The document discusses opportunities and challenges for value addition and processing of agricultural products in India. It notes that while India is a major producer of many agricultural commodities, it processes less than 2% of its output and wastes a significant portion of crops. The document argues for strategies to increase agro-processing and value addition in India in order to reduce losses, increase incomes, and better utilize agricultural resources.
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Value Addition in Agriproducts: Opportunities for Processing and Reducing Losses
1. Value Addition And Processing
of Agriproducts: Opportunities
and Challenges
BY:
Surabhi Mishra
Department of Biochemical Engineering and Food Technology,
H.B.T.I., Kanpur
2. SUMMARY
Present scenario of agriculture in India
Post harvest losses & the global picture
Value- added agriculture
Strategies for “value addition”
Agri-business
Subsectors of agri-business
Emerging areas of agri-business
Policy initiatives and taxation policies
Supporting institutions
Indian corporates in agri-business
An example of corporate-farming: Harrisons Malayalam Ltd
Present scenario problems
Key strategies at national level
Conclusions
3. • Food production in the country is adequate but
it is not accessible to all.
• Inadequate income earned by about 25%
population
• High post harvest losses on farm and in the
supply chain linking farmers to markets
(estimated annual loss of Rs. 44,000 crore)
• Inadequate livelihood opportunities in the
production catchments and rural sector
4. • High level of food wastage due to shortage of
storage spaces
• Mismatch between agri-exports and agri-
imports
• Huge quantities of under-utilized crop residues
and processing by-products leading to loss of
income and environmental sustainability
• Low levels of agro-processing and value
addition
5. • Indian wastes more fruits & vegetables than are
consumed in UK
• Cumulative waste is about $ 6.7 billion which is
equivalent to 40% of the total horticulture produce
• Poor infrastructure and logistics support
• Rough and unorganized handling
• India has 70% more arable land but produces 30%
less than China
6. • India ranks first in the world in cereal and milk
production and second in fruits & vegetables and in
five producers of groundnut, rice, wheat, tea, coffee,
sugar, spices & oil seeds.
• Even with an industry size of US $ 70 billion,we
process less than 2%.
• The industry has about 1.6 mn direct employees and
accounts for about 13% of the country’s exports and
6%of the industry investment.
8. Loss (%) at National Level in different
operations/channels
S.N CROP TOTAL LOSS
IN FARM
OPERATIONS
(%)
TOTAL LOSS IN
STORAGE (%)
OVERALL
LOSS (%)
1 Cashew 0.9 0.2 1.1
2 Sugarcane 7.8 0.9 8.7
3 Turmeric 6.7 0.7 7.3
4 Egg 4.9 1.7 6.6
5 Marine fish 1.8 1.0 2.8
6 Meat 1.4 0.9 2.3
7 Milk 0.7 0.1 0.8
9. •High income countries add US$ 180 worth of value to one
tonne of agricultural produce
•98% of agricultural produce in high income countries
undergoes industrial processing
•About 30% only is processed in developing countries
•Average value added per tonne in developing countries is
only US$ 40
If we realize with honesty we will have to
accept that Post harvest processing and value addition is
about 1.5 percent in India as against 30%
post harvest processing in some countries
10. Production to consumption chain of agro-processing activities
Production To Consumption Chain Of Agro-
processing Activities
11. • Primary/ secondary processing of main produce
• By-products utilization
• Supply/cold chain management
• Custom hiring services
• Product quality and safety
• Marketing
12. What is –
Value-Added Agriculture?
Adding Value – Process of changing or
transforming a product from its original state
to a more valuable state
Add value to wheat
By processing it into a
product (flour)
Desired by
customers –
(bread bakers)
13. • Expanding the level of processing in the food grains,
fruits & vegetables and dairy sectors on priority,
• Raising the level of processing from primary/ secondary
to secondary/ tertiary for all commodities,
• Modernizing the food processing sectors using the
efficient equipment and processes for cost
competitiveness and better quality products,
• Ensuring adequate training of workers, supervisors and
managers in food processing industries to ensure
efficient operations and product quality,
• Providing skills and knowledge to farmers for ensuring
quality of produce through adoption of GAP, and
• Promoting seamless value chain including post harvest
management and value addition in production
catchments to obviate the quantitative and qualitative
losses.
14. Adding value to products can be accomplished in a
number of different ways, but generally falls into
one of two main types:
Creating Value
Innovation
Industrial Innovation
Capturing Value
Coordination
15. CREATING VALUE
Occurs with actual or perceived value to a customer for
a superior product or service
Innovative new products
Enhance a product’s characteristics
Enhance services
Create brand names
Develop unique customer experiences
16. CAPTURING VALUE
Changing the distribution of value in the food/fiber
production chain.
Meant to ‘capture’ more of the consumer dollar through:
Direct Marketing
Vertical Integration
Producer Alliances
Cooperative Efforts
17. Selling products directly to the
consumer
Selling beef animals ‘on the
hoof’
Selling homemade soaps &
lotions to the general public
Think – eBay!
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Direct Marketing
18. – One producer or business owns the product from
beginning to end. This producer or business doesn’t
sell the product until the consumer purchases it:
Tyson Chicken -
Vertical Integration
19. Individuals / companies from the same level of the
food chain consolidate in order to produce and
market a superior product
Producer Alliances
20. Individuals or companies pool their products in
order to increase bargaining power.
Cooperative Efforts
21. Form value
Location value
Time value
Ownership/Possession value
Information value
6 Key Strategies for Adding
Value
22. ADDING VALUE: FORM
• Converting raw materials into finished or semi-
finished products
-Increases the usability of the product
-Processing and packaging
• Maintaining product quality
-Cleaning, grading, sorting, cooling
23. Adding Value: LOCATION
Provide product at a desired place
Providing assortment
Examples
–Door-to-Door delivery
–Mail order
–Convenience stores
–Truck stop fast food
–Internet sites
24. Adding Value: TIME
Providing product at a desired time
Market windows--using seasonality
Storage, scheduling, transportation, processing
25. Adding Value: OWNERSHIP or
POSSESSION
Cost and risk holder
–Insurance, hedging, options
Credit agreements
–Loans, letters-of-credit
Lease agreements
–Rent-to-Own
Examples
–U-pick farms
–Equipment rentals,
contract harvesting
or land clearing
–Shipping insurance
–Visa/MasterCard
and other credit
cards
–Futures markets
26. Adding Value: INFORMATION
To inform & educate
To persuade
Done through marketing functions–Advertising,
promotion, packaging, and labeling Examples
–Weekly ads
–Labels and brands
–Geographic
identity
–Packaging
–Third party
certification
–Point-of-purchase
materials
29. WHAT IS AGRI-BUSINESS?
John H. Davis (1955) “Agribusiness is emerging as a
specialized branch of knowledge in the field of
management sciences. In this context, agribusiness
can be defined as science and practice of activities,
with backward and forward linkages, related to
production, processing, marketing, trade, and
distribution of raw and processed food, feed and fibre,
including supply of inputs and services for these
activities”
30. Agribusiness Concept revolves around activities of
commercialization of agriculture, which refers to market
orientation of agricultural production and marketing
process. Transition from subsistence to commercial
agriculture. The agribusiness system is made of
thousands of businesses ranging from the small
producers to large corporations It is the management
that drives and directs the firms , farms and food
companies that come together in the whole agribusiness
system. Each of these businesses have managers
responsible for assuring successful completion of the
functions, tasks and activities.
31. The agribusiness system includes many facets:
Not only production (e.g., farmers, hatchery
managers), also
Organizations which provide inputs (e.g., fry,
chemicals, feed)
Processes the output (e.g., processing plants)
Manufacturers (e.g., shrimp microwavable
products)
Transporters/Sellers/Brokers (e.g., retail grocery
stores, seafood wholesalers, etc.)
32. The Agribusiness System
Input Sector Production
Sector
Processing-
Manufactoring
Sector
Agribusiness System
Note: the success of each part depends upon the proper
functioning of the other two!
33. The Input Subsector
Provides farmers with all things needed for
production: feed, fry, credit, equipment, fuel,
chemicals
Example- Raasi Seeds, National Agro Industries (seeds
cum fertilizer drills, Advanta India (seeds)
Relatively few input businesses compared to production
or processing
34. The Production Subsector
• Corporate farms
• New technologies have resulted in increased
specialization of production
genetically altered animals
specific pathogen-free stocks
• Example- Monsanto (new seeds), Mc. Cain India
(frozen potato foods), Pepsi Foods India, ITC.
35. The Processing-Manufacturing
Subsector
Includes all business that turn raw materials into finished (or
partially-finished) products
Also includes packaging, distribution, and sales, places and
forms desired by consumers
Marketing bill represents 70% of total amount spent by
consumers on food!!!
Firms in this sector are very large (again, gathering economies of
scale); very responsive to consumer tastes/ preferences
Examples: ADM (grain processing), Zapata-Haynie (fish meal),
Tyson Foods (feeds), ABT industries (export and import), Heinz
India
36. Enabling Environment for Agribusiness
in India
Agribusiness in India Based on the vision document
for the Ministry of Food Processing Industries (2005-
2015), the industry targets are as follows:
Industry should aim to increase processing of
perishables 20%. Increase value addition from the
present level of 20% to 34%. Share in global trade
up from 1.6% to 3%. The national policy aims to
increase the level of food processing to 25 % by
2025
37. Emerging Sectors in Agribusiness
IT in agriculture and rural development
Post Harvest management and value addition
Horticulture and food products marketing
NGOs in agriculture and rural development
Agriculture Extension Services
Consulting and other knowledge based activities
Biotechnology research and commercialization
Corporate farming and farm management
Agriculture supply chain management
Rural and agri-foods retailing
39. POLICY INTIATIVES
Use of foreign brand names is now freely
permitted.
After the enactment of the proposed Food Safety
and Standards Bill, 2005 in India, the food
processing sector would be governed by only one
law and one regulator, instead of 13 different laws
40. TAXATION POLICIES
A 100 percent tax deduction on profits for five years
and 25 percent for the next five years especially to the
upcoming agro-processing industries.
The government has proposed a comprehensive goods
and services tax (GST) by 2010. This will serve to
integrate the economy and make India a single
common market. Industry players are of the opinion
that the GST will provide a relief to the food and
beverages sector against the multiple taxes imposed at
various levels today.
41. Duty-free import of goods for development, operation,
and maintenance of SEZ units
100-percent income tax exemption on exports from
SEZ units for the first 5 years, 50-percent exemption
for years 6-10, and a 50-percent exemption of
reinvested export profits for years 11-15
External commercial borrowing by SEZ units up to
$500 million/year, without restriction, through
recognized banking channels
Exemption from central Government sales and service
taxes
Exemption from State sales taxes and other State levies
42. SUPPORTING INSTITUTIONS
APEDA- Agricultural And Processed Food Products Export
Development Authority
Small Farmers Agri-business Consortium
-ENTERPRENUERIAL TRAINING INSTITUTE
• Agri-Clinics And Agri-business Centers
• IIE, Guwahati
• NISIET, Hyderabad
• NIESBUD, New Delhi
44. AN EXAMPLE OF AGRIBUSINESS-CONTRACT
FARMING
A contract to purchase a specified quantity of produce
at a pre-agreed price
Fixed price
Market linked price
Quality of produce specified in contract or benchmarked to
certain agreed standards
Penalty for default usually specified in the contract but
rarely enforced
Relationship generally built on Trust
45. Harrisons Malayalam Ltd.
HML’s predecessors Malayalam Plantations Limited and
Harrisons & Crosfield Limited sterling companies
incorporated in England – history of 150 years.
In 1979, these companies incorporated as Indian
Companies under the names Malayalam Plantations
(India) Limited and Harrisons & Crosfield (India) Limited.
In 1984, the two companies merged to form Harrisons
Malayalam Limited. HML became part of the RPG Group
in the year 1989.
RPG Group - one of India’s largest industrial
conglomerates, with over 20 companies in its fold, spread
over 6 business sectors with an annual turnover over USD
3.25 Billion
Winner of the maximum number of awards at “The
Golden Leaf India awards” (TGLIA) for quality teas
46. Vital Statistics
Largest plantation company based in South India.
Single Largest Private Sector Employer in Kerala.
HML has 25000 hectares of land under its fold 6000
hectares - in Tea, 8000 hectares - in Rubber
Single largest producer of Natural Rubber in the Country,
Second largest producer of Tea in South India.
Largest Corporate grower of Pineapple Presence and other
horticulture crops – banana, passion fruit, cocoa, coconut,
arecanut and spices
Largest exporter of Tea in South India
– Some Important customers : Twinings – UK, Saralee –
Netherlands, Elink Schurmann – Rotterdam, May Co –
Russia, Baeshan – Saudi Arabia , A F Jones – Sri Lanka
47. THE HML WAY:
Caring for People and environment
An equal Opportunity employer with 7700 men and 8800
women workforce
Winner of FICCI awards thrice for corporate initiatives in family
welfare as a result of its Comprehensive Labour Welfare Scheme
Aimed at improving the quality of life of the employees and their
dependents.
Pioneer in corporate social responsibility in Kerala with
initiatives such as “ Rakshita ” a centre for development of
children and adults with multiple disabilities
Providing free medical aid for underprivileged in Rural Kerala.
The only company in this sector to bag the Kerala State Pollution
control award for its factory on more than one occasion
emphasizing the responsibility and initiative taken by the
company in preserving the natural resources for future
generation.
48. PRESENT SCENARIO PROBLEMS
Increasing nutritional requirements and decreasing
available land
Shortage of food grains
Declining rate of food production and increasing
population
Decreasing crop productivity
One of the Largest producers of fruits, vegetables,
meat, milk, eggs, fish but low cost producers, low
farmer incomes, poor exports, lack of storage
India’s current share in world trade of processed foods
is only 1.6%
49. KEY STRATEGIES AT NATIONAL LEVEL
• Develop national comparative advantage
• Development appropriate policy network
• Development appropriate marketing and management
skills network
• Establish comprehensive rural financial market
• Create market driven agricultural technologies
• Develop alternate investment to expand rural well-
being
• Enhance sustainable use of resources
50. CONCLUSIONS
Indian Agribusiness is at an interesting crossroads facing huge
growth opportunities.
It must gear up for and facilitate agriculture revolution through
farmer- corporate partnership.
Focus on market orientation is must.
Reduce loss through bringing all operations on single platform.
Need for wealth creation for farmers & investors, infrastructure
development ,critical commitment and discipline could provide
Global leadership.
Transformation from seller-buyer relation to strategic
partnership between corporate and farmer for a win-win
outcome.
Exposing traditional Indian agriculture to modern
technologies, creating large scale processed food manufacturing
and food chain facilities and consequently generate employment
and export earnings.