REPORT ON

DIAGNOSTIC STUDY OF
RICE MILLING CLUSTER OF BARGARH & ADJOINING AREA

By
Er. Pitambar Parida
&
Er. Epari Dharma Raju
Cluster Development Executive
Deptt. Of Industry, Govt. of Orissa, Bhubaneswar

Prepared as a part of curriculum during training programme for Cluster

Development Agents (17-26th Aug, 2005) at Bhubaneswar

Organised by
United Nations Industrial Development Organisation
Cluster Development Programme

&
 Xavier Institute of Management, Bhubaneswar
INDEX
Sl. No Contents Page
1 Introduction 2

2 Age of the Cluster 3

3 Nature of the Cluster 3

4 Industry Scenario 3-4

5 Cluster Details 4-8

6 Structure of Cluster 8-12

7 Evolution of Cluster 12

8 Production process - description of value chain 12-15

9 Analysis of Value Chain( as per FAQ standard) 16-17

10 Analysis of Business operations 18

11 Presence of support institutions 19-20

12 Business Development Service Providers 20

13 Infrastructure analysis of Cluster 20

14 Credit analysis of the cluster 20

15 Social and Environmental Conditions of the Cluster 21

16 Present Cluster Map 22

17 SWOT analysis 23-24

18 Vision for the Cluster 24

19 Key Problem Areas & strategic interventions proposed 24-28

20 Expected major outputs 28-29

21 BROAD ACTION PLAN 29

2
 RICE MILL CLUSTER OF BARGARH & ADJOINING AREA.
1. Introduction :
Bargarh & adjoining areas are the adjacent district having population of 22.75
Lakhs. With commissioning of Hirakud Dam Project, a green revolution started
after 1960. As a result of which Bargarh & adjoining areas became rice bowl of
Orissa. The main economic activities of the region is agriculture and main crops
raised are paddy. Following table would give an idea regarding the land in
Bargarh & adjoining areas.
Land Utilisation Pattern (2000-2001)

Particulars of Area Sambalpur Bargarh

(in Hectres) (in Hectres)
A) 152574 80490
• Forest Area
55000 54000
• Misc, tree, permanent pasture, land put
to non agricultural use, barren and
uncultivable land.
• Cultivable Waste 20489 15392
• Current Fallow (04-05) 671 22
• Other Fallow (04-05) 27392 6119
• Net Area SOW 193349 348725
• % of Forest Area of district to state 152574 80490
666293 583200
B) Agricultural Land (04-05)
• Total Cultivated Land 221412 354866

• High Land 124273 179437

• Medium Land 60759 89395

• Low Land 36380 76034

• Average area covered in Khariff

109704 2112093
(Paddy)
• Approx. Paddy production in Khariff. 19.24Qntl/Hec 22.28Qntl/Hec

3
 • Average area covered in Ravi 14058 43343
(Source : DDA, Sambalpur)
2. Age of the Cluster
The Bargarh & adjoining areas has a paddy growing area traditionally and
hence looking to the raw material availability and the ready market, rice being
the staple food for the state’s population, rice milling became a natural choice
for traders keen on investing. Thus the milling activity started in the area almost
50 years ago. Since then the number of units have grown to 150 units in the
area as estimated presently. The growth of the units in the cluster can also be
attributed to the influence of the neighbouring rice mills in Chhattisgarh with
similar paddy cultivating areas. In fact, due to the ongoing purchase support
from FCI, the number of milling units increased from 96 to 150 during the
period 2001-2005. As such the cluster is a naturally evolved cluster having
proximity of raw material, i.e. paddy which in turn enjoys regular water supply
from the Hirakud dam located in the cluster’s proximity.
3. Nature of the Cluster
As mentioned in the preceding paragraph, the rice mills are mainly spread
around Bargarh with a few units also being located in nearby district of
Sambalpur. In all there are about 150 rice mills in the region up to 2004-05.
These mills are of various capacities ranging from 2 tons/hr to 10 tons/hr, the
older units usually being that of low capacities while the comparatively new
units of higher capacities reflective of the growing investment in the sector.
These units buy 75% of the total requirement of paddy from the market yard at
the minimum support price and 25% is purchased directly from the cultivators
of the region. The average turnover of these units ranges from Rs. 3-4 crores in
case of lower capacities to about Rs. 6-8 Crores in case of the higher capacity
units. The cluster is organised on horizontal lines and the overall turnover of the
cluster is about Rs.1000 Crores and it comprises of small to medium size units.

4. Industry Scenario: -

4
a. World: In the international market Thailand, USA & UK have gone
ahead in rice production. These countries are basically producing short
grain non-basmati varieties. Besides Europe and UK also procure brown
Basmati Semi processed rice from India and finally process further as
per their requirements. The Milling Industries of these countries mainly
employ automatic advanced technology of processing, professionally
human resource and well managed organizations having concepts of
TQM, appropriate and modern technology and continuous R&D
activities. In non Basmati rice India faces top competition with Thailand,
Philipines and Vietnam whereas in Basmati rice India stands topmost in
the world as far as value structure is concerned. World produces 397.2
million tons of paddy (2001). It is estimated that about 800 million tons
( FAQ) of rice will be required by 2025 A.D.
b. India : - Rice milling units prevails mainly in the state like U.P.,
Uttaranchal, Punjab, Haryana, Orissa, W.B., A.P., Tamilnadu, Bihar,
Assam, Karnataka and Kerala at National level. The states produce rice
of both Basmati and non-Basmati variety. The Basmati varieties are
mainly produced in Punjab, Haryana, U. P. and Uttaranchal. As far as
exports of fine quality Basmati rice from the country is concerned 75% of
it is exported from state of Haryana only and is followed by Punjab.
Hence, the few bench marking cluster in the country is considered as
Haryana and Punjab, which are rich in production, exports, quality and
technology.
Few fully automatic plants from world top manufacturers i.e.
stacke Japan sorting machine imported from USA, UK & Japan have
also installed by few units of Karnal (Haryana), Kalady (Keral), Rudrapur
(Uttaranchal). Some of the units of Bargarh cluster have installed colour
sortex and silky plant. The paraboiled produced by these units may
compete in national and international market.

5
 5.Cluster Details:-
There are about 150 rice mills in Bargarh & adjoining areas, out of which
one is coming under large sector. The processing/milling capacity of these
units ranges from 2MT / Hour to 8MT/Hour. The units are located in various
blocks and villages of Sambalpur and Bargarh districts.

(a) Critical Mass

The cluster broadly consists of 150 mills spread mainly around Bargarh & adjoining
town. The average turnover of these units ranges from Rs. 3-4 crores in case of lower
capacities to about Rs. 6-8 Crores in case of the higher capacity units. Thus the
overall turnover of the cluster is about Rs.1000 Crores.

The growth on the basis of number, turnover and employment in Bargarh cluster can
be seen from following data provided by the association of the rice milling cluster:

Grow th of Rice Mills Cluster in in Bargarh & adjoing tow n

160
140
120
NO OF MILLS

100
80
60
40
20
0
2000-01 2001-02 2002-03 2003-04 2004-05
YEAR

The following data gathered from the cluster from various sources reveals that
employment growth has been steadily increasing except in the year 2001-02.

EMPLOYMENT GROWTH IN CLUSTER

12000
NO OF WORKERS

10000
8000
6000
4000
2000
0
2000-01 2001-02 2002-03 2003-04 2004-05
YEAR

6
 GROWTH OF RICE MILL CLUSTER ON THE BASIS OF TURNOVER

1000
900
800
700
600
RS IN CRORES 500
400
300
200
100
0
2000-01 2001-02 2002-03 2003-04 2004-05

YEAR

 Contribution of Cluster to export : 10 rice millers export to the tune of Rs. 130
crores approximately through Agents.
 Importance of the products in terms of its linkages with other products / sectors:
The product has primary linkage with packaging industry, machine suppliers of
engineering cluster of Cuttack-Bhubaneswar & Rourkela.
 Special features of the cluster in terms of seasonal / mainstay activities /
dependence: In this cluster paddy is a seasonal product mainly grown in two crops
i.e. Karif & Rabi.

(b) Location of the

Cluster Bargarh – Sambalpur
Rice Milling Cluster
The cluster consists of
the rice mill units
located mainly in
Bargarh area with a few
units falling in

7
Sambalpur district. The geographical map indicating the location of the cluster in
Orissa is as given below:

Within the cluster the fashion in which the rice mills are located in different villages /
towns of Bargarh and Sambalpur districts is shown as below:

Spread of Rice Mills in Bargarh - Sambalpur Cluster

45
40
35
30
25
No. of Mills
20
15
10
5
0
Hirakud

Maneswar
Dhankauda

Jujumara

Attabira

Paikamal
Sohela
Rengali
Burla

Bamra

Bargarh

Bhatli

Barpali
Sambalpur

Padampur

As such this becomes quite evident form the above given spread that the cluster has a
strong influence on the local economy of the region, affecting the lives of people from
paddy farmers to casual labour employed in the mills, the technical support of repairs
etc. provided by the local smaller units and the other economic spin-offs for the service
sector of the region.
A comphrensive status of the units of the cluster indicating investment,
capacity & employment is given below.

8
Sl. Year No of Production Value in Installed Employment Nos. Exports Investment
No. units in Lac MT Crores capacity (Direct & in
working in Lac MT indirect) Machinery
on single
shift basis
Regular contract
1. 2001-02 96 3.79 354.40 6.91 1920 4050 -- 76crores
2. 2002-03 110 4.32 411.30 7.92 2200 3300 -- 88crores
3. 2003-04 135 5.30 504.61 9.72 2700 4050 120Crors 108 crores
4. 2004-05 150 5.80 600.00 10.60 3000 4000 180crores 242crores

Growth trend of the rice milling industry in the last four years has been on
positive side. With 96 nos. of units in the 2001-02 in the cluster, their number
increase in 110 in the year 2002-03 registering growth of 19.5%. This figure
further increase to 135 in the year 2003-04 with another rise of 22.73% with
respect to the figure of the year 2002-03. Accordingly the rice production in
terms of quantity and value has also raised substantially.

6. Structure of Cluster :-
I. Rice Milling Industry :-as stated above 150 units are functioning in
the district of Sambalpur and Bargarh. Out of these 10 nos. of units
have installed colour sortex machine. They have started exporting
standard parboiled rice to Bangladesh and Indonesia through an
agent.
44% of the units have their installed capacity of rice milling to
the tune of 2MT/Hour and 36% of the units are with the capacity of
3MT/Hour. The state of Orissa including units mainly in Sambalpur
and Bargarh, Cuttack and Ganjam etc accounts for 75% of the total
mills of Orissa.
The units in SSI sector have installed low productive non-
automotive machines and mainly work for a period of 5 months with
effect from October to February linked with the Khariff Paddy
season. Due to irrigation facility in these two districts the units get
paddy for milling in Ravi season i.e for another three months. The

9
 rest of the season is called off season and units are mostly un-
operational.
II. Industry Associations : The rice milling industry in the district is
established in various blocks of districts but main industry
associations are functioning is Bargarh Rice Mill Association.
The above rice milling association mainly look after the
interest of the rice mills of their respective area covering the entire
industries, members and rice dealers. This association is operating
mainly in the office of the factory of the President of the Association.
No separate association level executives has been engaged /
employed by the district / regional level association. Neither any
separate staff for the association activities has been appointed nor
any magazine / periodicals or regular data / information flow among
existing members. Besides this these associations also do not
undertake developmental activities for their members except for
policies issue. Their activities are mainly directed towards changes in
the policy matter which are taken up with respective Government or
respective Agencies from time to time.

III. Controlling and Direct Promotional Institutions:

a) Ministry of Agriculture, Govt. of India.
b) Civil Supply Dept., Govt. of Orissa.
c) APEDA – Agriculture & Processed Food Products Export
Development Authority, Ministry of Commerce and Industry, Govt.
of India.
d) Food Corporation of India & State Procuring agencies.
e) Ministry of Food Processing, Govt. of India.
f) Standard Certification Agencies.

10
a) Ministry of Agriculture, Govt. of India : In order to protect interest of
farmers to get them minimum support price of paddy and avoid their
exploitation by intermediateries, Govt. of India under its policy every year fixes
the minimum support price of various crops including paddy. The state
Government is directed to watch and monitor the price stabilization and incase
the price found lowering than MSP, various states designated agencies take up
the bulk purchase of paddy as per the specification and thereby maintain the
minimum support price.

b) Civil Supply Department., Govt. of Orissa :-The state civil supply

department on the policy directions of Govt. of India to invoke and maintain
minimum support price of paddy for farmers.

c) APEDA: - It is an agricultural and processed food products export

development authority of ministry of commerce and industry and engaged in
augmenting, promoting and monitoring the exports of agro products including
rice. It also provides financial assistance to the merchant and industrial
exporters and has formulated the various schemes approved by Govt. of India.
APEDA’s scheduled products category include cereals, Basmati and non-
Basmati rice. The other major services of APEDA includes the following:
i. Formation of Agricultural Export processing zones. AEZ entail export
promotion with partnership of farmers, processors, exporters, central
and state govt. agencies and flow of information and data.
ii. Intervention in fiscal issues like rebate in excise, custom, sales tax,
mandi tax and state and central Govt. level for the units falling in the
zone.
iii. Financial assistance and grant in Aids and reduction in interest on
credits by banks.
iv. Legal, administrative tariff and non-tariff related issues.

11
 APEDA has so far established 32 AEZs with approval of state Govt. and
agencies including power Basmati rice in Punjab.

The APEDA’s assistance also includes carrying out exports inspection

passing on trade enquiry received from importer and financial cum grant in
assistance in infrastructure development, ISI-9000, TQM Certification
assistance in participation in international trade fairs and training etc.

e) Ministry of Food Processing formulates and implements the policies for food
processing industries with in overall national priorities and objective as well
facilitates the environment for healthy growth of food processing industry. The
major activities related to rice milling industries are as stated below:
i. Technologies up-gradation/modernization of food processing industries
ii. Setting up of food processing and training center.
iii. Creation of infrastructure facility for running degree/diploma courses
and training programmes for food processing.
iv. Training programmes.
v. For quality assurance and safety concept codex standards, R&D
including TQM, Bar coding, ISO 9000, ISO14000 and good hygienic
practices (GHP), Q.C. Laboratory.
vi. For schemes for backward and forward integration and other
promotional activities.
 Under backward linkages in procuring units ensure that high quality
seeds, fertilizers, pesticides and technical know how is provided to
the farmers in time.
 Under forward linkage to ensure regular market by establishing
linkages with market and assistance in market, surveys test
marketing and land building etc.
 For general advertisement to built awareness among the customer.
 For promotional activities like organizing seminars / workshops /
symposium / studies / surveys / feasibility reports.

12
  For participation in National / International exhibitions / fairs.
 For strengthening Industry Association by compilation analysis,
publication of statistics and dissemination information.
 For food fortification i.e. for dietary diversification and food
fortification using simple technologists by supplementing micro
nutrients.

Scheme for infrastructure development:

 To develop food path for infrastructure and common facilities for
use by small and medium enterprises, which enhance value addition.
 To develop packaging center to promote new technologists of
packaging.
 For value added centers to enhance self-life, higher realization
integrating value change and information flow and trace ability.

f) Standard Certification Agencies :- various national and international

standard certification agencies play active role in product and process
standardization, packaging and sampling standardization. The other part is
quality management system / TQM, ISO 9000, 14000 certification etc. the
following agencies assists in this regard.
 Bureau of Indian standards.
 About 38 international certification agencies providing certification
in ISO-9001-2000 & ISI-14000.

7. Evolution of Cluster:
The first rice mill namely M / s Hanuman Rice Mill, Sasan, Sambalpur
came up with an investment of Rs. 75,000 /- during 1953 in the cluster.
Of course the modern rice mill having parboiling dryer and sortex have
been introduced 3 years back. The no. of such mills will be around 10. The
cluster region is covering under western part of Orissa. It carries an extreme

13
climate which is favourable for production of Paddy. Canal from Hirakud Dam
irrigate major area of the district. Rice mills in this cluster area are 50 years old
hence traditionally skilled man power are available to operate the mills. It is well
connected by road to Raipur (Chhattisgarh) and Rourkela for better business
avenue.

Where the modern machinery are little bit costly and production cost is
slightly high still the rice produced out of the modern machinery have got more
demand in open market.

8. Production process - description of value chain :-

Here in this rice milling cluster procurement of paddy by FCI and state
procuring agencies are so to say nil. Last year only civil supply corporation and
MARKFED have purchased some quantity of paddy from market yards. In the
usual process the farmers are supplying URS (under relaxation specification)
quality of paddy at market yard. The millers used to buy URS quality paddy at
specific rates fixed by Collector i.e Rs.403.50 per 75 Kg bag. The sequence of
activities carried out in this cluster from raw materials to final product is stated
below :

The Collector, Civil Supply Officer, Tahasildar and RMC authorities have
a committee to decide the quantity of paddy to be purchased by a rice mill from
a separate market yard. The farmers having received identity card from local
tahasildar can only be eligible to bring paddy to the market yard. The farmer
has to pay 1% market fee on URS price while selling paddy to the millers. The
millers will take away the paddy to the respective mills after payment to the
farmers by their own trucks or trucks supplied by truck union.

The milling process are as follows :

Introduction of Mechanical dryer is a value addition over manual sun

drying process. Herein in mechanical drying system steam is being used and it

14
is a continuous process takes 6 to 7 hours for drying paddy. Advantage is that
the mill can run during rainy. Inclusion of parboling with mechanical dryer has
been considered as modern rice mill in Kerala. Rest other process are common
in this area.

15
 1. Raw Rice/Parboiled Rice processing flow chart

Paddy

Cleaning Soaking Steaming Sun drying

Mechanical
drying

Shelling Unit

Cleaning Dehusking Separator

Paddy Broken rice

Polishing unit

Separator Bran yard

Rice grader Broken rice,

smaller size rice
& impurities
Quality rice

Weighment
and packing

16
2. Process flow chart for exporting

Rice produced by common

rice mill

Silky unit

De stoning unit

Colour Sorting Machine

Grading

Weighment and Packing

17
 9. ANALYSIS OF VALUE CHAIN

Sl. Process Flow Process Accumulated Remarks

No. cost/Value (in value
Rs./-qtl. Of
rice)
1 Paddy (URS) 538 (URS: Under
Relaxation
System)
2 Transport 10 548
3 Cleaning, loading, soaking, drying, 20 568
dehusking, polishing, grading, etc.
4 Yeild A- raw rice
(a) Raw rice @ 67% i.e. 67 kg. cost of B – Parboiled rice
100 kg raw rice 847.76 (a)
(b) Parboiled rice @ 68% i.e 68 kg. 835.29 (b)
parboiled rice 100 kg
5 Cost of bags (2 nos.) 20 867.76 (a)
855.29 (b)
6 Transport 20 887.76 (a)
875.29 (b)
7 Sell price 965.70 (a)
952.10 (b)
8. Net profit • 77.94 (a)
• 76.81 (b)
9. Sell of rice brand–7%@ 500 35
10 Gross profit 112.94 (a)
111.81 (b)

18
Analysis of Value Chain( as per FAQ standard)
Process Flow Process Accumulate Remarks
Cost / Value d value
(in Rs/qntl)
1. Paddy (Gd-A) 560.00 560
2. Mktg. Fee 1%
3. Cleaning loading,
4. Misc. 1.5%
5. Total 2.5% 14.00 574
6. Drying 9.00 583
7. Dehusking & polishing 20.00 603
8. Grading 2.00 605
9. Yield
a. Raw rice @ 67% i.e. 67kg.
- Cost of 100 kg. raw rice 902.98(a) (a) raw rice
b. Parboiled rice @68% i.e (b) boiled rice
68kg 889.70(b) Charges to be
- Cost of 100 kg. parboiled paid by
rice CSC/agencies
10. Custody & maint. Charges 12.00 914.98 (a)
11. Cost of gunny bags 2 nos. 20.00 934.98 (a)
921.70 (b)
12. Transportation 20.00 954.98 (a)
941.70 (b)
13. Sale price 90.30 (a)
88.09 (b)
14.Net profit
15.Sale of rice bran(7%) 35.00
16.Sale of husk (19%) 500.00 9.50
17.Overall gross profit 50.00 134.80 (a)
132.59 (b)
N.B.: (i) This gross profit is excluding over head and administrative expenses.
(ii) For an average production of 100 kg rice 150 kg of paddy required.

19
(iii) The above practice would have been implemented but the practice is being
considered by the administrative authority.

10. Analysis of Business operations:

a) Raw material procurement and its quality cost etc.

Paddy is the basic raw materials for rice mills. Ministry of agriculture
Govt. of India fixes up the minimum support price of different crops including
paddy by way of policy to protect the farmers from exploitations. It is observed
in our diagnostic study that no farmer is able to supply standard quality paddy.
As such they are not getting minimum support price. This is one of the major
problem.

b) Production process related problems

• In the process of parboiling water affluent is generated and is harmful.
The rice millers are getting problem to store it.
• Rice husk is the cheapest fuel for generating steam but the waste
product fly-ash is another headache for disposal for the millers.

c) Design related problems

The rice mills working in this cluster are of very old technology. Electrical
consumption is very high. Here in this technology electricity consumption is
very high compared to modern rice mills.

d) Technology related problems

Technology is changing day by day. The technology adopted by the rice
millers here in this cluster is occupying more space, consuming more energy
polluting air and water and it is time consuming. As a whole the cost of
production is high for the technology.

e) Credit Issues
Finance is not a problem nowadays excepts some mills all other mills
have availed term loans and working capita from different commercial banks.

20
f) Marketing Issues
At present marketing of rice is not at all a problem because FCI is
purchasing 75% of the total production against levy quota. Open market has
the demand for consuming rest 25% of the production. If the levy system will be
out then marketing will be the major problem.

11. Presence of support institutions :-

APEDA, minister of civil supply deptt., Agricultural Deptt., Govt. of

Orissa, Central Rice Research Institution, Cuttack, Indian Council for
Agriculture Research, Agricultural Universities, National Productivity Council,
CIDBI, National Commercial Bank, NABARD, DIC, SISI, Certification Agencies,
Testing Laboratories, Engineering College, Engineering School, ITI, RMC.

i. Ministry of Agriculture : Ministry of Agriculture declares minimum

support price of different food grain including paddy and rice,

ii. Civil Supply Department : playing major role in this cluster. fixes
the maximum target of purchasing paddy for the rice millers through
specific market yard.

iii. Agriculture Deptt. of Orissa :- The Deputy Director of Agriculture

provides seeds to the farmers. They also have a agricultural lab. at
Sambalpur, which in turn informs the farmers about seeds suitable
for their local soils.

iv. CRRI, Cuttack : It is an inter-national level rice research center

institute produces new variety of paddy suitable to local climatic
condition.

v. OUAT : Orissa University of Agricultural Technology has a branch at

Chiplima, Sambalpur.

21
 vi. NABARD : It is an agricultural developmental bank providing
infrastructural assistances as well as conducts training and
awareness programmes for benefit of the farmers.

vii. SISI : Training and SSI programme, like EDP, MDP etc., export
marketing and provide technical appraisal report on demand.

viii. DIC : It is a promotional agency and the path finder for setting of SSI
units. Besides above project profiles, schemes and survey reports
are being prepared by DIC.

ix. Bank : It provides financial assistance to entrepreneur anon demand.

x. ITI / Engineering school / Engineering College : Generates

technical professionals. It may be proposed to introduce rice mill
operators short time course at ITI level.

12. Business Development Service Providers : (BDS)

The following are the basic BDS providors :

a) Farmers
b) Packing materials suppliers.
c) Transporters
d) Labour Contractors
e) Chartered Accountants
f) Export Consultants

The R&D and other institutes like ICAR, CRRI, OUAT, standard
certificate agencies, APEDA, CDP, SISI etc are in existence but rarely
approached by the industry except a few organized units who have been
benefited. There is a need to make the industry aware of various services
available and provided by these institutions.

13. Infrastructure analysis of Cluster

22
 Most of the units have been established on both the sides of NH6. A few
rice mills are established in the interior. But roadways are available. Railway
connections are there for both the districts. Electricity facilities are available.
Transporters are available for providing vehicle on hire basis.
14. Credit analysis of the cluster:-

Most of the mills have been financed by State Banks and other
nationalized banks. They are happy with the credit operations by the priming
stake holders.

15. Social and Environmental Conditions of the Cluster-

The first and foremost stakeholders of the cluster are the paddy cultivators linked to
the mills. These operate through the purchase agents/ traders and also through the
Regulated Marketing Committee (RMC) Centres located across the entire region. It is
estimated that about 2221797 hectares of land is cultivated during the Kharif crop thus
supporting a large number of farmers. The Rabi crop is mainly for preparing the seeds
for the commercial cultivation of paddy during Kharif season. Several small time
agents and traders coordinate the paddy’s movement to the mills from the farms.
Though there prevails a Minimum Support Price (MSP) for the rice grown in the area,
the small lots of paddy cultivated by individual farmers lets them operate through these
traders who act as middlemen between the mills and the farmers in most cases.

The mill owners are usually the ‘Marwaris’ who have migrated several generations
earlier into Orissa in pursuit of business opportunities and thus have almost ‘traditional’
experience of operating a rice mill. The younger generation of these business families,
after getting good education has started looking after the family business and have
started experimenting with different ways of growing the business. This has become a
good feature for the cluster. These units y have good relationships with the local
banks and approximately Rs.4-5 lakhs is the annual income of the owners.

However, the workers in the rice mills are not very highly qualified and most of the
workers get a sort of on-the-job training in the rice mills, the seniority and the
continued loyalty ensuring the promotion of the skilled worker to a supervisor level and
then into the day-to-day shop floor management of the mills is taken care of by these
persons. As such skilled manpower for the mills is an issue in the cluster. The daily
wages of the workers are estimated to be in the range of Rs.40-50/- per day.

Further the working conditions in a rice mill are not hygienic due to particulate
emission inside the work place and improper planning at the shop floor level. Since
rice husk contains high level of silica, the workers are susceptible to silicosis and

23
related ailments such as asthma etc. The workers operating at shop-floor level are
generally not covered under medical insurance schemes and thus health hazards to
the workers may be an important area of concern. None of the rice mills of the area
are having HACCP certification and this limits the capacity of the mills to go for direct
exports of rice. No unit in the entire cluster is ISO certified though both of these
certifications are not mandatory but desirable for the mills.

24
 16. PRESENT CLUSTER
SUPPORT INSTITUTIONS
APEDA Min. of Food Civil Supplies Deptt. CRRI SIDBI & Banks SISI & DIC Certification
Processing agencies
Engg. School & ITI
Colleges

B
F CENTRAL POOL/
AGENCY
CORE A
O
F FIRMS C
K
W
W
A EXPORT MARKET A
R 10 MT RICE MILL-1
R
D
D
L 8MT + 10 MT +
SORTEX -10 L
I
DOMESTIC MARKET I
N RMC/ MARKET
YARDS
N
K 6,4,3 & 2 MT RICE MILLS- K
A 1219 A
G
G
E
E
 Transporters
PACKING
 Spare parts Suppliers
MATERIALS
FARMERS
 Export Consultants SUPPLIERS
 Chartered accountant
 Labor Contractor

BDS PROVIDERS 25 RAW MATERIAL SUPPLIERS

Maintenance & Job Work Providers
 17. SWOT analysis :
The SWOT analysis of the cluster in the following parameter.
1. Market
2. Technology
3. Input availability
4. Innovation capability
5. Human Resource / skill
6. Business Environment.

This analysis identifies the strong and weak areas as well as opportunities and
threats envisaged in the cluster.

Sl. Parameter Strength Weakness Opportunity Threat

No.
1. Markets • Market support All rice mills depend Tremendous national Strong
available under upon the levy supply market is there. competition
levy/custome milling taken up by FCI. • Institutional from Asian
rice policy. support is available Countries.
• Most suitable • All the units
climatic environment having sortex
machine may be
clubbed off for
common brand and
export
2 Technology • Low cost • High • potential for • Tradi
fabricated machines production/ automatic productivity. tional
• Technological plant very costly & • Cost reduction technology,
infrastructure mostly imported and quality standard
available. beyond reach of SSI enhancement by and non-
sector. use of appropriate professional
• Entrepreneur technology/QMS. MS leading
not aware of sources to high cost
of low cost imported may retard
automatic plants and the industry
appropriate both at
processing domestic /
techniques. international
• Locally market.
fabricated plant are
unstandardised & low
productive.
3 Inputs Local resource Controlled minimum • Large * imposition
availability support price(MSP) of domestic of taxes and
paddy at compulsion of /international levies in
levy rice supply. market available comparison
• Potential for to
non-exporting unit neighbouring
to export states may
further lead

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 • Available to closure /
institutional support shift of
may be exploited. industries to
• Formation of neighbouring
consortium and states..
making common
brand for easy
export.
4 Skills Traditional operators • no skill Increased technical Skill base
available upgradation training and managerial needs
awareness and upgradation
trainings may lead to to adopt
productivity, quality latest
and efficiency technology
and
management
systems.
5 Business Ability of export Heavy taxes / levies and Tremendous growth Imposition of
environment segment to grow and controlled trade has potential with taxes, levies
meet international lead to closure / shift of institutional support. in
challenges. events. comparison
to
neighbouring
states may
taper down
the industry.

18. Vision for the Cluster

THE VISION OF SAMBALPUR-BARGARH RICE MILLING CLUSTER IS TO

ESTABLISH AND SUSTAIN AS MOST EFFICIENT. MODERNISED AND
EXCELLECE MODEL IN QUALITY RICE PRODUCTION AND PARTICULARLY
WITH EYE ON GROWTH IN EXPORT MARKET TO SETUP A CONSORTIUM BY
CONTRIBUTION FROM THE MEMBER UNITS. THE CONSORTIUM WILL WORK
ON NO PROFIT AND NO LOSS BASIS UNDER THE ADMINISTRATIVE CONTROL
OF RICE MILLING ASSOCIATION. THE CONSORTIUM WILL ESTABLISH AND
LOOK AFTER THE CFCs LIKE TESTING LABORATORY, OIL REFINERY,
TRAINING CENTRE, GUIDANCE CELL AND SPARE PARTS STORE.

19. Key Problem Areas & strategic interventions proposed :-

Detailed diagnostic study of the cluster has already been conducted by the Directorate staff
in technical collaboration with UNIDO. The detailed diagnostic study is attached with the
proposal.

19.1 Low output volume & quality of paddy

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The following table shows the state wise yield of rice across all the states of the country:

State Area in Million Yield (kg/hectare) % Coverage

hectare under irrigation
(1995-96)
AP 3.5 2431 94.8
Assam 2.49 1359 33.8
Bihar 4.98 1362 40.2
Gujarat 0.67 1550 55.6
Haryana 0.91 2797 99.4
J&K 0.28 1992 91.2
Karnataka 1.38 2419 66.8
Kerala 0.40 1636 49.9
MP 5.40 831 23.7
Maharashtra 1.48 1621 26.3
Orissa 4.50 1380 35.5
Punjab 2.28 3465 99.1
Tamil Nadu 2.36 2987 92.0
Uttar Pradesh 5.66 2148 62.3
West Bengal 5.90 2243 27.2
Others 1.23 -- --
All-India 43.42 1895 50.1
Source: Website of Ministry of Agriculture, Govt. of India
Thus it would be evident from the table that while Orissa stands 4 th in terms of area under
cultivation for paddy, in terms of yield it stands only 9th and this is because in terms of
irrigation it is 10th, lagging behind a number of states. This cluster lies in the catchment area
of Hirakud dam; it has a much higher portion of cultivable land under irrigation than the state
average. However, the quality of the paddy cultivated in the area is of a coarse and
unscented variety and thus yields very low margins to the paddy growers as well as the rice
millers. As such the cluster would grow if the quality and yield from the fields could be
increased through technical interventions.

Intervention proposed:

It is proposed that with the effective use of the expertise of CRRI (Central Rice Research
Institute) Cuttack and other such technical institutions, interventions would be done to
improve the yield and quality of the paddy of the region through active involvement of the
farmers of the region. The activities could be:
• Testing of high yield-high quality paddy types and then adoption of the same in the region
• Support for better farming practices to improve yield
• Awareness building activities for the farmers on such issues and improve their linkage
with NABARD and similar institutions for support to their activities
• Converge with various institutions engaged in agricultural development activities for joint
activities

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19.2 Low technology level

Though some of the mills of the area have modern facilities such as SORTEX and SILKY,
the poor quality paddy and the levy system of purchase have deterred most of the mill
owners to go for technology upgradation in their mills. Some of the mill owners who have the
modern facilities have reported better price appreciation even with the existing paddy variety.
As such with improved paddy quality, the output from the mills would increase and the
enhancement of productivity would yield better returns. The low technology levels in boilers,
the lack of facilities of re-use of the boiler heat and some technical gaps in the milling
technology itself have led to low output, high percentage of broken rice and other related
issues.

Intervention proposed:

It is proposed to enable the mill owners adopt better technologies in their mills, riding over
the availability of better quality paddy from the farmers and thus the following are proposed
for improving the technology level in the mills:
• Exposure visit to other rice milling clusters/ technical institutions etc. to cull out best
practices of rice milling
• Technical audit by suitable consultants to help the mills understand their technical
upgradation needs
• Interactive seminars/ workshops with institutions such as CRRI, APEDA and other
sectoral technology institutions etc.
• Visit and interaction of various machinery suppliers and other technical input
providers to the cluster
19.3 Inefficient boiler operation and other productivity issues

The energy survey in the cluster has been carried out by NPC consultants. It is found that
low thermal efficiency of the boiler leads to an effective use of only about 40-50% of the total
energy available. During the study it has been observed that the boiler operators do not have
the required certificate from Directorate of Boiler, Govt. of Orissa. The owners very often
engage unskilled people for operation of boiler and technical items as a result of which boiler
explosions take place quite often. Thus skilled work force is necessary for further growth in
the industry. The female workers are fully unskilled. Improvement in these practices and
optimisation of the boiler design may lead to substantial improvement in the energy
conservation area and thereby the profitability of the cluster.

Further the overall efficiency of the units in terms of low broken percentage of rice and
utilization of the by-products from the milling process are also important considerations for
interventions.

Intervention proposed:

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It is proposed that the following activities may be carried out to improve the overall
productivity of the mills of the cluster:
• Energy audit and energy conservation steps
• Exposure to suitable milling technologies to reduce the broken percentage & other
productivity enhancement issues
• Training of work force on boiler operations and certifications of some senior boiler
operators from requisite certifying institutions
• Assessment of possibility of utilising the by-products of the rice milling process for further
augmentation of incomes of the mills

19.4 Limited Market Outreach

The cluster produces substantial amount of rice but it has been simply been
complacent with its 75% production being taken up at levy prices fixed by FCI. Varying
Industry standards for the different qualities of rice is also posing issues; FCI standard is 2-
3% broken rice, in open market broken rice is acceptable up to 1-2% only. As per the FCI
guidelines, though there is an annual quota fixation for the district for lifting rice depending
upon the mill size, this levy amount is not mandatory and if the mills wish they can refuse and
sell in the open market. However, most of these traditional mill owners do no tend to leave
this assured market even if it turns out to be low paying due to less stringent quality
requirements and other such issues. Thus the low capacity utilization, inefficient techniques
and machines for production all get adjusted against the assured markets and the internal
dynamics of the trade. In this fashion, the cluster has not been able to penetrate into other
consumer markets and has a limited growth aspect as of now.

The limitation of marketing is also due to the fact that the rice millers do not go for
any further value addition, or diversification of their end products. Though there is a good
potential for making puffed rice and other such value-added products, the tendency to
restrain only to rice milling has been due to the poor quality paddy and inefficient milling
itself. As such, if the back-end activities would improve, then the overall product range of the
cluster could be diversified and thus provide a much larger market base to these units.

Intervention proposed:

The following interventions are proposed to overcome the issues of limited market outreach:
• Awareness building on HACCP certifications, ISO certifications and their market utility
• Facilitate certifications of some units for ISO 9000, HACCP etc.
• Buyer Seller Meets with good quality rice produced by the cluster’s units
• Hiring of marketing consultants for tie-ups with end use industries across the country
• Facilitate the upgradation in value addition activities in some units for puffed rice and
other such ready to use products

19.5 Lack of active associations:

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The existing association at Bargarh had been dormant for quite some time and only due to
the pilot level activities that were initiated during the study phase; some energisation of the
association has taken place. They have got into the mode of commonly planning some
activities and thus they need to be further strengthened to take up the developmental
activities in the cluster. As such these vehicles of growth need to be strengthened for the
long term growth of the cluster.

Intervention proposed:

The activities proposed to strengthen the association and the formation of the special
purpose vehicle (which has already started taking shape in the cluster) are as follows:
• Placing one secretarial staff (NDA) with the association to help in daily activities
• Coordination of meetings of the SPV formation and association
• Formation of consortia and other types of groups in the cluster to improve its social
capital
• Interaction of the associations with other rice miller associations for information exchange
etc.
• Regular handholding of the association and the groups created in the cluster
• Entrepreneurship and motivation training programmes for the rice millers

19.6 Common Testing Facility:

Regarding testing quality of rice, there is no unit of govt in this cluster. But Central Rice
Research Institute is located at Cuttack, where quality can be tested. Testing of motor,
instruments along with their calibration is an area where collaboration is a possibility. A
common facility centre is required in this sector.

Intervention proposed:
It is proposed that the SPV of the rice millers, which is coming up in the cluster due to the
ongoing efforts under the GoO–UNIDO Cluster Development Initiatives, would be further
strengthened and supported to take up the work of setting up of a common testing and other
facilities under a PPP mode in the cluster.

20. Expected Major Outputs

The major outputs that can be expected from the proposed interventions are as follows:

20.1 Firm level

20.1.1 Number of beneficiaries
This need based intervention programme would initially target the top 50 firms of the cluster
and then build upon the cadre of interested and willing partner mill owners to about 100 units,
who would be targeted directly during the programme for the various interventions
envisaged.

31
20.1.2 Range of Outputs:
• About 50 mills would be able to cut down production costs by 10%, leading to better profit
margins
• About 20 mills would be able to go for exports
• About 50 mills would improve their capacity utilisation by about 10%
• About 10 mills would go for various certifications such as HACCP, ISO 9000 etc.
• Training to unit owners in the field of 5S, TQM and benchmarking, ISO 9000 etc.
• Training to workforce on ISO 9000, cost reduction technologies, packaging etc.
• About 50 firms for paid business development services.

20.2 Cluster Level

• Setting up of common testing facilities for paddy, rice husk, water, common motor
repairing etc. under PPP mode
• Overall increase of turnover of the cluster by 20%
• Increase in the share in the domestic market by 30% and in export markets by 15%
• Increased employment in the cluster by 10%
• Improvement in the status of the farmers of the area by cultivation of better quality &
better yield rice and therefore better price appreciation
• Improved environment conditions by use of the by-products from the rice mills
• Strengthening local associations of the cluster and their effective contribution to the
activities of the cluster who would have a long term action plan and would have
contributed by about 50% to the initiatives under the proposed project

21. BROAD ACTION PLAN :-

1st Year
1. Networking with CRRI for improving yields of existing varieties of paddy &
introducing new varieties including training to farmers, linkages of farmers with
credit providing institutions like MFIs, NABARD etc
2. Study tours to other cluster
3. Association / SHG / NGO/ Network capacity building for workers of Rice Mills in
conservation of Energy
4. Exposure Visit for farmers
5. Brochure preparation
6. web-site launching
7. Service of external consultants for export / other markets
8. Miscellaneous developmental costs (translation, publications)

2nd Year
1. Organisation of training programs on HACCP
2. Study tour for farmers to learn different practices
3. Association / SHG / NGO/ Network capacity building for workers of Rice Mills in
conservation of Energy
4. Exposure Visit for Rice millers
5. Brochure preparation
6. web-site launching
7. Service of external consultants for export / other markets
8. Miscellaneous developmental costs (translation, publications)

3rd Year
1. Organisation of training programs on ISO Certification

32
2. Study tours for farmers demonstrations of technology / equipment
3. Conducting energy audit of Rice Mills
4. Exposure Visit for Rice millers
5. Brochure preparation
6. web-site launching
7. Service of external consultants for export / other markets
8. Miscellaneous developmental costs (translation, publications)

33