PIVOTAL ROLE OF SAGOSERVE IN GROWTH OF TAPIOCA BASED INDUSTRY IN SALEM REGION OF INDIA*.

K.K. Kaushal, I.F.S., Special Officer and Managing Director SAGOSERVE, Omalur Main Road, Salem 636 302, Tamil Nadu Email :kaushal64@gmail.com

Abstract The Salem region has the highest productivity of Tapioca in the world. It offers good raw material and abundant sun shine for a longer period of the day throughout the year, helping the manufacturers to produce more tapioca based products eg., sago and starch. Consequently, this area is known as the land of sago even at the

international level. Prior to 1981 the manufacturers of starch and sago in Tamil Nadu faced a lot of problems pertaining to credit, marketing, warehousing and modern technology. To get over these problems the starch and sago manufacturers formed SAGOSERVE, The Salem Starch and Sago Manufacturers Service Industrial Cooperative Society in 1981 under the Tamil Nadu Cooperative Societies Act.1961. Since then the tapioca industry in the region has grown manifold and the area under Tapioca cultivation in Tamil Nadu is the highest in the country. Unlike Kerala (where it is a staple food) it is industrially processed into Starch and Sago and the state accounts for 90 per cent of the Indias production of the two commodities. About 1.25 lakh tapioca growers, twice this number of agricultural workers and 70000 industrial workers over four lakh persons in all are directly or indirectly dependent upon the tapioca based starch and sago industry in the region. SAGOSERVE provides financial, warehousing and marketing facility to the sago and starch manufacturers.

SAGOSERVE helps the manufacturers to produce quality products by sanctioning subsidy for modernization in association with Government of Tamil Nadu. The annual turnover of SAGOSERVE is more than Rs.370 crores and it has been posting profits every year. Last year SAGOSERVE was bestowed the Best Primary Industrial *Paper presented in the International Conference on Public Policy and Governance, IISC, Bangalore Sep.4-6,2012

Co-operative Society Award by National Co-operative Development Corporation, New Delhi. Besides it has made the entire industry quality conscious as all the arrivals are tested in its laboratory and only those lots which pass its six tests are accepted for sale. The daily tender rates of SAGOSERVE have become a bench mark for the entire industry within and outside country. Tapioca is generally cultivated in marginal lands by the resource poor farmers (mostly tribals) and healthy growth of the entire sector steered by SAGOSERVE has helped them immensely. Introduction India acquires significance in the global cassava (tapioca) scenario due to its highest productivity in the world (34.37 t ha-1) (FAOSTAT, 2009). Similarly within India, Tamil Nadu prides itself in having the highest productivity of 38 t ha-1. Also 70% of the sago produced in India is from Tamil Nadu as 90% of the tapioca produced in the state is produced in the state is processed into sago and starch. As high as 60% of the sago produced in Tamil Nadu is marketed through SAGOSERVE. According to Food and Agriculture Organization, root and tuber crops form staple diet for three percent of the global population. Cassava is mostly used as a staple food in the African continent and in the South America. Industrial utilization of cassava is common in Thailand, Indonesia, Vietnam and India in the form of starch, sago, dried chips, flour etc., In India, it is cultivated in an area of 0.28 mha producing 9.62 mt. It is an important food crop in Kerala. Due to its diversified uses, tapioca has become an important commercial crop in the states of Tamil Nadu and Andhra Pradesh. Salem Sagoland Tamil Nadu stands first in respect of processing of tapioca into sago and starch throughout the country, meeting about 80% of countrys demand. There are about 450 sago and starch industries in the small scale sector in the State. Salem has traditionally been the land of sago and starch. The cultivation area and processing units are concentrated in Salem and adjoining districts. The industry got a boost during the IInd World War when imports from the Far East were not possible.

The Salem Region offers good raw material, cheap labour and good sunshine for a longer period of the day throughout the year, helping manufacturers to produce more tapioca based products eg. Sago and starch and therefore this area is known as the Land of sago/starch, even at the International level. SAGOSERVE : A Gift to Tapioca Industry Prior to the formation of the SAGOSERVE, the manufacturers of starch and sago in this district faced a lot of problems pertaining to credit and marketing of tapioca

products. Merchants used to offer low prices for their goods and middlemen exploited the situation in the absence of organized marketing and warehousing facilities. To get over these problems, the sago/starch manufacturers formed The Salem Starch and Sago Manufacturers service Industrial Co-operative Society Ltd. , Salem in 1981 under the Tamil Nadu Co-operative Societies Act 1961. This society, popularly known as SAGOSERVE throughout the world, is functioning under the administrative control of Director of Industries and Commerce, Govt. of Tamil Nadu. After the emergence of SAGOSERVE on the horizon of tapioca industry, bargaining power of manufacturers has substantially increased in the field of marketing and the menace of middlemen between processor and primary wholesaler has been eliminated. Due to sustained efforts of the society, sago/starch industry has now become the backbone of Salem Districts Rural Economy, providing employment to more than 5 lakh persons both in field as well as factories. Main Objectives 1) To remove middlemen from the scene of trade and to ensure better prices for the tapioca finished products. 2) To provide warehouse and credit facilities to members. 3) To improve tapioca cultivation and sago and starch industry and thereby the economic condition of tapioca cultivators and sago and starch manufacturers. 4) To improve productivity in the tapioca based industry and disseminate market intelligence to its members.

5) To strengthen the co-operative movement in the sago sector.

Incentives Offered by the Government 1) 2) State participation in the share capital structure of the Society. Reduction of VAT rate from 5% to 1% for sales routed through SAGOSERVE.

3)

CST exemption for the goods sold to other States out of the stocks purchased from SAGOSERVE. Subsidy for modernization of sago and starch manufacturing units

4)

These incentives have played a vital role in strengthening of SAGOSERVE and helped the sago/starch industry thrive. Working of SAGOSERVE SAGOSERVE members send their finished goods for sale to the Society. On receipt of goods, the member is paid 70% of the value of the goods as advance and consignment is assigned a Lot Number. Samples drawn from this consignment are put to Tender Sale conducted daily except on Sundays and the days of State/National holidays. After paying a tender deposit of Rs.2, 50,000/- (or) any amount as may be fixed from time to time, the buyers are registered with the society and only then they can participate in the tenders. At present, both industrial concerns as well as private

traders have registered themselves as buyers at the SAGOSERVE. After verification of sample of starch and sago in the Tender hall, the traders quote their rates in secret tender forms and the results are announced after tabulation around 2.30 P.M. The member-producer has the option of confirming the highest rate against his goods. Once he confirms the sale, he is paid another additional advance calculated with reference to the sales rate after keeping Rs.40/- for starch and Rs.50/for sago per bag for recoverable expenses. The goods of the members, till the

confirmation of the sale and those of the buyers, till they take delivery, are stored in the SAGOSERVE godowns at a nominal godown rent.

Besides this tender system, SAGOSERVE is executing the orders directly received from the consumers/end users against 100% payment from private merchants and Cooperative societies respectively on behalf of the members. Quality Sago consumers prefer white colour. But the colour is the first casualty in case of any imperfection or any shortcut deliberate or accidental in the manufacturing process. The unscrupulous manufacturers resort to the unsavory practice of adding

chemicals like bleaching agents (such as calcium hypochlorite, sodium hypochlorite, etc.,); acids (such as sulphuric acid, hydrochloric acid, phosphoric acid, etc); and artificial whitening agents (such as 2-B-Con or Tinopal) to impart an artificial brilliant white colour to their improperly manufactured sago. The chemically treated sago

overcomes the handicap of colour but it is not good for the health of the consumer and attracts the Food Adulteration Act. To ensure that chemical treatment of sago is not encouraged, Sagoserve has established a modern lab in its premises and all the

dispatches by the members are tested for pH, CN, chloride and sulphates. Only those lots which pass all the above tests are accepted for sale by Sagoserve. This has forced the manufacturers to improve their factories and the manufacturing process so that their dispatches do not fail in any of the tests in the lab. Conclusions SAGOSERVE has been bestowed the national Co-operative Excellence Award by the National Cooperative Development Corporation. Its turnover has exceeded Rs.350

crores last year. It has emerged as leader of the SAGO industry not only in Tamil Nadu but in the entire country. SAGOSERVE is striving to ensure healthy growth of tapioca cultivation and processing.

GROWTH OF SAGOSERVE AT A GLANCE (all figures in lakhs)

Year Turnover No. of bags 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 0.19 7.52 11.27 16.06 8.82 11.39 13.19 11.85 9.05 9.07 13.31 14.77 14.79 20.27 22.00 21.14 20.22 23.61 20.67 18.89 24.41 13.07 14.69 16.40 18.55 15.89 19.04 17.26 11.94 12.59 14.76 Sale Value Rs. 40.63 2701.52 3880.00 3153.00 2973.00 4517.00 4550.00 3328.00 4520.35 5247.15 5972.61 6740.74. 10725.97 11795.59 14025.99 18995.58 19273.68 16614.91 21514.21 23347.67 20470.37 14328.75 18767.29 18398.38 23029.00 22379.42 23622.35 24852.38 30722.62 37141.42 34005.34 Revenue to State Government TNGST/VAT Rs. 1.89 117.78 178.85 137.58 132.17 224.76 208.16 168.16 211.27 137.04 138.16 156.61 247.53 273.00 326.18 397.45 392.19 332.29 429.40 466.54 409.04 592.99 415.44 386.29 482.12 459.49 470.52 495.40 306.72 370.75 339.15 AST Rs. 0.16 4.12 11.94 31.63 33.83 62.66 62.76 47.42 89.11 130.95 145.84 165.95 266.96 292.00 345.66 473.88 489.98 415.37 537.20 583.02 511.24 ----------TOTAL Rs. 2.05 121.90 190.79 169.21 166.00 287.42 270.92 215.58 300.38 267.99 284.00 322.56 514.49 565.00 671.84 871.33 882.17 747.66 966.60 1049.56 920.28 592.99 415.44 386.29 482.12 459.49 470.52 495.40 306.72 370.75 339.15 Net Profit Rs. -2.69 6.20 4.55 32.09 22.06 18.82 19.18 36.54 11.39 11.30 27.37 22.30 20.10 63.76 34.07 63.46 109.65 33.91 22.89 26.62 136.08 152.41 148.87 35.39 64.08 181.58 84.54 188.06 172.74 228.70(T)