a short analysis of value addition and agri-business in india

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.

7. POST HARVEST LOSS : SUMMARY
CROP % Loss, minimum % Loss, maximum
CEREALS 3.9 6.0
(Sorghum) (Wheat)
PULSES 4.3 6.1
(Chickpea) (Blackgram)
OILSEEDS 2.8 10.1
(Cottonseed) (Groundnut)
FRUITS 5.8 18.0
(Sapota) (Guava)
VEGETABLES 6.8 12.5
(Cabbage) (Tomato)

8. Loss (%) at National Level in different
operations/channels
S.N CROP TOTAL LOSS TOTAL LOSS IN OVERALL
IN FARM STORAGE (%) LOSS (%)
OPERATIONS
(%)
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
Desired by
By processing it into a customers –
Add value to wheat product (flour) (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. Direct Marketing
 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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18. Vertical Integration
 – 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 -

19. Producer Alliances
 Individuals / companies from the same level of the
food chain consolidate in order to produce and
market a superior product

20. Cooperative Efforts
 Individuals or companies pool their products in
order to increase bargaining power.

21. 6 Key Strategies for Adding
Value
 Form value
 Location value
 Time value
 Ownership/Possession value
 Information 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
Examples
–Insurance, hedging, options –U-pick farms
 Credit agreements –Equipment rentals,
–Loans, letters-of-credit contract harvesting
or land clearing
 Lease agreements –Shipping insurance
–Rent-to-Own –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

27. R&D ORGANIZATIONS IN AGRO-PROCESSING
SECTOR, INDIA
 CFTRI, Mysore;  OTRI, Anantpur;
 CIPHET, Ludhiana;  PPRC, Thanjavur;
 IARI, New Delhi;  MERADO, Ludhiana;
 NDRI, Karnal;  MPKV, Rahuri;
 DFRL, Mysore;  ILRI, Ranchi;
 CIAE, Bhopal;  IVRI, Izatnagar;
 IIT, Kharagpur;  NIRJAFT, Kolkata;
 GPBUA&T, Pantnagar;  CIRCOT, Mumbai;
 IGMRI, Hapur;  IISR, Lucknow;
 TNAU, Coimbatore;  IGFRI, Jhansi;
 PAU,Ludhiana;  KVIC Mumbai;
 GAU, Anand;  HBTI, Kanpur;
 RAU, Udaipur;  PHT Institute, Pune
 BCKV, Kalyani;

28. Visible benefits

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
Processing-
Input Sector Production Manufactoring
Sector 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

38. KEY OPPORTUNITIES AREA
Land Preparation
Seed Sowing
Nutritional Application
Crop Protection
Irrigation
Harvesting
Storage
Transportation
Farmer Market
Equipment Services
Agri-business Warehouses
opportunities Post Harvest Treatment
Biological Services
Seeds & Seed treatments
Fertilizers, micronutrients, pesticides
Irrigation Systems
Trading Infrastructure
Packaging
Marketing
Transportation

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

43. INDIAN CORPORATES IN AGRICULTURE
 HARRISONS MALAYALAM LTD.
 PUNJAB-PEPSI PARTNERSHIP
 ITC-E CHAUPAL
 HARYALI KISAAN BAZAAR
 MAHINDRA SHUBH LABH
 CARGILL FARM GATE BUSINESS
 TATA KISAN SANSAR

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.

51. THANK YOU