firm/export units should encourage the small scale
units to Produce intermediate products under this technical supervision with
buy back arrangements as it is practiced in case of mango by some firms.
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.
v) Food parks
98
industrial estates by availing financial assistance provided by the Ministry of
Food Processing Industries in 9th Plan schemes.
99
SECTION - VIII
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 non-
farm 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.
Based on the above objectives, the paper has been divided into
seven sections, each section covering one objective.
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
All these above measures have resulted in India becoming the
second largest producer of fruits and vegetables in the world. During the
last five years i.e., 1991-92 to 1995-96, the total production of fruits and
vegetables has recorded a growth of 30 per cent.
One of the main reasons for this situatioin is lack of direct link
between producers and the processing industries. The earlier attempts to
integrate production-marketing-processing made during the 1970s under Indo-
Bulgarian project in Karnataka and the recent attempts by Pepsi in Punjab
have failed mainly due to the lack of proper understanding of the various
factors in the linkages. In this paper a model is developed showing the
factor linkages that play a crucial role in establishing direct contact between
producers and processors. This model discusses the production factors like
variety, cost of cultivation, yield, return, marketing factors like market price,
price offered by FVPI and processing factors like raw material - finished
product ratio etc., and their interlinkages.
The two alternatives envisaged for ensuring the supply of quality raw
material at reasonable prices are to have contract farming with the
producers or to go for captive farming by the firm itself. The contract
farming and its implications as practiced by some FVPI's were discussed in
this paper with the help of case studies on two processed vegetables viz..
Gherkins, which is an imported vegetable and a traditional vegetable,
tomato around Bangalore. Problems faced by the cultivators and also the
processing firms like 'Red Farmers', holding up of vehicles etc., were
brought out from the case studies. The captive farming was found to be
practiced successfully by processing industry in case of horticultural crops
which have very high capital requirements with intensive farming and with
less land requirements such as mushroom cultivation and hitech floricultural
102
projects. The new trends in captive farming by the private companies like
Maxworth orchards Ltd., Anubhav plantations etc., was also discussed.
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.
103
From the detailed discussions on various aspects, the following
suggestions are made.
iii) The areas around FVPIs can be notified as in the case of sugarcane
which will help to establish linkages between producers and
processors.
vii) The Govt, should relax land ceiling acts to encourage large scale
plantation of perennial fruit crops like mango, ber, pomegranate on
marginal lands.
viii) The Govt, should formulate a long term National Policy on Food
Processing Industries to encourage their proper growth.
104
SECTION - IX
REFERENCES
1. Agricultural and Processed Food Products Export Development Authority (APEDA), Export Statistics
for Agra & Food Products, India, 1991-92, 1992-93, 1993-94, 1995-96, 1996-97 & 1997-98 and
Financial Assistance Schemes, APEDA, New Delhi.
2. Ambadan, S.N. Pandey and J.C. Anand, 1977, Studies on raisin Production from grapes (Vits
Vinifere) grown under Delhi Conditon, Indian Journal of Horticulture, 34:215-49.
3. Anon, 1993, "No import needed for mushroom" observer dated 26-6-93 as given in Indian Food
Packer, 47(4) : 152, 23 August, 1993.
4. Anon, 1993, Scheme to help Farm, Food Processing Sector, The Observer dated 23-6-1993 as
given in Indian Food Packer, 47 (4) : 52.
6. Anon, 1995, Assistance schemes of Ministry for Food Processing Industries" Indian Food Insutry, 14
(5) : 19.
7. Anon, 1998, Outline of Assistance under schemes of the Ninth Plan, 1997-2002, Ministry of Food
Processing Industry, Government of India, Nov. 98.
8. Anon, 1998, 'Gherkins-Modern technique of cultivation'. Agriculture and Industry Survey, B (8) : 35.
9. Anon, 1998, "Gherkins in the world market", Agricluture and Industry Survey, 8 (8) : 36.
10. Arve, Vasanth Rao, 1992, Grape Industry in India - Export strategy and constraints. In Souvenier of
the Inernationat Symposium on recent Advances in Viticulture and Genology, 14 and 17th February
1992. Hyderabad.
11. Baisya, R.K. 1980, "Fruit and Vegetable Processing Industry in Rural India. Its Problems and
Prospects, Indian; Food Packer, 34 (6) : 29-32.
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