Documente Academic
Documente Profesional
Documente Cultură
But ^thats not the end. Food processing topic also overlaps with
GS2
GS3
1.
2.
Government policies and interventions for development in various sectors and issues arising out of their design and
implementation.
3.
storage, transport and marketing of agricultural produce and issues and related constraints;
4.
Sci-Tech research e.g. Food irradiation, developing new crop hybrids, animal-breeds etc.
+ same food processing points can be selectively used for discussing rural-unemployment,
food inflation, general inflation, FDI in multi-brand retail; even current account deficit and rupee
depreciation: whether its essay / interview or group discussion (in case of SBI/CAT) hell even RBI
Officer phase II descriptive papers.
Structure of the [Food processing] Article series:
1.
2.
3.
4.
5.
Then we start basic theory of supply chain management (SCM), and upstream downstream
issues of individual food processing sub-sectors viz. Dairy, Fruit and Veggies, Egg-MeatFishes, Confectionary, Wine, Edible oil etc.
References used for this article series
Source
Title
comment
1.
Books
2.
3.
A Manual for
Entrepreneurs: Food
Processing Industry
(Tata McGraw-Hill
Publication)
Food processing:
Opportunities and
Challenges (ICFAI
university press)
PDFs
Planning commissions report
on Encouraging Investments
In Supply Chains and cold
storages
Web
supply chain,
opportunities, obstacles
various schemes
Note: All those Food processing related PDFs have been uploaded on https://files.secureserver.net/
0sL2N0Ej5XwsWc
12th Five year plan uploaded on https://files.secureserver.net/0sLrYY0FFJRric
Indian food processing industry: Significance
size
Location wise: Maximum factories in (ie. more than 1000 in given state)
Coastal states: Andhra, Maharashtra, Karnataka, Kerala, Gujarat, Punjab, WB
location
Non-coastal States: UP, Punjab
Observe majorities of the food processing factories are concentrated in the coastal states.
Increasing Employment
Food processing industry provides plenty of direct and indirect employment opportunities,
because it acts as bridge between Agriculture and Manufacturing
As per ASI survey in 2010, Food processing industry generated highest employment among
all industry. Giving employment to almost 17 lakh people.
12th Five year plan (FYP) wants to create more than 50 million jobs. Out of that, Food
processing sector is to create one million jobs.
Curbing Migration
When food processing plants are setup near agro/rural regions, they reduce:
1.
2.
disguised unemployment
3.
exploitation of farmers
4.
rural-urban migration
1.
unplanned urbanization,
2.
In the last few years Food inflation has been a major problem. Food inflation is eventually
passed through into manufactured goods through higher money wages.
Therefore persistent high food inflation= bad for general macroeconomic stability.
1.
2.
Indian villagers are away from market= have to grow cereals. (as we learned in Von Thunen
model)
In recent years, Government increased Minimum support prices for rice and wheat.
That leads to surplus grain production=>Pvt. Players give less price to farmer=>government
has to buy wheat @Minimum support price (MSP) but FCI didnt have enough storage
capacity
On the other hand, weve to rely on imported oilseeds because of higher MSP, farmers prefer
to grow rice/wheat than oilseeds=> higher oilseed import adds to Current account deficit
and leads to 1$=62 rupees=>crude oil expensive=petrol expensive=everything transported
through petrol/diesel gets expensive=thus the cycle of middle class exploitation is complete.
Coming to the original point: we need crop diversification, all farmers shouldnt be growing
just rice and wheat. But if want to seduce the farmers into growing other crops, then following
must be done
1.
Promote food industry with backward linkages to farmers growing fruits, vegetables, milk, fish,
meat, poultry, grain, etc.
2.
once weve done #1 + #2=> then even the farmers away from market area will see good income
opportunity in growing non-cereal crops => crop diversification => the excessive rotting-wheat
surplus problem is solved.
Some filler significance points: food processing
1. Increases shelf life: milk vs butter
2. Increase value: milk vs butter
moveing to.
Scope/Potential
in production of
rice, wheat, potato, garlic, cashew nut, groundnut, dry onion, green peas, pumpkin,
gourds, cauliflowers, sugarcane, tea
among top
five
With such a huge raw material base, we can easily become leading food supplier in the world. (But
we havent, because of the obstacles discussed later).
Geographical advantages
1.
2.
More than 26 types of climatic conditions= can cultivate large variety of fruits, crops,
vegetables.
3.
4.
Variety domestic animals such as cows, buffaloes, goats, chicken, lamb, sheep.
5.
Large irrigated area under cultivation. Ample supply of fresh water for human, plant and
animals.
New Demand
In the upcoming years, there will be good demand for healthy, modern food products due to following
reasons:
1.
Youth population (age group 15 25): doesnt shy away from trying new food products.
2.
More Nuclear families: usually working couple => less cooking time + expensive maids=need
ready to eat / ready to cook food.
3.
Rising incomes, middle class and rich families=can afford processed food.
4.
5.
Growing migration from rural to urban India + rising income = demand for bread, butter etc.
6.
Media penetration, advertisements=> demand is created for health-drinks, noodles, creambiscuits, cornflakes etc.
7.
8.
Diabetes, obesity, Blood pressure, lifestyle diseases =>demand for healthy food.
year
turnover USD
2015
>250 billion
2020
>300 billion
Government Initiatives
Many food processing sectors that were earlier reserved for small scale industries (SSI) have
been de-reserved
FDI limits have been relaxed, Excise duties have been reduced, export subsidies given
and so on (^all these elaborated in later articles.) Together they facilitate the expansion of food
processing industry in India. More scope points, specific to individual sector (i.e. Dairy, meat, fish
etc) later articles.
so far everything sounds hunky dory but if our food processing industry was so awesome, then UPSC
wouldnt have included it in the syllabus. Then, what are the.
Obstacles to food processing?
country
India
barely 6-7
China
>20
USA
>60
1.
When you purchase raw material in large bulk, you negotiate/bargain with supplier.
2.
Fixed cost remains same (building rent, cost of lights, initial cost of buying machinery etc.)
e.g. you bought a ice cream machine for 10 lakh- whether you make 100 liters ice cream or
1000 liters ice-cream per day- its upto you but the more ice cream you produce, the average
unit cost decreases. (think of 100/5 vs. 100/50)= hence bigger the plant, cheaper to produce.
Most of Indian food processing units/companies/enterprises/factories are small sized meaning = poor
economies of scale. It leads to following problems:
Aspect
Pricing
Since unit production cost is high, he cant sell his products cheap unlike a big MNC, and Indian
consumers are price sensitive.
BrandBuilding
Small players=small profit, seasonal business. In global market they cant establish themselves as a
long-term player they only do opportunistic businesses, undercut each other.
Low
Technology
Marketing
Cant invest in R&D to develop new products (e.g. chilli chewing gum or tomato cream
biscuit!)
but on the other hand, an Indian Halwai (sweet maker) cant do same level of marketing in
USA to create demand for jalebi or peda.
Un-Export
Quality
retailing
Instead small company relies on multiple small supplier hence Raw material=non-uniform in
quality.
Then their products are rejected in US/EU market for not meeting the Codex/HACCP
standards. (e.g. mango juice rejected for stone weevil, buffalo meat rejected for food-nmouth disease, fish rejected for heavy metal contamination and so on.)
Cant do forward linkage e.g opening its own factory retail outlet like Nike, Adidas or Apple
=> small company has to rely on third party retailers and need to give them margin from
sales= profit decrease and poor economies of scale continues.
1.
For long, many food processing items were reserved for Small scale industries only.
2.
High input costs due to multiple taxes, middle men. Profit level is low=cant expand.
3.
Government schemes, subsidies, grants have low-ceilings =Individual person cant setup big
plants
4.
5.
Bigger the plant, bigger the headache in terms of tax-liabilities. Creative Indian entrepreneurs
rather setup multiple small plants to get subsidies/tax benefits of MSME-industries, and sell
unbranded food products.
Price Sensitivity
Indian public=Low per capita income = higher price sensitivity and higher income
elasticity in relation to food expenditure.
Preference For
Fresh Food
truckload of agri-problem. Well see the individual problems in later articles. for
the overview:
Agri Problems
Supply Chain
Problems
Logistics
high cost of raw material (driven by low productivity and poor agronomic
practices)
Taxes on processed food in India are among the highest in the world.
Multiple and complicated tax regimes have rendered the food industry
uncompetitive
While the various acts are necessary, court cases turn out to be
expensive for small-entrepreneurs- especially if involved in inter-state
trade.
Infrastructure
Finance
Taxation
Schemes
Laws
Market
Information
Manpower
Packaging
Very few universities offer special courses for food processing and
entrepreneurship.
Potato Chips
20%
Fruit Juice
19%
Jam
12%
Chicken Nuggets
8%
Branded Atta
6%
type
post-harvest % loss
cereal
wheat
pulses
blackgram
oilseed
groundnut
10
fruits
guava
18
veggies
tomato
12
spices
turmeric
marine
inland-fish
1.
2.
But both of them have cold-storage facilities, hence they sell l both dry and wet/fresh food products
dry
fresh
But in India, kirana stores dont have cold storage facilities=> they only sell dry food products.
and fresh produce is sold through vendors with push-carts=>wastage because they dont
have cold storage.
Meat, poultry and marine products are primarily sold in separate markets but they too dont
have cold storage=>wastage.
1.
4.
2.
5.
3.
6.
The number of laboratories in the country is insufficient. Most of these laboratories lack worldclass facilities and infrastructure. Equipment, Testing manuals outdated
2.
Many laboratories are not equipped with basic facilities such as for testing antibiotic residues,
heavy metal contamination and other toxic contaminants in the food items.
3.
Very slow response time of Government controlled food laboratories is long, extending to upto
5 years.
4.
Most laboratories at sea ports are not fully equipped to handle testing of imported products,
organic foods, residual radioactive matter, new toxins and allergens, textural analysis,
residues of veterinary drugs, enzymes and hormones etc. these tests are necessary for
complying with Codex, HACCP , GMP , GHP etc before exporting to in US/EU markets.
Lack of Skilled Manpower
Research Technicians
Food Engineers
Technical Representatives
Food Microbiologists
Problems
But right now, every year, barely ~5000 graduates and postgraduates
pass out from in different disciplines of Food science and technology.
Engineering curriculum does not equip graduate engineers with the skill
of designing cold chain infrastructures. Fresh graduates find it difficult
to make heat load calculation and configure the plant & machineries in
energy-efficient manner.
Lack Of Men
Lack Of Courses
Outdated
Syllabus And
Professors
Inspectors
Engineering
Lack of R&D
1.
Sarkari Domain
2.
3.
4.
Baba Adams
Mindset
Manpower
Implementation
5.
There is a huge opportunity for developing and commercializing desi foods for export e.g.
ethnic beverages such as kokum, coconut water and ethnic food such as khakra, amla
preserve etc. But, to make them appealing to foreign consumers, R&D required for product
development, food-texture, rheology, mouth-feel, smell, color, packaging etc.
5.
area
processing
packaging
Packaging films that offer optimal barrier properties to extend shelf life.
Transport capacity
India
developed countries
16 tonnes
36 tonnes (USA)
Indian national highways account for only 2% of the total road network but carry 40% of all
cargo.
This puts a high pressure on the highways due to the high traffic volumes => delays in transit
+ damage to perishable products
Though highways are well-spread, theyre yet to connect all 550,000+ villages in India
Railway
problems
Ports
Environmental and social hurdles in land acquisition= hard to get setup new
port / expand the existing port.
Although India is the second largest producer of food in the world but its share in worlds exports is
very low despite its inherent strength in tea, spices and rice. Why?
As a result input cost =high, hence pricewise, we cannot compete with other
exporters.
Our processing has largely remained in primary forms like pickling, sun
drying and/or making preserves. Sometimes we just export intermediate
product to second country theyll further process it and sell to third country
@even higher price. (e.g our shrimps to Japan, Japan selling them to US)
Often our products rejected from US/EU markets for not meeting Codex,
HACCP quality standards
transport
Poor cargo facilities at airports and ports are other bottlenecks discussed
earlier
Packaging
Dumping
expensive
Raw Material
low
processing
low quality
Branding
Devaluating
^these are just few of the many problems/obstacles faced by Indian food industry. In the next article,
we see various government schemes related to post-harvest management, food processing industries
and agro-export.
Mega Food parks, Agri-Export Zones(AEZ), Cold Chains and truckload of government
schemes
Problems with government schemes
1.
Agriculture is a State subject. No scheme can be successful without coherence between the
Centre and States in policies and strategies. But we have plethora of bodies and departments
@center and state level=empires within empires. Even Left hand doesnt know what right
hand is doing. Problem is compounded when ruling parties are different at state and center
level.
2.
Most schemes have Low ceiling (they just give a few lakh rupees) + as plant size increases,
the MSME tax benefits decrease. So, food-entrepreneur setups two small plants using money
two schemes, rather than one big plant. Smaller the plant=>poor economies of scale=>high
production cost, cant invest in marketing-research, innovation, export quality products.
3.
These Subsidies/grants are back-ended (meaning ca$H is not given before you start the
project, but only after the project is completed or in final stage)
4.
But Parameters of project approval/ file-Processing= non-transparent (just like our UPSC).
Timely clearance of project files=nope. Sometimes they dont even give reasons for rejecting
project. Food-Entrepreneur is unsure whether bureaucrats will approve his file or not (+bribe
demand)
5.
Significant time lags from the date of application for financial assistance, to release of funds=
affects the project schedule= cost overruns for the investor.
6.
Most schemes seek to get investors to pump money in certain infrastructure without providing
the necessary support for the utilization of the infrastructure. (e.g. asking pvt player to setup
cold storage, without guaranteeing continuous electricity supply).
7.
8.
Inputs of Panchayati raj institution, cottage industries, local entrepreneurs are considered
irrelevant in scheme design.
9.
Lack of focus/financing for freezer cabinets in retail outlets/kirana stores, vending machines
for tea/coffee/beverages.
10. Working capital requirements are high for food processing industry (thanks so many
intermediaries, electricity, high duties on imported chemicals etc.) But these schemes only
give money for initial project/machines. Dont provide support for working capital (i.e. cost of
day to day operations, buying raw material, electricity-utility bills etc.)
Solution: Integrate all schemes offered by various Ministries and allied agencies.
After years of stupidity and badass thuggary, finally they woke up during 12th Five year plan drafting.
Now theyre converging various schemes of Horticulture board, Agriculture ministry, Food processing
ministry and Commerce ministry under the National Mission on food processing. ok, better late than
never but even small time players like Thailand and Vietnam have reformed before we did. So theyre
already ahead in the race of capturing export market. Anyways, lets check various plans, missions,
schemes.
12th FYP: food processing
Starting with some (stupid) numbers:
work
Horticulture development
more than 15000 cr. (in 11th FYP this was barely 4000
crores)
food processing
1.
Develop the food processing sector to reduce food inflation and food
wastage
2.
Create 1 million additional jobs during the Twelfth plan period in the food
processing sector
3.
4.
5.
6.
7.
8.
overall
Schemes
Finance
Fancy
Things
Export
9.
a.
b.
Side note: The new Mains syllabus contains Ministries and Departments of the Government so, in
that context, while were doing the food processing, better prepare this ministrys functions as well:
Functions of MoFPI
1.
2.
R&D in food processing, Specialized packaging for food processing industries, Technical
assistance and advice to food processing industry
3.
4.
5.
6.
Bread, oilseeds, meals (edible), breakfast foods, biscuits, confectionery, other ready
to eat food products
Alcoholic drinks, beer, Aerated waters / soft drinks and other processed foods
MoFPI is responsible to 2 fancy missions +3 (bogus) schemes & given ~700 crores in 2013s budget.
2 fancy missions
3 schemes
1.
1.
2.
2.
3.
adopted In 2005
What?
targets by 2015
20%
35
3%
investment
This vision2015 document was prepared by Rabo India Finance ltd. It talks about individual sectors
(dairy, meat, tea, coffee etc.) Well see those points later during articles on individual sector.
National Mission on Food Processing (NMFP)
for decentralized implementation of various schemes under Ministry of Food processing with
help of state governments.
Contribution ratio:
Centre
state
North East
90
10
75
25
Will do following:
1.
2.
3.
Help state governments to create synergy between their agricultural plans vs. food processing
sector.
4.
5.
6.
Skill development, training and entrepreneurship for both post-harvest management and food
processing industry.
7.
8.
Help food processing industry to meet quality /food safety standards for both desi and foreign
markets.
1.
2.
3.
4.
Modernization of Abattoirs
5.
6.
7.
Promotional Activities
8.
function
composition
Chairman: Sharad Pawar, the b0$$ of both Agri and Food processing
ministries.
Industry associations
^this is ~200 words. From UPSC point of view, the Aukaat of NMFP is not beyond 15 marks questions
on salient features. Hence not covering any further. Moving to the three schemes
#1: Mega Food Parks:
Mega food parks will be setup in 12th Five year plan. Government allotted more than 1700 crores for
it.
First, a Special Purpose Vehicle (SPV) will be created to setup the Mega Food Park.
So, What is this special purpose vehicle, does it look like Tata Sumo or Tata safari? Long
thing cut short: youre aware of debt vs equity. SPV = a limited company setup with money
from farmers associations, private players, financial institutions, state level agencies etc.
(meaning theyre are equity holders)
Then Government will give them grant to cover **% of project cost. Thus Food Park is setup
and everyone benefits.
Area
General
50
75
Core Infrastructure
Facilities
Non-Core Facilities
Common Facilities
Basic Infrastructure
Services
training centres,
irradiation facilities
road-road connectivity
electricity, telecom-internet
parking bays
Mega food parks are based on the hub and spoke model. So what is this Hub and Spoke model?
Imagine a bicycle wheel: it has a strong central hub with a series of connecting spokes. Thus we have
Multiple Primary Processing Centres (PPC) that supply raw material to the hub
Three Tiers:
SHG
Field collection
Center
Primary
Processing
Center (PPC)
What?
^ Similar concept for eggs and milk. click the following diagram and concept will become clear:
Here, each tier is viable, independent and linked with higher players in the market.
This way thousands of farmers directly connected to food industries located in the Mega food
park, without any commission agents= Small, marginal, poor farmers will get more money.
Location Factors: Bhagalpur and Chittor
Details
Central
Processing
Center (CPC)
Primary
Processing
Centers
(PPC)
1.
Nuzvid,
2.
Tirupati,
3.
Madanapalle
1.
Purnea
2.
Katihar
3.
Khagaria
4.
Samastipur
4.
Mogilli
1.
2.
Location
Advantages
3.
4.
Sidenotes
5.
Banka
1.
2.
3.
will benefit 6000 farmers / producers directly and 25000-30000 farmers indirectly.
2.
3.
rural-urban migration,
unplanned urbanization,
4.
5.
6.
will provide efficient supply chain management from farm gate to retail outlet.
7.
8.
farmers can utilize the Cold Storages, Ripening Chambers, and Ware houses = less wastage,
no distress sales
9.
10. Food entrepreneur can establish backward linkages (with farmers) and forward linkage (with
retailers) = compact supply chain=more profits.
#2: Cold Chain infra
Full name of scheme: Establishment of Cold Chain, Value addition and Preservation
Infrastructure
Looks like FoodPRO ministry doesnt have any intelligent babu to comeup with a fancy name/
abbreviation for this scheme. Atleast they could have named it after you know who. But alas $harad
Pawar is the b0$$ of Foodpro ministry, perhaps thats why schemes are not allowed to be named
after you know who.
Anyways what does this cold storage scheme do?
Helps creating integrated cold chain and preservation infrastructure facilities without any break from
farm to consumer. Under this scheme, following facilities created:
1.
Minimal processing centre at the farm gate level having facilities like weighing, sorting,
grading, pre-cooling, cold storage and normal storage facilities;
2.
3.
Distribution hubs having facilities such as multi-purpose cold stores, variable humidity stores,
blast freezing etc.
4.
Financial assistance
Area
General
50
75
1.
build-own-operate (BOO)
2.
build-operate-transfer (BOT)
3.
Features:
1.
2.
3.
4.
5.
6.
Financial assistance
area
General
50
75
1.
Dimapur (Nagaland)
6.
Patna (Bihar)
2.
7.
Ahmednagar (Maharashtra)
3.
Ranchi (Jharkhand)
8.
4.
9.
5.
So, these three were the main schemes of Food processing ministry.
1.
2.
3.
slaughterhouse modernization.
Now lets look @some chillar schemes of this MoFPI (Ministry of food processing industries)
MoFPI: Misc. Schemes
North
East
#1 Institutes
MoFPI has two institutes to offer B.Tech, M.Tech, Ph.D level programs in food processing
HRD
1.
2.
1.
all recognized universities- public / private can get funding upto 75 lakhs for
starting food processing related courses, buying books, e-journals, magazines,
teaching infrastructure etc.
2.
Quality
To export in developed countries, your food processing plant would require HACCP,
GMP, GHP certificates. Ministry gives financial assistance for it.
testing
labs
Enough of Food processing Ministry. Lets look at the schemes by other departments/ministries.
(Here, Im only focusing on schemes related to post-harvest management, storage, food processing
and Agro-export, otherwise there are dozens of schemes related to agriculture, public procurements
etc. but theyre ignored here.) First the food grains
National Policy on Handling and Storage of Foodgrains
Launched in 2000.
1.
2.
Declaration of foodgrains storage as infrastructure (meaning it can get various tax benefits
for investment)
3.
Encourage mechanical harvesting, cleaning and drying at farm and market level
4.
5.
6.
7.
a.
b.
create infrastructure for the integrated bulk handling, storage and transportation of
foodgrains
PEG scheme
In recent times, Government has increased the Minimum Support Price (MSP) for wheat and
rice. Result? high procurement but FCIs storage capacity =limited=rotten grains.
Government
FCI
meaning FCI will hire that private godown to store public-procured food grain
and pay for service
FCI reforms
1.
Dunnage materials: wooden crates, bamboo mats, polythene sheets to prevent moisture
from floor to the foodgrains.
2.
3.
4.
The principle of First in First Out (FIFO) to avoid longer storage of foodgrains in godowns.
5.
a.
b.
1.
2.
3.
Provide pledge finance and marketing credit to farmers, so they dont have to distress sale
immediately after harvest.
National Horticulture Mission (NHM)
Provides funding for various activities (R&D, nurseries etc) including funds for post-harvest
management, supply chain infrastructure, cold storages.
Terminal market complexes (TMC)
These Terminal market complexes will establish forward linkages with wholesalers,
distribution centres, retail cash and carry stores, processing units and exporters.
1.
3.
2.
4.
Sambalpur (Odisha)
Commercial Horti
but In short, they give subsidy for setting pack house, pre-cooling unit,
cold storage, controlled atmosphere (CA) storage, refer transport,
ripening chambers etc.
More subsidy is given for North East, Hill states and scheduled areas.
Tech Dvlp
1.
2.
3.
4.
Technology Awareness
5.
Organising/participation in seminars/symposia/exhibitions
6.
7.
8.
9.
market
information
1.
2.
3.
4.
Horticulture
Promotion
Service
1.
2.
3.
4.
5.
Develop short term and long term strategies for systematic development
of horticulture,
6.
7.
8.
9.
1.
2.
3.
4.
establish standards and protocols related to cold chain testing, verification, certification and
accreditation as per international standards
5.
6.
1.
2.
3.
4.
5.
6.
7.
To create general awareness and provide education and training to farmers, entrepreneurs
and market functionaries.
Agmarknet
Prices
Movement
information on the type of goods that have arrived across the various wholesale
markets Commodity
Farmers Advisory
Weather
All India weather conditions and weather forecasts and their impact on
the agri-production levels
Commodity
Exchange
Research
higher institutes for agricultural research, international agencies like the Food
and Agriculture Organization
ok so far we saw the schemes associated with Agro+Horti+Marketing. Now moving to Dairy
Dairy Schemes
By Department of Animal Husbandry, Dairying & Fisheries
They run following schemes:
1.
install Bulk Milk Coolers at village level close to the area of milk production
2.
Scheme (IDDS)
Dairy Entrepreneurship
Development Scheme (DEDS)
Scheme will run in 14 states Uttar Pradesh, Punjab, Haryana, Gujarat, Rajasthan, Madhya
Pradesh, Bihar, West Bengal, Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh, Orissa
and Kerala.
^These states collectively account for over 90% of countrys milk production.
1.
Breed improvement + animal nutrition=> increase milk production, reduce methane emission.
2.
Strengthen of village based milk procurement system= Rural milk producers to get greater
access to the organized dairy sector.
3.
Funding pattern
ca$h comes
from
to
1.
2.
ultimately to
State Government
^Exactly 159 words. Again aukaat of National dairy plan cannot be beyond 12-15 marks from UPSC
point of view, hence not going into further details. Besides, well look more into Dairy sector in
separate article later. Time to move on to Agro-Export related schemes
Agri Export zones (AEZ)
2.
Villagers and field officers are unaware about the scheme and its conceptual framework
3.
4.
5.
The investment made by central and state government have not materialized into real-useful
assets on the ground.
6.
Indiscreet proliferation of AEZs in certain states. WB, Maharashtra have multiple Agro export
zones while Odisha barely got one AEZ and that too in 2013= More than a decade after the
scheme was launched in 2001!
Export credit schemes
1.
Focus Product
Scheme (FPS)
2.
3.
duty credit for exports to countries NOT included in above FMS list
e.g. Thailand, Taiwan and the Czech Republic. (ok then when next:
another scheme for countries not included in MLFPS list?)
duty credit for exporting following
1.
4.
Vishesh Krishi
2.
5.
3.
4.
5.
You exported xyz worth Rs.100 then Director General of Foreign trade will give you a scrip
(piece of paper) worth Rs. 2 to 5 (or whatever % credit is decided in the scheme)
When you import capital goods, youve to pay custom duty. But you can use these credit scrip
to pay for that custom duty.
Another doubt: Why does or why should government give duty credit?
Ans. Because other (stupid) schemes have failed to improve the rural infrastructure, hence it is
difficult to transport/market these products from India to abroad. Therefore duty credit is given to
offset infrastructure inefficiencies and other associated costs involved in marketing of these products.
Misc. Bodies
List is not exhaustive (and that is the criticism: too many bodies=lack of coordination.)
Export related
APEDA
MFEDA
bears the cost for doing analysis of peanuts, grapes for meeting HACCP/Codex
standards.
For inspection- certification for marine, milk, meat, poultry, marine and egg
products, and honey for export units.
EIC
Boards
Coffee
Board
Spices
Board
Tea Board
R&D, HRD
Under Ministry of Food processing Industries (if tea, coffee and spices
boards were setup under Commerce ministry then why did they setup
grapes board under Food processing ministry? Ans. so they can
confuse aspirants to ask a stupid MCQ in some exam.)
Grapes
Nddb
Meat + Poultry
Statutory body
Deemed to be University
ICAR
CFTRI
Crop
processing
NIFTEM
Nutrition
Horticulture
research
Developing world class managerial talent with advanced know how in food
science and technology.
Next article, we see the nuisance of middlemen, APMC Acts, direct cooperative markets (Rythu bazar
etc).
Nuisance of APMC Acts, Commission Agents; Marketing of agricultural produce: issues and
constrains for GS Mains
APMC Acts: What and Why?
In news columns, and TV Debates surrounding food inflation and FDI in multibrand retail, youve
often heard experts talking about APMC acts. So, what are these APMC Acts and how did they led to
proliferation/nuisance of middlemen/intermediaries in food supply chain?
In old Bollywood villages, there is always one Lala / Muneem type character. He lends money
to farmers for seeds/cattle/marriage expenses, then arbitrarily purchases his wheat/rice
@throwaway prices + compound interest rate + illiteracy =>farmers in perpetual debt.
To fix above problem, State governments started enacting Agricultural Produce Market
Committee (APMC) acts since 50s.
1.
Ensure that intermediaries (and money lenders) do not compel farmers to sell their produce at
the farm gate @throwaway prices=farmer is not exploited
2.
All food produce should first be brought to the market yard=> sell through auction=farmers
gets good money.
A State is geographically divided and Market (Mandis) are established at different places
within the states.
Wholesale, retail traders (e.g. shopping mall owner) or food processing company etc cannot
buy farm output directly from farmer. Theyve to get it through the Mandi.
Old APMC Acts: Problems?
Membership
1.
2.
Farmers
Cheated
Double
Commission
Resistance To
Reform
1.
during peak season, when they buy from farmer @low prices, they dont
drastically reduce the prices to final consumer.
2.
during lean season, when consumers prices are high, the farmers do not
get higher returns on their produce.
Even when electronic auction centres were established like the Safal
National Exchange in Bangalore, the existing markets did not allow the
transition to a transparent system.
No Value
Addition
Price
Discovery
No auction
Cess
The licensee traders and commission agents have formed informal cartels
@mandis. No auction takes place. Even if auction is held, collectively
these traders keep low bidding so farmer never benefits.
As a result, fruits and veggies often get rotten due to lack of processing,
storage facilities at the Mandi. Even the good produce gets contaminated
due to flies and larvae=>gastrointestinal diseases.
License raj=Lootera-raj
To operate in an APMC Market (Mandi), you need to get a license. This license raj leads to following
problems:
1.
In most Mandis, the pre-condition to get license=> you must own a shop or warehouse in the
Mandi. But Shops / warehouses are limited n number= extremely high prices.
2.
If you cant find a shop/warehouse, then youll have to find an old man who has license but
leaving business due to age/health problems and his sons not keen to join this profession.
Then you buy his shop/license @extremely high price (because there will be other buyers too
outbidding each other to buy his license!)
3.
Because 1+2+3=> Commission agent/middleman/trader has to make heavy investment to start his
business in APMC. So, he decides to exploit the farmers to recover that big investment.
In Mandi, even weighmen, Paddlers, Hamals have to get license => they also need to pay huge
bribes=> they also overcharge the farmers to recover their (bribe) investment.
Hoarding
Over the years, Indias Agro-production has increased but number of intermediaries in APMC
remained constant= their cartel controls the supply= hoarding, opportunistic profiteering. But how?
Lets understand that with potato example:
December to March
Potato demand
Big traders, agents: they buy potatoes from farmers @throwaway prices in the Mandi.
They rent large cold storage houses across different states for storing potatos only. (Majority
of cold storage facilities in Uttar Pradesh and West Bengal only devoted to Potato-storage)
Thus these traders control the potato supply across India. And whoever can control the
supply, can control the prices.
Thanks to this hoarding and cartelism=> in peak and lean season of potato, youll find price
difference up to 150 per cent or even more. Similar case for onions, tomatoes, daal and
everything else.
APMC Definition vs MSP
Although main focus was on cereals, pulses and oil-seeds, even horticulture produce (fruits
and veggies) also came within the broad definition of agriculture.
And over the last five decades, the share of perishable produce in the APMC market is
increasing For example, the Azadpur Mandi in Delhi principally caters to perishable crops
rather than cereal or oilseeds.
Problem= government declares minimum support prices (MSP) for many cereal, pulses and
oilseeds crops=> middleman @APMC cannot exploit the farmers beyond a level (otherwise
he can sell it to the FCI)
but for fruits and veggies, government doesnt declare minimum support prices (MSP)=>
gives plenty of opportunity for the middleman to exploit farmer (as well as end consumer).
Model APMC Act
So far we saw that original APMC Acts enacted by various states=bogus, inefficient, useless,
ridiculous.
2003
After years of badass thuggary and inefficiency, suddenly Union agriculture ministry woke up,
drafted a new Model APMC act, and asked the State governments to adopt it. (Why? Because
Agriculture is a state subject. So it is upto the States to reform their laws..)
2006
2012
So far only 16 states have adopted the model APMC act. (as per the reply given by $harad
Pawar in Loksabha)
lolz
lolz
commission agents
permitted.
lolz
2.
3.
4.
5.
maha-lolz
Ok this new Model APMC act sounds all well and good. But here are the problems
Model APMC Act: Limitations/Problems
1.
So far, Only 16 states adopted the Model APMC Act (as of 2012). Why? Because Middleman/
trader lobby made truckload of cash from exploiting farmers and consumers. Part of that
money given in election funding to ruling parties in States=>reforms stalled.
2.
Model APMC act is not uniformly adopted, states have made their own modifications. For
example
Andhra
Andhra Pradesh permitted private markets but theyve to pay a license fee of
Rs 50,000 and project must be min.10 crores =discourages small farmer/trader
associations from setting up their own private markets.
Odisha
Haryana
Some states
Even the private markets are subjected to Mandi tax and Mandi cess.
commission
agent
Madhya Pradesh abolished commission agent system but some other states didnt
adopt this provision of model APMC.
Bihar
WB
No market fee are charged from the farmers But other charges for loading/
unloading/Hamal charges are vogue/uncontrolled.
E-Auction
Membership
The APMC Market Committee should only fix the transaction fee and keep
a Bank Guarantee from traders to ensure that the farmers payment is not
affected.
Remove
horticulture
No License
No Cess/Tax
Contract farming
Contract farming is a forward agreement between farmers and buyers
buyer
farmer
Agrees to grow and supply the produce to the buyer @ predetermined quality,
quantity and prices.
Contract farming is prevalent only in those states, where the APMC acts are favorable for private
player e.g. Andhra Pradesh, Himachal Pradesh, Madhya Pradesh, Maharashtra who adopted the
model APMC Act.
Farm produce
Buyer company
Potato, Tomato,
Chilli
6000
Basmati, Maize
400
Mahindra Shubhlabh
Soyabean
1200
ITC
Karnataka
Ashwagandha
700
Himalaya Healthcare
Madhya
Pradesh
Wheat
15,000
Hindustan Unilever
State
Punjab
Contract Farming also done for export oriented cropping of Basmati, Chilli, Gherkins and soybean.
Below APMC-Mandi market
Below the Mandi markets, there are primary assembly markets such as village-bazaar,
weekly haat in tribal areas etc.
There is wide variation in their governance. Some states run them under Panchayati Raj
institutions, some states put them under supervision of district administration.
Condition of cattle markets and fish markets are even worse. Most of them do not have even
basic amenities like sheds, sanitation or drinking water.
Long before the circulation of Model Act (2003), several States had promoted Farmers Market.
Example
Rythu Bazar
By Andhra government in 99
to eliminate middlemen
Current scenario:
>100
villages covered
>2000
farmers covered
>40000
Apni Mandi
Rajasthan
Kisan Mandi
Tamil Nadu
Uzhavar Shanthigal
Maharashtra
Shetkari bazaar
Problem: Over the years, small traders have taken over the place of farmers in many of these
markets= again problem of middlemen and commission agents.
In South Korea, with direct marketing of agricultural products= middlemen were removed and as a
result:
upto 30%
upto 20%
Virtual Markets
Example of such virtual markets= Future exchange, Spot Exchange, Warehouse Receipt
System and Web Marketing.
In India, the Multi Commodity Exchange (MCX) and the National Commodity Derivatives
Exchange (NCDEX) are the two biggest players in the agro-futures market.
NCDEX
MCX
Farmer will first deposit his produce to a NCDEX nominated warehouse, gets
receipt.
This receipt can be traded by the participant on the e-mandi across the country.
MCX online portal for commodity trading also available in regional languages to
help non-English speaking farmers.
an allied topic is negotiable warehouse receipts, but well see it in the next article under financetaxation-FDI-exports.
ITC e-Choupal
In 2001, ITC (India Tobacco Company Limited) started small internet kiosks at the village level.
Provides following:
1.
2.
3.
4.
5.
6.
Coverage
more than
farmers
4 million
villages
40,000
kiosks
6000
Thanks to ITCs e-Choupal, farmers income increased by 10-15% (compared to earlier when they
relied on middlemen @mandi)
Anyways well see more about these intermediate market, supply chains in individual articles for fruitveggies etc. Now moving to the next law topic
Single Food Regulator
USA
UK
Food standard agency (FSA) is the single authority for formulating all food laws.
Aus+NZ
Australia and New Zealand have a common single regulator known as Food
Standards Australia New Zealand (FSANZ)
Totally awesome: just check the list of overlapping and outdated laws
India
1.
2.
3.
Vegetable oils, De-oiled meal and edible flour control order, 1967 ( VPO)
4.
5.
6.
7.
8.
9.
Many ministries deal with food laws = multiple bodies which set food standards = ambiguity,
confusion for consumers, traders and manufacturers.
2.
3.
They dealt only with physical parameters of size, colour and farm impurities. But not on
microbiological and toxicological characteristics (which are necessary for export to US/EU).
4.
Food laws are often inconsistent and contradicting each other. e.g. Emulsifiers and
Stabilisers are permitted for use in Jams, Marmalade & Fruit Chutney under PFA but not
under FPO.
5.
In many cases, where one standard is more stringent than the other. Then food-entrepreneur
would adopt the more stringent standard in order to prevent potential penalization and bribe
harassment by food inspectors. For example, FPO allows use of artificial sweeteners in
certain fruit products whereas PFA does not. Hence, the industry avoids using artificial
sweeteners altogether.
FSSAI Act 2006: Features
Established a statutory body The Food Safety and Standards Authority of India (FSSAI)
@Delhi Under the Administrative control of Ministry of Health & Family Welfare
Various Orders by Central Ministries e.g. Fruit Product Order (FPO), Meat Food
Products Order. Milk and Milk Products Order, Vegetable oil, Edible flour Order etc.
Advisory
Survey
Provide them rapid, reliable and objective information about food safety
Guidelines
Networking
HRD
In the next article, we see the finance-taxation-FDI-export matters related to food processing industry.
Then well dig into Supply chain management, upstream-downstream requirements for individual
sectors: dairy, confectionary, fruit-veggies meat-fish, etc.
Export, Dumping, FDI, Finance, Taxation, Budget Provisions, CODEX, NWR, BRGF, RKVY
Agriculture Export
World Trade Organization (WTO) aims to improve international-trade by reducing the tariff and nontariff barriers. Lets refresh the concept:
Tariff Barrier
Taxation tools that affect import / export: Examples
1.
In the Colonization-era, British had imposed heavy taxes on Indian textile coming to London,
in order to protect their local industries from competition.
2.
Before the LPG reforms of 1991, India too had imposed heavy taxes on most of the imported
items: be it wristwatches, goggles, cars or radios.
3.
Aug 2013, Union Government increased the import duty on gold to 8 per cent to reduce
the gold consumption (and to provide sustainable livelihood to desi-smugglers who
were not given 100 days in work under MNREGA.)
Dumping
When businessmen export goods at a price that is less than the price charged in the domestic
market- its called dumping.
USA has imposed a countervailing duty (~6%) on Indian frozen shrimps, because Indian
shrimp gets plenty of subsidies from Indian government for shrimp farming and export and
hence Indians are able to dump shrimps to USA and hurt USAs local shrimp businessmen.
(or atleast thats what America claims).
Anyways, Indian shrimps are not the only items subjected to anti-dumping duty in USA.
Shrimps
from
Thailand
government buys shrimp from farmers and sells it to processors at low price
China
government gave finance to build the worlds largest shrimp-processing and export
plant
Malaysia
Country
China
1.
2.
Optical fiber imports from India after allegations from the local Chinese
industry that they were being sold at artificially low prices.
Thailand
Indian steel
Indonesia
1.
Weve slapped anti-dumping duty on steel wheels imported from China used in commercial
vehicles.
2.
Under probe: US, China, Malaysia and Taiwan: Because Theyre exporting solar equipment
to India at ridiculously low prices and was bleeding the desi industry. Similar issue with
glassmakers and electric cable manufacturers from those countries.
Non-Tariff Barrier
Non-tariff barriers affect import/export, without using taxation tools. For example
Quantitative restrictions
Under Gold control Acts of 1960s, An Indian Gold Smith was not
allowed to possess a stock of more than 300 gms of primary gold at any
time.
Import prohibitions
Import licensing
When Murthy started Infosys, he had to make 50 trips to Delhi for three
years just to get a license to import computers.
Export Subsidies
Labour/Environment
standards
e.g. some developed country banning import from third world country
saying child labour was used etc.
Health Standards
In WTO system => Sanitary and Phytosanitary measures (SPS Agreement) a country can
impose ban on imported food products, if they do not meet the Codex standards. (=meaning
this type of non-tariff barrier is permitted in WTO).
and as you can guess, Indian food products get banned/restricted in developed countries for
not meeting those quality standards
This is a two-way street though, India also banned import of American Chicken to prevent
Avian influenza among Indian poultry. (Although USA has dragged India to WTO saying India
has not provided any scientific evidence in line with international standards to justify this ban.)
Anyways, here are some of the Indian food export, there were banned in US/EU/China/Japan
in past.
1.
Groundnut
2.
Mangos
3.
4.
Indian Shrimp
5.
Fish
6.
poultry
Adding insult to the injury, once the ban is imposed and IF we want to get the ban revoked, then
Weve to invite their food inspectors/specialists to India, let them check our premises
Weve to bear all the cost of their accommodation, travel expenses etc.
=expensive game, small Indian players/companies cant survive in the international food business.
HACCP
For preventing microbiological, chemical and physical contamination along the food supply
chain.
So, if you want to safely export food products to US/EU, then first you need to get certificate
that your plant meets the HACCP standards. (certificate system similar to ISO standards)
It doesnt mean we havent anything. Here are some of the steps taken:
for inspection- certification for marine, milk, meat, poultry, marine and egg
products, and honey for export units.
2.
3.
EIC certificate is recognized in European Commission (EC) for marine products and
basmati rice and by the US for black pepper.
APEDA
BIS
collaboration
Bears the cost for doing analysis of peanuts, grapes for meeting HACCP/
Codex standards.
has adopted the CODEX, hazard analysis and critical control point (HACCP)
and food hygiene standards
Were collaborating with USA, UK, Netherlands, Switzerland and Germany for Agritechnology transfer, financial and marketing tieup and quality control.
MoFPI
Additional Suggestions
Negotiation
Foreign
Offices
Certification
Government needs to expedite the negotiations with US, EU, China and Japan, to lift
restrictions on Indian fruit/food/marine exports into these countries.
APEDA already supports the cost of quality certification programs such as HACCP
and Eurepgap for grapes and peanuts. More food-items should be included in this
scheme.
Food Safety and Standards Authority of India. We already saw its salient
features in previous article,click me
Desi Labs
Zoning
Sample Cost
Food exporters to US/EU are first required to their samples to the importing
country to get trade-approval. Government should provide financial
assistance to small/medium exporters for this.
Fssai
1.
Seeds
Livestock
a.
b.
2.
If seeds are imported then have to comply with National Seeds Policy
1.
2.
3.
Aquariums
4.
5.
Plantation
In Tea sector:
Note: Besides ^above, FDI is not allowed in any other agricultural sector/activity
In July 2013, Government changed FDI limits in 12 sectors, here is a fancy graphic courtesy of
Indiatoday
Foreign firms
1.
2.
Are eligible for grants, subsidies, benefits offered by various government schemes.
Our food industry got FDI >Rs.6000 crore in last three years (2009 to 12)
When talking about FDI in food processing, a doubt comes in mind: if foreign giants are
permitted in India, will there be no place for small players, will they be wiped out?
Fragmented
Demand vs
Economies of
Scale
Cottage and small units do well ^in such product segments because
of their local traditional knowledge.
Wheat flour has daily and universal demand in India. But most
Indians prefer to get wheat grains and get it milled in Local flour mills.
Cheapness
Pace of life
Thus, MNC-food Giant doesnt get automatic success is every region and every product. Small
players have their own opportunities in the food processing sector, while big / international players
have theirs.
FDI: Retail
E-commerce
Single-Brand Retail
IKEA
Furniture
Pavers England
British Footwear
Brooks Brothers
Damiani
Italian Jewelry
Promod
French Fashion
Le Creuset
Crockery
Decathlon
Sporting Goods
FDI: Multibrand Retail
Maha-clichd topic, you probably have read/heard/seen it dozen times already. Hence not going into
all details.
Country
India
100%
Multi-Brand Retail
As per the official FDI circular, State Governments/Union Territories would be free to take
their own decisions in regard to implementation of FDI in Multibrand Retail.
As of June 2013, Following states/UT permitted foreign giants to open multi-brand retail
outlets in their area.
1.
Andhra
2.
Assam
3.
Delhi
4.
Haryana
5.
HP
6.
JK
7.
Karnataka
8.
Maharashtra
9.
Manipur
10. Rajsthan
11. Uttarakhand
12. Diu-Daman-Nagar Haveli (UT)
(As of June 2013)
But How / Why is Multibrand-FDI relevant/important from food processing/agro point of view?
desi food players are mostly small scale = poor economies of scale = they
dont have the money to invest in backend infrastructure.
less Wastage
Better Income
These retail giants have deep pockets = large economies of scale = they
use direct purchase / contract farming to get the fruits-veggies. Thus
middleman eliminated=farmer gets more price.
Small Scale
Government made FDI condition that Retail giants need to buy part of
their goods from small scale industries.
employment
Foreign giants will tie up with a local player (e.g. Bharti, Tata etc)=Indian
managers/workers in those desi companies also learn new things
Later some of thm might setup their own firms utilizing the workexperience=Thus foreign business knowledge, technology trickles down
and benefits Indian economy.
Techknowledge
upgrades
No investors came forward, even after Government permitted 51 per cent foreign direct
investment in multi-brand retail (henceforth referred as Walmarts to save the typing
headache).
so recently government decided to relax the conditions to attract them (+to bring more dollars
to calm down the rupee fall)
Tight Conditions before
CITIES
MSME
example of backend
infrastructure=processing,
manufacturing, distribution, design
improvement, quality control,
packaging, logistics, storage, warehouse, agriculture market produce
infrastructure etc.
BACKEND
To run any type of business: be It farming or food processing= you arrange for finance. What are the
Sources of Finance?
Banks
NABARD
SIDBI
EXIM
NCDC
APEDA
Sharad Pawar
NHB
although Food processing sector forms very small part of its loan
portfolio
Agricultural ministry
MFPI
venture funds/angel
investors
But both farmers + food processing entrepreneur have trouble getting loans/financing. Why?
Why cant Farmer get loans easily?
Bank manager hates NPA in their branch. Because it affects his reputation and further career growth/
promotions. On the other hand.
shrewd
farmer
Im not going to repay the loan because I know that government will launch another
debt-waiver scheme just before election and my loan will be forgiven!
good
farmer
Why the hell should I pay the loan diligently while ^others can get away scot-free?
Even when banks give loan, agriculture is a risky business because of pests,
vagaries of monsoon=crop failure
Farmers need small loans e.g. 10-20-50,000 rupees. =>banks need to employ
a large staff to look after all the documents and processing work=>additional
salary burden= cost of giving loan increases.
Banks find it more lucrative to use the manpower in urban branches where
individuals need loan in larger amount (e.g 12-15 lakhs or more in each
homeloan)
If farmer mortgages his land to get loan, he has to pay stamp duty =additional
burden on the farmer.
Some states (Andhra, UP, TN, Gujarat, HP) have relaxed rules in this regard,
other state governments need to take similar steps.
NPA
Manpower
cost of
credit
Stamp duty
documents
many small-marginal farmers dont have documentary proofs for their land/
cattle ownership= problem while filling up the loans-application forms.
States
High
Southern
Medium
Low
Nearly three quarters of the farmer households still do not have access to the formal credit or
insurance system= have to rely on informal borrowing/credit from evil moneylender @very high
interest=always in debt.
Talking of insurance: three main agro-insurance schemes run by Agriculture Insurance Company
(AIC):
1.
2.
3.
National Agricultural
Insurance Scheme
(NAIS)
Coconut Palm
Insurance Scheme
(CPIS)
WE know that prices of potatoes, onions vary significantly between peak harvesting season
and lean season. The middlemen @APMC control this storage and supply and make a killing
business.
Then why dont farmers themselves store their produce for the lean season? Because a
farmer cannot afford to wait selling his potatoes for such long time in hope of getting better
money. He needs quick cash so he can buy seeds, fertilizer, pesticides for the next round of
cropping cycle. (and to settle the loans he took for the previous cycle)
He deposits this Warehouse receipt to bank, as a collateral and gets short-term loan for next
cropping.
The farmer can decide to sell his warehouse-produce when prices are favorable (during lean
season) and use it to settle the loan.
WDRA
Warehousing Development and Regulatory Authority.
Statutory body under Ministry of Consumer Affairs, Food & Public Distribution (2010). Main functions:
1.
2.
3.
1.
Bank faces lower risks because collateral for the loan is a liquid asset (agro-produce
recipient, backed by a central act).
2.
Previously, Small/marginal farmers couldnt easily get loans because they didnt have
conventional loan collateral (land, gold, cattle etc.) But now they can get it easily using Kisan
Credit Card +Negotiable warehouse receipt.
3.
Protects farmers against distress sale of their produce and exploitation by middlemen.
4.
5.
Reduces hoarding and food inflation (because farmers less cartelized than APMC
Middlemen.)
6.
Provides alternate employment opportunity for those APMC middlemen- they can form a
group, setup warehouse and get certificate from WDRA.
7.
Warehouse receipts are a proven tool for financing, already successful in Brazil, Indonesia,
Singapore and Argentina
1.
2.
3.
4.
Seasonality
Strength
Credit Rating
Excess
Capacity
5.
New
Tech=Risky
Therefore,
1.
2.
He will give loan but charge higher interest rate for the additional risk.
3.
He might give loan for the initial capital for buying plant, machinery, vehicle (for which
government provides grants/subsidies) but not for the working capital requirements.
1.
2.
3.
4.
5.
salaries of workers
6.
For Small sized food processing unit, the working capital requirement is quite high because high cost
of raw material, many middlemen= low profits. Result?
1.
Poor Economies of scale that we already saw in first article. (click me)
2.
3.
Dont have spare money for backward linkages with farmers. (e.g. contract farming, supplying
farmer with seeds/fertilizer to get quality agro produce.)
Permission-raj
As an entrepreneur, even if you manage to get loan/finance, you still need following permissions
before setting up a cold storage / food processing unit:
1.
Approval from district collector for change of land usage and land conversion.
2.
NOC from Gram Panchayat, if the land falls under Gram Panchayat.
3.
4.
5.
6.
NOC from Pollution Control Board. (has to renewed from time to time)
7.
8.
Approval from local Excise Department for getting CENVAT exemption for Cold Storage
equipment
9.
Thus, it takes lot of time (and bribes) to get so many permissions=> food-entrepreneur gets
demotivated. Not just Food entrepreneur- any small entrepreneur has to go through same ragging by
banks and government departments and as a result:low IIP + low GDP + low export + High CAD +
High inflation and so many other problems to Indian economy.
License Raj
Today, Industrial license is not required for most food processing enterprises, except for
alcohol and beer and those food items reserved for small scale sector (=Pickles, chutney,
bread, mustard oil, ground nut oil.)
But for long, food items were reserved for SSI=hampered the growth of this industry.
Taxation
1.
Agriculture produces have long been subject to numerous taxes, charges: market fees,
market cess, commission charges, Octroi entry tax, sales tax, weighing charges, labour
charges for handling, loading and unloading, purchase tax, Rural Development cess etc.
2.
For example, In Punjab, the total market charges on transactions of foodgrains are more than
15% of the final value (2011 data)
Punjab
tax%
market fee
2%
Purchase Tax
4%
VAT
4%
3%
3%
^These are just the legit taxes, the commission by middleman is additional burden on the final
consumer.
3.
Tea/coffee/rubber plantation incomes are subjected to Income tax. Tea plantations also
subjected to land tax in Assam.
3.
Previously plastic packaging, aluminum packaging had been subjected to high excise duty
(~16%)= high input cost for food industry.
Budget 2013: Agro and Food processing
Lets look@how Budget 2013 will directly/indirectly help agriculture/food processing sector
$pending
Numbers not important, the point is truckload of cash allotted to help farmers (or atleast to pretend)
Agro Ministry
25000 cr
Agro Research
3000 cr
1000 cr
500 cr
Ago-Credit Target
7 lakh crores
9000 cr
5000 cr
20000 cr.
NABARD
Green
Revolution
Interest
Subvention
Nutri Farms
Institutes
Coconut
National
Livestock
Mission
(Dont you think this overlaps with the national dairy mission that we saw in last
article!)
Storage
IDF
Skill
BRGF
CTT
Agricultural commodities will be exempted from the proposed Commodity Transaction Tax
(CTT).
TDS
Chindu introduced 1% TDS on transfer of immovable property but exempted agricultural land
from this.
GST
Work in progress.
Income tax deduction
If you setup business in following category, youll be given tax-deduction (how to calculate income tax
and deduction? already explained click me)
category
150%
150%
100%
100%
Custom Duty
reduced the
duty on
Exempted
from duty
1.
Hazelnuts
2.
1.
raw sugar, white or refined sugar will not attract any export duty. But,
in future, exemption may be withdrawn to regulate its export in case of
shortage within India.
2.
item
veggies
Area
Agro-machinery: renting/leasing
Food
Processing
Supply Chain
transport of various agro products, tea, coffee, sugar, milk, salt and edible
oil etc. (except liquor.)
Cultivation
Transport
R&D/Support
Misc.
Although unrelated to the main title of this article, but lets get overview of following, since they found
mention in the Budget 2013:
Backward Regions Grant Fund (BRGF)
Who?
When?
2007
Why?
What?
DistrictComponent
2.
StateComponent
1.
Bihar
2.
3.
West Bengal
4.
Ca$h
Movement
Transparency
1.
2.
3.
Planning
Implementation
agrarian reforms
When
Sub-Schemes
In Eastern India: Assam, West Bengal, Orissa, Bihar, Jharkhand, eastern
Uttar Pradesh and Chhattisgarh to improve in their rice cultivation
1.
Green
Revolution
2.
Pulses
3.
Edible Oil
4.
Veggies
5.
Nutri-Cereals
bajra, jowar, ragi and other millets: create awareness regarding their
health benefits.
6.
Protein
7.
Fodder
8.
Rainfed
9.
Saffron
10. Vidarbha
11. PPP
Rashtriya Krishi Vikas Yojna (RKVY) has greater acceptance among states as it provides flexibility to
formulate state-specific strategies
States
projects undertaken
Maharashtra
1.
projects on piggery,
2.
3.
4.
5.
6.
7.
8.
9.
Kerala
RKVY challenges:
1.
More than 80% of farmers have small/marginal landholdings= poor economies of scale.
RKVY hasnt not effectively addressed the issue of land consolidation / land reforms.
2.
Less than 10% of the plan outlet spent on Marketing / Post Harvest Management.
3.
Often the projects proposed under RKVY are not in tune with priorities and developmental
gaps identified in State Agricultural Plan (SAP).
Supply Chain Management, Upstream Downstream requirements for Fruit & Vegetables,
Confectionery industries
What is supply chain management?
Supply chain is a system that links a company with its suppliers and customers.
1.
2.
to right place
3.
at right time
4.
In a cost-effective manner.
What is upstream-downstream?
Point of
reference
farmer
food
processing
company
Kirana shop
Flipkart.com
In short,
Upstream
1.
Farmers,
2.
Mandi-agents
3.
Wholesaler
Book publishers
Mobile/electronics/computer companies
Downstream
1.
middlemen @Mandi
2.
3.
households (if he is
directly selling to final
customers)
1.
distributors
2.
wholesalers
3.
retailers
4.
final-customers
Aam-admi
Online buyers
Upstream
downstream
Backward
Forward
What
Why?
Examples
1.
2.
3.
4.
Starbucks (chain of
coffee bars) buys coffee
plantations in Central
America.
5.
1.
2.
3.
4.
5.
Vertical integration
When companys backward and forward integration is so good that it practically runs
everything from making raw material to selling final product to final customer. Example Oil
giants such as Shell/BP have their own oil wells (supply), refineries (processing) and petrol
pump (retail).
In other words, Vertical integration is achieved when Single firm absorbs several firms
involved in all aspects of a products manufacture from raw materials to distribution.
For Indian food processing industry, Vertical integration is extremely difficult because like we
saw earlier:
Indian food entrepreneurs are small sized and loan starved, while Vertical integration
requires deep pockets and truckload of cash.
FDI permitted only in a few specific sectors of Agriculture. Many states have outdated
APMC laws. = backward integration is difficult.
FDI in Multibrand retail is permitted but with many conditions.= Forward integration
also difficult.
Setup
Rythu Bazar
Backward
food industrys
forward
farmers
Food Industry: Supply Chain
stakeholder
Who?
1.
2.
3.
4.
5.
Processed
Products
What?
Primary
Products consumed in the original state. Dont have any no value addition. (e.g.
just chop apple from the tree, pack it in wooden-boxes and send to market)
Secondary
Basic level of processing: grading, sorting, cleaning, cutting, drying, grinding etc.
before they are consumed. (e.g. dried fish, turmeric powder, chili powder, wheat
flour.)
Tertiary
Combining multiple primary, secondary products from above and doing high value
addition (e.g. ice creams, biscuit, jam, cakes, pastries etc.)
As you can imagine: tertiary food products ought to have a longer supply chain than primary
products because tertiary food products need variety of inputs.
But in India, even primary processed food too has a lengthy supply chain thanks to dozens of
intermediaries before farm produce reaches the fork. Observe the following diagram:
click to enlarge
As you can see this supply chain is lengthy and fragmented= high cost and wastage. An ideal fruit
supply chain should be similar to FHELs.
FHELs Apple Business: Optimized Supply Chain
Fresh and health Enterprises ltd (FHEL) = subsidiary company under CONCUR, started in
2006
FHEL directly procures Apples from Shimla & Kinnaur districts of Himachal
Pradesh and transports them to Sonepat for sorting, grading, packing &
storage.
Company has its own trucks, as a result apples reach to from HP to Sonepat
within a day.
These scientists interact with the farmers, help improving apple quality and
productivity, post-harvest management.
FHEL also arranges all inputs required by the farmers like nutrient packages,
pesticides/ fungicides, packing materials, farm implements, etc.
Raw Material
Uniform
Quality
Middlemen
FHEL was among the first companies to procure apples directly from the farmers
and has now refined the procurement system. This has eliminated middlemen in the
chain.
This acts as a benchmark and all the farmers are able to bargain well with
other apple traders.
Price
Storage
1.
via Marketing Associates in Delhi, Mumbai, Chennai, Ahmedabad and other big cities
2.
Via Cash and Carry wholesale or Retail Chains such as Bharti Wal-Mart, Big Bazaar, Aditya
Birla retail, etc.
With the above upstream and downstream arrangements, FHEL has shortened and optimized its
supply chain and as a result
1.
2.
More profits to both company and farmers, since middlemen are eliminated.
3.
Ok well and good for FHELs apples but most of the Indian food processing industries dont have such
supply chains. From the last three articles on [Food Processing], we can derive a few common points
What are the upstream requirements for efficient supply chain management? (From Food
entrepreneurs point of view)
Upstream requirement
1.
2.
3.
4.
5.
solution
1.
2.
3.
4.
farm mechanization
5.
land reforms
6.
7.
8.
9.
quick transport
Next, What are the Downstream requirements for efficient supply chain management? (From
Food entrepreneurs point of view)
Downstream-Requirement
solution
FRUITS
UP
Andhra
WB
MH
Bihar
Guj
Odisha
TN
TN
Karnataka
Big list of individual fruit/veggie grower states= given at bottom under the title Misc.
Export potential
Processed Food
Mango Pulp
Pickles, Chutney
More youth + Higher disposable incomes + heath consciousness=> Urban junta preferring
fruit juices over carbonated drinks (e.g. Thumbs up, Coke)
Big players have responded to this trend by focusing on their non-carbonated soft drinks
(+More ads using Bollywood celebrities like SRK, Kat, Bips)
Boss
Slice, Tropicana
Pepsico
Real
Dabur
Maaza
Coca Cola
Frooti
Parle Ago
Fruit-Veggies SCM: Upstream Requirements
#1: Need New Varieties
Almost 1500 mango varieties are grown in India but only 3-4 of them are worthy of export but they too
face problems:
Alphonso
Mango
Famous and highly valued. But due to its thin skin, it can only remain fresh for 20
days (even in cold storage) = low shelf life.
Totapuri
mangoes
Cheaper than Alphonso mangoes and have higher pulp content. But Totapuri
mangoes banned in some foreign countries due to stone weevil pest
Raw
material
Potato
quality problem
Most Indian potato varieties = dont have uniform size and length=> cant make
good chips/French fries.
Orange
Very old variety grown in India= high bitterness level and pip content.
Pepsi and Dabur import orange juice concentrate for their juices
India grows red delicious variety = very cheap and hence preferred by Desi
costumers
But this apple varieties has cardboard-like texture and peculiar taste that
foreigners hate. Hence US/EU consumers prefer New Zealand / Australian
Apples over Indian.
Apple
Nuisance of Middlemen
For most fruits, the cultivation/gestation period at least 3-4 years. But banks dont easily give
loans to farmer for such long period.
Hence difficult to encourage farmers to experiment with new varieties of fruits/veggies, even if
the new variety has more profit/export potential.
Given this lack of timely financing from banks / financial institutions, the fruit-farmer goes to
middlemen, who advance money to the take the farm on lease.
Then middlemen manipulates selling prices, to enhance their margins. e.g. Indian
Mangoes=wide price fluctuations in Middle-east.
South American countries offer more consistent prices and are a threat to India. Indias
dominance in the pulp sector is gradually eroding due to this factor
1.
Research-development (R&D) to make new varieties of fruits n veggies with longer shelf life,
disease resistance and export quality-uniform size-length-color-texture.
2.
Government should promote cultivation specific fruits and vegetables in a specific states.
It would lead to ease in monitoring of new verities + uniform quality=> easier to process +
export worthy. For example
Raw
Material
What to do?
Where to focus?
Orange
Maharashtra, Andhra
Pradesh
Potato
UP , West Bengal,
Gujarat
Apple
Mango
UP , AP , TN,
Maharashtra
Sapota
Karnataka, Maharashtra,
Litchi
Onions
Maharahstra
Partnership/Collaboration
As we saw above, Indian orange=bitterness=not good for juice making. Pepsi imports FCOJ
(Frozen Concentrate of Orange Juice) as raw material for its Tropicana juice brand
Recently Pepsi and Government of Punjab have partnered to promote cultivation of new
orange variety in Punjab, to reduce dependence on the imported FCOJ.
1.
2.
3.
4.
5.
Ensures that a crop harvested over a period of one or two months is capable of serving the
round the year market demand.
#investment in cold storage
Broadly, fruits & vegetables can be classified into three segments, based on their shelf-life in cold
storage
Long (6-8
moths)
Example
Moderate(8-10
weeks)
hardly
Needless to say, for category B and C, government needs to provide innovative tax-reliefs/incentives
to attract more investment.
Non
Horti
There has been a relative neglect of the non-horticulture cold chains especially
those relating to meat, poultry and fishing.
State Governments need to actively work on these cold chains via their Animal
Husbandry & Fisheries Departments.
New
tech
1.
2.
3.
4.
General Packet Radio Services (GPRS) for updating the details on the central
server for storage and movement of produce in and out of cold storages
#Electricity
Desi cold storages have high operation cost than their foreign counterparts, mainly because
of high consumption of electricity.
Reason: Food entrepreneur doesnt buy efficient (and expensive) equipment on Engineers
advice. Instead, they buy cheap quality equipment on CAs advice. Why? Because we saw
earlier, government schemes have low-ceilings + if project cost increases too much foodentrepreneur wont get loans under Priority sector lending of Bank and wont be eligible for
various tax benefits available to MSME industry.
#3: Transport
Entrepreneur: needs to get easy loans for reefer vans and refrigerated trucks.
Railways: Introduce dedicated horticulture trains. More frequency of freight trains in agroregions.
Horticulture trains
Who?
1.
2.
Why?
When?
1.
2.
Since there is no ventilation, they keep the doors open =>theft during transport.
3.
slow speed
2009: idea mooted under Kisan Vision Project of Indian Railways in 2009.
2012: Horti train between Maharashtra and Delhi, with banana and potato as core
cargo.
1.
Specially designed containers with good ventilation=>increases the shelf life of the produce
2.
Container train has been designed to run at a top speed of 100 kilometre per hour (kmph) as
against the maximum speed of 75 kmph of conventional railway wagons and trucks= faster
delivery less rotting.
3.
Accepts small quantities, to the unit of one container without agents or middleman. Even
small farmers who wish to transport goods to various destinations now have the chance to do
so without coughing up huge sums to middle-men or clearing agents.
Lets see an example, Banana Train= connects Maharahstra to Delhi. Lauched in Sept.2012
core
cargo
direction
Banana
Jalgaon (MH) to the rail yard of the Azadpur mandi in Delhi.by the way, Azadpur Mandi
@Delhi= Asias biggest market for fruits and vegetables.
Potatos
If train returns empty with no cargo=uneconomic. In Delhi-Maharashtra route, we connected them with
Banana and potatoes. Similarly following projects should be considered:
1.
2.
Who?
Railway Ministry
When?
Why?
How?
1.
2.
3.
*Although topic is from 2009 but been in news in August 2013 for:
1.
2.
And for us, it becomes important for GS Paper 3 because UPSC syllabus contains
1.
2.
Anyways, under this Kisan Vision project, 6 Perishable Cargo centers were to be developed at:
1.
Nasik (Maharashtra)
2.
3.
4.
5.
6.
A Pilot project was started @Singur, WB in 2009 itself but yet to take off because
Although facility has the capacity to store more than 1,000 tonnes of potatoes, but lack
of proper roads for trucks to enter the area. Recall the criticism of government schemes
from earlier article. Most schemes seek to get investors to pump money in (Cold storage)
infrastructure without providing the necessary (road) support for the utilization of the
infrastructure.
Cold storage projects have to be near the market, especially the multi-purpose ones. This
project was located far away from the market and could not find many takers.
Fruit and Veggies SCM: Downstream Issues
Export Transport
It takes about 3 weeks to send Mango from India to EU via sea=> sea transport is unsuitable
for Alphonso Mango export. Youve to transport it via air
Indian air-cargo-transport=> fuel surcharge and variety of taxes. Combine that with exchange
rate difference =Pakistani mangos are cheaper in EU compared to Indian mangos.
Similarly Terminal handling charges at several ports are also high (compared to Hong Kong
etc).
1.
2.
Higher cost of transport => product price increased in destination country = pricewise, it
becomes uncompetitive.
Export: Regulatory issues
Japan
Australia
USA
EU and in the Middle East follow CODEX standards when importing fruit based products.
Indias problem: Lack of post-harvest treatment facilities such as for vapor treatment Lack of
packhouses from farm to port.
Even after complying with these requirements, Indian exporters need to invite and sponsor
visits of the quarantine departments of the relevant importing country for lifting of the ban.
Such visit / inspection costs about ~ USD 100,000/visit/person
Similarly for grape exporters: the cost of EurepGap certificate Rs.75000 / farmer.
APEDA (under Commerce Ministry) provides financial help for Eurepgap certification, more
fruits and veggies need to be given similar help to meet with the certification/ requirements in
foreign markets.
Retail
As we saw in the first article, The Kirana-wallas in USA (known as mom and pops stores) have cold
storage / refrigeration hence they can sell fresh fruits/veggies but our cart-pullers, small-veggies
sellers dont have such facilities=wastage. Hence FDI multi-brand=necessary for the growth of fruit-
1.
2.
Middle-aged= Chocolate gift boxes for Diwali and Raksha-bandhan etc. This
advertisement model has been successful in China, chocolate box gift has become a
routine-gift for wedding receptions.
Year
2012
60
2017 (Projected)
140
woolly aphid (an insect pest) causing high damage to sugar crops in Maharashtra and
Karnataka
successive increase in sugarcane prices in past years, mainly politically driven= abnormally
high cost of production of sugar
This Increase in raw material (sugar) prices has hurt profit margins of confectionary units
because companies are unable to pass on the higher costs to consumers.
^To put this in other words- the dairy owners can form a cartel and raise milk prices every
month, but youll still purchase it, because milk is an essential item.
But If toffee makers form a cartel and raise price of 1 toffee from one rupee to two rupees,
then most people will stop buying or giving additional pocket money to their kids! Meaning
toffee-maker cannot pass the increased raw material cost to the final consumers.
Hence Desi confectionary industry wants rationalization of the sugarcane pricing policy. For
more read Ranagarajan Sugar committee article click me.
#Cocoa
Kerala is the leading cocoa producing state in the country but industrial demand is
significantly higher, estimated at nearly three times the cocoa cultivation.
But cocoa cultivation= Inadequate marketing network + fluctuations in prices =farmers feel
insecure.
Need R&D, Need to introduce superior varieties using clonal technology to improve yields.
Cocoa buying attracts >10% purchase tax in Kerala= input cost increased for confectionary
unit.
Base
Gum
Weve to import most of the basegum (for chewing gum) from Europe and South
East Asia=>manufacturing cost increased.
Need to promote R&D and production for base gum within India.
@Processing
But Indian consumer=price conscious, hence toffees usually sold in single unit
(e.g. 1 clairs for 1 rupee)
Innovation
Packaging
ChocoSCM@Downstream
Taxation
Reach
freebies
local kirana stores and large retailers, paan and cigarette outlets are covered
extensively
In Toffee business youve to lure kids by offering free tattoos, stickers, toys etc.
Export
Potential
In the aspect, Indian toffee makers are far behind their American/European
counterparts.
In China, the recent trend of gifting chocolate at wedding banquets has led
rise demand for premium-chocolate gift packs, we can make an entry Chinese
market too.
Just some stupid Tables for informative purpose only, otherwise hardly relevant from exam point of
view.
Leading States: Fruits
Fruit
leading producer
Banana
Mango
Citrus
Papaya
Guava
Grapes
Pineapple
Apple
Litchi
Sapota
Potato
Brinjal
Tomato
Tapioca
Cabbage
Onion
Cauliflower
Okra
Peas
Sweet Potato
Jam
Pickles
Sauce / Ketchup
Squashes
Potato chips
Pepsi
Cooking pastes
Company
Perfetti
Brooklyn, Big Babool, Alpenliebe, Center Fresh, Chlor Mint, Golia, Cofitos
Parrys/
Lotte
Coffy Bite, Lacto king, Coconut punch, Caramilk, Madras Cafe, Soft-Spot, Flavoured
Candy, Mango, Sunshine, Shakti, Pineapple
Parles
Melody, Mango bite, Kismi, Poppins, Rola cola, LuxDairy, Peppermint, Rosemint
GDC/ Joyco
Candico
Minto, After smoke, Candy king, Americano, Orange-tutti frutti, Drum Beat, Vanilla
Roll, Elaichi roll, Big Freedom, Jumbo-Gumbo, LocoPoco, Minto-Fresh
Ravalgaon
Nestle
Cadburys
Next time we see upstream downstream issues related to milk-meat-marine, tea-coffee-liquor-oil etc.
Milk Dairy Sector, Supply Chain, upstream downstream issues, Amul Model, Operation Flood
Scope-Significance of Dairy Sector
Top five Milk producers (World)
HIGHEST
PRODUCTION
1.
India
2.
3.
China
4.
5.
Russian Federation
LARGEST
POPULATION
CONTRIBUTION TO
GDP
Availability
EMPOWERMENT
Per capita milk availability All India: ~290 gm; Punjab (highest):
>900gm.
still per capita milk availability in India less than world average
1.
Bangladesh
5.
South
2.
Indonesia
6.
Korea
3.
Malaysia
7.
Sri-Lanka
4.
Philippines
8.
Thailand
Hence Indian dairy production could be utilized to earn good foreign exchange by targeting those
markets. More under Downstream=>Export.
SOME STUPID NUMBERS FROM ECONOMIC SURVEY:
Year
Eggs(Million Nos.)
Fish(Million Tonnes)
2011-12
>120
>60,000
>8500
Brand Name
official name
GUJARAT
Amul
ANDHRA
Vijaya
KARNATAKA
Nandini
MAHARASHTRA
PUNJAB
Verka
TN
Aavain
Issue: there is a regional imbalance in production and processing capabilities. e.g. UP contributes
over 17 percent of Indias total milk production. Ironically, only one percent is procured by cooperatives, remaining milk goes to private-dairy players, who exploit farmers, and do adulteration.
Top 5 states
NO. COWS N BUFFALOS
MILK PRODUCTION
1.
Uttar Pradesh
1.
Uttar Pradesh
1.
Punjab
2.
Madhya Pradesh
2.
Rajasthan
2.
Haryana
3.
Rajasthan
3.
Andhra Pradesh
3.
Rajasthan
4.
Andhra Pradesh
4.
Punjab
4.
Himachal Pradesh
5.
Maharashtra
5.
Gujarat
5.
Gujarat
Bottom in all of above: North Eastern States, Delhi, Goa and UT.
Fodder=need irrigation.
Therefore, states with good irrigation facilities and / or rich farmers that can afford tubewells=
milk production is high.
For these reasons, you can see how MP is in top-5, for number of cows and buffalos BUT still
MP doesnt figure in top-5 in milk production due to fodder shortage. (Rankings taken from NDDB
website)
@Upstream Issues
Low productivity of milch animals
Country
Australia
>4000
EU
>5500
USA
>8000
World Average
3100
India
800
India has worlds largest cow population, but the average productivity of Indian cows is among the
lowest in the world. WHY?
1.
2.
Breeding problems
3.
Fodder problems
1.
2.
3.
Manpower
Need to strengthen the mobile veterinary services to ensure doorstep veterinary support, particularly in inaccessible areas.
information
Inadequate availability of vaccines vs. High prevalence of FMD, theileriosis and brucellosis
amongst cattle
3.
FMD alone causes economic loss of ~Rs.20,000 crore per year to India. lets check more
details about FMD for MCQs.
Foot and mouth Disease (FMD)
FMD affects cloven-hoofed animals (those with divided hoofs), including cattle, buffalo,
camels, sheep, goats, deer and pigs.
It can even affect wild animals e.g. Deer, wild pigs and buffalos.
Pigs are regarded as amplifying hosts because they can excrete very large quantities of the
virus in their exhaled breath.
Cattle are very susceptible to FMD. They get infected by breathing even small quantities of
the virus.
FMD spreads rapidly from one animal to another, especially in cool, damp climates and/or
when animals are housed closely together.
Although FMD is not very lethal in adult animals, it can kill young animals and cause serious
production losses.
Stops eating because its tongue and mouth gets blister- very painful to chew
anything. =Adult animal can survive a few days of starvation but young animal will
die.
FMD has serious ramifications in international trade of milk and meat. Because countries that
are free of the FMD disease= they ban or restricting imports from FMD affected countries.
There is no cure for FMD. The Affected animals will recover with time. Although Vaccines can
protect against the disease.
Department of Animal Husbandry, Dairying & Fisheries (DADF) has initiated National Programmes for
prevention and control of FMD, with help of State government.
#2: Breeding issues
CLIMATE
The cattle from temperate region have higher milk production. (e.g.
Denmark)
So even when we import foreign cattle breeds, they give less milk
because of climatic factor.
BREEDING
RESEARCH
Notable breeds
Solution?
BREED
HOLSTEIN FRIESIAN
JERSEY
Government started National Project for Cattle and Buffalo Breeding (NPCBB) is to promote
genetic upgradation of Indian cattle livestock through Artificial Insemination.
NGOs like BAIF and JK trust are operating about 6,000 mobile artificial insemination centres.
#3: Fodder problems
1.
2.
But majority are poor farmers= rely on common pastures =>underfed cattle= less milk yields.
3.
For the same reason: MP is in top 5 for cattle population but not in top 5 for milk production
4.
While the number of livestock is increasing, the grazing lands are diminishing, because
Farmers prefer growing food grains, oil seeds, and pulses hence fodder production
generally gets lower priority.
5.
At present, fodder is being cultivated only on 4% of gross cropped area= insufficient to meet
requirement.
6.
7.
Agriculture crop residues are sold to paper industry, packaging, etc. rather than using as
animal feed.
8.
We dont have specific extension machinery with specialized manpower for popularization of
good fodder varieties.
Solutions?
FODDER
BANKS
to procure surplus fodder from the farmers in areas with good rainfall /
irrigation.
the degraded forest areas, mostly under the Joint Forest Management
Committees (JFMCs), can be used for assisting growth of indigenous
improved fodder varieties of grasses, legumes, and trees under areaspecific silvi-pastoral systems.
Dovetail the ongoing schemes like MGNREGA and RKVY for ^this
purpose.
Lets see Azolla in detail, for UPSC is nowadays obsessed with asking
minimum one MCQ from some random agro related plant/organism thing
E.g. Mycorrhizal biotechnology and Nostoc algae in CSAT 2013.
FOREST
AZOLLA
PRODUCTION
Azolla fern
FOR CROPPING
FOR LIVESTOCK
FEED
Azolla reduces evaporation from water surface and increases water use
efficiency in rice.
Azolla has 50-60% protein on dry weight basis, rich in almost all
essential amino acids, vitamin A, vitamin B-complex and minerals
Dry Azolla can be mixed with other fodder, or can be given directly to
cattle, poultry, sheep, goats, pigs and rabbits.
Milk Quality
From farm to dairy, there is significant deterioration in milk quality. Because of two reasons:
1.
2.
BOGUS
INFRASTRUCTUR
E
BOGUS
HANDLING
1.
2.
3.
1.
2.
3.
4.
SENSORY PROPERTIES
COMPOSITION
HYGIENE
bacteriological growth
Solution?
1.
Currently, when farmer supplies milk @dairy cooperative society (DCS) of his village, they
only test one thing: fat content. Therefore, farmer has no incentive to maintain any other
qualities of milk.
2.
Setup quality testing facilities @collection center to test bacteria count, acidity, smell/taste,
bacterial count, heavy metals, pesticides residue etc. and not just fat-content alone.
3.
4.
5.
Supply of Hygiene Kits+ Training to DCS staff. Impose penalty if they dont comply with the
standards.
6.
Less manual handling, use more machines: Bucket Milking machines, Feed racks, water
bowls and partitions etc.
@Processing Level
Bulk of new capacity in the period in last decade, has been established in the Northern states,
Maharashtra and Tamil Nadu. Remaining states are lagging in dairy growth.
Capacity utilization of dairy plants is about 60% (assuming 300 working days in a year). Due
to Lack of milk availability in the lean season.
For e.g. Rajasthan has 8% share in milk production and 11% share in consumption of milk
products, however the share in dairy processing capacity is 4%. Meaning much of the milk
escapes from the value-addition in dairy supply chain. A similar situation prevails in Bihar.
Anand/Amul Model/dairy cooperative model
1946
1965
Sardar Patel encourage the farmers of Anand region in Gujarat, to form their own milk
cooperative, to protect themselves from exploitation from private milk traders
National Dairy development board setup @Anand, to replicate the dairy cooperative model
throughout country.
(PM Lal Bahadur Shashtri)
1971
1974
GCMMF starts maketing milk products under single brand name Amul (Anand Milk Union
Limited)
Amul Supply Chain
VILLAGE
DISTRICT
MARKETING
COOP.UNION
STATE MILK
COOP.
FEDERATION
Combined, all DCS together handle more than 18 million kg milk / day.
they process milk=> butter, ghee, milk powder, cheese, ice cream etc.
They can sell their products under the brand name Amul as long as
they meet the requirements of GCMMF. (e.g. must collect 30,000 litres
milk daily for a period of three years)
Amul has more than 5000 outlets of own- at high streets, residential
areas, Railway Stations, Bus Stations, Educational Institutions, across
India.
Other than that, even private shops, hotels, restaurants etc. too sell
Amul products.
RETAIL
this Amul Model eliminates middlemen and directly engages farmer with the processor
(dairy)
These cooperatives form part of a national milk grid which links the milk producers throughout
India with consumers in more than 700 towns and cities
Reach
Competition
Management
Even the largest Indian dairy player (Amul)s annual turnover is quite lower
than a large MNC dairy company like Nestle.
Dairy cooperatives are subject to state laws /regulations. But often, the
elections in dairy cooperatives are won using money and caste equations.
When such fraudsters get key positions in the dairy board, all they care is
how to recover their investment by taking bribes in appoint of dairy staff=>
inefficiency + lack of new initiatives.
Meaning there is 90% increase in the wholesale price of Milk, compared to base year 2004.
This type of killer price rise=> has led to adulteration, fake milk from urea, Nakli-Maawaa etc.
once in a while, youve seen reports about this, particularly in Delhi-UP region.
In long term, theyll destroy Indias name in foreign market, just like Chinese milk products lost
business internationally, after news reports of Melamine adulteration in 2008.
Synthetic Milk
Synthetic milk is prepared by mixing urea, caustic soda, refined oil (cheap cooking oil) and common
detergents.
INGREDIENT
REFINED OIL
Even in legit (real) milk, the traces of detergent are found because farmers
and dairy staff use cheap detergents to clean vessels, buckets etc. but dont
thoroughly wash them.
DETERGENT
CAUSTIC
SODA
UREA
STARCH
To neutralize the acidic PH of other ingredients and thus prevents fake-milk from
turning sour during transport.
Higher the SNF=better the milk-quality, fetches more price when sold to
dairy.
Heath hazards of Synthetic milk: damages kidney, heart problems, cancer and even death
National Survey on Milk Adulteration 2011
Bihar, Chhattisgarh, Odisha, West Bengal, Mizoram, Jharkhand and Daman & Diu= their milk
failed in all tests.
~70% of Indian milk doesnt meet the standards set by set by the Food Safety and Standards
Authority of India (FSSAI)
Last year, Union government quoted ^this report, while filling affidavit in SC about milk adulteration.
Union also said that it Is state governments responsibility to act on milk adulteration problem. Later
SC asked state governments to file affidavit about what action theyve taken.
#2: Ethnic products: untapped potential
Examples of ethnic milk products: Paneer, Rasogolla, Sandesh, Pantua, Rasomalai, Cham,
Rajbhog, Kulfi, Rabri, Basundi, Burfi, peda, Gulabjamun, Kalakand, Dahi, Mishti Doi, Lassi,
Chhach / Mattha, Srikhand etc.
Scope: For ethnic milk products, profit level is ~12-38% of the input cost.
PROBLEM
1.
2.
3.
SOLUTION
1.
2.
3.
export
import
>700
>100
Earlier we saw India is located close to the milk deficit countries, but still India hasnt capitalized on
this location advantage due to the following reasons:
1.
2.
Only ~35% of milk produced in India is processed. Rest is sold by local doodhwalla= not
enough milk available for export.
3.
Domestic consumption of milk has increased => less surplus left for exports
4.
Lack of experience in marketing products in international markets, particularly for ethnic milk
products.
5.
Low productivity and quality are the key reasons due to which processors in India, are not
able to achieve the scale of operations of their counterparts in New Zealand or Australia.
Ban
2011
Export of milk powders (Skimmed Milk Powders, Whole Milk Powders, Dairy Whitener, Infant
Milk Foods etc.), Casein and Casein Derivative was prohibited
2012
ban lifted, these milk/casein products export given under Vishesh Krishi and Gram Udyog
Yojana(VKGUY)
Fonterra crisis
2013: News report came that Fonterras milk powder could have been contaminated with the
Clostridium bacteria. It can cause fatal botulism.
After this news report, China and Sri Lanka banned Fonterras products.
Fonterra CEO says: it was a false alarm, the bacteria variety found in our milk powder is not
capable of causing botulism, but nonetheless we have recalled all the batches exported. So
dont worry
Anyways, all this negative publicity and banning of New Zealand dairy products= gives opportunity for
Amul to tap those export markets.
#4: Tax on inputs
In earlier times, dairy industry had been subjected to octroi and sales tax etc. creating a nonlevel playing field with the unorganized sector.
There had been high level of taxation on dairy equipment and machinery (excise, sales tax,
octroi) Even the excise duty on polyethylene film, aseptic packaging machines, milk vending
machines, pouch filling machines, used in packing and distribution.
This has hampered the growth of dairy industry. Although nowadays, taxes on most of these
items have been reduced / abolished.
Enough of supply chain, lets look at some allied topics: NDDB, Operation Flood, Government
schemes related to dairy sector.
NDDB
AWARD
CHAIRMAN
(PERSON IN
NEWS)
NDDB has Won Indira Gandhi Rajbhasha Award for the financial year
2011-12. (But declared in 2013).
After Vergese Kurien, the father of white revolution, she has been
managing NDDB.
Operation Flood
1965
NDDB setup.
1970
1996
1.
2.
3.
LEVEL
Org.
VILLAGE
DISTRICT
District Union
STATE
State Federations
NATIONAL
NDDB
PHASE1
PHASE2
PHASE3
Setup dairy cooperatives in 10 states and link them with four metropolitan cities: Mumbai, Delhi, K
Chennai.
Finance: by the sale of skimmed milk powder and butter oil gifted by the European Union
Karnataka, Rajasthan, MP
Connected more than 40,000 villages and 4 million farmers in the dairy cooperative umbrella.
Imports of milk solids ended. Our milk requirements now met through desi-dairies. (Otherwise
imagine, if we were still relying on imported milk, like imported crude oil than what will be
the current account deficit and rupees downfall!)
CONSUMER
EMPOWERMENT
ECONOMIC
EMPOWERMENT
SOCIAL
EMPOWERMENT
1.
2.
3.
4.
5.
6.
Milk production doesnt require much land. Even landless poor can
participate.
7.
8.
9.
WOMEN
EMPOWERMENT
(Although given in previous article, but copy pasting again for the sake of continuity during readingrevision)
Department of Animal Husbandry, Dairying & Fisheries
They run following schemes:
1.
install Bulk Milk Coolers at village level close to the area of milk production
2.
Dairy Entrepreneurship
Development Scheme (DEDS)
fodder
clean milk
Scheme will run in 14 states Uttar Pradesh, Punjab, Haryana, Gujarat, Rajasthan, Madhya
Pradesh, Bihar, West Bengal, Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh, Orissa
and Kerala.
^These states collectively account for over 90% of countrys milk production.
National Dairy plan will do following:
1.
Breed improvement + animal nutrition=> increase milk production, reduce methane emission.
2.
Strengthen of village based milk procurement system= Rural milk producers to get greater
access to the organized dairy sector.
3.
Use of ICT technology: Internet Based Dairy Information System (i-DIS), Data warehousing
System along with Business Intelligence tool etc.
4.
Funding pattern
ca$h comes
from
to
1.
2.
ultimately to
State Government
MCQs
1.
2.
3.
4.
5.
6.
a.
b.
c.
d.
None of above
a.
b.
c.
Both
d.
None
a.
Sahiwal
b.
Murrah
c.
Gir
d.
Kankrej
a.
b.
c.
both
d.
none
a.
b.
To neutralize the acidity of other ingredients and stops milk from turning sour
c.
d.
None of above
a.
b.
c.
Both
d.
None
1.
NDDB
2.
3.
Descriptive
2m
12m
1.
2.
3.
25m
1.
The destruction of Indias village system was the greatest of Englands blunders.
2.
3.
Dairy cooperatives have played an important role in the women empowerment and
social transformation of rural India. Comment
4.
Write a note on the upstream and downstream issues in the dairy sector of India.
Essay (200m)
1.
2.
There is more potential for economic growth in rural India than at any time in
decades.
3.
The Internet is becoming the town square for the global village of tomorrow.
4.
5.
6.
A nation that continues year after year to spend more money on military defense than
on programs of social uplift is approaching spiritual doom.
(GS1) Distribution of key natural resources across the world and India
Comprehensive Marine
Fishing Policy, 2004
Fishermen Welfare
Scheme
Related to freshwater,
saltwater and shrimps.
later: well see [Food processing] Poultry, meat, tea, coffee, wine, edible oil.
Fisheries: Scope/significance
Ranking
GDP contribution
still, Indias share in world export Is barely 0.1% (for each fish
and meat individually)
40 lakh fishermen
Gives employment to
more than
1.
China
1.
Andhra Pradesh
2.
India
2.
West Bengal
3.
Peru
3.
Gujarat
4.
Indonesia
4.
Kerala
5.
Vietnam
5.
Tamil Nadu
Fish
3400
3%
Meat
2700
2%
Geographical advantage:
Coast Line
Continental Shelf
+millions of hectares of ponds, tanks, rivers, reservoirs, canals, brackish water area.
EEZ Exclusive Economic Zone
The EEZ of India can be further divided into the following regions:
North West
South West
Lower East
Upper East
Andaman- Nicobar
Lakshadweep
6 lakhs sq km EEZ
4 lakh sq km EEZ
There is immense potential for import of fish into India from neighboring countries in South Asia and
South East Asia.
Indian fisheries sector classification
1.
Marine
Coastal Fishing
2.
Inland (Freshwater)
3.
Aquaculture
Supply chain: Fisheries
Among all Desi food processing industries, Fish processing supply chain = shortest. Because
in most of the cases, fishermen themselves sell their catch directly to consumers via local wet
fish markets.
1.
2.
Despite government ban, fisherman use fine-sized net= even Juvenile fish are being caught.
3.
30% to 40% of the catch is discarded by fishermen in high seas because juvenile fish who
dont fetch good prices in market= resource lost.
4.
During breeding season, fishing is banned in coastal waters. But the authorities dont enforce
it strictly.
5.
6.
The EEZ around Andaman-Nicobar and Lakshadweep confluences with international waters.
This makes these Island territories vulnerable to illegal Fishing by foreign vessels.
7.
Most fishing vessels dont have facility to freeze the fish onboard immediately after catching=
quality deterioration before they reach the coast.
8.
unregulated fishing of highly migratory species just outside the EEZ=negative impact on
Marine biodiversity.
9.
Most vessel dont have special equipment to do deep water fishing beyond depth of 400m.
Example yellow fin tuna found around Lakshadweep islands. Theyre almost unexploited
since the technology for deep long lining is not prevalent in the Islands.
Freshwater@Upstream
But even those state governments not enforcing fishing net size in rivers, lakes and
reservoirs= juvenile fish caught and discarded.
EMPIRES
MNREGA
AQUACULTURE
Shrimp-farming@Upstream
Pink revolution=Shrimp.
PARENTS
ANTIBIOTICS
FEED COST
TRAINING
Disease free brooder stock (parent shrimps)= not available. Hence their next
generation is also diseased.
NOTABLE
PLAYERS
WATER
QUALITY
PACKAGING
Potable water is not available at landing and cleaning sheds at the ports.
LOW VALUE
ADDITION
INVESTMENT
More than 1/3rd of Indians eat fish but demand for processed fish=limited because
Indian consumer prefer wet (fresh) fish rather than processed fish.
Cost of processed fish product= 20-25% higher than fresh fish.(due to indirect taxes)
Desi Consumers prefer to buy fresh fish from wet markets and process it at home
INFLATION
Fish prices more than doubled during the Eleventh Plan, a higher
inflation than either crops or any other livestock segment.
MARKETING
RETAILERS
MARKETING
RESEARCH
DUMPING
REJECTIONS
Jurisdiction:
States
Marine fisheries within the territorial waters are the subject of maritime states
Centre
Fisheries beyond this limit within the EEZ fall in the jurisdiction of Central Government.
Comprehensive Marine Fishing Policy, 2004
ACTIVITY
1.
SUBSISTENCE FISHING
2.
SMALL-SCALE FISHING
3.
protection + welfare
technology transfer to small scale sector
INDUSTRIAL FISHING
1.
ATTENTION TO CONSUMERS
Attention to consumer rights. Ensuring food safety, mandatory bar coding and
packaging for sale of fish products.
Ensure international quality and food safety in fish and fishery products.
Protect consumers from fish contaminated with heavy metals and other hazardous
chemicals discharged from industrial establishments.
o
2.
3.
4.
ATTENTION TO FISHERMEN
Government to contribute towards Insurance scheme for only those fishermen who
do not own a boat.
Fishermen Housing Schemes will unified and implemented as a master plan through
a national agency.
ATTENTION TO ENVIRONMENT
Regulate Mesh sizes in different parts of the fishing gear. Penalties for violations of
mesh regulations.
greater liaison between Central and State Pollution Control Board to control all
industrial establishments discharging effluents in to the sea
Hazard Analysis and Critical Control Points (HACCP) in effluent discharge systems
will be made mandatory.
HRD, R&D, use of IT, strengthening marine database via satellites etc.
National Fisheries Development Board (NFDB)
HQ: Hyderabad. For both inland and marine fish. Promotes following
1.
2.
3.
Mariculture (cultivation of marine organized in enclosed section of ocean / pond / tank etc.
Example: prawn, pearls, agar etc)
4.
Government Schemes
To prevent any short term decline in the standard of living. (via insurance
+ savings)
PROMOTIONAL
To enhance the long term general living standard of the entire community.
(via model village + training)
four broad components
1.
MODEL
FISHERMEN
VILLAGES
2.
INSURANCE
3.
SAVINGS CUM
RELIEF
4.
TRAINING
self explanatory
CIBA
IMMUNoDot
Silver
pompano
An immunodot blot test for early detection of WSS virus in shrimp. Patent pending.
Several international organizations, including the World Bank, UNDP , DANIDA, NORAD,
ODA (UK and Japan) provide aid to India for the development of fisheries sector .
(UK) has provided technical aid for the prevention of post-harvest losses in marine fisheries.
Recently, FAO launched a scheme for providing technical assistance to implement Hazard
Analysis Critical Control Points (HACCP) in seafood processing industries.
State governments
1.
2.
Awareness camps to educate the fishermen on importance of the breeding cycle of the fish to
replenish the stock.
3.
Regulate fishing net size. 30 mm mesh size should be standardized for use.
4.
Announce specific financing schemes for purchase of requisite vessels and equipment
5.
Allow only a sustainable number of vessels to operate in the coastal waters. Dont give
license to everyone.
6.
Leasing of coastal zones There is need to consider leasing of coastal zones on a long
term basis (30 years) to private sector players, for introduction of advanced mariculture
technologies such as cage culture, pen culture etc. for augmenting fish production.
Mock Questions
MCQs
1.
2.
a.
Eastern Cost has larger area under EEZ than Western Cost
b.
c.
Both
d.
None
a.
b.
c.
Both
d.
None
1.
2.
3.
4.
Descriptive
2m
12m
1.
2.
3.
4.
25m
1.
Although India is the second largest fish producer of the world, the share of fisheries
sector in Indias GDP is negligible. Examine the reasons for this phenomenon and
suggest remedies.
Essay
1.
Civilization is like a thin layer of ice upon a deep ocean of chaos and darkness.
2.
India is rich in people, rich in culture, rich in resources and rich in trouble.
Poultry, Meat, Supply Chain, Upstream, Downstream, Avian influenza, government schemes
revious article was on fisheries, now comes meat/poultry.
UPSC syllabus
prelims
GS2: Statutory, regulatory and
various quasi-judicial bodies.
1.
2.
fodder point that China has agreed to allow meat import from
India. (earlier it was banned because of diseases)
fodder point that Omans ban on Indian poultry has badly affected
our business.
After this, only one and last article remains in [Food processing]: tea, coffee, wine, edible oil and
confectionary.
Poultry: Scope/significance
Poultry business has potential to grow because:
1.
2.
It takes far less feed to produce a kilo of chicken than the equivalent amount of pork or beef.
3.
Many youngsters becoming non-vegetarian under the influence of advertisements e.g. KFC,
McDonalds etc.
4.
Consumer studies from other countries say when vegetarians choose to convert to nonvegetarianism, they first experiment with poultry before trying other meat products.
5.
Increasing prosperity in emerging markets= people can afford to put more meat on the table.
Contribution to economy:
1.
2.
3.
Backyard poultry provides cheap protein nutrition and side income to poor families.
4.
REGION
characteristic
NORTH
EAST
WEST
No concentration of production.
No full integrators.
No concentration of production
High cost of maize feed, transport problems =hampered the growth of organized
poultry farming.
click to enlarge
Big poultry companies have backward integration. Lets observe the case study of Saguna Foods
UPSTREAM
Company has its own pharma division in TN. They provide are
anti-bacterial, antibiotics, vitamins, mineral supplements etc. to
those contract farmers.
1.
MEDICINE
2.
FEED
3.
TRAINING
Sagunas experts make regular field trips and train the farmers on
how to raise poultry in a scientific-efficient manner.
As a result of 1+2+3, all chicken/eggs are uniform in size, shape and quality.
4.
PROCESSING
Can process >35000 birds per day and export >1500 metric
tonnes chicken per month.
Another big player with similar backward integration is Venkys (Pune based company):
supplies Chicken to Indian outlets of McDonalds, KFC, Pizza Hut, and Dominos.
But just two Cinderella stories doesnt mean everything is well and good with Indian Poultry
business. Lets observe the constrainsPoultry@Upstream
Maize (Poultry-Feed)
Therefore, fluctuations in the prices of maize, soybeans/oilmeals significantly affect input cost
in poultry business.
Maize consumption by the animal feed sector (which accounts for almost 50% of maize
consumption) has been growing much faster than maize production.
Maize is primarily a rain-fed crop, the annual production level is dependent on monsoons=
fluctuations in production level (and therefore fluctuation in price level).
Government offers better MSP for rice and wheat. Hence farmers prefer rice/wheat over
Maize cultivation.
December-April period, maize is grown only in a small region in Eastern India = high feed
prices for North East poultry business.
Adding insult to the injury: Indian exports of maize to Bangladesh, Nepal and other countries
have been rising exponentially. These countries do not have significant domestic maize
production, yet their poultry industry is growing rapidly. (Meaning, Bangleshi and Nepali
are using Indian maize to improve their poultry business, while Indian poultry farmers are
struggling.)
After the outbreak of bird flu, (+ inflation), desi customers decreased egg/chicken
consumptions and foreign countries also imposed ban on Indian poultry. As a result, most
poultry farmers are making losses.
Government needs to address this inconsistency in its policy on maize and poultry rearing.
Avian Influenza
Outbreak of Avian influence (commonly known as bird flu)= culling of poultry + fall in
demand= hurt the business.
Since many poor families raise poultry in backyard dont maintain hygiene standards=flu
outbreak.
This not only hurts the family but also commercial players, because foreign countries will
impose ban on import of Indian egg/chicken because of the bird flu news.
Haemagglutinin
(H)
Neuraminidase
(N)
There are multiple varieties of (H) and (N), and based on their combination in the given virus,
scientists name it H5N1, H5N2 etc.
Avian flu
Swine Flu
Bird
Pigs
H5N1
h2N1
LPAI
HPAI
Species affected
Poultry flocks
(chickens, ducks,
turkeys, geese)
One type of wild ducks constitute the natural reservoir of the virus.
Wild birds may carry H5N1 from one area to another through the process of
migration.
virus can spread rapidly through contact between a sick bird and a
healthy bird.
this virus causes a high mortality rate. Even healthy birds have to
be culled to prevent further spread of virus.
Over the years, H5N1 virus has infected numerous birds in Asia,
Europe, America and Africa.
Human
Disease can also affect humans but only after eating poultry meat that has
not been cooked properly or after very close contact between a person and
an affected animal.first outbreak: Hongkong97
1.
The Action Plan to combat Avian Influenza was revised in 2012 and circulated to the State/UT
Governments for implementation.
2.
About 90% veterinary workforce of India has been trained to combat bird flu.
3.
4.
5.
6.
7.
All the state governments have been alerted to be vigilant about the outbreak of the disease.
8.
Government has banned imports of poultry from bird flu positive countries. (and Oman
banned our poultry exports, so tit for tat, the circle of karma is complete.)
9.
Government has alerted Border check posts with neighboring countries to stop transport of
live-birds/eggs/chicken.
Contract Farming
Contract Farming prevalent in Southern India for poultry business. eg. Saguna Foods and
Venkys.
Farmers provided with feed, medicines and bird growing fee. Some companies have state of
the art processing plants located close to cities.
But this contract farming model has still under developed in the remaining parts of India.
@Processing
Poultry processing capacity India ~ 25,000 birds per hour BUT, Average utilization is barely
30%. Because Several of the operating units are run by small and unorganized players.
The only big players in Indian Chicken business= Venkys, Godrej, Arambagh and Suguna.
@Downstream
Poultry Hygiene
At Retail level, chicken are slaughtered on street side shops/hotels by untrained people. Result?
1.
2.
3.
4.
5.
Improper ventilation and space for storing live chicken = droppings / feed / feathers spread
bacteria.
Slaughter waste generated per day in Mumbai alone is about 150 tons.
Solution= ban street side slaughter of all animals + rigorous food inspection of all such shops, just
like in developed countries.
Taxation and Smuggling
On the other hand Tamilnadu has exempted Meat, fish eggs, poultry and livestock from VAT.
OCT
12
WHO confirms bird flu outbreak in government-run turkey farm at Hesaraghatta, Karnataka,
NOV
12
Oman, the biggest egg export market for India, bans import of eggs and chicken from India because of bird flu
JUN
13
Oman has lifted the ban on importing poultry products from India, but with condition that an Indian company m
its premises and husbandry procedures verified by Omani officials first.But in during this ban time, the Oman
businessmen made import-contracts with Brazil and Holland for supply of eggs and chicken. So, even after th
we are not seeing much high demand from Oman.
Demand
High cost of feed, high food inflation, ban by Oman= Poultry business is deeply affected, Most poultry
farmers are selling below production cost and making losses.
Govt. schemes for poultry
#1: Poultry Development Scheme
By Department of Animal Husbandry Dairying & Fisheries (DADF) under Agro Ministry.
1.
Assistance to State
Poultry Farms
analysis laboratory.
Poultry given to BPL families= supplementary income + nutritional
support.
Rural Backyard
Poultry
Development
2.
Poultry Estates
3.
To setup poultry breeding farms, feed godown, feed mill, marketing of poultry products, egg
grading, packing and storage houses for export, egg and broiler carts for sale of poultry
products etc.
REGION
org. located @
NORTH
Chandigarh
EAST
Bhubaneswar
WEST
Mumbai
SOUTH
Bangalore
REGION
SOUTH
NORTH, WEST
Japanese Quail
EAST
Guinea Fowl
They train farmers, women beneficiaries, various public and private sector poultry organizations,
NGOs, Cooperatives and foreign trainees etc.
National Livestock Mission (NLM)
Athulya chick
Kalamasi Fowls
1.
2.
Indian buffalos have near organic nature (i.e. grown without use of drugs/antibiotics unlike
American cattle=less harmful effect on human health).
in
livestock
goats
sheep
BOVINE MEAT
Saudi Arabia, Vietnam, Malaysia, Angola, Kuwait, Egypt, UAE, Jordan, Iran
SHEEP
CHICKEN
Supervision falls within the purview of the local bodies (panchayats, municipalities or
corporations).
1.
Markets are primitive in functioning. No facilities for weighbridges, ramp facilities for loading
and unloading, feeding and watering animals.
2.
3.
4.
Meaning, the meat-processing companies pay advance money, veterinary services, fodder to
the farmers and ask them to raise buffalos/sheep/pigs for slaughtering.
But in India, buffalo slaughter is allowed only when the buffalo outlives their useful life as a
dairy or a draught animal.
Result:
1.
Male buffalo calves often slaughtered illegally (=revenue loss for government)
2.
Theyre starved when farmers do not find them useful for draught purpose.(=resource loss,
animal cruelty)
3.
Meat processing companies find it difficult to do contract farming for buffalo/sheep etc. Hind
Agro is the only Indian player which has backward linkages with male buffalo calf rearing.
4.
No control over animal feed =meat quality is not uniform = doesnt commend high prices
abroad.
5.
Meat yield
Need for crossbreeding for buffalos that have higher meat yields.
Some countries have banned Indian buffalo meat due to Foot and Mouth
Disease (FMD). We already discussed FMD in the dairy article click me
Disease
veterinary
services
fodder
@Processing Level
There are two types of slaughter houses in India:
#1: MUNICIPAL SLAUGHTER HOUSES
Municipal slaughter houses are owned and operated by local and state governments.
Their infrastructure + facilities are (as you can guess) inadequate and outdated.
They charge fees but often money is not used for upgrading the infra/facility.
The animals are often kept in poor conditions (due to lack of adequate infrastructure)
=unhygienic meat.
Meat-export companies need to have private slaughter houses to meet the quality standards
of US/EU.
But since meat is a highly controversial subject involving religious, social angles=> local
authorities are reluctant to give land allocation for new private slaughter houses.
Since many of the slaughterhouses are unorganized and illegal- the byproducts of livestock
slaughter are not utilized for additional income e.g. Meat-cum-Bone Meal (MBM), tallow, Bone
Chips etc. could be sold as pet food. Viscera, waste could used for methane generation etc.
Since 9th Five year plan, Central government had come up with a scheme to upgrade municipal
slaughter houses, but progress is unsatisfactory. Why?
Under this scheme, center: state will share cost burden equally (50:50) but state governments are
reluctant to pay their 50% money, because of following reasons
1.
2.
Negative perception of meat eating and therefore limited proactive action by all concerned
authorities.
COMPANY
BRAND
PRODUCT
Hind Agro
Industries Ltd
Premier, Saffa
Al Kabeer
Al Kabeer
PRICE
Indian consumer = price sensitive. Chicken and Buffalo meat are more
consumed than other varieties.
TAXATION
Currently , there are no taxes levied on wet market sales (i.e. fresh
meat)
SELF-BAN
REGIONAL
PREFERENCE
Eastern India and Coastal regions prefer marine products over poultry/animal.
FRESH
Indian consumers prefer to buy freshly cut meat from the wet market, rather
than processed or frozen meats. Health concerns associated with red meats
leading to preference for poultry.
Meat Export
Till now, China did not allow import of Indian meat because of concerns about Rinderpest
and foot & mouth disease.
But in May 2013, India-China made agreement thatll help in export of buffalo meat, fishery
products and poultry feeds from India to China.
Decline of competitors
Indian buffalo meat exports =potential to grow, because some of our competitors are on decline:
COMPETITOR
AUSTRALIA
WHY DECLINING?
US meat industry uses too much antibiotics, some health conscious elite
customers from US/EU prefer Indian buffalo meat for its organic nature.
USA
To protecting threatened breeds of livestock whose population is about of 10,000 (for animal))
and 1000 (for poultry)
state
Bonpala sheep
Sikkim
West Bengal
Yak
Kachchhi camel
Gujarat
Chegu goat
Himachal
Nilgiri sheep
Tamil Nadu
Muzzafarnagari sheep
Uttar Pradesh
Berari Goat
Maharashtra
Abattoir modernization
(copy pasting from earlier article)
Scheme by Ministry of food processing industries.
Abattoir= slaughterhouse/ butcher house. Food processing ministry runs a scheme for them. This
scheme Under PPP mode with involvement of local bodies (Panchayats or municipalities) via
1.
build-own-operate (BOO)
2.
build-operate-transfer (BOT)
3.
Features:
1.
2.
3.
4.
5.
6.
Financial assistance
area
General
50
75
1.
Dimapur (Nagaland)
7.
Patna (Bihar)
2.
8.
Ahmednagar (Maharashtra)
3.
Ranchi (Jharkhand)
9.
4.
5.
to promote production of animal based protein through livestock development, dairy farming,
pig and goat rearing and fisheries
Disease eradication schemes
National Project
on Rinderpest
Eradication
also provide direct part employment and indirect employment to people in feed, fodder, meat
leather and various input services.
#2: Slaughterhouses @small towns
This way, the loss in the meat sector due to transportation of live animals, shrinkage of meat
and environmental pollution in the cities will be prevented
fresh hides and skins in the tanneries in vicinity of the slaughterhouses will boost production
of quality leather.
pilot implementation in three states: Uttar Pradesh, Andhra Pradesh and Meghalaya
#3: Utilization of Fallen Animals
More than Rs.900 cr are lost per year, due to non-recovery/ partial recovery of hides/skins and other
by-products from the fallen animals. Hence this scheme was launched with following objectives
1.
Provide opportunity of employment to rural poor engaged in carcass collection, flaying and
by-product processing
2.
Produce better quality hides and skins through timely recovery, better handling and transport
3.
rabbits
Livestock Insurance
first Livestock census was conducted during 1919-20 and since then
it is being conducted quinquennially by all States/UTs in India
Livestock Census
Animal Quarantine
and Certification
Service
Livestock Health
& Disease Control
program
The scheme helped to prevent the entry of exotic diseases like Madcow disease (BSE), African swine fever and contagious equine
metritis.
Pig Development
Central/Regional Disease
Diagnostic Laboratories
Mock Questions
MCQS
1.
a.
b.
c.
d.
2.
3.
4.
5.
None of above
a.
b.
c.
Carnivore animals such as Cats, tigers, leopards are immune to avian influenza.
d.
None of Above
a.
b.
NABARD
c.
d.
a.
Rinder pest
b.
Brucellosis
c.
d.
a.
b.
c.
d.
None of above
Descriptive
2 marks
1.
2.
Livestock Insurance
3.
Livestock Census
4.
5.
15 marks
1.
2.
Discuss the Upstream issues affecting Indian poultry business and suggest remedies.
3.
Lack of backward integration in the buffalo meat supply chain, has hampered the
growth of meat processing industry in India. comment
4.
List the initiates taken by Department of Animal Husbandry, Dairying & Fisheries for
promotion of meat and poultry industry.
5.
6.
Factory farming is one of the biggest contributors to the most serious environmental
problems. comment
Essay
1.
2.
3.
Man is the only animal for whom his own existence is a problem which he has to
solve.
4.
Tea, Coffee Supply Chain, Upstream, Downstream for UPSC General Studies Mains
Tea: Scope Significance
Indias rank
production
consumption
export
Provides employment to more than 50,000 workers around Darjeeling alone and overall ~5
lakh tea-farmers
Location
REGION
TEA SEASON
March-December.
small scale: Karnataka, Tripura, HP, Uttarakhand, Arunanchal, Manipur, Sikkim, Nagaland,
Meghalaya, Mizoram, Bihar and Orissa.
Yields of tea usually drop after 50 years. Tea gardens in Darjeeling are about 80-100 years
old.
Result? = low yields and deterioration in tea quality= low prices in foreign market.
Solutions?
Need to upgrade Tea estates through replanting, uprooting and cloning of high yielding
varieties.
Therefore most tea estates prefer to maintain status quo. Thus production keeps declining
with each year.
Land Ceiling
Act
Collectivization
Single biggest reason for the slow growth in area under tea cultivation in
India.
Under this Act, the Government acquired large tracts of then uncultivated
land from tea estates
But Land Policy does not permit land with the government to be
transferred to the corporate sector for cultivation.
Thus plantation labor act increases cost of production. Hence, tea estate cant afford replantation/
cloning=lower yields every year.
lets look at some more negative factors
RAINFALL
FERTILITY
Erratic rainfall pattern causes frequent landslides in the hilly terrain, causing
huge damage and heavy losses to the estates.
During rainy season, even workers refuse to come due to fear of landslides.
POLLUTION
In the Assam-Darjeeling region, the transportation of goods is highly timeconsuming and costly because of the poor condition of the narrow roads
during agitation for a separate Gorkhaland, when many tea estates were
closed for indefinite periods
ROADS
LAND
MAFIA
Taxation
TAX
CENTER
STATE
corporate tax
Tamilnadu removed tea from agricultural tax though. Other major tea growing
states need to follow suit.
Unbranded, loose tea manufacturers at local level- they are not required to pay any taxes/
excise duty/corporate tax or any other state-level levies.
This leads to MRP price difference between branded and unbranded tea.
Branded Tea players see less demand= stretched financial condition= again, cant invest replantation
of tea shrubs.
Bought leaf factories
Bought leaf factories (BLF) have their own independent tea processing units
But they donot own tea plantations, they procure leaf from small growers via auction centers.
BLF factories are not subject to the plantation labour act or agricultural tax=> their operation
cost is lower than tea estates.
Exit
Initially, the fast-moving consumer goods (FMCG) companies like Tata tea and Hindustan
Unilever bought tea plantations in Assam and Tamilnadu to bring down the cost of raw
material.
but both had negative experience due to ^above Upstream issues, so by 2005, they sold
away plantations to former employees and other companies.
Now Tata and Hindustan Unilever focus on blending, packaging and marketing only.
Tea Auction
About 50% of world production continues to be traded via the auction mechanism.
Auction centres are located at all major producing countries, with the exception of China.
In India, Tea Auction centres located at Guwahati, Siliguri, Cochin, Calcutta, Coonoor,
Coimbatore and Amritsar.
Problem:= in auction, the brokers gulp down majority share. tea producer doesnt get fair
share.
Tea Supply Chain: Downstream
DESI
CONSUMER
YOUTH
DEMAND
But in foreign countries, the demand for green tea and non-CTC orthodox
variety=high.
PREMIUM
The premium tea (Expensive brands) = very small demand in India, not even 10%
of total tea sales.
Export related
leading exporters
importers
LOW VALUE
ADDITION
KENYAN
COMPETITION
Fall of USSR
TRADE
AGREEMENTS
They blend our tea varieties, repack and re-export it to other countries
@higher price.
but now USSR has collapsed and newly emerged CIS countries prefer
to import cheaper tea from Sri-Lanka, Kenya, Bangladesh, Indonesia
etc.
India has entered into Trade Agreements with Nepal and Sri Lanka,
which have resulted in imports of tea from these countries into India.
The combined negative effect of all of above upstream, downstream issues can be seen in following
table:
1970
2011
tea
33%
10%
another table:
2011
tea
4000
10%
Meaning: despite favorable agro-climatic conditions and cheap manpower, tea doesnt fetch us much
export earnings.
Foreign consumer Preference
BLACK TEA
GREEN TEA
both Green tea and black tea are made from the
same tea plant, Camellia sinensis
Future strategy
1.
Government needs to streamline taxes, help estate owners to plant new shrubs.
2.
In the traditional tea-drinker Western markets (i.e. UK, Ireland, Netherlands, Australia, New
Zealand) strong growth in tea-demand is unlikely. Because their younger population is
shifting towards Coffee. Tea is regarded as an old-fashioned drink.
3.
Indian government + tea growers need to make marketing/awareness campaign about the
health benefits of green/herbal/organic tea to create its demand in non-tea drinkers and youth
abroad.
Tea Board of India
1.
2.
The Board has members drawn from Parliament, tea producers, traders, brokers, consumers,
and representatives of Governments from the principal tea producing states, and trade
unions.
3.
4.
Provides Financial and technical assistance for cultivation, manufacture and marketing of tea.
5.
helps plantation workers and their children through labour welfare schemes
6.
Darjeeling Tea is given GI-status (Geographical indicator), Tea board coordinates with foreign
agencies to see that it is strictly enforced.
7.
Export Promotion
8.
The Indian cafe business is estimated at ~1500 crore rupees, and is expected to grow at
more than 10% per year.
Plantations are eco-friendly, also provide the perfect habitat for birds.
2011
coffee
4500
2%
Traditional areas
Non-traditional
North Eastern
region
ARABICA VARIETY
ROBUSTA
Kerala leads.
less
less
less
2.
3.
Solutions?
1.
Crop diversification. Apart from coffee, the planter should also start vanilla, cocoa, cinnamon,
cashew , pepper, cardamom, cinnamon, medical and aromatic plants. (Depending on soilclimatic conditions).
2.
Such crop diversification would ensure continued employment of the existing labour force
without affecting the ecological balance.
3.
Problem? = The state land ceiling acts do not permit reduction in acreage under coffee. They
need to be amended especially for TN and Karnataka.
labor
The labor laws for the plantation sector stipulate that any person who is employed for more
than 90 days, needs to be treated as a permanent employee of the estate. And He must be
given gratuity, housing, education, canteen facilities etc.
Such labor laws impose an additional burden on the small coffee estate where labour is
required seasonally.
Further, coffee estate owners are moving to Robusta cultivation. Robusta variety needs less
labour than Arabica. (yet difficult to give VRS to redundant labourers because of the laws)
Organic Coffee
Organic coffee is produced by using only non-synthetic nutrients and plant protection
methods. (e.g. bio fertilizers and biopesticides).
At present, biggest exporters of Organic coffee=Peru, Ethiopia and Mexico. And India has
good potential for organic coffee production because:
1.
Traditional farming practices such as use of cattle manure, composting, manual weeding etc.,
already done in vast majority of small holdings.
2.
skilled manpower available for labour intensive operations like manual weeding, shade
regulation and soil conservation measures etc.
3.
Majority of these small holdings especially in Idukki zone of Kerala, Bodinayakanur zone of
Tamil Nadu and all the tribal holdings in Andhra Pradesh and the North-Eastern states are
already growing coffee using organic methods.
Suggestions:
1.
2.
3.
union
state
Income tax.
But if coffee grower sells his coffee in cured form, he is subjected to income tax.=>It
discourage the coffee grower from value addition or curing. they sell coffeebeans in
unprocessed form=less income.
Agriculture income tax. Karnataka has imposed purchase tax on coffee=>tax evasion
by unregistered units, while honest grower suffers. This tax should be scrapped.
Majority population =tea drinker. Domestic coffee consumption mainly in South India: Tamil
Nadu, Karnataka, Kerala and Andhra Pradesh + selected big cities.
no. of outlets
Tata-Starbucks
11
1.5 crore
32
3.5 crore
Costa Coffee
100
60 lakh
1200
40 lakh
No, UPSC is not going to ask ^this, but Im providing the info to show that coffeeshop is also a good
career backup option. Only challenge: real estate cost/rents in prime locations.
Govt.Control
For long, the domestic and export market of coffee was administered and regulated by the
Indian Coffee Board = typical inefficient marketing-distribution of a government agency.
But Coffee export was liberalized in the 90s, Indian Coffee Boards monopoly was
removed=export improved. But we were late to enter the game, Brazil, Columbia etc. already
had captured the international business. The top Coffee MNCs made contract farming
agreements with them and Indian coffee growers have been lagging behind ever since.
Cess
Coffee exports are subject to a cess= makes our coffee expensive in foreign market.
This export cess is pooled into the Consolidated Fund of India, BUT money not used for
benefiting the coffee sector (i.e. for estate upgradation, R&D, HRD etc.)
Government should either remove this cess or use its money for benefitting coffee sector.
Coffee bars
Globally, the largest growth in coffee markets is driven by liquid coffee retailing through coffee
bars and vending machines. E.g. Starbucks, Nescaf etc.
Other coffee growing regions are also capitalizing on this trend by establishing their own
brands of cafes in the major consuming regions. e.g. Juan Valdez, the icon of Colombian
coffee, has opened Juan Valdez coffee shops across the world.
In such business environment, exporting coffee beans alone, wont bring lot of money. We
also need to establish forward linkages e.g. Indian retail coffee bars abroad.
The combined negative effect of above Upstream-downstream issues can be seen in this table:
1970
2011
coffee
1%
2%
^as you can see very negligible rise in our export. (Source Economic Survey 2012)
Foreign Marketing
Indian coffee: Positive attributes
1.
2.
plantations are eco-friendly and provide the perfect habitat for birds
3.
Government + industrial associations need to make generic campaigns abroad, to highlight ^these
positive attributes of Indian coffee.
Monsooned
coffee
Although Japan and China are traditionally tea-drinking countries, coffee is establishing itself as an
everyday beverage, among the youth= potential for Indian coffee exports.
Coffee Board of India
1.
2.
3.
4.
5.
6.
7.
5m
1.
2.
15m
1.
2.
Despite favorable agro-climatic factors and labour availability, Indias share in world
tea exports has declined considerably over the years. Examine the upstream and
downstream issues responsible for this and suggest remedies.
Essay
1.
2.
To stimulate wildly weak and untrained minds is to play with mighty fires.
3.
4.
for onion
for onion
This article marks the end of food processing series from my part but shouldnt mark the end from
your side because nothing prevent UPSC from asking any other topics not covered in these articles.
Keep an eye on newspapers, you can never know when youll get lucky.
Edible oil: Scope-Significance
1.
India is the worlds fourth largest vegetable oil economy after US, China and Brazil
2.
India is blessed with many agro climatic zones- allows us to cultivate Groundnut, mustard/
rapeseed, sesame, safflower, linseed, castor seed, coconut and oil palms.
3.
Edible oil industry in India has made an investment of Rs 10,000 crore and employs around 5
lakh people.
4.
5.
Since India is the second largest producer of rice in the world next to China, there is good
scope for rice-bran oil production.
6.
Good scope for Tree Borne Oilseeds (TBO).(more details in middle part of this article)
Edible oil: Location
Oilseeds area and output is mainly concentrated in Central and southern parts of India.
oilseed
Groundnut
Soyabean
Sunflower
Total Oilseeds
REGIONAL PREFERENCE:
edible oil
mustard/rapeseed
North-east
Soybean
North
groundnut
west
Coconut oil
south
In terms of overall consumption: Palm oil (mainly imported) >>soybean >>mustard oil>>groundnut oil.
Upstream issues
#1: Low supply of oilseed
From late80s to mid90s, the oilseed production in India was good because
1.
Government had launched Technology Mission on Oilseeds (TMO) program to boost oilseed
production.
2.
During that time, MSPs for grains were kept in check (now theyre quite higher oilseeds)
3.
1.
In 94, government liberalized edible oil imports=> consumers shifted to cheap varieties like
Palm oil and Soybean oil.
2.
In recent years, Government has raised the minimum support prices (MSP) for foodgrains
more than MSP for oilseed. Farmers find it more lucrative to grow wheat/rice than oilseed.
Although Government shouldnot Increase in the MSP of oilseeds, because itll lead to
corresponding increase in the market price of such products=>both consumer and oil refiner
will suffer.
3.
Result?
1.
2.
More than 40% of edible oil demand met through imports. Leads current account deficit =
rupee depreciation.
3.
In 2011 alone, we imported edible oil worth more than 45,000 crore rupees. (=~2% of import)
#2: Oil palm cultivation
Palm oil forms significant part among the imported edible oil. We need to become less dependent on
imports. Solutions?
1.
Focus on Andhra Pradesh, Karnataka and Tamil Nadu enhance local production.
2.
Oil palm has long gestation period (4-5 years) =farmers are hesitant to shift to oil palm
because of the fear what will we earn during those 4-5 years?=> Government should
promote intercropping (Banana, Maize , Chilies and Vegetables in the first three years), to
make oil palm plantation more sustainable and economically viable.
3.
Under the current MSP regime, economics are superior for wheat and rice than oilseeds. (from
farmers point of view)=> it is difficult to get more area under oilseed cultivation. Solutions?
1.
For different agro climatic zones of the country, develop early maturing and disease resistant
varieties of oilseeds with higher oil content.
2.
Encourage private sector participation and direct farmer processor linkages. This would
ensure adoption of superior crop management practices.
3.
4.
5.
Develop warehouse receipt based financing. Itll allow farmers to store the output and sell it at
favorable prices.
6.
Rice Bran Oil is obtained from the outer brown layer of rice.
Were the second largest producer of rice in the world next to China, with potential to produce
about 1 million of Rice Bran Oil per annum.
There is need to modernize the huller rice mills => easy separation of husk and bran. Then
bran can be used as raw material for rice-bran oil.
#5: Tree borne oilseeds (TBO)
Examples?
1.
Sal
2.
Mango Kernel
3.
Mahua
4.
Neem
5.
Karanja
8.
Kokum
6.
Jojoba
9.
Kusum
7.
Chura
10. Tung
TBO: significance?
1.
Tree borne oils grown in forest, non-agricultural land= less harmful to ecology (Compared to
fertilizer, pesticide based farming.)
2.
3.
TBO product
can be used as
Cattle feed.
There is a growing trend among international chocolate manufacturers, to use TBOs fats from
Western Africa/Indonesia. This highlights the export potential for Indian TBO. Following should be
done to utilize this potential:
1.
2.
3.
Result=>Old units (which have outlived the tax-exemption period)= they become
uncompetitive.
Thus new units keep adding despite existing industry-wide surplus capacity.
The average profit margins for oil-processing in edible industry are low (<5%).
Therefore, the government should not provide any tax incentives, which create a non-level
playing field for existing players vs new players
Economies of Scale
1.
2.
solvent extraction (to chemically remove residual oil from the oilcake solids)
3.
oil refining
In EU, US, China above three processing stages are done in one vertically integrated plant= shortercompact supply chain=economies of scale.
But in India, the Crushing of groundnut, rapeseed/mustard , safflower and sunflower =reserved for the
small scale sector. These small scale institutes make up more than 75% of edible oil industry.
Result?
1.
2.
3.
lower oil recoveries from oil seeds (because outdated equipment technology)
Solution?= Dereservation would allow for crushing of seed and solvent extraction of cake to be carried
out in the same complex. This will increase oil recovery. As per industry sources, due to economies of
scale, the cost price for the final oil produced would be lower by 2%.
PLAYER TYPES:
Ghanis
Small scale
expellers
Solvent
extractors
They crush and process hard oilseeds with low-oil content such as soybeans and
extractors cotton seed as well as chemically extract residual oil from the oilcake
These plants refine solvent-extracted oil. However, oil refiners are usually not
integrated because of the SSI problem.
Oil Refiners
NOTABLE PLAYERS
Edible Oils
National Dairy Development Board (Anand), ITC Agro- Tech (Secunderabad), Marico
Industries (Mumbai), Ahmed Mills (Mumbai)
Vanaspathi
Oil brands
1.
Wilmar, the largest palm oil conglomerate in the region, already owns one of Indias largest oil
refineries in collaboration with the Adani group.
2.
Bunge Agribusiness India, bought Dalda Vanaspati from Hindustan Lever Ltd
Entry of foreign players
100% Foreign Direct Investment ( FDI)is allowed in Indian vegetable oils and vanaspati in industry
through the automatic route.
Past few years, foreign players have setup port-based edible oil refinaries in India. Location factor?
RAW
MATERIAL
MNC players source oils/oilseeds from other countries where they have a
sizeable presence.This reduces the cost of raw materials and improves their
competitiveness.
TRANSPORT
Port location= can import crude edible oil/oilseeds, refine and distribute it.Refined
oil is then transported by rail.
TAX
duty differential between crude and refined oils makes it advantageous to import
crudeoil and refine it in India.
Port-based refineries also enjoy tax concessions for a few years in certain states.
Downstream issues
#1: Tax Uncertainty
2001: import duty on both sunflower oil and safflower oil increased from 35% to 75%,
Result: MRP of those two oils increase and consumers started shifting to cheaper varieties
e.g. soybean oil. =this type of quick shifts are bad for desi oil producers.
Thus Frequent change in import duties increases operational complexity and uncertainty for
the domestic oil processing industry.
we Need stable taxation policy for edible oils @both union and state level. Lahiri Committee
Report on Edible Oils said the same thing.
Price
Indian consumers are very sensitive to prices. Price of edible oils is the biggest driver for
consumption. We can see it from following evidences:
1.
Only a small percentage of edible oils are sold in branded form. (Because branded oil attracts
more taxes=>more expensive)
2.
The penetration of branded oil is barely ~30% in Urban areas and ~10% in rural areas.
3.
Soybean oil, Palm oil => cheaper than other varieties. In recent years, their
import+consumption has increase significantly.
4.
Consumption of olive oil (mainly imported) = negligible, due to high prices. Olive oil mainly
used by high income families and premium hotel/restaurants only.
#2: Health concerns
1.
2.
Because Local oil businessmen lobby (and their election funding) => most state Governments are not
stringent about edible oil quality.
Recent innovations by edible oil companies:
INNOVATION
how
Branded players have improved the packaging for customer convenience e.g.
PACKAGING
BLENDED
OIL
1.
Tetra packs,
2.
easy-to-pour pouches,
3.
Companies are launching blended oils, combining the health benefits of two
types of oils. e.g. a blend of Sunflower oil and Ricebran oil in the ratio 20:80
Stearin is non-edible fat, and used for soap manufacturing. Can also be imported at a very
low custom duty.
Thus, some bogus players use (imported) stearin for making fake vanaspati oil. This is bad for
both
consumer health
Solution
1.
Under the current free trade agreements with Sri Lanka / Bangladesh / Malaysia / Indonesia,
crude palm oil is imported @0% duty. Then used for making palm oil. Result=>desi palm
farmers dont get good prices.
2.
Malaysia and Indonesia-the two biggest exporters of palm oil- give subsidy to their refiners.
3.
On the other hand, Indian government has moved in the opposite direction- imposing more
and more duty on desi refiners.
4.
Already one refinery has shut down while many others are struggling- leading NPA problems
for banks.
5.
When edible oil refineries shuts down=>negative impact on soap industry as well, because
Stearin is keyinput for soap making. Stearing is generated as a by-product during the edible
oil refining process.
6.
To counter this, and to protect its own refining industry, the Indian Government should levy
higher import duty on Refined Palm Oil/Palmolein coming from Malaysia, Indonesia.
#6: Soybean export
Because of the concerns over genetically modified food, many customers in Europe, Japan prefer
non-GMO soybean products. Indian Soybean is non-GMO= weve good export potential. But following
needs to be done:
1.
2.
Government should provide transport subsidy for soy meal exports because most of the
processing units are located in the hinterland.
3.
Soybean Meal needs to be classified and included in the Vishesh Krishi Upaj Yojana
(Special Agricultural Produce Scheme) to boost exports. By the way, this scheme was started
to promote export of fruits, vegetables, flowers, minor forest produce and their value-added
products. Exporters of such products shall be entitled for duty credit scrip.
Onion Crisis
Onion crisis is too clichd-blow-out-proportion topic, hence the chances of getting a UPSC Mains
question=very low. But still here it goes:
India produces all three varieties of onion red, yellow and white.
REGION
North India
winter (Rabi)
World
India
1.
China
1.
Maharashtra
2.
India
2.
Karnataka
3.
USA
3.
Gujarat
4.
Egypt
4.
Bihar
5.
Iran
5.
MP
1.
2.
3.
4.
FINANCIAL
DISTRESS
ASYMMETRY OF
INFORMATION
But traders compare rates of all markets, including major distant and
export market and then decide where to send their produce or just
hoard it until prices rise up.
Onion Traders wear many hats by bending (not breaking) the APMC
rules.
OLIGOPOLY
Middlemen
STRIKES
order suppliers,
Storage
Farmer from distant part has to go empty handed / his produce gets
wastage because of such strikes
For historical and financial reasons, large storage capacities for onion
have remained with private traders and that too in Nasik belt= they can
hoard the onions and create artificial scarcity to increase prices.
#3: Lack of onion cooperatives
In the dairy article, we saw how dairy cooperatives saved the farmers from exploitation and
empowered the women and weaker sections of the society. Then why cant same story repeat with
Onion cooperatives?
1.
Due to various agro-climatic reasons, onion belt is in actually a scattered chunk of large
number of smaller sub belts. This prevented liaison and coordination among farmers of
various tehsils.
2.
Farmers dont have the trading expertise, market knowledge and risk bearing capacity- hence
their cooperatives havent been successful in onion business
3.
Onion traders with deep pockets, can maintain yearlong expenses even in lean seasonfarmers cooperatives cant.
4.
REGION
Consumers PREFER
Traders buy onions small lots from the market yards and pool the produce for sorting /
grading
Then, they send different grades to different markets all over India.
But Individual farmers/ farmers cooperatives lack the training and resources to do this.
Export policy
1.
2.
Unseasonable rains in late Sept and Oct 2010 destroyed the onion crop. Yet the government
agencies allowed traders to export more than 1 lakh tonnes of onion in October 2010.
3.
Nowadays, whenever onion prices begin to increase, government bans the export (without
fixing he fundamental problems) still exporters manage to sell onions though fake documents.
4.
As a result, Indian traders and farmers lost their credibility in the export markets as unreliable
suppliers. Foreign buyers prefer onions from other countries over India.
Lack of Irradiation
Food irradiation= foods are exposed briefly to a radiant energy source such as gamma rays
or electron beams. This kills harmful bacteria and increases the shelf life of the crop.
food irradiation increases onion shelf life by stopping sprouting which causes the crop to spoil.
BARC had setup a food irradiation unit in Lasalgaon in Nasik district of Maharashtra.
But In the last four years, not a single onion has been irradiated here. Irony is many of
the farmers in this area are not even aware of this facility-. I do not know what happens
inside. But my friends tell me that it is a facility used to make and test bombs, says
Nandu Kor, an onion farmer from nearby village!
1.
Much of the stored onions of last years crop are exhausted= hence shortage.
2.
Onion districts of Maharashtra were facing severe drought. Farmers had to hire water
tankers and brought water from 30 and 40 kilometers to their onions. Thus, cost of input
increased=>MRP also increased.
3.
The ongoing rains have also stopped the arrival of fresh crop from Rajasthan, Madhya
Pradesh, Andhra Pradesh and Tamil Nadu because of transport and logistic problems.
4.
New crop from South India is yet to arrive in the Northern cities of India. (most probably in
October)
5.
From Sept 7 to 15: Lasalgaon market (Asias largest wholesale market for onion) was closed
for five days due to holidays and weekends. This led to decline in onion supply in the market
=Price rise.
6.
Traders with political affiliation are hoarding onions to raise prices and create an issue before
state assembly elections
NAFED & Onion Crisis
NAFED functions:
1.
2.
3.
4.
To undertake import, export , wholesale or retail of agricultural, horticultural, forest and animal
husbandry produce.
5.
6.
7.
8.
9.
marketing research-analysis, International collaboration, PPP, HRD, R&D and other fancy
things.
1.
NAFED is responsible for fixing the minimum export price (MEP) of onion in collaboration with
DGFT (Director General of Foreign Trade).
2.
When there is shortage of onion in desi market, NAFED will increase the Minimum export
price (MEP) to reduce the export of onions.
3.
Example: In August-2013: the MEP for onion was $650 a tonne. Meaning as an export
you cannot send onion abroad for a price cheaper than $650 (although many exports fake
documents and send onions anyways)
4.
NAFED intervenes in the domestic marketing whenever there is glut in the market and prices
reach uneconomical levels. In such situation, NAFED procures onions from farmers and
traders.
5.
In extreme case, it also imports onions from abroad. E.g. during current September crisis,
NAFED floated a global tender to import onions from Pakistan, Iran, China and Egypt to boost
domestic supply and curb prices.
Solutions?
PANCHAYATI
RAJ
DESTROY
OLIGOPOLY
EXPORT
INFRA
1.
Under 11th Schedule of constitution: the markets and fairs fall under
the purview of Panchayats. State governments should empower the
Panchayats to carry out this function efficiently. (rather than relying on the
APMC mechanism)
2.
3.
4.
5.
6.
7.
8.
9.
1.
India is the largest producer and exporter of Basmati rice in the world.
2.
At present, Haryana accounts for over 50% of total basmati rice production in India, Punjab
accounts for 15% and the balance is cultivated in Uttaranchal and UP.
3.
Key export markets for Indian basmati are the Middle East, Europe and the United States.
4.
Middle East accounts for bulk of basmati exports because of the large South Asian expatriate
population.
5.
Small players account for a significant proportion of Indias rice exports, some of whom do
not adhere to the requisite quality requirements. This creates a negative perception, not only
about specific players, but also about the country of source i.e. India.
6.
Negligible focus on identity preservation. (Indian basmati rice or India durum wheat). In US/
EU the marketing focus must be on how Indian varieties are non-GMO.
7.
Therefore, it is essential that the Government via APEDA, undertakes necessary steps to
educate exporters and ensures compliance with norms.
Bread-Biscuit
BREAD
Bread-based foods such as burgers, sandwiches and pizzas, are becoming the
key food offerings of most restaurants.
White bread dominates market but brown bread demand growing due to health
benefits.
For long, the biscuit industry was reserved for the SSI sector=hampered the
growth and economies of scale. But after de-reservation, the biscuit industry has
picked up the growth momentum, SSI units have joined as franchisees of large
biscuit manufacturers.
BISCUIT
1.
Aggressive TV marketing
2.
3.
4.
Growing income levels and increased consumer spending on high value food
items.
Two types of wheat
Bread Wheat
Durum Wheat
less
soft to medium
very hard
less
less
Indian durum varieties have a high level of resistance to leaf rust and other
diseases
not much
Middle East, South Africa and Mediterranean countries are the potential
clients for Indian durum wheat.
Challenges:
The grain is handled manually. Impurities and moisture levels translate into higher losses
along the chain.
click to enlarge
Supply Chain Britannia
EDIBLE OIL
SUGAR
UPSTREAM
WHEAT
PROCESSING
DOWNSTREAM
(RETAIL)
GENERAL
INSTITUTIONAL
MSP problem
(Although highly debatable if you dont believe in free market economy.)
From Governments point of view:
FARMERS
POORS
MIDDLECLASS AND RICH
PEOPLE
1.
FCI is becoming the first and often the only buyer of wheat. But FCI godowns= small-scale,
low-quality structures=> grain rotting. Food Corporation of India should be the buyer of last
resort.
2.
Farmers shifting to wheat. Cultivation of sugarcane, oilseeds, and pulses declined. Sugar and
edible oil prices increased=food inflation=middleclass suffers.
3.
In global commodity business, the wheat prices go up and down significantly but Indian wheat
price remains always high (because of high MSP). Hence, price-wise India wheat is not
competitive in exports (compared to Americans and Canadians.)
4.
Desi Bread-Biscuit industry also suffers because outdated APMC act=they have to procure
wheat through APMC mandis=nuisance of middleman=high cost of raw material.
1.
Instead of MSP, give Income support system to farmer through Kisan Credit Cards.
2.
Remove APMC middleman. Encourage direct linkage between farmers and food
entrepreneurs.
3.
Remove PDS shops. Just give them direct cash transfer to poor families so they can buy from
normal shops.
Taxation
Via GST, there is need to streamline all indirect taxes (Centre as well as State) across the
supply chain for grain and grain based products.=benefit to both consumer and producer.
Essential Commodities Act (ECA) leads to several hindrances including easy inter-state
movement of food grains and essential food items.
90s: central government announced its policy to treat the entire country as a single food zone.
However, there is ambiguity with respect to the government policies as State Governments
continue to impose restrictions on movement and storage of agricultural produce.
Need for innovation
Most companies in India produce bread or biscuits of a single variety; such as white bread
and sweet glucose biscuits respectively.
But a variety of products can be made by changing the shape, recipe, and by incorporating
other ingredients or processing conditions.
In countries such as West Germany as many as 200 varieties of breads are made, both in
large and small scale bakeries.
Although this is not really a food processing industry and there is low chance UPSC will ask
something about liquor industry supply chain management given its taboo nature. But just for
timepass and educational purpose, here it goes:
Upstream issues
BEER
Beer is made from malt. But good quality malt not available easily.
Need APFC reforms to promote direct purchase arrangements with farmers growing
barley vs beer manufacturer.
WINE
All wine manufacturers have faced capacity constraints, largely on account of lack of
availability of raw material (grapes)
Although 75,000 acres of land is under grape cultivation, wine grapes account for
under 2000 acres currently.
Maharashtra is the largest producer of wine grapes in India, and Karnataka second.
BEER
Through merger acquisitions, small players are gone, and the top 2 beer players in India
account for about 75% of beer sales=>economies of scale achieved.
1.
2.
Wine bottles, corks and shrink caps are usually imported, either because of nonavailability or cost.
3.
Therefore, the cost of bulk wine of average quality from India works is much higher
than Australia, Chile, Italy and France.
4.
WINE
Taxation
Beer is subjected to excise duty, interstate transportation: Import taxes, charged by the
destination state and export tax (levies) charged by the producing state.
Mahrashtra and UP= all these taxes raise beer MRP by 40% =>leads to smuggling, illegal
sales, mafia-police-politician nexus to evade taxes.
SOLUTION: need to rationalize taxation structure for wine and beer. Experiences from other
countries reveal that lower taxes can result in greater compliance and therefore higher tax
revenues
Downstream: Liquor Retail- 3 models
Pricing is market-determined
AUCTION MARKET
GOVERNMENT
CONTROLLED
(Communist model?
lolz)
Export: Beer
Chinese beer market has about 400 brewers, of which the top 10 account for only 45% of the
market. This has resulted in low profit margins for Chinese beer companies.
In contrast, the top 2 beer players in India account for about 75% of beer sales in India and
the industry will undergo further merger-acquisition in the near future=economies of scale for
Indian beer makers.
Thus, there is an opportunity to capture Chinese market though cheap Indian beer.
Export: Wine
PREFERENCE
Wine is mainly consumed in urban India, with a high proportion being in the
large metros.
Red wine is the single largest type of wine consumed, followed by white
wine
The success of New World wine makers in Chile and South Africa should
be an excellent example to the Indian industry.
EXPORT
Mock Questions
5marks
1.
NAFED
2.
3.
15marks
1.
The recent Onion crisis is the result of market inefficiencies, weak supply chains and
monopolies in the market. Examine this statement and suggest remedies
2.
The hike in minimum support prices of certain crops is blamed for the food inflation and
declining area under cultivation of pulses and oilseeds. Should government do away with
MSP-regime? Yes/No/Why?
3.
Despite favorable agro-climatic factors, a significant demand of edible oil is met through
imports. Examine the upstream factors responsible and suggest remedies.
4.
(GS4) Article 47 of the constitution says: The state shall endeavor to bring about prohibition
of the use except for medicinal purposes of intoxicating drinks and of drugs which are
injurious to health. then is it unethical for the state agencies to sell liquor? Yes/No/Why?
Essay
1.
2.
Democracy is a form of government that substitutes election by the incompetent many for
appointment by the corrupt few.