FINAL REPORT

Operationalising the Agribusiness Infrastructure Development Investment Program- Phase II

-Maharashtra-

April 2010

Prepared by Client: Asian Development Bank OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Table of Contents

1 Introduction 1 1.1 Project outline and intent 1 1.1.1 Value Chain approach 1 1.1.2 Hub and Spoke model 2 1.2 Integrated value Chain Regions 3 1.2.1 Agri‐Marketing and Infrastructure 3 1.2.2 Selection of Regions 3 1.3 Methodology 4 1.4 Structure of the Report 9

Nashik Integrated Value Chain 10

2 Focus crop: Pomegranate 12 2.1 Value chain analysis 13 2.1.1 Trade channel of pomegranate 13 2.1.2 Price build up along the value chain of pomegranate 16 2.2 Infrastructure Assessment 18 2.2.1 Post harvest Infrastructure 18 2.2.2 Marketing Infrastructure 18 2.3 Gaps identified in the value chain 18 2.4 Potential for Intervention 19 3 Focus crop: Grape 20 3.1 Value Chain Analysis 21 3.1.1 Trade channel of Grapes 21 3.1.2 Price build up along the value chain of Grapes 24 3.2 Wineries 25 3.3 Export of Grapes 26 3.4 Infrastructure Assessment 28 3.4.1 Post Harvest/Marketing Infrastructure 28 3.4.2 Institutional Infrastructure 28 3.5 Gaps in the value chain 29 3.6 Proposed Interventions 30 4 Focus Crop: Banana 31 4.1 Value Chain Analysis 33 4.1.1 Existing Post Harvest Infrastructure and Institutional Mechanism 38 4.2 Gaps in the value chain and potential interventions 42 5 Focus crop: Onion 44 5.1 Value chain analysis 45 5.1.1 Trade channel of Onion 45 5.1.2 Price build up along the value chain of Onion 47 5.2 Infrastructure Assessment 48 5.2.1 Marketing Infrastructure 48 5.3 Gaps in the value chain 49 5.4 Potential for Intervention 49 6 Focus crop: Tomato 50

i OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 6.1 Value chain analysis 51 6.1.1 Trade channel of tomato 51 6.1.2 Price build up along the value chain of Tomato 56 6.2 Infrastructure Assessment 58 6.2.1 Post harvest infrastructure 58 6.2.2 Marketing Infrastructure 58 6.2.3 Institutional Infrastructure 59 6.3 Gaps in the value chain 59 6.4 Potential for intervention 60

DPR: Nashik Integrated Value Chain Project 61 7 Spoke: Malegaon 62 7.1 Focus Crops and Estimated Throughput 62 7.2 Proposed Facilities 63 7.2.1 Pack House 63 7.2.2 Warehouse 65 7.2.3 Other Facilities 65 8 Spoke: Pimpalgaon 67 8.1 Focus Crops and Estimated Throughput 67 8.2 Proposed Facilities 68 8.2.1 Packe Hous 68 8.2.2 Pack Shed ‐Ambient 69 8.2.3 Ambient Onion Stores 70 8.2.4 Other Facilities 71 9 Hub: Nashik Road 72 9.1 Focus Crops and Estimated Throughput 72 9.2 Proposed Facilities 73 9.2.1 Pack House 73 9.2.2 Pack Shed ‐ Ambient 75 9.2.3 Banana Ripening Facility 76 9.2.4 Ambient Onion Stores 76 9.2.5 Dry Warehouse 77 9.2.6 Cold Store 77 9.2.7 Other Facilities 77 10 Spoke: Srirampur 78 10.1 Focus Crops and Estimated Throughput 78 10.2 Proposed Facilities 79 10.2.1 Pack House 79 10.2.2 Onion Storage 81 10.2.3 Other Facilities 81 11 Spoke: Sangamner 82 11.1 Focus Crops and Estimated Throughput 82 11.2 Proposed Facilities 83 11.2.1 Ambient Pack Shed 83 11.2.2 Onion Store 84 11.2.3 Other Facilities 84 12 Spokes (banana): Vivra, Chinnawal, Kajgaon, Danora 85 12.1 Focus Crops and Estimated Throughput by Cluster: 85 12.1.1 Cluster I 85

ii OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 12.1.2 Cluster II 86 12.1.3 Cluster III 86 12.2 Proposed Facilities 87 12.2.1 Pack House 87 12.2.2 Banana Ripening Facility 89 12.2.3 Other Facilities 90 13 Financial Analysis 91 13.1 IVCs in Maharashtra 91 13.2 Nashik IVC 91 13.2.1 Project Details 91 13.2.2 Project Cost 92 13.2.3 Preliminary & Pre‐operative Expenses 95 13.2.4 Means of Finance 96 13.2.5 Key Operating Assumptions 96 13.2.6 Financial Performance 99 14 Economic Analysis 101 14.1 Methodology and Assumptions 101 14.2 Quantification of Benefits 102 14.3 Quantification of Costs 104 14.4 Cost‐Benefit Statement 105 14.5 Calculation of Economic IRR (EIRR) and NPV 105 14.6 Economic Appraisal Results 105 14.6.1 Major Economic Indicators: 105

Aurangabad‐Amravati Integrated Value Chain 107

15 Focus Crop: Sweet Lime 109 15.1 Value Chain Analysis 109 15.2 Infrastructure Assessment 114 15.2.1 Post Harvest Infrastructure 114 15.3 Gaps in the Value Chain 115 15.4 Potential Interventions 115 16 Focus Crop: Kesar Mango 116 16.1.1 Value chain analysis 116 16.1.2 Price build up along the value chain of mango 119 16.2 Infrastructure Analysis 121 16.2.1 Marketing Infrastructure 121 16.3 Gaps in the value chain 122 16.4 Potential for Intervention 122 17 Focus Crop: Orange 123 17.1 Value Chain Analysis 123 17.1.1 Value Chain Actors and Functions 124 17.1.2 Grades in Orange 127 17.2 Post Harvest Infrastructure and Institutional Arrangements 129 17.3 Gaps in the value chain 130 17.4 Potential for Intervention 130 18 Focus Crop: Lemon 132 18.1 Value Chain Analysis 132

iii OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 18.1.1 Price build up along the value chain of Lemon 134 18.2 Infrastructure Assessment 136 18.2.1 Post Harvest/Marketing Infrastructure 136 18.3 Gaps in the value chain 136 18.4 Potential for Intervention 136 19 Focus Crop: Banana 138 19.1 Value Chain Analysis 138 19.1.1 Value Chain Actors and Functions 139 19.2 Infrastructure Assessment 142 19.2.1 Post Harvest Infrastructure 142 19.3 Gaps in the Value Chain 143 19.4 Potential Interventions 143 DPR: Aurangabad‐ Amravati Integrated Value Chain Project 144 20 Spoke: Warud 145 20.1 Focus Crops and Estimated Throughput 145 20.2 Proposed Facilities 145 20.2.1 Ambient Orange Pack house 146 20.2.2 Dry Warehouse 147 20.2.3 Add on/Commercial Facilities 147 21 Spoke: Anjangaon 148 21.1 Focus Crops and Estimated Throughput 148 21.2 Proposed Facilities 149 21.2.1 Banana Pack House 149 21.2.2 Ambient Orange Pack house 151 21.2.3 Banana Ripening Facility 152 21.2.4 Dry Warehouse 152 21.2.5 Other facilities 152 22 Spoke: Akola 153 22.1 Focus Crops and Estimated Throughput 153 22.2 Proposed Facilities 153 22.2.1 Dry Warehouse 154 22.2.2 Ambient Packing Shed 154 22.2.3 Business Centre 155 23 Spoke: Sangrampur 156 23.1 Focus Crops and Estimated Throughput 156 23.2 Proposed Facilities 156 23.2.1 Pack House 157 23.2.2 Banana Ripening Facility 159 23.2.3 Dry Warehouse 159 23.2.4 Other Facilities 159 24 Spoke: Jalna 160 24.1 Focus Crop and Estimated Throughput 160 24.2 Proposed Facilities 160 24.2.1 Ambient Pack House 161 24.2.2 Other facilities 162 25 Spoke: Paithan 163 25.1 Focus Crops and Estimated Throughput 163 25.2 Proposed Facilities 164 25.2.1 Pack House 164

iv OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 25.2.2 Sweet lime Ambient Pack House 166 25.2.3 Dry Warehouse 167 25.2.4 Other facilities 167 26 Financial Analysis 168 26.1 Aurangabad‐Amravati IVC 168 26.1.1 Project Details 168 26.1.2 Project Cost 168 26.1.3 Preliminary & Pre‐operative Expenses 171 26.1.4 Means of Finance 171 26.1.5 Key Operating Assumptions 172 26.1.6 Financial Performance 174 27 Economic Analysis 176 27.1 Methodology and Assumptions 176 27.2 Quantification of Benefits 177 27.3 Quantification of Costs 179 27.4 Cost‐Benefit Statement 180 27.5 Calculation of Economic IRR (EIRR) 180 27.6 Economic Appraisal Results 181 27.6.1 Major Economic Indicators: 181

Maharashtra: Integrated Value Chains 182

28 Conceptual Plans for Facilities 183 28.1 Planning Concept 183 28.1.1 Master Plan 184 28.1.2 Buildings 184 28.1.3 Services 184 28.1.4 Road & Parking 184 28.1.5 Green Area 185 28.2 Link Infrastructure 185 28.2.1 Approach and Accessibility 185 28.2.2 Linkages for Power, Water, Storm Water etc. 186 28.2.3 Design Considerations 186 28.2.4 Sanitary Installation, Water Supply and Fire Fighting Systems 189 28.2.5 Fire Protection Measures 192 28.3 Cost Estimates for IVCs in Maharashtra 193 28.3.1 Nashik IVC: 193 28.3.2 Amravati‐Aurangabad IVC 195 29 Stakeholder Consultations 221 29.1 IVCs in Maharashtra 221 29.1.1 Farmers 221 29.1.2 Traders/Wholesalers/Local processors/Cold Chain Owners 222 29.1.3 Industry Players 222 29.2 Stakeholders’ Meeting at Mumbai 223 29.2.1 Suggestions from Stakeholders on Policy Issues: 223 29.2.2 Suggestions on Proposed Interventions: 224 29.3 Stakeholder’s Meeting at Raheja Centre Point, Mumbai 224 29.4 List of Potential Investors 225 30 Assessment of Market Demand 227

v OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 30.1 Assessment of Food market in India 227 30.2 Growth drivers of value added food products 228 30.3 Assessment of Food retail Industry 229 30.4 Major players in organized food and grocery segment 231 30.5 Assessment of major consumption markets 232 30.5.1 Delhi 233 30.5.2 Mumbai 234 30.5.3 Kolkata 235 30.5.4 Patna 236 31 Impact Assessment 237 31.1 Integrated Value Chain: Envisaged Impacts 237 31.1.1 Illustrative Example: Pomegranate Value Chain 238 31.1.2 Illustrative Example: Grape Value Chain 239 31.1.3 Illustrative Example: Banana Value Chain 241 31.1.4 Illustrative Example: Sweet Lime Value Chain 243 31.1.5 Illustrative Example: Mango Value Chain 244 31.2 Other key Impacts 237 32 Capacity Building 247 32.1 Capacity Building: Needs Assessment 247 32.2 Farm/Production Cluster level 247 32.2.1 Capacity Building at Production cluster/farm‐level 248 32.3 Capacity Building at Hub‐Spoke Level 249 32.3.1 Capacity Building at hub and spoke‐level 249 32.4 Capacity Building Coverage 251 32.5 Implementation arrangements 251 32.6 Summary Financials for Maharashtra 251 33 Policy and Regulatory Aspects 252 33.1 Issues relating to policy‐ Agri‐business infrastructure 252 33.1.1 Regulatory Issues 252 33.1.2 Credit 254 33.1.3 Technology Induction 254 33.1.4 Capacity Building 255 33.2 Recent Policy Initiatives taken by the Government 255 33.2.1 State Level APMC 256 33.3 Initiatives taken to promote Agribusiness Investment in Maharashtra 256 33.3.1 Amendment to APMC Act 257 33.3.2 Grapes Processing Industry Policy, 2001 257 33.3.3 Package Scheme of Incentives, 2007 258 33.3.4 Others 259 33.4 Existing Schemes Pertaining to Agri‐business infrastructure 260 33.4.1 Impact of Schemes on Development of Agribusiness Infrastructure 260 33.5 Policy Initiatives Critical to Successful Implementation of AIDP 260 33.5.1 Applying the Integrated Value Chain approach 260 33.5.2 Suggested Policy Interventions 261 34 Implementation Frame work 262 34.1 Proposed Models under Public‐Private Partnership 262 34.1.1 Approach to Public–Private Partnership (PPP) in India 262 34.1.2 Experience of PPP in India 262 34.1.3 PPP in Agribusiness Infrastructure: 263

vi OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 34.1.4 Viability Gap Funding Scheme (VGF) 264 34.2 Challenges of VGF model for Agribusiness Infrastructure under AIDP 265 34.2.1 Under VGF, ownership of project assets has to remain with the Government 265 34.2.2 Private sector is given a contract/concession 265 34.2.3 User charges need to be determined before implementation of the project 266 34.2.4 Need for a flexible PPP structure for AIDP 266 34.2.5 BOT vs BOT –Annuity models 266 34.2.6 SPV Model 267 34.3 Preferred Operational Model for AIDP 267 34.3.1 Proposed Project Grant, O&M Framework and Recovery of Charges 270 35 Project Implementation Structure 272 35.1 Role and Responsibilities of Project Implementing Agency (Mother SPV/PMU) 273

Annexure

vii OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

1 INTRODUCTION

IL&FS Cluster Development Initiative Limited (IL&FS Clusters) has been appointed by Asian Development Bank (ADB) to prepare a Detailed Project Report for operationalising the Agribusiness Infrastructure Development Investment Program Phase II in the states of Bihar and Maharashtra. The Agribusiness Infrastructure Development Investment Program (AIDP) is a Program of Asian Development Bank in the agriculture sector in India. This document is the Final Report.

1.1 PROJECT OUTLINE AND INTENT AIDP is aimed at addressing three main constraints to agriculture growth- outdated technologies; lack of public investment in basic infrastructure and limited diversification. Taking into account the Integrated Value Chain (IVC) approach, the program targets improving physical and institutional linkages along agricultural value chains through support of agribusiness market infrastructure; support infrastructure like last mile roads, power, water; systems relating to market intelligence; and, capacity building and strengthening/establishing value chain linkages. The intent of the program is to achieve accelerated investment in agriculture and to support related infrastructure in rural areas, along the Integrated Value Chains. The interventions may target several or all of the following: • Aggregation facilities • Sorting, grading, packaging • Storage (ambient and controlled temperature) • Value addition and market intelligence • Distribution facilities including logistics • Value chains for end-to-end linkages

1.1.1 Value Chain approach The Integrated Value Chain approach guides the process and forms the underlying structure for this initiative. Of the several motivations to employ a value chain approach, the ‘development’ orientation is partial to one that drives economic growth with the aim of poverty reduction through the integration of large numbers of micro- and small players (in this case, farmers, traders, commission agents etc) into increasingly competitive value chains. By influencing the structures, systems and relationships that define the value chain the aim is to help farmers, traders and other stakeholders to improve (or upgrade) their products and processes, and thereby contribute to and benefit from the chain’s competitiveness. Through

1 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT this approach, the government would enable the small and mid-size players—including small-scale farmers—to create wealth and escape poverty1. The value chain approach; as discussed here, though not especially different from other economic development approaches is distinct in that it simultaneously emphasizes several features like: ƒ A market system perspective ƒ A focus on end markets ƒ Understanding the role of value chain governance ƒ Recognition of the importance of relationships ƒ Facilitating changes in behaviour ƒ Transforming relationships ƒ Targeting leverage points ƒ Empowering the private sector through its greater involvement Taking a value chain approach necessitates understanding a market system in its totality: from input supply to end market buyers; the support systems that provide technical, business and financial services; and the business/market environment in which the sector operates. Such a broad scope of analysis is needed because the principal constraints to competitiveness may lie within any part of this system or the environment in which it operates. While it may be beyond the capacity or outside the mandate to address certain constraints, the failure to recognize and incorporate the implications of the full range of constraints generally leads to limited, short-term impact or even counter-productive results.2 A careful understanding of these dynamics underpinned the project from its early stages right up to the final proposal. In particular, with an eye to effective implementation, special attention has been directed at the proposed institutional arrangements and capacity building support across levels. To elaborate, this approach envisages to bring about positive changes through increased competitiveness, to make visible and measurable differences across the board. The focus of the value chain approach is thus on transforming relationships— particularly between players linked vertically in the value chain—to: ƒ facilitate upgrading to become competitive, and ƒ adapt to changes in end markets, in the enabling environment or within the chain to remain competitive

1.1.2 Hub and Spoke model Use of the concept of the hub and spoke model in the value chains is another key aspect of the project. This takes into account existing players in the supply chains and resolves them into the new, ordered and

1 “The Value Chain Framework” Briefing Paper www.microlinks.org/ev.php?ID=21629_201&ID2=DO_Topic 2 ibid 2 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT more efficient structures that employ the use of improved infrastructure and systems. Assignment and clarification of roles along with support of the appropriate infrastructure, or the wherewithal to execute the functions leads to improved efficiencies, greater value realisation and, finally, improved competitiveness. The illustration alongside demonstrates the flow and activities from spoke to hub and from there to the consumption markets.

1.2 INTEGRATED VALUE CHAIN REGIONS One of the most industrialized states in the country, Maharashtra has achieved good economic development over the years with agri & allied sectors contributing 14% of GSDP even as agriculture is the livelihood of 55% of the population. It is the largest producer of fruits in India (11mn MT annually) and a leading producer of grape, pomegranate and orange. It is the second highest producer of banana and ranks seventh in vegetable production (6.4 mn MT annually) in the country. Maharashtra is the highest producer of coarse cereals and cotton and ranks second in sugarcane production in the country. .

1.2.1 Agri‐Marketing and Infrastructure The state has 294 main markets and 607 sub-markets of APMCs with their size varying from <1 Ha to >100 Ha; also, infrastructure facilities in the markets vary greatly. In the state, 291 main markets and 54 sub-markets have been computerized and connected through internet to MSAMB. At present, 75% of the value of produce traded through APMCs comprises rice, paddy, wheat, soyabean, onion, potato, tur, gram, jaggery and cotton. Marketing channels of horticultural crops are different and may vary, mostly including pre- harvest contractors; the routing may involve farmer cooperative societies, APMC market- to varying degrees and direct deals with traders/commission agents of distant markets, by some farmers.

1.2.2 Selection of Regions The regions identified for the purpose of this project in Maharashtra lie in different agro- climatic zones and vary considerably in terms of agricultural production in both volume and variety. The selected regions are also significant in terms of quantum of produce- which have been flagged as the focus crops being studied, for the respective regions. Regions identified for the purpose of the project are: • Nashik Region • Aurangabad-Amravati Region

3 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Nashik Region This region includes Nashik, Ahmednagar and Jalgaon districts. The districts in this region collectively produce 72% of the state’s total production of banana, 51% of grape, and about 29% of pomegranate, of Maharashtra’s total production. The area also accounts for 85% of onion, about 70% of tomato, cauliflower and cabbage produced in the state. Based on these considerations, and the assessed potential for development, the focus crops identified for the region are pomegranate, onion, grapes, banana, and tomato. This region is also among the highly industrialised, also in terms of agri-business infrastructure and food processing units. Nasik and Jalgaon produce 38% and 14% of India’s grape and banana respectively. Synergies between the IVC projects and other Aurangabad‐ Amravati initiatives proposed- Nashik Region Mega Food Park, Region Modern Terminal Market, NAIP and other initiatives add to the focus on this region for this programme.

Aurangabad‐ Amravati Region This region covers Aurangabad, Amravati, Buldhana, Jalna and Akola districts, in Maharashtra. The region is known in particular for sweet lime in Aurangabad and Jalna, Kesar mango in Aurangabad ; lemon and banana in Buldhana, and orange in Amravati. Maharashtra ranks second among Indian states in production of sweet lime, producing about 23% of the total production in the country, with 98,400 Ha of area under sweet lime cultivation and an annual production of 678,700 MT. This cluster produces about 87% of the total sweet lime grown in the state. The major orange producing districts in the region are Amravati and Akola. The state ranks fifth in terms of production of lemon among Indian states producing about 6.3% of India’s total production of lemon. Though the region’s production of mango is small compared to the mango-belt in North India, Kesar mango is fast cornering a niche segment of the market with its distinctive taste and the efforts of the local growers in Aurangabad region. In sum, the selected areas have very good potential for interventions of the kinds envisaged under the project.

1.3 METHODOLOGY

In the course of the assignment, an assessment was made of the current status of produce, existing supply linkages and systems of aggregation, transportation, trade, sale and processing in the identified areas. Feasible clusters of high value agricultural /horticultural

4 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT produce and high volume produce in Maharashtra, were specially flagged for examination along with an assessment of gaps, as also of the extant infrastructure. The different phases of the assignment were as follows: Phase I: Identification of regions for the integrated value chains of high value/volume agricultural/horticultural produce in the regions. Phase II: Detailed field survey and analysis, gap analysis, identification of stakeholders Phase III: Stakeholder-consultations Phase IV: Structuring and detailing of project components (including locations and financials) for each of the selected integrated value chains Phase V: Stakeholder-consultations for pre-testing models and project finalization

PHASE I: Identification of regions for the integrated value chains of high value/volume agricultural/horticultural produce in the region IL&FS Clusters undertook to identify the major regions for Integrated Value Chains of high value/volume agricultural/horticulture produce based on primary and secondary studies and in consultation with some key stakeholders; representatives of the concerned departments of the state. The methodology adopted for the purpose was: ƒ A study of various existing data e.g. relating to production, processing, marketing, infrastructural facilities, along with a mapping of the same. ƒ To validate findings of secondary data, limited field assessments were carried out. A team of agribusiness supply chain experts mapped the state for production clusters, related infrastructure, existing systems and assessed the market demand and supply for different crops. Based on this, different high value and volume crop regions for the integrated value chains were flagged for consideration. The potential for value addition to the produce through processing at different levels to increase efficiency, preserve quality and/or reduce wastage/spoilage was additionally taken into account and assessed Detailed production data of agri/horticultural crops was collected and analyzed. The status of agri/horticultural processing, marketing and infrastructure including storage, connectivity, etc. in the clusters were also assessed in the context of production on the one hand and its consumption market on the other. Focused field assessments were undertaken (of a limited scope) to validate the secondary data in some areas in the envisaged integrated value chains.

PHASE II: Detailed field survey and analysis, gap analysis, identification of stakeholders A survey team was put in place to undertake detailed field surveys for each of the identified integrated value chains. As part of this exercise, IL&FS Clusters undertook an assessment of the range of activities under the value chain to understand the gaps and inefficiencies in order to identify sub-sectors with the most potential for growth. The methodology adopted is outlined below: ƒ A detailed structured questionnaire survey was canvassed for mapping the entire value chain. This included assessment of marketable surpluses, mapping of the

5 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT existing supply chain and identification of gaps at each stage, with added focus on institutional arrangements and infrastructure including marketing infrastructure, existing technology in use and potential for appropriate technology induction etc. The process of mounting the survey involved: o Identification of blocks to be surveyed, based on production areas of the district that are known for the identified crops; villages from the identified blocks were visited by the survey team to collect data o A two-level assessment- to gauge from farmers about the clusters, crops and quantity, and also obtain information regarding the same from DHOs, DAOs and market players such as commission agents to know their assessment of clusters and quantity. This helped check, verify and triangulate information and views. ƒ The survey team was led by the agribusiness supply chain experts, and in addition to the canvassed questionnaire, included focus group discussions at the cluster level, interviews with key stakeholder representatives and group consultations. This process was spread over six weeks. ƒ Consultations were a key part of the project development exercise, extending beyond the survey period, and, included stakeholders such as farmers, consumers, traders, agro-enterprises, processors, exporters of raw and value added products, as also private sector firms not currently involved but with the potential for participation in the project. ƒ The prepared action plan was validated through focus group discussion and bring out environmental and social acceptability, financial feasibility, legal and other issues. ƒ Social and environmental impact experts made independent assessment to understand the context The agribusiness supply chain experts assessed the demand for high-value crops and value- added products in the domestic and international markets in consultation with the product specialists on the team, and identified sub-sectors in the integrated value chains with the most growth potential. Institutional, infrastructural and logistical barriers for product categories were also identified. The cold chain experts conducted an independent assessment in the field to assess the cold chain needs for the identified integrated value chains, in view of the highly perishable high- value products to suggest cold chain solutions for each integrated value chain. The cold chain experts along with the logistics expert mapped the existing supply chains to identify the temperatures ranges ideal for the selected produce types and their requirements throughout the supply chain. For the focus crops, the following type of information was collected. ƒ Crop harvest times; ƒ Processes required for different crops – picking, washing, grading, packaging, storage; ƒ Existing types and numbers of facilities for undertaking these operations; ƒ Transport-types used, to and from these facilities; ƒ Road networks connecting the clusters and markets, and also the facilities; ƒ Main sources of consumption for the different crop types – un-organized retail, organized retail (supermarkets), export;

6 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT ƒ Typical number of stages in the existing supply chains – commission agents, aggregators, traders, markets, etc. ƒ Cold chain technology such as temperature controlled facilities and transport that is in use in the existing supply chains. Based on findings from the field studies, areas where key improvements can be made towards quality, waste reduction and greater value realisation from the produce, with the development of cold chain facilities, were flagged. The identification of cold chain interventions focused on post harvest cold-chain management, reducing metabolic rates (respiration and degradation by enzymes) and water loss/volume reduction and wilting, appropriate time for handling and processing, and, maintaining predictable consistent quality at delivery points. Based on this, facilities, relevant technologies and transportation has been identified and scoped. Infrastructure specialists worked closely with the agribusiness supply chain specialists and the cold chain specialists to identify and rationalize requirements and evolve the applicable Hub and Spoke concept, located within the Integrated Value Chains. A parallel assessment of the consumption markets in the existing supply chains took into account the following aspects: 1. Key market requirements and factors that affect price and shelf life such as quality, packaging, presentation, processing and Good Agricultural Practice (GAP) requirements. 2. The specific activities and unit cost of the specific activities needed to meet market requirements, e.g. mechanical harvesting, grading and packaging, cool storage, etc. 3. The commodity volumes and the synergies that may be developed between different products for harvesting, grading, packaging, processing, storage and transport. Outputs from these were used to define the scope of the infrastructure requirements and provide the design parameters for value-adding plant and equipment as well as agribusiness centres, storage and handling facilities. A social development specialist assessed aspects of the project critical for the project’s sustainability. Poverty and Social Assessment was undertaken by the social development specialist on a sample basis pertaining to key indicators of poverty and human development. Given the nature of the activities, the project does not have a significant land acquisition component that involves resettlement or any significant impacts to the indigenous peoples in the areas.

PHASE III: Stakeholder‐consultations The program aims at developing commercially sustainable integrated agri-infrastructure projects; inputs and suggestions of potential investors in developing the projects have been used to further develop the projects. After the detailed field survey, the analysis and the gaps identified were discussed with a range of key stakeholder groups, among them, farmers, consumers, agro-enterprises, research and extension organizations, food processing industry, intermediaries in the value chain, exporters and food retailers and private sector firms with potential for participation, etc. to get their feedback on the analysis and understanding of the issues.

7 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT These valuable inputs have been used at several instances for the accurate structuring and detailing of project components in the integrated value chains. These inputs have also informed the need to build capacities along the envisaged integrated value chains.

PHASE IV: Structuring and detailing of project components (including locations and financials) for each of the selected integrated value chains Based on the need assessment for each value chain, action plan were drawn-up and stakeholder consultations undertaken to identify locations of hubs and spokes in each integrated vale chain. International best practices were also used as applicable to benchmark and inform the practises to be instituted along the value chains. The cold chain specialist developed detailed designs of the identified cold chain elements of the selected value chains along with costs- the infrastructure specialists developed the costs of civil works and technical equipment, in consultation with the cold chain experts. Improving efficiencies along the supply chain and greater value realisation were kept in focus. The infrastructure specialist made an estimate of the civil works for buildings as well as for supporting infrastructure like water and power supply, effluent treatment etc. using tabled standard cost norms. The master plans of identified project structures in the selected value chains have been included. A market intelligence and information system has been envisaged an integral part of the proposed interventions and knowledge centres have been proposed at hub and spoke locations. The project finance/PPP specialists along with agribusiness supply chain experts, cold chain experts and infrastructure experts have developed detailed project costs for each value chain. The project finance/PPP specialists have considered various PPP options for project structuring. After detailed analysis of various operation models, most feasible options have been recommended to ensure smooth project implementation. Project structuring for determining various PPP options and identification of procurement options for various components along with sources and quantum of investment from different sources and the possible ways of meeting the O&M expenses of the assets for the value chain of each selected product of project, are also included.. The agribusiness supply chain specialists explored existing farmer organizations (groups/clubs/cooperatives/associations) in the identified value chains, and recommendation for further formation of groups and capacity building have been included in the project with a suitable institutional mechanism, to ensure that small and marginal farmers are included in benefiting from the project.

PHASE V: Pre‐testing models and project finalization In consultation with the strategic advisor, pre-testing of project components with potential private sector investors and existing stakeholders has been carried out. The legal/PPP contracts experts undertook to review existing legal frameworks in the states with respect to the sub-project construction and implementation aspects.

8 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 1.4 STRUCTURE OF THE REPORT The document, for Maharashtra, covers both Integrated Value Chains; Nashik and Aurangabad-Amravati and the layout is as follows:

Nashik Integrated Value Chain ƒ Map of region ƒ Introduction- Separate sections detailing focus crops Pomegranate, Grape, Tomato, Onion, Banana ƒ Spoke description, proposed system ƒ Proposed Locations for Hub and Spoke model, system ƒ Proposed Integrated Value Chain Project

Aurangabad‐Amravati Integrated Value Chain ƒ Map of region ƒ Introduction- Separate sections detailing focus crops Sweet lime, Kesar mango, Orange, Lemon, Banana ƒ Spoke description, proposed system ƒ Proposed Locations for Hub and Spoke model, system ƒ Proposed Integrated Value Chain Project

Conceptual plans of facilities

Stakeholder consultations

Market assessment

Impact assessment

Capacity building

Policy and regulatory aspects

Implementation framework

Project implementation structure

9 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

NASHIK INTEGRATED VALUE CHAIN

Nashik region, Maharashtra

Focus Crops

ƒ Pomegranate ƒ Grape ƒ Tomato ƒ Onion ƒ Banana

DPR: Nashik Integrated Value Chain Project

ƒ Description of Hub and Spokes

10 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Nashik Region IL&FS Clusters identified Nashik region for Integrated Value Chains of high value/volume agricultural/horticulture produce based on a combination of factors like agricultural production in terms of volume and variety, human and economic development, suitability for development of integrated value chains and commercial viability of infrastructure projects. The map below indicates the region covered under this Integrated Value Chain: This region includes Nashik, Ahmednagar and Jalgaon districts.

Nashik Region

The districts in this region collectively produce 72% of the state’s total production of banana, 51% of grape, and about 29% of pomegranate , of Maharashtra’s total production. The area also accounts for 85% of onion, about 70% of tomato, cauliflower and cabbage produced in the state. Based on these considerations, and the assessed potential for development, the focus crops identified for the region are: Focus Crops in this region are: ƒ Pomegranate ƒ Grape ƒ Tomato ƒ Onion ƒ Banana

11 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

2 FOCUS CROP: POMEGRANATE

Maharashtra, the largest producer of pomegranates in the country accounts for 70% of total production of pomegranates. In 2007-08, total area and production of pomegranates in Maharashtra was 98500 Ha and about 0.6 million MT respectively. Crop production and productivity of Pomegranates in Maharashtra in 2007-08 have marginally declined from the previous year. Solapur, Sangli, Nashik, Ahmedanagar, Pune, Dhule, Aurangabad, Satara, Osmanabad and Latur are the major districts under pomegranate cultivation in the state. Nashik district alone accounts for 26 % of the total production of pomegranates in the state. In 2007-08, the total area and production of pomegranates in Nashik district was 9132 Ha and 0.15 million MT respectively. Most of the area under pomegranates in Nashik district is concentrated in three talukas i.e. Malegaon, Satana and Deola.

Area and production of pomegranates in the identified region

Districts Area in Ha Production in MT Nashik 9132 155244 Ahmednagar 4388 30644 Jalgaon 3575 27288 *Source: Directorate of Horticulture, GoM Ganesh, Mrudula and Bhagwa are the major varieties grown in the cluster. Bhagwa is the preferred variety for export as well as for all new plantations in the region. Some of the major varieties and their characteristics are mentioned below: Ganesh: It is a prolific bearer. The fruit are very large with yellowish red rind and pinkish aril with soft seeds. The average yield ranges from 8-10 kg per tree. Mrudula: This variety has all the characters of the Ganesh variety except the arils are dark red in colour. The colour of the arils in 'Ambe' bahar and 'Mrig' bahar is dark red in colour while it is pink during the 'Hasta' bahar. The average fruit weight is 250-300 grams. Bhagwa: Fruits of this variety are very attractive because of saffron coloured smooth and glossy peel. Aril is cherry red in colour that is suitable for processing as well as table purpose. Fruits have better keeping quality as compared to other varieties i.e. 12-15 days under ambient condition. The variety is not susceptible to fruit crack and fruit drop. Because of thick peel, this variety is also suitable for long distance transport and hence it fetches 2-3 times higher price as compared to ‘Ganesh’. It is a high yielding variety and the yield per tree is around 30-40 kg. Pomegranate is propagated through grafting. The plant starts bearing fruit from 2nd year onwards. Recently, tissue-cultured saplings are also being planted in the area. Around two hundred thousand tissue culture saplings were planted in the region last year, covering an area of about 100 Ha, which were distributed free of cost by a private player (Jain Irrigations). Around 80-90% of the farmers in the cluster use drip irrigation as availability of water is a problem in many areas of the cluster. Pomegranate is harvested round the year in the cluster. The fruit harvesting increases by 10-15% mainly from July to September and again from November to March. Harvesting of the fruits is relatively low from April to June.

12 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Die back is among the major diseases of pomegranate in the cluster, which sometimes lead to dying of entire orchard within two years. Black spot, fruit crack and fruit drop are the other disorders found in cultivars of pomegranate. Export of pomegranate from the cluster has started picking up in recent years after exporter’s educated farmers on Good Agricultural Practices and requirements of international markets. A few farms in the cluster are EurepGAP certified and about 4000-5000 farmers are in the process of obtaining certification. Around 150 MT of pomegranates were exported in the year 2008-09 from the region mainly to United Kingdom, Holland, other European and gulf countries.

2.1 VALUE CHAIN ANALYSIS

2.1.1 Trade channel of pomegranate The following illustration depicts the various stakeholders of the pomegranates supply chain:

Various channels of the pomegranate supply chain Pre Harvest are mentioned below:

Pre‐harvest Village Pre‐harvest contract: contractor aggregator This is the most commonly used sales system of Commission agent pomegranates. Around 85-90% of the produce from an orchard is sold under pre-harvest contract. Farmers prefer to sell their entire produce from an Wholesaler orchard to a contractor, irrespective of the size and grade, because of lower price realization for lower Semi‐wholesaler grades. The price is paid to the farmer on per kg basis. After harvesting and aggregating the produce, the pre-harvest contractor supplies pomegranates to Retailer bigger APMC markets like Mumbai, Delhi etc, where the traded is facilitated by a commission Consumer agent. The produce is bought by wholesalers, who does further distribution to semi-wholesalers and retailers.

Village level aggregator Around 10-15% of the produce from an orchard is sold through village level aggregators. These fruits are very small in size at the time of harvesting of fruits by the contractor and hence they are not plucked by the contractor.. These are plucked by the farmer later on and sold through village level aggregators in APMC markets of Nashik, Malegaon and Satana. The major players involved in trade of pomegranates are farmer, pre-harvest contractor, village level aggregator, commission agent, wholesaler, semi-wholesaler and retailer. The role played by major stakeholders and the value added at each stage is briefly captured below:

Farmer: The average landholding of pomegranate farmers is around 8 Ha, which is spread into 3-5 land parcels. Around 50% of the land is used for pomegranate cultivation and the rest is used 13 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT for growing other crops. As mentioned earlier, pomegranates are propagated through grafting. The plants are sown in square system that accommodates 750 plants in a hectare. Most of the farmers set up their orchards in different land parcels and each orchard is of different variety. The objective is to harvest fruits round the year . Farmers incur a cost of Rs160,000 in establishment of orchard in a hectare. Besides this, farmers incur capital cost of Rs 2 million in drip irrigation system, construction of packing shed etc for an orchard of 7 Ha. As the size of orchard increases, it becomes much more economically viable to the farmer. The cost of establishment of orchard in a hectare is represented in table below:

Activity in a Ha for 750 plants Cost in Rs Pit digging @ Rs 10/pit 7500 Fertilisers* 12000 * 20 bags of fertilizers per Ha @ Rs 600 per Organic manure** 22500 bag of 50 kg of NPK Pesticides 12500 **7.5 trolleys of Rs 3000 each Growth hormones for root setting 3750 ***1 kg per plant @ Rs. 9/kg Neem cake*** 6750 ****Rs. 100 per day (1 person per acre Farm labour**** 90000 throughout the year) Irrigation 500 Planting material @ Rs 15/plant 11250 Total 166750 The capital cost incurred for establishment of an orchard in 7 Ha is mentioned below:

Capital cost incurred in orchard of 7 Ha Rs in lakhs Besides the initial establishment Land levelling 2.5 cost, farmers incur a cost of Rs Water storage tank 6 100,000 – Rs 200,000 in Drip irrigation system 4.5 maintenance of 1 ha of orchard. It Borewell with electricity connection 2 mainly comprises of costs labour quarter 2 incurred in application of packing shed 2.5 fertilizers, pesticide application, room for drip irrigation filter systems 0.5 irrigation, pruning etc. Total 20 The operational cost per Ha is shown below:

Operational cost per Ha for 750 plants Cost in Rs Fertilizer-3 kg per plant (3 Fertilizer 27000 applications @ 1 kg per liquid fertiliser 8000 application) pesticides 21000 Pesticides - 14 litres per plant @ micro‐nutrients 6250 Rs. 2 per litre irrigation 500 Staking - 4 bamboo sticks per labour for various operations 90000 plant @ Rs. 5 per bamboo stick staking 3750 (life of bamboo sticks - 4 years) Total 156500 The plant starts bearing fruit from 2nd year onwards. The average yield per tree is around 40 kg. The contractors start visiting pomegranate orchards of farmers when the fruits are nearing maturity. The price is negotiated between the farmer and contractor on the basis of size and quality of the fruit and it is decided on per kg basis. Most of the farmers prefer to deal for the entire produce of an orchard

14 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT irrespective of the grades, due to inconvenience in arranging transport to the local APMC and low price realization for lower grades. The average price realized by a farmer is around Rs 35/kg for Bhagwa variety. However, the price is dependent upon grade and variety and varies from Rs 25-80. Payment to the farmer is done by the contractor within seven days after harvest.

Pre‐harvest contractor: The pre-harvest contractor is responsible for harvesting of fruits, sorting, grading, packaging and transportation to destination markets. The time of harvesting depends upon the market demand, as assessed by the trader. When fruits attain maturity, the trader informs farmer to start plucking. It is done by the farmer using his own family members. However, some of the large farms employ labour at the rate of Rs. 120 /day. Plucking usually starts in the morning with the help of secateurs or manually by retaining 1 cm stalk with the fruit. Harvesting continues throughout the day. All the fruits are harvested in 2-3 pickings within a span of one month. Fruits are collected in plastic crates of 20 kg each and it is handed over to the contractor after weighing by the labourers employed by the contractor. Sorting, grading and packaging are done manually at farm itself. Every farmer provides a small space on his farm to the contractor for grading and packaging. In certain farms, it is done on a concrete platform with tin shade and others use tarpaulin on the ground as well as for shade. Grading is done manually on the basis of size, colour and health of the fruit and packed in the corrugated boxes using paper cuttings for cushioning. A team of 6 people, which comprises of 2 helper, 2 people for sorting/grading and 2 persons for packaging, can handle 2-3 MT of pomegranates in a day. The prevailing charges for each of them are mentioned in table below:

Size and quality of the box vary depending Activity Charges in Rs per person upon the destination markets. 3 fold CFB Sorting/Grading 120 Packaging 150 boxes are used for local market while 5 fold Other activities on farm 80 CFB boxes are used for distant markets. Generally, 2.5 kg, 5 kg, 8 kg and 10 kg CFB boxes are used. 5 kg boxes are used for Delhi and Mumbai markets and 8 Kg boxes are used for Delhi, Kolkata and Jaipur markets. The cost of 5kg and 8kg CFB boxes is around Rs 5.5-6.5/box and Rs 8-9/box respectively. The contractor arranges for pick up of fruits from farm gate to the point of aggregation in smaller trucks of 3 MT capacities. The cost of transporting 3 MT produces from farm to the point of aggregation, which is usually 25-30kms away, is around Rs 1500. Thereafter it is transported to bigger APMC markets like Mumbai, Delhi etc in trucks of 9 MT capacities. The cost of loading and transportation from the point of aggregation to Mumbai comes to around Rs 8000 per truck of 9 MT capacities. Thus the entire cost of weighing, grading, packing, loading, transportation to destination markets, unloading and commission is borne by the trader, which comes to around Rs 8.2/kg.

Commission agent: They facilitate trade between the contractor and the wholesaler for which they charge a commission of 8-10% from the contractor. Payment to the contractor is made by the commission agent on behalf of the buyer/wholesaler.

15 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Wholesaler: They are the bulk breaker and are responsible for distribution of pomegranates to various locations in the country. The wholesaler pays marketing cess @1.05% and sends the produce to semi-wholesalers or retailers.

Village level aggregator: When the farmer sells pomegranates through village level aggregator cum transporter, the aggregator arranges for transport and brings the produce in crates to APMC markets. The total expenses borne by the farmer comes to around Rs 10, which includes cost of transportation, unloading charges as well as margin of the village level aggregator. As mentioned earlier, only 10-15% of the produce from an orchard is sold through aggregators in APMC markets. APMC markets of Malegaon and Satana receive only grade C and D, which are smaller in size and have visible spots on the fruit, whereas Nashik APMC receives all kind of grades. The produce is sold by open auction through commission agents and they charge 8% commission from the farmers. The produce is bought by traders and they pay marketing cess @1.05%. Pomegranates are graded, packed at the space provided by the commission agent and its cost is borne by the trader.

Pomegranates are loaded in trucks and Activity Cost in Rs /box sent to many places all over the country Grading Sorting and Packaging labour Rs. 3 like Kanpur, Bareilly, Jhansi, Patna, Packaging Material (10 kg per box) Rs. 10 Ludhiana, Amravati, Nagpur etc. Paper cutting for cushioning (250 gm to 500 gm per box) Rs. 8‐10 Loading into trucks Rs. 0.75

2.1.2 Price build up along the value chain of pomegranate Value chain of 1 kg of pomegranate indicating the various activities and cost build-up at every step has been mapped, as shown below.

Consumer price

Retailer’s margin

Rs 80 Losse s Rs 11.5 Wholesaler’s margin

Transport Rs 8

Losses Rs 6

Rs 0.3 Marketing cess

Rs 3 Contractor’s margin Rs 60 (Wholesaler’s Price)

Com mission charges Rs 0.6

Transportation, loading, U/L, losses Rs 6 Grading, Packing RsLosses 5

Farmgate price Rs 2.3 Rs 50 (C ontractor’s Price)

Rs 1.5

Rs 35

16 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Some of the assumptions of the price build up are: • The most commonly observed trade channel has been selected for the price build up of pomegranate i.e. Farmer- Pre harvest contractor-Commission agent- Wholesaler-Semi- wholesaler-Retailer. • The price build up is indicated for medium grade ‘Bhagwa’ variety of pomegranate. • The transportation cost has been taken from Malegaon to Mumbai • The cost of retailing, which includes the cost of shop, wages, rent etc, has not been considered. As evident from above, farmers incur a cost of Rs 5/kg in maintenance of pomegranate orchard. Around 3-5 % of the produce, which may be cracked, rotten or damaged by the pest is culled during sorting and grading on the farm. The average price realized by the farmer is around Rs 35/kg and thus his net margin is Rs 28/kg. As explained earlier, the cost of grading, packaging, loading, unloading, transportation and commission at APMC market, which is around Rs 8-9, is borne by the contractor. It has been observed that after the replacement of wooden boxes and gunny bags by plastic crates and corrugated boxes as packaging material in recent years, per cent of produce wasted during handling and transportation from farm to market has considerably reduced. Some contractors have reported that once the produce is packed at farm in the corrugated boxes, not even 1% of the total produce is wasted during handling and transportation to the destination markets. The price realized by the contractor is Rs50/kg at APMC Mumbai and his net margin is Rs 6/kg. The produce is traded in APMC market and it is bought by the wholesaler and he pays marketing cess @1.05%. Since commission agent facilitates trade and also pays to contractor on behalf of the wholesaler, he takes financial risk and thus charges commission at the rate of 8% from the contractor. The net margin realized by the wholesaler and retailer is around Rs 6 and Rs 11/kg respectively. At retail level pomegranates are mostly sold on the basis of count instead of weight. The price build up can be summarized as below: Particulars Farmer Contractor Wholesaler Retailer Cost of maintenance/ Purchase price (Rs/Kg) 5 35 50 60 Cost of marketing, transport, wastage (Rs/Kg) 1.7 8.9 4 8.5 Selling price(Rs/Kg) 35 50 60 80 Price spread 28.3 6.1 6 11.5 Some of the salient features of the price build up are mentioned below: • There are around five intermediaries between the farmer and consumer. The intermediaries are contractor, commission agent, wholesaler, semi-wholesaler and retailer. • The price build up from farmer to consumer is around 2.5 times. • The produce is sold on mark up basis and at retail level it is sold on count instead of weight in Mumbai. However, in the retail markets of Delhi, pomegranates are mostly sold on weight basis. • Since pomegranate is a hardy fruit, wastages are quite low along the value chain i.e 3- 5% at farm level and 1% during handling and transport. Major losses occur at retailer’s

17 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT level (both weight and value) i.e. around 5-10%, if the produce is not sold on the same day. • The contractor bears the product risk and his price spread is Rs 6/kg and earns 8 paisa of a consumer rupee. • The commission paid by the contractor to the commission agent constitutes 6 paisa of a consumer rupee. • The wholesalers bears product, marketing as well as financial risk, though to a lesser extent, and his share in a consumer rupee is around 8 paisa. Around 5% of the produce is also wasted at wholesale level. • The retailer deals in smaller volumes and his share in a consumer rupee is around 14 paisa.

2.2 INFRASTRUCTURE ASSESSMENT

2.2.1 Post harvest Infrastructure Nashik region does not have any pack house for pomegranates. Some of the traders are using pack houses meant for grapes for washing, sorting, grading, waxing, pre-cooling etc. There are about 533 pomegranate processing units in the region involved in manufacturing of juice and anardana.

2.2.2 Marketing Infrastructure Major APMCs in the region, where pomegranate is traded, are Malegaon, Satana and Deola. None of the APMCs has any cold storage facility or any other facility such as grading packing line etc. for pomegranate.

2.3 GAPS IDENTIFIED IN THE VALUE CHAIN An assessment of the range of activities under the value chain was undertaken to understand the gaps and inefficiencies in the pomegranate value chain. A detailed structured questionnaire survey was undertaken to map the existing supply chain and identification of gaps at each stage, with added focus on institutional, infrastructural and logistical barriers.

3 Based on data from 2006-07 18 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT After the detailed field survey, the gaps identified were discussed with a range of key stakeholders to get their feedback on the analysis and understanding of the issues. Some of the gaps identified in the value chain are: • Farmers have limited knowledge about scientific crop management, which is a prerequisite for export. • Plucking is mostly done manually. Use of equipments for harvesting is limited to a few large growers. • Pomegranates are graded and packed manually at farm level. Farm level pre-processing facilities like pre-cooling, washing, grading, sorting are absent. As already mentioned, some of the traders use pack houses meant for grapes for pre-cooling and other operations. • As already mentioned, export has recently started picking up from the region. However, there is no export oriented pack house in the region. Because of this, exporters have to either transport their produce to export facility centre at Baramati or Indapur, which are approximately 250-300 km away. This results in delayed pre-cooling and relatively short shelf life of the produce and hence less price realization.

2.4 POTENTIAL FOR INTERVENTION Based on the need assessment of the pomegranate value chain, action plans were drawn-up and stakeholder consultations undertaken to identify areas of potential interventions. Some of the areas identified for intervention are: • It is proposed to set up a pack house for pomegranates at Malegaon in Nashik district. The pack houses may have facilities for: • Pre-cooling, • Sorting/grading • Packing • Cold storage. It is estimated that the throughput of pomegranates at Malegaon spoke shall be 2000 MT. This spoke will also handle other crops such as grapes, onion and maize. The details of the facilities have been captured in the subsequent chapter. Pomegranates may be transported in reefer vans to avoid physical and quality loss during transit Since export of pomegranate has recently started from the region, farmers may be educated about Good Agricultural Practices and requirements of international markets.

19 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

3 FOCUS CROP: GRAPE

Maharashtra is the largest grape producing state of India, contributing to more than 75% of the total grape production in the country. Within Maharashtra, Nashik, Sangli, Solapur, Pune are major grape growing districts, of which, more than 60% of the grape is produced in Nashik alone. As per the Directorate of Horticulture, Government of Maharashtra, total area under grape production in Nashik in the year 2007-08 was about 32000 hectares and production was around 0.6 million MT. Major grape growing talukas in Nashik are Niphad, Dindori, Nashik and Sinnar.

Area and production of Grapes in the identified region

Districts Area in Ha Production in MT Nashik 32113 610147 Ahmednagar 1132 30553 Jalgaon 18 391 *Source: Directorate of Horticulture, GoM Of the total production of grapes, about 10% goes into wine manufacturing, 2-3% in raisin making, 5% in exports and rest 82-83% in domestic market for fresh consumption. Grape is grown on trellises using iron angles, bamboo sticks and wires. Cost of establishment of an orchard comes to around Rs 0.5 million per Ha. Fruiting starts from 3rd year and economic yield starts from 5th year onwards. Most of the farmers in Nashik region are using drip irrigation for grape cultivation. Thompson Seedless, Black Seedless and Sonaka are popular among table varieties and Shiraj is grown for processing. Major varieties exported from the region are Thompson Seedless, Black Seedless, Flame Seedless and Sharad Seedless. Some of the major varieties and their characteristics are mentioned below: • Thompson Seedless: This variety is seedless and the berries are green in colour. It accounts for the bulk of export of grapes for table purpose. It is available from mid Jan to mid April. • Sonaka: This variety is also seedless and has elongated berries. It is available from mid Jan to mid April. • Black Seedless: This variety is seedless and black in colour. They are good for table purpose as well as for processing into wine. It is available in January and February. Grape is harvested from February to May. The fruits are harvested at full maturity when the colour turns light green or yellowish. For export purposes, fruit is harvested at full maturity before change of colour. In Nashik district, productivity of grapes is 19MT/Ha. However in export oriented farms, the productivity of grapes is around 25-30 MT/Ha. Around 90% of the table varieties produced in the region is sold on farm itself. Of the remaining 10%, about 6- 7% of the produce goes to local APMC.

20 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 3.1 VALUE CHAIN ANALYSIS

3.1.1 Trade channel of Grapes The following illustration depicts the various stakeholders of the grapes supply chain: Various channels of the grape supply chain are mentioned below: • Around 85-90% of the grapes produced in the region are sold directly from the farm and are bought by traders. The trader does the sorting, grading and packaging at the farm itself and the packaged grapes are sent to destination markets. As mentioned earlier, traders visit orchards when the fruit is nearing maturity. The price is decided on per kg basis depending upon the size and quality of fruit. • Around 10% of the produce goes into processing/winery industry. • Around 5% of the produce goes for export purpose. As shown in the figure above, major players involved in the trade of grapes are farmer, trader, commission agent, wholesaler, exporter and processor. The role played by major stakeholders and the value added at each stage is briefly captured below:

Farmer: Farmers incur a cost of around Rs 0.5 million in establishment of orchard in a Ha. The cost of establishment of an orchard in a hectare is represented below:

Activity Cost in Rs per Ha Land preparation 25000 Trellises and support system* 312500 drip irrigation system 62500 green manure 30000 organic manure 37500 fertilisers 20000 pesticides 25000 irrigation 2500 planting material 3750 Total 518750

*Support system Rate Quantity/Ha Iron angles Rs. 35 per kg 500 angles @ 1 angle per 5 plants Wire Rs. 65 per kg 500 kg Bamboo Rs. 10 per stick 2500 sticks

21 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Grape is a labour intensive crop especially during 4 months of the year starting from flowering till fruit maturity i.e. from Oct to January. Major operations include spray of chemicals, thinning of bunches, covering of bunches by paper, cleaning of bunches by removing dead or rotten berries etc. Labour accounts for more than half of the operational expense incurred during the year for taking one crop. Use of pesticides, growth hormones and fertilizers is very high in grapes and is second major contributor towards operational cost. The operational cost incurred by the farmer in a hectare is represented below:

Operational cost per Ha in Rs Export Domestic Winery Fertilizer 60000 50000 25000 Chemical application after pruning 3750 3750 3750 Growth hormone 17500 8750 8750 Pesticides 25000 25000 20000 Irrigation 5000 5000 5000 Paper cover for bunches 5000 0 0 Labour for various operations 132500 87500 47500 Total Cost 248750 180000 110000 The break up of the expenses incurred by the farmer on employing farm labour is mentioned below:

Activity Export Domestic Winery Pruning and growth regulator application 6250 6250 6250 Fail fruit removal 3750 3750 3750 1st dipping of bunches in GA 7500 7500 0 2nd dipping of bunches in GA 7500 7500 0 3rd dipping of bunches in GA 7500 0 0 1st thinning of bunches 25000 25000 25000 2nd thinning of bunches 25000 25000 0 4th dipping of bunches for fruit shine 7500 0 0 bunch cleaning 20000 0 0 bunch covering 25000 0 0 bunch/branch tying 12500 12500 12500 Total 147500 87500 47500 Processing varieties require less labour and an operational cost per Ha comes to around Rs.0.1 million. Operational cost for table varieties is around Rs 0.18million per Ha, whereas the operational cost for export quality produce is around Rs 0.25 million. All operations till and including harvesting are farmer’s responsibility. The fruits are harvested at full maturity and when the colour turns light green or yellowish. For export purposes, fruit is harvested at full maturity before change of colour. When the fruit is of about 4 months i.e. in January-February, traders visit the farms and a price is negotiated between the farmer and the trader depending on fruit size and quality. Payment terms vary from case to case on the basis of relationship between the farmer and the trader. However, a token amount is paid to the farmer by the trader at the time of price fixation. Duration of remaining payment vary from immediate to 2 weeks after harvesting. Price received by the farmer varies from Rs. 15 – 40 per kg depending on the size and quality of berries. Around 5% of the produce from an orchard are loose berries and they are not bought by the traders. The farmer brings these berries to local APMC market, where it is

22 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT traded through a commission agent. These berries are mainly used for consumption in local market as well as for making raisin. Grape grown for export purpose by the farmers i.e. berry diameters of more than 16 mm, tests are conducted for residue levels. Farmers need to get 3-4 samples tested and each test costs around Rs. 5000-7000 to the farmer. Destination of the produce is decided on the basis of residue level and the price offered is determined on the basis of destination market. Europe has the most stringent residue norms in comparison to Middle-Eastern countries and then comes Bangladesh.

Pre‐harvest Contractor (Trader): Trader picks up the produce from farm itself after sorting, grading and packaging. These activities are done by his work-force hired for the entire grape season of 3-4 months. The entire operation is done manually at the orchard. Mostly labourers migrated from northern states are involved by the traders for carrying out the above operations. They are relatively available at cheaper rates than the local labour. Wages of farm labourers vary from Rs. 80- 150 per day. A team of 3-4 people can grade and pack about 1.5-2.0 MT of grape in a day and load it in the truck. Grading is done on farm manually on the basis of colour and size. Characteristics of different grades are as follows; Grade A: Berries are > 16 mm diameter Grade B: Berries between 16 – 14 mm diameter Grade C: Berries less than 14 mm diameter Grape is packed in corrugated fibreboard boxes. Boxes come in various sizes of 2 kg, 4 kg. A box of 4 kgs costs about Rs. 8-10. Since grape is sold before harvesting, risk of price fluctuation in the market shifts from farmer to the trader. Traders are resourceful and are more capable to bear this risk by storing the produce during peak season.

Pre-harvest Contractor – The Driver of the Value Chain

Pre-harvest Contractors, popularly known as “Vyapari” or Trader, play an important role in the value chain of grape. They maintain a network with other traders operating in major markets across the country. Orders are taken over the phone and supply is done as per market demand. Hence, the traders are able to control the price fluctuation to some extent. Moreover, many traders own cold stores in Nashik and provide further buffer against glut by storing the grape for 2-3 months during peak harvest season. This also enables them to fetch a better price during lean season.

Commission Agent: They facilitate auction of the produce brought to the APMC. Major markets of grape in Nashik are Pimpalgaon and Nashik APMCs. Open auction system prevails in these markets. CA is authorised by the APMC to charge the commission @ 8% of selling price from the seller in Nashik and Pimpalgaon, whereas 10% in case of Mumbai APMC. CA also provides credit facility to the buyer of the produce by making immediate payment to the seller on behalf of the buyer. Payment to the CA by the buyer is done after 1-2 weeks depending on their relationship. Market fee and cess @ 1.05% is being paid by the buyer to the APMC, which is also routed through the CA.

23 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

3.1.2 Price build up along the value chain of Grapes Value chain of 1 kg of fresh grapes indicating the various activities and cost build-up at every step has been mapped, as shown below.

Consumer’s Price Losses at Retail Level Rs 50.00 Retailer’s Margin Rs 2.00 Wholesaler’s Margin Rs 8.00 Market Fee @ 1.05% Rs 4.63 Trader’s Margin Rs 0.36 Commission @ 10% Rs 2.94 Transportation, Unloading at APMC Rs40 (Wholesaler’s Price) Rs 3.50 Grading, Packing, Loading Rs 1.25 Farm gate price Rs 35 (Trader’s Price Rs 2.30

Rs 25

Some of the assumptions of the price build up are: • The most commonly observed trade channel has been selected for the price build up of grape i.e. Farmer- Trader - Commission agent- Wholesaler -Retailer. • The values have been assumed for the Grade B grape i.e. berry diameter of 14-16 mm, which are the best quality available for the domestic market. • The transportation cost has been taken from Niphad to Mumbai • The cost of retailing, which includes the cost of shop, wages, rent etc, has not been considered. The grape farmers incur a cost of Rs 12.5/kg in cultivation of grapes. The price offered by the trader to the farmer is Rs 25 and the net margin realized by the farmer is Rs 7.5/kg.

Reduction in Wastage by Use of CFB Boxes Earlier grape was packed in wooden boxes using dry leaves of sugarcane or using some other grass as cushioning material. Ventilation was limited in the wooden boxes due to which temperature and ethylene levels were high inside the box. This resulted in low shelf-life of the fruit inside causing higher level of wastage while transporting to distant markets. Grass used for cushioning also caused damage to the berries. Wooden boxes have been replaced by cardboard boxes during the last 5-8 years. Now, corrugated fibre board boxes of 3 ply and 5 ply are being used for packaging of grape. These boxes have provision for ventilation and wastages have been reduced considerably. The trader is responsible for grading, packaging, loading in trucks and transportation to destination markets and unloading at the APMC market. He incurs an expense of Rs 3.5/kg in bringing the produce from farm to market. The trader also pays commission to the commission agent, which is charged to him at the rate of 10%, which comes to around Rs 3.5/kg. The price realized at the APMC market is Rs 35/kg and the trader’s margin is Rs 3/kg. The produce is bought by the wholesaler at APMC market and he pays marketing cess 24 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT @1.05%. The wholesaler earns a margin of Rs 4.6/kg and does distribution of grapes to various retailers. The retailers margin is Rs 8/kg and thus the consumer price reaches to Rs 50/kg. The price build up can be summarized as below:

Particulars Farmer Trader Wholesaler Retailer Cost of maintenance/ Purchase price (Rs/Kg) 12.5 25 35 40 Cost of marketing, transport, wastage (Rs/Kg) 5.0 7 0.5 2 Selling price(Rs/Kg) 25 35 40 50 Price spread 7.5 3 4.5 8 Some salient features of the price build up are mentioned below: • The price paid by the consumer is almost two times of the price realized by the farmer. • There are around 4 intermediaries in the supply chain of grapes i.e. trader, commission agent, wholesaler and retailer. • Grape farmers receive 15 paisa of a consumer rupee. Around 4- 5% of the berries come out of bunches during harvesting, sorting, grading and packaging, which are discarded by the trader. These berries are sold by the farmers to local women at very low prices i.e. Rs. 5-8 per kg and are used for raisin making. • Total wastage of about 8-10% has been reported by various actors of the value chain. Once grape is packed by the trader, no losses are observed till the produce is sold in the APMC to the wholesaler. Further 4-5% berries loosen out of the bunch at retailer’s level and are either thrown away or sold at a very low price. • Trader plays an important role in the value chain of grapes. They bear product as well as price risk, for which they earn a margin of Rs 3/kg i.e. around 6 paisa of a consumer rupee. As grapes are sold before harvesting, risk of price fluctuation in the market shifts from farmer to the trader. Traders are resourceful and are capable to bear price risk by storing the produce during peak season.

3.2 WINERIES There are about 32 wineries in Nashik manufacturing more than 75 lakh litres of wine every year. Most of these wineries are located in Niphad and Dindori Talukas. A wine park has also been set up by Maharashtra Industrial Development Corporation (MIDC) in Vinchur, Taluka Niphad. Wine varieties cover about 10% of the area under grape. Wineries require a different variety for manufacturing desired quality and taste of wine. Since these varieties are not consumed as table grapes, wineries enter into contract with the growers for assured buy-back of the produce at a pre-determined price. In case of processing varieties, it is the farmer’s responsibility to deliver the produce at the winery. Grading and packing is not done in case of processing varieties. Plastic crates are

25 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT used to carry the produce. A tempo carrying 200 crates of 20 kg each, charges Rs. 500 for transportation of produce to the winery located about 15-20 kms away. Payment to the grower is done immediately upon delivery of the produce at the winery. Payment is done generally by cheque instead Farmer’s Margin of cash. Contract Price Rs 15.54 Value chain of grapes used Transportation for processing is much short Rs 25.00 and simple. Values build up Harvesting Losses Rs 0.13 at each stage and activity of Cost of Production the value chain for wine Rs 1.00 grape (per kg) is as shown. Rs 8.33

3.3 EXPORT OF GRAPES

Dependence of Growers of Processing Varieties on Wineries

Many farmers preferred to grow processing variety of grape as it is less labour intensive and pay more for fewer efforts. Due to slow down in wine industry, wineries are left with huge stocks of unsold wine. Hence, in the year 2007-08 and 2008-09, procurement of raw material was relatively low and many wineries did not buy the produce at the contract price. It was informed during the field survey that some farmers got only Rs. 15 per Kg as against the contract price of Rs. 25 per Kg. Moreover, it could not be sold in the market for fresh consumption as the taste of processing varieties is not accepted by the consumer in the fresh market segment.

Farmers incur a cost of around Rs 0.25 million in cultivating export quality grapes in a hectare. The productivity of export oriented farms is around 25-30MT/Ha, of which, about 15-17 MT produce is of export quality and the remaining produce is sold in domestic market. Farmers are paid Rs. 35-60 per kg of grape for export quality produce depending on the market. Average price for different grades and approximate quantity of each grade harvested from one Ha of vineyard is as given below;

Quality Quantity produced per Ha Price in Rs. per kg. Export Quality 15‐17 MT 35‐60 Domestic Quality 7.5‐10MT 20‐30 Loose Berries 2 MT 5‐6 Farmers producing export quality grape have to obtain EurepGAP or Global GAP certification for their farms. The certificate is valid only for one year. For Global GAP, certification charges vary between Rs. 20000-25000 per farm, if taken individually, whereas, if certification is taken as a group of farmers together, charges of Rs. 5000-7000 per farm are levied. Major varieties exported from the region are Thompson Seedless, Black Seedless, Flame Seedless and Sharad Seedless. Residue testing of random samples is being done to check if the pesticide residue is within the permissible limits. Samples are tested at Pesticide Residue Analysis Laboratory, which has been recently set up in Nashik by National Horticulture Research & Development Foundation (NHRDF). The laboratory has also been recognized by APEDA and accredited by NABL for residue analysis of all export oriented agricultural produce especially grapes, pomegranate, mango, onion and other such products. Till last year, samples were sent to Pune for residue testing. Charges of residue test are Rs. 5000-7000 per sample.

26 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT For export purpose, grape is harvested by the trader early in the morning, generally between 6:00 to 8:00 a.m. and the harvested produce is brought to the pack house by 10:00 to 11:00 a.m. Sorting, grading, packing and pre-cooling operations take about 10-12 hours and it is then stored in cold rooms, until full container load is processed. Temperature maintained during various operations of grapes is as follows:

Operation Temperature (degree C) Pre‐cooling 0 Storage 0‐1.5 Grape is exported to European countries in 4.5, 5 and 9 Kg boxes. Plastic punnets or pouches are used as separators in the boxes. Each punnet or pouch contains 500 gram grapes each. As a standard practice, about 250 grams grape is packed extra per 5 kg so as to compensate for moisture loss during transit. Grape is exported in refer containers by sea. The container takes 17-20 days to reach UK from Mumbai. Shelf life of grape is about 3 months, if processed properly. Sulphur pads are used between grape boxes to increase its shelf life. Boxes are palletized and loaded into the container at pack house. Each pallet contains 120 boxes of 5 kgs each and 20 such pallets are loaded in one container of 12 MT. The containers are checked and sealed at the pack house and sent from Mumbai to JNPT Mumbai for export. Clearing & Forwarding Agents charge about Rs. 7000-8000 per container for paper work for excise and custom clearance. Freight from Nashik to JNPT Mumbai is between Rs. 18000-20000 per reefer container. Freight from JNPT, Mumbai to UK in 2009 was USD 2500. The cost break-up for exporting 1 kg of grape is Item Cost Cost of procurement Rs. 40 per kg Packaging material* Rs. 35‐40 per 5 kg box Operational cost of pack house Rs. 3‐3.5 per kg Clearing & Forwarding Rs. 7000‐8000 per container of 12 MT Excise & Customs Rs. 2000 per container Phyto Sanitary Certification Rs. 1000 per container Terminal handling charges at JNPT Rs. 16000‐17000 per container Freight: Nashik‐Mumbai Rs. 18000‐20000 per container Freight: Mumbai‐UK 2500 USD per container * packaging material include 3 ply CFB box @ Rs. 25‐28 per box and punnets or pouch, grape guard etc. Many exporters are using imported boxes of 3 ply for export purpose, which cost Rs. 30 per box of 5 kg each, imported from Italy or South Africa. Quality of imported boxes is reported to be better than Indian boxes. Average selling price of grapes in Europe is about GBP 7.5-10 per box of 5 kg. During Christmas season, grape prices are as high as GBP 14-20 per box of 5 kg in Europe and early varieties of grapes exported from India can fetch such returns. Most of the corporate such as ITC, Mahindra and Deepak Fertilizers etc. are operating on margin basis. They charge 14-15% of the sale price as their margin and pay rest of the amount to the growers after deducting their all expenses. 25% of the expected sale price of produce is paid to the farmer in advance and rest is paid after sale proceed is realized. None of these companies have invested in infrastructure in the area. Existing pack houses are being taken on rent on per kg basis and used for processing of fresh grape. There are about 138 grape exporters in Nashik area. Bhandari, N.D. Grapes, FreshTrop Fruits etc. are some of the big grape exporters from the region.

27 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 3.4 INFRASTRUCTURE ASSESSMENT

3.4.1 Post Harvest/Marketing Infrastructure Nashik is the leading grape exporting region in the country and exported about 1400 containers to Europe and Middle-East in 2007-08. About 150 exporters are operating in Nashik district most of them are into grape, onion and vegetables export and few of them export pomegranate as well. Nashik has about 84 APEDA recognized pack houses, used mainly for export of grapes. Few of them are not in functional stage, particularly 2-3 pack houses that were established by cooperative societies. About 6-7 of these pack houses are owned by co-operatives and rest all are privately owned by the exporters. The pack houses are operational during grape season and remain idle during 6-8 months during the year. Some of these pack houses have their gensets for power back-up and many of them have taken connections on Express Feeder of Hindustan Aeronautics Limited (HAL) for assured power supply. About 7-8 pack houses in Nashik area have big cold storage facilities i.e. 2000 MT or above, while others have only about 50-150 MT cold storage capacity. As per an estimate, pack houses in Nashik have a cumulative capacity to process 1000-1200 MT of grape per day (processing includes grading, packing, pre-cooling and storage). Some cold stores are used for pomegranate, vegetables and raisins during off-season. Export of grape is a remunerative business and most of the pack house owners do not realize the need to utilize the facility for any other purpose to increase its viability. Some cold stores also stock the grape during peak supply and sell them into domestic market for about 2 months after the grape season is over. About 16 new proposals for setting up of grape pack houses have been submitted to APEDA this year.

3.4.2 Institutional Infrastructure Maharashtra State Grape Growers Association, Grape exporters association and MahaGrapes are the three major institutions operating in the region. Maharashtra State Grape Growers Association: The association was registered in 1960 and since then it is working to provide technical support to growers through extension services, arranging of seminars and group discussions, importing and distributing some important inputs like Gibberellin etc. The association is headquartered in Pune and it has four divisional offices in grape growing areas. One of its divisional offices is located in Nashik. The association has 25000 members cultivating grape on more than 40000 hectare of land. Of these, 7500 farmers are from Nashik area. The association has a nursery for quality planting material and testing laboratories with facilities for testing of soil, water, petiole for better quality production. One such testing lab has recently been started in Nashik. These facilities are available for members and non‐members. It has a monthly technical magazine “Draksha Vrutta” to guide the farmers and keep them updated with the latest information in viticulture. Life membership fee for becoming member of the association is Rs. 665. Differential charges are levied for testing facilities from members and non‐members. For example; Soil test per sample: Rs. 276 for members and Rs. 436 for non‐members Water test per sample: Rs. 168 for members and Rs. 226 for non‐members

28 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The association played an important role in formation of grower cooperative societies for marketing and exports of grape. These cooperative societies later formed MahaGrapes. The association has also taken lead in formation of Grape Growers Federation of India. MahaGrapes: Mahagrapes is a partnership firm of 16 farmers’ cooperative societies. It was established in January 1991. Mahagrapes assists its member societies in marketing of produce especially in international markets and provide market information. The 16 member co‐operative societies have almost 2500 farmers as their members. Each member co‐operative society has a pack house with a pre‐cooling of 5 MT & 3 cold stores of 30 MT capacities each. Technology of these facilities was imported from California. Of the 16 member societies, 4 societies are from Nashik district, as mentioned below; Baglan taluka grape growers co‐op.society ltd., Nashik Mogi grape growers co‐op, society ltd., Nashik Malta grape growers co‐op society, Nashik Shriram grape growers co‐op society, Nashik Two of the above cooperative societies i.e. Mogi and Malta are almost non-functional now and the facilities are closed. Both the societies have a debt of about Rs. 35-40 lakhs. The main reason behind the failure of these societies is crop shift. Both the societies are located in Malegaon area of Nashik district, where grape has been replaced by pomegranate due to decreasing water resources and high operational cost and labour requirement of grape. Grape Exporters Association: This is an association of grape exporters. Major activities are to represent exporters’ interest at APEDA, importing countries etc. Primary agricultural cooperative societies are the main source of credit for most of the grape farmers. Amount of credit varies from crop to crop and landholding of the farmer. For grapes, the amount is as follows: Grape (export): Rs. 90,000 per acre Grape (domestic): Rs. 70,000 per acre These crop loans are provided for a maximum period of one year. Rate of interest charged on these loans is 6% per annum. Term loans are also provided by the PACS and rate of interest differs in that case. Term loan is generally given for irrigation systems, tools, farm implements etc. Loans upto Rs 300,000 attract an interest of 12.5%. If the amount exceeds Rs 300,000, the rate of interest increases to 14.5%

3.5 GAPS IN THE VALUE CHAIN

An assessment of the range of activities under the value chain was undertaken to understand the gaps and inefficiencies in the grape value chain. A detailed structured survey was undertaken to map the existing supply chain and identification of gaps at each stage, with added focus on institutional, infrastructural and logistical barriers. After the detailed field survey, the gaps identified were discussed with a range of key stakeholders to get their feedback on the analysis and understanding of the issues. Gaps in the value chain identified during the field surveys are as mentioned below: • Use of agro chemicals including pesticides and growth hormones is very high in grape. • Residue is checked only for the produce meant to be exported, whereas it is equally important to provide residue free fruit to the domestic market also. Also, chemicals used for grape for export purpose are different than those used for domestic purpose. The chemicals used in case of export purpose grapes leaves less residue and are more expensive. • Grape is a labour intensive crop. Decreasing availability of labour and increasing labour cost calls for farm mechanization.

29 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT • Post harvest infrastructure for grape in Nashik region is quite good. Lot of investment has already been done by traders, exporters and growers’ cooperatives with assistance from Government of India. However, the infrastructure is utilized only for 4-5 months in a year and remains idle for rest of the year. • Approximately 4-5 % of the berries that loosen during harvesting are used for making raisin at household level. Sulphur solution is used in making raisins from loose berries, which is not good for health and causes thyroid problems. • For the domestic market, most of time grapes are directly kept into cold storage without pre-cooling the produce. • Refrigerated transport is required to maintain the fruit quality after the produce is taken out from cold stores during off season, which is almost absent. At present, stored fruit is also transported through normal trucks.

3.6 PROPOSED INTERVENTIONS Based on the need assessment of the grape value chain, action plan were drawn-up and stakeholder consultations undertaken to identify areas of potential interventions. It is proposed to set up 3 pack houses for grapes in the region. The proposed locations for spokes are Malegaon, Pimpalgaon and Nashik Road. The estimated throughput at Malegaon shall be 2000 MT per annum. Pimpalgaon and Nashik Road shall handle 5000 MT and 10000 MT/annum respectively. The pack houses shall have following facilities for grapes: • Washing • Sorting/Grading • Pre-cooling • Packaging • Cold Storage • Container stuffing: This facility is proposed to be set up at Nashik Road, which is also a proposed location for hub. Besides grapes, Malegaon spoke would also handle pomegranates, onion and maize. The other two spokes would also handle other crops such tomato, vegetables etc.

30 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

4 FOCUS CROP: BANANA

Maharashtra is the leading producer of banana in the country with about 25% share in country’s total production. Average productivity of Banana in Maharashtra (63 MT/Ha) stands highest among major producing States. Total area under Banana cultivation in Maharashtra is estimated at 80000 Ha with a yearly production of about 4.96 Mn MT. Important districts of the state under banana cultivation are Jalgaon, Hingoli, Nandurbar, Beed, Parbhani and Pune. Jalgaon district is popularly known as Banana bowl of the State with about 39264 Ha area under banana crop. It alone accounts for 65% of the total area under banana cultivation in the state and it holds approximately 18-20% share in national production. In Jalgaon district, Raver taluka alone accounts for about 29000 Ha of banana cultivation. Besides Raver, other important talukas are Yawal, Chopda and Jalgaon. The production snapshot of Jalgaon, share of respective production clusters and their contribution to State’s total output of Banana are provided in the table below: Avg. Productivity Production %age of State’s Area (Ha.) (MT/Ha) (MT) Production Jalgaon 39264 65 2556287 51.5 Maharashtra 75000 65 4962900 Source: Directorate of Horticulture, Government of Maharashtra (FY 2007-08)

Cluster I The cluster comprises of Raver taluka and accounts for about 52 percent of district’s total production. This production statistics alone make it an ideal cluster for interventions in post harvest infrastructure for Banana crop. Major Banana growing villages in the cluster have established forward linkages with key consumption markets like Delhi, Amritsar, Srinagar, Jammu, Chandigarh, Jalandhar, Indore, Bhopal and Lucknow. The cluster has exclusive rake siding facility for rake loading at Raver, Savda and Nimbora railway stations in Raver taluka. This facility provides excellent transport facility for bulk transport of Banana during the peak season.

Cluster II The cluster comprises of Chopda and Yawal taluka and accounts for about 23 percent of district’s total production of Banana. This is the second largest cluster followed by Raver in terms of production. Major Banana growing villages in the cluster have established forward linkages with key consumption markets like Delhi, Amritsar, Srinagar, Jammu, Chandigarh, Jalandhar and Lucknow. This cluster has no rail connectivity and almost entire transport of raw material happens through road transport. The cluster is located along Burhanpur- Ankleshwar highway and provides connectivity to markets in M.P & Gujarat. This highway also connects to National Highway-3 at Shirpur which is about 50 km from Chopda. Transportation hub at Savda is the key source for supply of trucks in season.

Cluster III The cluster comprises of Pachora and Bhadgaon taluka and accounts for about 7 percent of district’s total production and about 5 percent of State’s total production of Banana. Area

31 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT under Banana in this cluster has drastically gone down between 1996-2004 due to the decrease in precipitation levels. However, with improved rainfall conditions, area under banana cultivation is again on an increasing trend since 2007. Major Banana growing villages in the cluster have established forward linkages with key consumption markets like Delhi, Chandigarh, Jalandhar, Indore, Bhopal and Lucknow. This cluster has good connectivity both via road as well as rail transport. The cluster falls on the route of central railway. However, transport of raw material mainly happens through road transport. The cluster is located at about 30 km from national highway-6 (Mumbai-Nagpur) and 75 km from national highway-3 (Mumbai-Agra) which provides connectivity to potential consumption markets. The major varieties cultivated in the state are Grandnene and Shreemanti, followed by Mahalakshmi and Robusta. a. Sreemanthi: It is a popular commercial variety grown extensively for table purpose in the cluster. The plant is of dwarf variety, making it less prone to wind damage. The bunch size and the fruit length are quite good and the latter ranges from 6 to 8 inches. The average bunch weight, with 6-7 hands and with about 13-15 fruits per hand, is about 15-25 Kg and in some cases as high as 30 Kg. The thick rind of the fruit retains the greenish colour even when the fruit is ripe. b. Grand Nene: It is a semi-tall variety grown significantly in the cluster. It is a high yielding variety and produces bunch of large size with well developed fruits. A Bunch weighs about 25-30 kg. Dark green fruits turn bright yellow upon ripening depending on ripening conditions. The fruit is very sweet with a good aroma. It also has a better shelf life in comparison to Sreemanthi which makes it suitable for export purpose. Banana in the district is grown mainly in two seasons as described below: a. Season 1: This season is known as “Mrig Bag”. The planting time for suckers is between May and June and it takes about a year’s time for the complete flowering though onset of flowering can be seen from eighth month itself. The harvesting period ranges from July to September. Banana cultivated in “Mrig Bag” season consumes more water and is mainly rainfed as this crop witnesses two summer and rainy season. Also, abundant sunshine, supported by assured irrigation provides for robust growth of crop. The banana plant of this season is comparatively taller than the banana plant of Kand bahar. Most of the banana plantation in all the clusters are sown in this season and it accounts for 75-80 percent of sowing. b. Season 2: It is also known as “Kanda Bag” as the suckers planting time coincides with the planting of Kanda (local dialect name of Onion in Maharashtra). The planting time for suckers is between October and November and takes about ten months to a year’s time for onset of flowering. Crop under “Kanda Bag” season encounters two winter seasons which hinders the vegetative growth and also affects the yield. The critical growth window for the crop is the period of May-June which is about 6 months after the plantation. “Kanda bag” is mostly planted in Chopda taluka in cluster II and accounts for 60-70 percent of total sowing. However, recent trend since last four years indicates that banana is generally grown throughout the year in cluster I & II which leads to an availability of banana fruits for almost 9 months in a year except November, December and January.

32 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 4.1 VALUE CHAIN ANALYSIS Around 80-85% banana produced in Maharashtra is marketed out of the state to New Delhi, Lucknow, Kanpur, Amritsar, Jaipur etc. New Delhi is the most important market for banana of Maharashtra and it acts as a major consumption as well as distribution centre for markets in national capital region. Banana in the region is marketed in the following ways: A. Marketing through cooperative societies: Around 70% of the banana in the region is traded through cooperative societies. The Society works on a membership basis and each farmer has to pay a nominal fee to become a member of the society. The principal function of the society is to market the produce. The societies negotiate with the commission agents in destination markets about the price and thus provide marketing linkage to its members. The societies charge a fee of 2-3% to the farmers on the selling price of the produce. B. Marketing through fruit merchants: When banana bunches are mature, local fruit merchants negotiate the price and give advance payment to the farmers. Bunches are procured at farm itself and then dispatched to destination markets. Fruit merchants bear cost of transportation as well as the risk associated with it. Post Harvest Contractors facilities aggregation, transportation to the destination market and payments to the farmers from the traders/commission agents. For his services, the PHC generally charges a commission of 2-3% of the value of the crop to the farmers. C. Direct Marketing: Some of the progressive farmers in the region having big landholding directly liaison with traders/commission agents of wholesale markets and send the produce to destination markets after fixing up the rate and quantity over phone. The cost of harvesting is borne by the farmer. The farmer facilitates aggregation and the transportation but the transportation cost is borne by the buyers. D. Procurement by companies: Some of the companies such as Jain Irrigation System procure banana from identified progressive farmers. They give farm extension support to growers as well as provide cellophane for covering banana bunches on plants. The transportation cost is borne by the buyer companies.

The supply chain mechanism for Banana in the region is depicted below:

More prevalent Post Harvest Commission Trader/ Retailer Consumers Contractor Agent Wholesaler Farmers

Cooperative Commission Trader/ Retailers Consumers Agent Wholesaler Less prevalent Society

33 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The major activities along the supply chain are as follows:

Harvest Harvesting is carried out manually.

Produce aggregated on roadside at various pick up Aggregation points; then loaded on trucks for transportation to nearest rake point or directly to destination market

Primary Produce is transported via. railway wagon/surface Transport transport by 10 MT trucks to destination markets

Sorting & Grading Sorting/grading and packaging (when required) is (Packing is also done as mostly carried out at destination market where the per requirement) bulk braking takes place

Ripening of produce takes place at destination market‐ Ripening a good practice, as it minimizes post harvest losses transporting raw, hard banana to long distances

Post ripening & sorting/grading, produce is Secondary Transport transported under a non‐cold chain environment to retail markets in the catchment area of destination markets

Commonly used post harvest activities Banana is mostly propagated by suckers followed by tissue cultured plantlets. Planting is done in the months of June-July as well as during October-November. Around 80% farmers use suckers as planting material and the rest use tissue cultured plantlets as well as suckers of tissue cultured plants. Around 1600-2000 plants are sown in an acre. About 90% of the farmers use drip irrigation for irrigating their fields which saves about 45-50% of the water consumption. Average yield of banana is approximately 60-65 MT per hectare. Banana orchard has an eighteen month cycle and total cost of cultivation of 1 Ha of orchard is about Rs. 200,000. The breakup of the cost of cultivation of banana per Ha is given below: Components Cost in Rs Cost of lease @ Rs.20000/acre 50000 Interest on borrowed capital @10% 15000 Drip irrigation 12500 Fertilizers & Manures 52000 Electricity 12000 Labour@ Re. 1 per plant/acre 4250 Harvesting 13500 Total cost 159250

34 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT *Planting materials are obtained from the existing orchards free of cost. The cost of new suckers, if a farmer wants to buy from the market, is Rs. 1-2/sucker. The economics of banana cultivation in the study region is given below:

Cost of cultivation per Ha (Rs.) 159250 Average yield per Ha (in MT) 65 MT Average price per MT (Rs.) 6250 Farmers income from sale of banana (Rs.) per Ha 406250 Farmers net realization (Rs./Ha) 247000 The planted crop gets ready for harvest within 12-15 months of planting. Harvesting is done manually and banana bunches are generally cut at 75 -85% maturity level. The time of harvesting depends upon: • Distance of destination markets: For distant markets like Delhi, fruits are harvested at early maturity levels than nearer markets of Mumbai and Pune. • Prevailing market price: If the price prevailing in wholesale markets witnesses increasing trend, farmers prefer to harvest the crop and vice versa. • Demand from wholesale markets: Pre harvest contractors prefer to lift banana bunches from the field when the demand from buyers increases. Sorting and Grading is very minimal at field level. In case of banana transported through railway wagons, some amount of sorting is seen at railway station. Banana hands with scattered, thin and short fingers are removed from the bunch with the help of sickle. There is negligible storing of banana at the farm level. Most of the storing is done near the consumption market. After harvesting, bunches are carried on shoulders by the labourers and brought to the aggregation point wherein produce is loaded on normal trucks and it is sent to the destination markets. For rake loading, produce is transported in normal trucks from field to railway stations and further loaded on railway wagons.

Key Observations: Rake Loading • Around 75-80% of the banana is transported through trucks while balance 20-25% is routed through railways. • Around 80% of the produce transported through railways is sent to Azadpur mandi, Delhi. Other places where banana goes include Lucknow, Kanpur, Jaipur, Amritsar etc. • Annually 140-160 rakes amounting to 300000 MT of Banana is sent out from major rake points at Raver, Sauda and Nimbura railheads of Jalgaon district. • There are 3 banana growers union at Nimbuara, Sauda and Raver. Banana growers union, Sauda has approximately 125 members. For booking of wagons, unions place their demand one day in advance to the railways and the unions are given priority over others. • Rake loading happens for 5-7 hours twice or thrice a week at three stations in Jalgaon districts viz Raver, Sauda and Nimbura.

35 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Rake Loading at Savda Station in Raver Taluka

Rake Siding Loading Operation

Wagon Filling Rejected bananas Typical Value chain of banana (per Kg) (from Jalgaon to New Delhi) is represented in the diagram below:

Retailer’s margin Secondary transportation and ripening cost Wholesale Margin at Rs. 2.50 Azadpur Mandi Commission @4‐6% at Rs. 1.00 Azadpur Mandi Rs .. 1.50 Rs. 18.00 Wastages (Retailer’s Pr ic e) * Rs.0.30 Labour and transportation Rs 2.50 Rs. 14.00 Commission of PH C @ 2% (Wholesaler’s Price) Farmer’s Price Rs 2.50

Rs 0.20

Rs 6.45

* This is the cumulative wastage along the chain (details given below) (Amounts are per Kg) In the value chain, the farmer pays 2% commission to Post Harvest Contractor. The loading and unloading labour cost and transportation cost to distant markets are paid by the wholesaler. Further transport, labour and ripening costs are borne by the retailer.

36 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Wastage happens at different levels in the value chain. It is lowest at the farmer/pre harvest contractor level as Wastage the produce is in the hard and raw stage while it is maximum at the Farmer/PHC level At the wholesaler level‐ At the retailer level‐ 10‐ retail level where 5% 8‐10% 12% the produce is at Crop damage Moisture / weight loss Physical damage due to the ripened stage. Improper harvesting Physical damage due to poor handling, storage The factors techniques, improper poor handling, storage and transport, transportation and or transport Grading / Grading / sorting by responsible for handling sorting by retailers customers wastage vary at different levels and are shown in the diagram: In case of transportation from Maharashtra (Jalgaon) to New Delhi through trucks, expenses vary from Rs 2-2.5 per kg. Commission charges at Delhi are 8 %.

Transportation Costs (In Rs.) Delhi 38000 Rake Transport Lucknow 28000 One Rake load of 38 MT Delhi 22000 Chandigarh 30000 Jammu 32000 Road Transport Jaipur 20000 One Truck Load of 10 MT Despite of immense potential for export of banana from the cluster to gulf countries and European markets, volume of exports has not been picking up. MAHABANANA, (A federation promoted by MSAMB with an objective to strengthen market support to the growers) has initiated the export from the cluster and sent a few consignments to gulf markets. However due to lack of appropriate farm gate infrastructure including cold chain and manual operations leading to a higher cost and wastage, the profit from exports remains a concern. A typical export value chain of banana is depicted below: Value Chain- Export (Raver to JNPT, Mumbai) (Per Kg)

Landed @JNPT Transport to JNPT Mumbai Rs 12.5 Primary Tpt, Processing & Packaging Rs 1.5 Farm gate Price Rs 2.5

Rs 8.5

(Amounts are per Kg) Growers in the area mention that maintaining the quality of export banana all along the supply chain till it reaches the destination markets, remains a challenge for them while such concerns are not critical when catering to domestic markets where produce is transported mostly under a non -cold chain environment. The wastages in the above chain are minimal and are limited only from harvesting to the pack house and are around 5%.

37 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT • Price Dynamics Monthly average wholesale price of banana in Jalgaon varies from Rs 600-800/Quintal. Banana is graded primarily into three grades based on the following:

Grade Length of finger No of fingers in one Kg A 7.5 – 8 inches 5‐6 B 7 to 7.5 inches 7‐8 C Less than 7 inches 9 and above Grade A banana is firm, have straight fingers with no mark of damage and bruises. Grade B bananas are slightly shorter in length. Most of the upper grade banana goes out of the state. And, rejected and damaged banana is consumed locally. Grade A banana While the good quality grade-B banana is sold at Rs 700-800/quintal in wholesale markets of Maharashtra, rejected bunches are sold at Rs. 600–700/quintal. In case of Delhi, biggest market for banana from Jalgaon, wholesale prices vary from Rs. 900-1100 per quintal with Grade-A fetching highest prices. Retail prices of ripened bananas in Delhi varies from Rs 30- 40 per dozen.

4.1.1 Existing Post Harvest Infrastructure and Institutional Mechanism Presently, there is little post harvest infrastructure for banana in the region. There is no storing facilities and almost negligible cold chain infrastructure. Limited use of cold storage has been observed for banana. This is because banana can be grown all round the year and therefore does not need to be stored after harvest season. Banana is also harvested before fully ripe enabling it to be handled and transported to the consumption market whilst it is harder and less susceptible to damage. Cold chain technology is being used for banana primarily for the export (very low volume) and processing industry. Sorting and grading is minimal and mostly done manually. There are very few pack houses in the region. Some of them are described below: • MSAMB Export Oriented Banana Pack House An export oriented pack house of MSAMB, under assistance from APEDA, has been set up at Savda in Jalgaon. This is a modern packing hall for banana for export that has been in operation for a few months. Facilities in the pack house include sorting, grading, pre-cooling, ripening, a pack line with vacuum packing benches, and cold storage. It has five ripening chambers each with 5 MT capacity and a cold storage of 25 MT capacity. The insulation on the cold store consists of modern composite polyurethane panels and the refrigeration equipment is modern using self contained evaporator and fan units within the cold store. Ventilation for gas and humidity control is basic but the stores are designed for short term shortage before loading to a refrigerated shipping container. The pre-cooling chamber is used to reduce the temperature prior to storage. The Tapti Valley Banana Wine & Products Cooperative Society has taken the facility on annual lease basis from MSAMB and processes banana on job work basis. Export quality banana is processed at the facility and is sent to Jawaharlal Nehru Port Trust (JNPT) Mumbai for export to gulf markets.

38 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Packaging Line Pre- Cooling Chamber

Cold Store Washing Sorting Grading Line As per feedback, the capacity of the facility is under utilization as it does not get enough volume for processing. Lack of on-farm aggregation facility and proper transportation to pack houses result in physical damage of produce (for e.g. bruises) which lowers volume of export quality grade from the lot.

Banana Pack House, Chinnawal, Raver Taluka (Jalgaon) MSAMB, with the assistance of FAO, set up a pack house at Chinawal village in Raver taluka in 2003. Facilities in pack house include washing, sorting, grading and packing. The plastic crates from harvest are placed on an overhead conveyor system and dipped in the treatment tanks before being taken to the pack bench for drying and packing. MAHABANANA carries out primary processing and packaging of grade-A banana. There is lack of on-farm collection centres due to which there is a higher wastage during transportation to the distant pack house. As a result, almost 30 percent of the produce falls under grade-B during sorting and grading at pack house. In addition to this, the pack house is not supported by cold chain. This facility was designed for export. Six containers were exported but money was lost on these and the facility was not used beyond this. The losses may have been due to problems with quality and shelf life due to the following: • The farmers claimed that the conveyor speed and size of the dipping tanks is improper and the dipping is too fast; • There was no pre-cooling facility and banana was loaded to shipping containers at field temperature;

39 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT • Although shipping containers were refrigerated, the refrigeration units could not remove the field heat and thus bananas produced ethylene, which accelerated the ripening process. Apart from these, there are some companies that procure banana for processing

and fresh trading and export. They have their own pack houses with ripening facilities and cold store.

Jain Irrigation System Jain Irrigation System, a 25 year old company headquartered at Jalgaon, started its business of manufacturing different types of irrigation systems in 1989. The firm has ventured in the business of food processing in1994 and has set‐up modern integrated food processing facilities for dehydration of onion, vegetable and production of fruit purees, concentrates and pulp in Jalgaon in Maharashtra and Chittoor in Andhra Pradesh. These plants are ISO 9001 & HACCP certified and meet International FDA statutory requirements. Today it is recognized amongst the top food processing companies in the country. The product profile mainly includes dehydrated Onion and vegetable products and aseptic fruit purees, concentrates and juices, IQF and Frozen products. The facilities include following annual installed capacity for fruit and vegetable processing.

Fruit Pulps and Concentrates 100,000 MT Frozen Fruits 5,000 MT Onion & Vegetable Dehydration 120,000 MT Banana Ripening Facility 4000 MT (Cumulative) Banana, Onion and Mango are the main crops processed at Jains followed by other fruits and vegetables. The company is a key ingredient supplier to major players like Pepsi, Knorr and Parle Agro etc in addition to catering off‐shore markets as well. The company today has access to various marketss acros the globe. The company is also actively engaged in providing technical assistance to the farmers in its catchment area of operation in terms of providing genetically superior planting materials, efficient water and fertilizer management system and agronomical guidance. It also buys fruits and vegetables from growers under contractual arrangement and processes them at its respective processing facilities. Selected varieties of Banana, Guava, Mango, Pomegranate, Aonlas, Papaya and Tomato puree are processed in the plant. Jain Irrigations have also set up a modern R&D and incubation center at Jalgaon for invention and test market for new products in food processing.

40 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT In spite of such a huge production base concentrated in a radius of about 75 km in 6-7 blocks of the district and almost round-the-year availability, volume of exports to potential markets is almost negligible. While the production clusters have highly evolved linkages with various domestic consumption markets, they hardly have been able to establish such linkages with export markets to leverage its strengths. In order to provide a strong platform for export of Banana, Directorate of Agricultural Marketing and Maharashtra State Agriculture Marketing Board together facilitated the formation of MAHABANANA, which is the apex cooperative marketing society. It was registered in January, 2002 and the registered office is located at APMC, Jalgaon. The main objectives of the society are as follows: • To plan a strategy for Banana export and to implement export process • To supply tissue culture plants of Banana varieties having export potential and also provide technical guidance for cultivation • To organize seminars, workshops and demonstrations to create awareness about cultivation of export quality Banana and post-harvest management • To include more numbers of cooperative fruit sell societies as partner members of MAHABANANA. During the year 2006-07, MAHABANANA facilitated sale of about 1300 MT which were sent to domestic markets in Delhi, Punjab, Haryana and J&K. It has also exported about 20 MT of Banana under the brand name of ‘MAHABANANA’ to Dubai (UAE). For export purpose, it has actively done the exercise for selection of appropriate farms, covering banana bunches with perforated poly bags, farm management including use of appropriate insecticides and pesticides and proper post harvest management. It has played a key role in setting up of a banana pack house set up by The Shetkari Fruit and vegetable cooperative society at Chinawal village in Raver taluka. In addition to above activities, the apex society is also engaged in extending credit facility to its members at reasonable interest rates.

41 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Shri Tandulwadi Hingone Group Co‐operative Fruit Sell Society The society was established in the year 1945 in Village Kajgaon under Bhadgaon taluka in Jalgaon district. This 65 year old society is one of the few successful cooperative societies in the district. There are about 1550 members enrolled in the society. It plays a key role in marketing of Banana in the cluster. It is engaged in providing financial assistance to its members and also facilitates marketing linkages for sale of the produce. During the year 2008‐09, the society sold 4600 MT through local merchants. The commission charged by the society from its members is 5 percent. The sale happens through a pre‐fixed price with the local merchant and society receives payment within 10 days of dispatch after which the money is paid to the growers. Generally, the marketing officer of the society is in continuous touch with the local merchant to assess the demand during the season. He then liaison with growers to firm the plan for harvesting, dispatch etc. It arranges labour for harvest, loading and transport etc and ensures that produce is dispatched as per the plan.

The society also provides crop loan to member growers for a period of one year or for a crop season. The rate of interest charged by the society varies from 8‐10 percent. Typically, farmer repays the loan out of the proceeds of sale of the crop. During the year 2007‐08, the society disbursed an amount of Rs.1.93 mn towards crop loan to its members.

4.2 GAPS IN THE VALUE CHAIN AND POTENTIAL INTERVENTIONS

An assessment of the range of activities under the value chain was undertaken to understand the gaps and inefficiencies in the banana value chain. A detailed structured survey was carried out to map the existing supply chain and identification of gaps at each stage, with added focus on institutional, infrastructural and logistical barriers. After the detailed field survey, the gaps identified were discussed with a range of key stakeholders to get their feedback on the analysis and understanding of the issues. The major gaps identified in the value chain of banana are as follows: • Traditional methods of post harvest mechanism is followed which leads to damage of fingers. • Farm level collection centres are absent; sorting, grading, de-handing, washing and packing is virtually absent in the area. • Since de-handing is done at destination markets, transportation of central stem along with the bunch adds up to the cost of transportation. • 25-30% of the fruits are wasted along the value chain as mentioned earlier. Pack houses in the region are few and the pack houses already present in the region are facing problem in procurement and quality maintenance mainly due to the fact that these are stand

42 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT alone facilities without support infrastructure/facilities. There is a good potential of integrated facilities which would include the following:

Pack houses Modern Pack houses may be created at the main production clusters in the region which would cater to the banana grown in the surrounding area having a truck travel time of about 2-3 hrs from the farm to the pack house. The pack houses would have the following infrastructure: a. De-handing, Washing and De-sapping facilities b. Sorting and Grading Line c. Fungicidal Treatment facility d. Packaging facilities (in corrugated cartons/crates) 4 pack houses for banana in Jalgaon district are proposed with the above facilities. The proposed locations are Vivra, Chinnawal, Kajgaon and Danora.

43 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

5 FOCUS CROP: ONION

Maharashtra produces 25-30% of the total production of onions in the country and contributes to about 80-85% in the total onion export. Total area under onion cultivation in Maharashtra increased from 0.15 million Ha in 2005-06 to 0.25 million Ha in 2007-08 and the production also increased from 1.87 million MT to 4 million MT during the same period. Productivity of onions in Maharashtra is around 15 MT/Ha which is marginally higher than the national average. Nashik and Ahmednagar are the major onion producing districts of Maharashtra. Total production of onion in Nashik and Ahmednagar is approximately 0.6 million MT and 0.75 million MT respectively and together they account for 55% of the total onion production of the state. In Nashik district, productivity of onions is around 18 MT/Ha. Niphad, Baglan and Yeola are the major taluks under onion cultivation in Nashik district. In district Ahmednagar, major taluks are Nevasa, Sangamner, Srirampur and Rahuri.

Area and production of onion

Districts Area in Ha Production in MT Productivity in MT/Ha Nashik 32690 588420 18 Ahmednagar 45120 740314 16 Jalgaon 5120 70375 14 Onion is cultivated in three crop seasons viz. kharif (June-Aug), late kharif (Sep-Dec) and rabi/summer season (Jan/Feb-March/April). Around 50-60% of the crop is cultivated in rabi/summer, 30-40% in late kharif and 10-15% in kharif season. Kharif and late kharif crops are sold in the market after harvesting and are not suitable for storage due to their short shelf life, whereas rabi/summer crop can be stored upto 4-6 months. Major varieties cultivated in the region and their keeping quality is mentioned below:

Variety Season Colour Storage N‐53 Kharif Red Poor Storage N 2‐4‐1 Rabi Brick Red Good Storage N‐257‐9‐1 Rabi White Good Storage Poona Fursungi Rabi Rose Red Good Storage While N-53 variety is cultivated in kharif season, N 2-4-1, N 257-9-1 and Poona fursungi are cultivated in rabi season. Onion is a six months crop and it is grown by transplanting the seedlings which are 4-6 weeks old. Three crops of onion are taken in the region. Most farmers take 2-3 crops in a year on different land parcels of their land holding depending on the crop rotation planned. It has been observed that 2 crops are taken by the farmers on the same piece of land in a year. Various crop stages and their timing in a year is mentioned below:

Onion Seasons Nursery Transplanting Harvesting Kharif June‐July August November‐December Rabi September November March‐April Onion is sold through APMC markets in the region. There are about 12-14 big onion markets operating in Nashik district and 8-10 markets in Ahmednagar district. While Lasalgaon, Pimpalgaon, Malegaon, Umbrane, Yeola and Manmadare important markets in Nashik

44 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT district, Srirampur, Rahuri, Sangamner are the major market for onions in Ahmednagar district.

5.1 VALUE CHAIN ANALYSIS

5.1.1 Trade channel of Onion The following illustration depicts the various stakeholders of the onion (grown in Rabi season) supply chain: While kharif and late kharif onion is sold by the farmers within 15 days to 1 month after harvest, rabi onion is stored by the farmers in on-farm bamboo based conventional storage structures. Onion is sold in APMC markets through open auction system. The commission agent facilitates the trade and the produce is bought by the wholesaler. The wholesaler does the distribution of produce and sells to either retailers or wholesalers of distant markets. The role played by major stakeholders and the value added at each stage is briefly captured below:

Farmer: As mentioned earlier, onions are cultivated by transplanting of seedlings. The seedlings are prepared by the farmer in his own nursery. About 6.25 kg of seeds are required to prepare seedlings for a hectare. The cost of seeds is around Rs 5000for 4 kg of seeds. The total cost incurred by the farmer in raising seedlings for transplanting in a hectare is around Rs 8900.

Activity Cost per Ha Seed for nursery 7800 Fertiliser 500 Pesticides 600 Total 8900 Farmers incur a cost of around Rs 63000 in cultivating onion in a hectare. The break up of the cost of cultivation is mentioned below:

Activity Cost per Ha Nursery 8900 Labour for transplanting 9000 Fertilisers 7500 Pesticides 5000 Irrigation 750 Labour for inter‐culture 23000 Labour for harvesting 9000 Total 63150

45 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The intercultural operations are carried out three times by the labourers. Farmers give contracts for arranging farm labour and the price is negotiated between the farmer and the contractor on the basis of size of farm. The entire activity is carried out by farm labour. After harvesting, onions are cured on farm and stored in bamboo based conventional structures. The width of the storage is about 8-10 feet and there is no ventilation except for the few outer layers of the produce. Conventional storage structures have many inherent problems and cause losses to the produce stored. They are built on the ground which leads to rotting of bulbs, which come in contact with the soil. Dampness during rains and sometimes direct water flow is among the other problems of conventional storage.

Presently, farmers in the region are resorting to improved storage structure where the lower base of onion storage structures is raised 1.5-2.00 ft from the ground level. As already mentioned, kharif and late kharif onion is sold by the farmers within 15 days to 1 month and around 40- 50% of rabi/summer onion is stored by farmers in on-farm bamboo based conventional storage structures. The farmer takes out the onion from storage when he has to sell it in the APMC market. The produce is graded manually at farm level and packed in gunny bags of 50 kg each or brought loose to the nearest APMC market in trucks or tractor trolleys by the farmers. In Srirampur and Rahuri markets, onions packed in gunny bags are traded while in case of Pimpalgaon and Lasalgaon markets, onions are brought in loose condition. Onion is traded in the APMC markets through open auction system. A commission of 6% is levied on farmers by the registered commission agents.

Commission agent: The commission agent facilitates trade between the farmer and the wholesaler and for which they charge 6% commission from the farmer. Payment to the farmer is made immediately by the commission agent on behalf of the wholesaler.

Wholesaler: These are traders/ or commission agents of distant markets or wholesalers of local markets. The APMC markets levies a market cess of 1% on wholesalers. The wholesalers either sell the produce directly or store it, depending upon the market conditions. The wholesalers store onions in storage structures, owned or rented, after buying it from APMC market. Some of the large traders also provide storage facility to other traders on rental basis. Storage rentals generally vary from Rs 10,000 – 12,000 per season for a capacity of 50MT. The stored produce is graded, packed and then dispatched to destination markets. Grading is done manually on the basis of size. Mostly women and children (girls) are engaged in grading/sorting operations. Trader pays Rs. 3 per bag of 50 kg each for sorting, grading and

46 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT bag filling. A team of 25 can grade and sort about 20 MT onions per day. Labour charges for weighing, stitching and loading on trucks are Rs. 0.60 per bag.

5.1.2 Price build up along the value chain of Onion Value chain of 1 kg of onion indicating the various activities and cost build-up at every step has been mapped, as shown below. Some of the assumptions of the price build up are: • It is assumed that onion is traded at Srirampur APMC and sold in local markets by the retailers. • Onions packed in gunny bags are brought to the APMC market. • Grading and packing have been done at the farm level.

Consumer Price

Retailer’s margin

Losses Rs 14

Retailer’s expense Rs 2

Wholesaler’s margin Rs 1

Wastage Rs 0.5

Wholesaler’s expense Rs 1

Farmgate price Rs 1.5

Rs 0.5 Rs 10.5 (Wholesaler’s Price)

Rs 7.5

The average cost of onion cultivation comes to around Rs 3.5/kg. Generally, farmers incur a cost of Rs 60,000 per Ha on onion cultivation and the production is around 20 MT/Ha. Around 2-3 % of onion is wasted during harvesting and weight/value loss to the tune of 5- 20% has been observed during storage. Farmers incur a cost of Rs 1.4/kg in marketing his produce (which includes grading, packing, transportation and commission) and his net realization is Rs 3.1/kg. Farmer’s realization is better after 2-3 months of harvest, but it’s offset by the losses (weight loss, rotting and sprouting) during storage which ranges from 5- 20% depending on the duration and condition of storage. The produce is bought by the wholesaler, who earns a margin of Rs 1/kg.Onion is mainly transported by trucks; however some quantities are also transported by rail from Niphad. The retailer’s margin is around Rs 2/kg and price jacks up to Rs 14 when it reaches consumers. Some of the salient features of the price build up are: • There are 3 intermediaries between the farmer and the consumer.

47 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT • The price realized by the farmer is almost half of the price paid by the consumer and farmer earns 22 paisa of a consumer rupee. • In case of onion, moisture loss/weight loss is quite high i.e. around 10-20%, depending upon the storage conditions. • Wholesalers and retailers earn 7 paisa and 14 paisa of a consumer rupee respectively. The price build up can be summarized, as below: Particulars Farmer Wholesaler Retailer Cost of cultivation/ Purchase price (Rs/Kg) 3.0 7.5 10.5 Cost of marketing, transport, wastage (Rs/Kg) 1.4 2 1.5 Selling price(Rs/Kg) 7.5 10.5 14 Price spread 3.1 1 2

5.2 INFRASTRUCTURE ASSESSMENT

5.2.1 Marketing Infrastructure Nashik district has 2.13 lakh MT of storage capacity for onions at farm level as well as around 87,000 MT storage capacities at market level. However, conventional storage of onions witnesses several problems viz. loss in weight, sprouting and rotting of bulb. To reduce these losses, Maharashtra State Agricultural Marketing Board (MSAMB) with the help of NABARD and National Research Centre for Onion and Garlic, Rajgurunagar has developed a scientific onion storage structure. A scheme has also been launched by MSAMB under which, a subsidy of Rs. 1500/- per MT for 5, 10, 15, 20, 25 & 50 MT capacity onion storage structures will be granted to farmers, Cooperative Societies and APMCs. Improved storage An irradiation facility has been set up by MSAMB at Lasalgaon and another irradiation facility has been set up by Hindustan Agro in Rahuri. The details are as follows:

Irradiation facility at Lasalgaon, Nashik (jointly run by BARC and MSAMB): The facility was set up by Bhabha Atomic Research Centre in 2003, with an investment of Rs. 80 million. The plant can handle up to 10 MT of produce per hour and is approved by USDA. Initially the plant was set up to cater to irradiation operation in onion and potato to prevent sprouting and hence enhanced shelf life. Later, it was upgraded to handle mango after India started exporting mango to US. In mango, irradiation destroys stone weevil, which is a required for quarantine purposes. Regular inspections by PPQ (Plant Protection & Quarantine) are done at the facility. Quantity handled at the facility

Year Quantity handled (MT) The total time taken in the irradiation process from Mango Onion 2009‐10 130 700 receiving to dispatch is about 4-5 hours. Time taken inside 2008‐09 275 ‐ the irradiation plant for various produce varies such as 2007‐08 150 ‐ about 1.5 hrs for onion and 2.5 to 3 hrs for mango.

48 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Treatment is done by Cobalt-60 and gamma rays. The charges for treating different commodities are as follows; Onion: 10% of the price of produce • Mango: Rs. 25 per box of 3.5 kgs each

Irradiation facility at Rahuri, Ahmednagar(owned by Hindustan Agro Cooperative Society): The facility in Rahuri is under construction. It is being set up by a cooperative society, with transfer of technology by BARC. The facility would be able to handle 20 MT per hour, once it is operational.

5.3 GAPS IN THE VALUE CHAIN Some of the gaps identified in the value chain are given below: • Since farmers have limited information about market, they bring the produce to APMC market without knowing about the price trend and sell the produce at the prevailing price. • Because of inadequate storage at APMC markets, onions coming to various markets are sold on the same day even if prices are low. Farmers do not take back the produce because it would jack up their transportation cost. • Manual grading is practiced at farm/market level, which is time consuming.

5.4 POTENTIAL FOR INTERVENTION It is proposed to set up handling facilities for onion at two spokes in Nashik district and two spokes in Ahmednagar districts. In Nashik district, storage structures would be set up at Malegaon and Pimpalgaon spokes and in Ahmednagar district, the proposed locations for spokes are Srirampur and Sangamner.

49 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

6 FOCUS CROP: TOMATO

Maharashtra ranks 7th in tomato production in the country and it occupies a share of 7% in national production. In 2007-08, total area under cultivation of tomatoes in Maharashtra was around 32,000 Ha with production of around 0.7 million MT. Productivity of tomatoes in the state is 22.2 MT/Ha that is higher than the national average of 17.9 MT/Ha for the year 2007- 08. The production trend of tomatoes is captured in table below:

Year Area in Ha (000 Ha) Production in 000 MT Productivity (MT/Ha) 2005‐06 35 887 28.2 2006‐07 30.7 681.3 22.2 2007‐08 32.2 715.3 22.2 *Source: NHB database Nashik, Ahmednagar and Pune are the major tomato producing districts of Maharashtra. Pimpalgaon in Nashik, Sangamner in Ahmednagar and Narayangaon & Rajgurunagar in Pune are the famous markets of tomatoes all over the country. In Nashik region, total area under cultivation of tomatoes in 2007-08 was around 10,000 Ha and production was 0.19 million MT. Districts Area in Ha Production in MT Nashik 8457 135312 Ahmednagar 1828 50526 Jalgaon 492 9056 Total 10777 194894 *Source: Directorate of Horticulture, Govt. of Maharashtra As shown above, Nashik and Ahmednagar are the major districts under cultivation of tomatoes. Niphad, Vinchur, Dindori, Sinnar, Chandvad and Nashik are the major tomato producing talukas in Nashik district and Akole and Sangamer in Ahmednagar district. Abhinav, 1389, Utsav and Samrat are the major varieties cultivated in the region. Most farmers prefer to grow long varieties of tomato as it contains more flesh and less juice and have relatively better shelf life as compared to round varieties. Some of the major varieties and their characteristics are: ƒ Abhinav: Abhinav is a high yielding late variety. Plant height goes up to 4-4.5 feet and the yield potential is around 40 MT/Ha under favourable weather conditions. The fruit is of good quality and fetches a higher price by Rs. 1-2 per kg as compared to other varieties. Seed of this variety is about 2.5 times costlier as compared to other varieties. ƒ 1389: 1389 is also a high yielding variety and it gives an average yield of about 25-30 MT/Ha under favourable weather conditions. Plant height is relatively short and goes up to 3-3.5 feet. Tomato is a four months crop and it is grown by transplanting the seedlings which are 3-4 weeks old and 6-8 cms in length. Three crops of tomato are taken in the region with a gap of about 1 month for a continual supply for about 6 months. Most farmers take 2-3 crops in a year on different land parcels of their land holding depending on the crop rotation planned. It has been observed that 2 crops are taken by the farmers on the same piece of land in a year. Various crop stages and their timing in a year is mentioned below: Nursery Stage Transplanting stage Harvesting May June July end – August 50 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT June July September – October July August October – December Fruits are harvested on full maturity when the colour of fruit starts turning from green to yellow but the fruit is still unripe and firm. Ripe red tomatoes are sent to the nearby markets :, Mumbai, Surat, Ahmedabad etc. and firm tomatoes with yellowish colour are sent to Kolkata, New Delhi, Jaipur, Jammu etc. and smaller sizes are sent to Ranchi, Patna and Allahabad etc.

6.1 VALUE CHAIN ANALYSIS

6.1.1 Trade channel of tomato The following illustration depicts the various stakeholders of the tomato supply chain: The major players involved in trade Farmer of tomato are farmer, commission agent, wholesaler, retailer, exporter and tomato processor. Farmers bring Commission Agent at Processors Exporters their produce to APMC markets, APMC market where tomatoes are traded and bought by the traders. The commission agent Trader facilitates trade between the farmer and the wholesaler. It also purchases Wholesaler tomatoes on behalf of exporters as well as processors and sends it to Retailer them. The role played by each stakeholder and the value added at each stage is briefly captured below:

Farmer: Most of the small farmers prepare their own nursery for raising tomato seedlings due to its cost effectiveness. The cost of raising seedlings at own farm comes to less than Re.1/seedling. There are local nurseries as well as some government nurseries that supply tomato seedlings to the farmers at a cost of Rs. 3/seedling. On an average, 7500 seedlings are transplanted in a hectare. Farmers incur a total cost of Rs 50,000- 55,0004 in cultivation of tomatoes in a hectare. Besides this, farmers spend around Rs 25,000-30,000 on bamboo sticks and wires, which can be used for around 4 years. Tomato plants are given support of bamboo sticks and tied with wires so that the plant can bear the fruit weight and fruit is not spoiled by touching the ground. A bundle of 100 bamboo sticks costs Rs. 800-1000 and the price of wire is about Rs. 60000/MT. 25 bundles and 100-125 kg of wire are required in a hectare. Some farmers also use strings instead of wire, which costs much lesser.

4 It does not include cost of bamboo sticks and wires used for giving support to tomato plants 51 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The cost of cultivation in a hectare is represented in table below:

Inputs Cost per Ha (Rs) Seeds 3750 Fertilisers and pesticides in nursery 2500 Labour for placing support to the plants 18750 Labour for Harvesting 10000 Organic Manure 5000 Fertiliser and Micro‐nutrient 6250 Pesticides 5000 Irrigation and other expenses 3750 Total 55000 Dug wells and bore wells are the most common source of irrigation in the region. Some farmers use drip irrigation particularly in the areas where water is scarce, whereas most of the farmers use flooding method of irrigation for tomato. Tomato is grown in rotation with onion, wheat and pulses. The economics of tomato cultivation in a hectare has been given in the table below, with an assumption of productivity at 25 MT per hectare.

Particulars Amount in Rs Cost of cultivation 55000 Bamboo sticks and wires* 3125 Plactic Crates** 1375 Transportation Cost*** 10000 Other Expenses@ 8% (Commission @ 6% + market fee @ 1.05% + others) 9000 Total Expenses 78500 Income @ Rs. 4.5 per kg. 112500 Net Profit 34000 Net Profit per kg 1.4 * apportioned cost with an assumption of 2 crops per year, 4 years of life span for the bamboo sticks and wire ** apportioned cost with an assumption of 3 crops in a year and 6 years of life span for plastic crates *** Assumption of total yield to be 10 MT/acre and transportation cost Rs. 8 per crate The average yield of tomatoes in Nashik and Ahmednagar districts is around 17-20 MT/Ha. About 4-5% of tomatoes are wasted at farm level due to over ripening because of delayed harvesting and pest attack. Tomatoes are harvested by the farmers on full maturity when the colour of fruit starts turning from green to yellow. The fruits are collected on a tarpaulin or a cloth on the field. Harvesting is done manually during day time and about 10-12 harvestings are done for each crop. Each harvest is done at an interval of 3-4 days and some fruits ripe fully during the gap. The prevailing labour charges for harvesting of tomato are Rs. 8 per crate. The tomatoes are graded manually on farm according to size and maturity levels. Four grades are popular among the farmers; • Red (fully ripe) big size • Fully mature (half ripe) big size • Fully mature (half ripe) medium size • Unripe and small size fruit

52 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Graded tomatoes are put in plastic crates. Each plastic crate can hold around 20kg of tomatoes and the cost of a crate is around Rs 160. Around 150-175 crates are required to handle crop of one hectare. Tomato farmers reported that the normal life of a plastic crate to be about 6-7 years. Farmers bring their produce to APMC markets in plastic crates. Most of the farmers use hired vehicle that carries the produce of many farmers to get the full vehicle load. Even if the produce is brought to the market in an aggregator’s vehicle, most of the farmers themselves come to the market. The transporters charge on per crate basis from the farmers depending on the distance from farm to the market, which is generally between Rs. 8-12 per crate for a distance of 20-30 kms. Pick-up van with a capacity of 1.5 MT and tractor trolleys are the most common mode of transport used by the farmers. Some farmers also get their produce in Toyota Qualis or Tata Sumo owned by them. The evacuation time of tomatoes depends upon the timing of APMC markets. If the produce is sold to the evening market, retention time at farm is 2-4 hrs and if it is sold in the morning market, retention time at farm is about 12-16 hrs. Some APMCs operate in the afternoon such as Pimpalgaon, which is known to be the biggest tomato market in the region, whereas others like Sangamner and Nashik APMCs operate in the morning hours. Unlike in other vegetables where farmers prefer to go to nearest APMC markets, tomato farmers are attracted more towards Pimpalgaon APMC since large traders are available and a better price can be expected. Farmers have preference for Sangamner APMC since there are no commission agents and produce is sold directly to traders through negotiation hence farmers realization is higher by 6%.The price discovery method varies from market to market. Nashik APMC has an open auction system, whereas in Pimpalgaon and Sangamner APMCs, one to one negotiation takes place. Traders observe the quality and quantity of the produce and contact with their counterparts in distant markets to check the demand and market price at other places. Payment is made to the farmers within 24 hrs of the sale of produce. All the APMCs in Nashik have electronic display system, where prices of major commodities in important markets of the country are displayed. However, it has been observed that farmers rarely come to see the displayed price. Some APMCs like Lasalgaon still update the daily minimum, maximum and average price and arrival of major commodities in nearby major markets and announcements are made every day morning on the price and arrivals of previous day. Pimpalgaon APMC has taken some initiatives to sensitize farmers and enable them to take an informed decision. SMS service has been recently started by the APMC to disperse the information regarding daily price of tomato and onion. About 10000 farmers are covered under this initiative so far and SMS is sent to them everyday at 11:00 a.m. after the market price is opened. Also, a weekly report is published in all Marathi newspapers Tomato is a very uncertain crop due to high price fluctuation. The price realized by the farmers is on the basis of arrivals in the market, demand at consumption markets and grade/quality of the produce. Average market price of different grades is mentioned below: Grade % of Total Harvest Average Market Price (Rs.) Red (fully ripe) big size 10‐15 4‐5 Fully mature (half ripe) big size 35‐40 5‐6 Fully mature (half ripe) medium size 30‐35 4‐5 Unripe and small size fruit 10‐15 1‐3

53 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT This year the price realized by farmers in Nashik APMC market varied from Rs. 1.5 per kg in September month to Rs. 12 per kg in November. Prices in September were very low because of huge arrivals in the market. The crop was very good due to low rainfall and some of the farmers reported crop productivity as high as 50MT/Ha. After the unexpected rains in the month of November, standing crop was adversely affected and resulted in high market prices due to low arrivals in the market. Still, tomato is a widely grown crop as it is of short duration and provides quick returns to the farmers for their regular needs. Generally, farmers take credit from village credit cooperative societies. The current rate of interest charged by the societies for crop loan is 6% and about Rs. 37500/Ha is given to farmers for cultivation of tomato. Crop loans are given for the duration of up to one year. Farmers open their account with the society and 5% of the total loan amount is deducted and kept as fixed deposit until the fixed deposit amount reaches Rs. 20000. In case of default due to crop failure or any other reason, a farmer does not get further credit from the society and has to go to the local money lenders. These money lenders are commission agents or traders of the nearby APMC markets. The rate of interest charged by them is 3% per month, which is quite exorbitant. The settlement is done at the time of sale of produce by the farmers and the money is deducted from farmer’s payment. In certain cases, commission agents do not charge interest on the money rather take other advantages, which are as follows: • First right to buy / facilitate sale of the produce • In the event of low production or crop failure in the region, farmer would help the lender in getting produce from his fellow farmers or relatives, hence assuring better business to the lender

Commission agent: They are registered with APMCs and have relations with both traders and farmers. Farmers take their produce to the traders who they feel will get them the best price on the basis of their own experience and relationship developed over the years. At the same time, traders inform their desired purchase price to the commission agent after enquiring the price and demand of the produce at distant markets. Commission agent plays an important role to facilitate the transaction to the satisfaction of both trader and farmer and thus charges 6% commission from the buyer of the produce. Another important role played by the commission agent is to make timely payment to the farmers. As per the guidelines issued by APMC, farmer should be paid within 24 hours of sale of his produce. Since traders, who are the buyers of the produce, send the produce to distant markets and get paid only after the produce reaches to the destination; commission agent pays to the farmer on behalf of the buyer. Payment terms between the trader and commission agent are on mutually agreeable terms, which may range from one week to four weeks depending on their relationship. As mentioned earlier, commission agent also provides credit support to the farmers and get first right to facilitate sale / buy the produce. In some cases, no interest is charged by the commission agents on the amount lent to the farmers, if he sells his produce through the lender. Commission agents are mostly local people and hold a powerful position in the value chain. It was informed by a commission agent in Pimpalgaon APMC that some outside traders started applying for license to operate as commission agent to save 6% commission. Their VC power

54 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT can be gauged from the fact that commission agents’ association was able to convince the APMC not to issue licenses to outsiders and they should act only as buyers.

Trader: As per rough estimation by the commission agents and traders operating in Pimpalgaon APMC, there are about 1000-1500 traders operating in Nashik region. About 30-35 are big traders operate in the area, who deal with about 2-3 trucks daily on an average. Most of these big traders operating in the region are from other states and only about 10-15% is from within the state. These traders have trading as their family business and some of their family members or relatives operate as wholesalers in distant markets such as Delhi, Chandigarh, Jaipur, Kolkata, Bhubneshwar etc. They migrate to Nashik during tomato season for about six months and to some other tomato producing belt in other states thereafter. Some traders also trade in grape after tomato season is over. APMC provides space to these traders for sorting, grading, packaging and dispatch of produce, but only a few traders have been accommodated by the APMC due to limited space and huge volumes handled in the market. Many traders take private land outside APMC premise on rent for the season and set up temporary shops there. Area of these places range between 1500 -2500 sq. ft. depending on the volumes handled by the traders. Rentals vary from Rs. 20000-25000 for the entire season. Though farmers bring the graded produce to the market, traders further grade the produce on their own parameters depending on the requirement of the destination market. Grading and packaging is done by employing labourers. Like traders, majority of labourers are also migrants from other states. They come during the tomato season and stay in the trader’s shop itself. Generally experienced people bring their own team of about 15-20 people and take labour contracts for the entire season. A team once contracted, would work only for one trader for the entire season. The contractor is being paid on per crate basis. Normally the charges are Rs. 2-3 per crate for sorting, grading, crate filling and loading. These operations are being carried out during any hour of the day and night as well as per the requirement. There are no fixed working hours. A team of 15 people can process 25-30 MT per day. Large traders use their own plastic crates for further transportation. Newspaper is used for cushioning so that the produce could be saved from damage during transit. Only English newspaper is used for the purpose as the quality of paper and ink are better than other newspapers. These old newspapers are available at Rs. 10-12 per kg and one kg newspaper is sufficient to provide cushioning to 7-8 crates. Traders reported normal life of a plastic crate to be about 10 years. In some cases, wooden boxes are also used to pack tomato. It generally happens in case of small traders who do not have empty crates available and the buyer agrees to pay for the price of wooden packaging. Newspaper is used as cushioning in wooden boxes also. Each wooden box contains 20-28 kg of tomato and cost of wooden box ranges from Rs. 30-55 per box. Lower quality boxes are used for relatively shorter distances such as Nagpur, Chhattisgarh and Andhra Pradesh, whereas good quality boxes are used for far off markets in Uttar Pradesh and Bangalore. Wooden boxes are generally used only once Tomatoes are transported to destination markets in trucks of 10 MT and 16 MT capacities. Each truck of 10 MT can carry about 500 loaded crates of 20 kgs each and 1500 empty crates. Transportation cost varies depending on distance of destination market. Transportation charges for a 10 MT truck for different markets are as follows:

55 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Route Charges (Rs.) Pimpalgaon – Delhi 22000‐25000 Pimpalgaon – Mumbai 7000‐8000 Pimpalgaon – Bhuvaneshwar 30000‐35000 Ripe red tomatoes are sent to the nearby markets and firm tomatoes with yellowish colour are sent to distant markets. Smaller sizes are sent to Ranchi, Patna and Allahabad etc. The trader does business on mark-up basis.

Wholesaler: Wholesalers are based at consumption markets and mainly deal with distribution of produce to retailers in particular cities, towns or villages. Most big wholesalers in major markets of India are closely linked with the traders and may even be related.

Exporter: As per the estimates by traders, about 8-10% of total production is exported out of Nashik district. Tomato is mainly exported to Dubai and most of the exporters are based at Mumbai. Orders are placed by them to the local commission agents, who purchase the produce on exporter’s behalf and send it to Mumbai. Purchase price for an exporter is Rs. 5-10 per kg of tomato. The produce is further sorted, graded and packaged at Mumbai for export. The entire set of activities are given on contract to the team of labourers, who charge Rs. 2.5-3 per box. A team of 25 people processes about 7 MT tomatoes from unloading to grading, packing and loading in 3-4 hours. Grading is done in the supervision of the exporter or his employee. Only big size firm fruit of yellow colour is used for export purposes. For export purpose, CFB boxes of 5 ply are used for packaging. Each box contains 7.5 kg of tomatoes and cost of such CFB box comes to about Rs. 29-30 per box.

Processor: On an average 30-40 MT of tomatoes are bought daily by the local processors for making tomato powder and tomato puree. Processors generally buy either the smallest size of tomato, which is not used for table purposes or the over ripe tomatoes, which cannot be sent to distant markets. Average purchase price for the processor is about Rs. 1-2 per kg of tomato.

6.1.2 Price build up along the value chain of Tomato Value chain of 1 kg of tomato indicating the various activities and cost build-up at every step has been mapped, and are shown in the diagram. Some of the assumptions of the price build up are: • The most commonly observed trade channel has been selected for the price build up of tomato i.e. Farmer-Commission agent-Trader-Wholesaler-Retailer. • The cost of cultivation does not include cost of bamboo sticks, wires, cost of crates etc. • The cost of retailing, which includes the cost of shop, wages, rent etc, has not been considered. • Wastages along the chain have been calculated for each level and the cumulative wastage has been taken into account.

56 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Consumer price

Retailer’s margin Cumulative Rs 15.5 Wastage Rs 4.8 Wholesaler’s margin

Wholesaler’s expenses Rs 2.0

Trader’s margin Rs 2.0

Rs 1.0 Trader’s expense

Rs 0.8 Rs 8.8 (Wholesaler’s Price) Farmgate price

Rs 1

Rs 4 Rs 5.8 (Trader’s Price)

Farmers incur a cost of Rs 2.4 in cultivating 1 kg of tomato. The produce is harvested and graded on farm and transported to APMC market by the farmer. He incurs a cost of Rs 0.4 in bringing the produce from farm to APMC market. Besides this, farmer also pays Rs 0.3 to the commission agent for facilitating trade. The price realized by the farmer at APMC market is Rs 4/kg and his net margin is Rs 0.9/kg. After buying tomatoes from the farmer, trader does further grading and packaging based on demand of buyer/destination market. The total expense incurred by the trader is around Rs 1/kg and his mark up is around Rs 0.8-1/kg. Traders send the produces to wholesalers, who are based at consumption markets and mainly do the distribution of produces to the retailers in a particular city, town or village. The cumulative wastage observed in case of tomato is around 20%. Analysis of wastage at every level is shown below:

5‐10% Retailer 3‐4% Destination Market / Losses due to 2‐3% Wholesaler delayed sale / unsold Primary Market / Losses during produce 4‐5% 4‐5% Trader transportation Farm Level Improper grading by the farmer, losses Over ripening due to during delayed harvesting transportation and pest attack

The price build up can be summarized, as below: Particulars Farmer Trader Wholesaler Cost of cultivation/ Purchase price (Rs/Kg) 2.4 4 5.8 Cost of marketing, transport, wastage (Rs/Kg) 0.7 1 1 Selling price(Rs/Kg) 4 5.8 8.8 Price spread 0.9 0.8 2 Some of the salient features of the price build up are mentioned below:

57 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT • There are 3-4 intermediaries between the farmer and consumer. The intermediaries are trader, commission agent, wholesaler, semi-wholesaler and/or retailer. Trader, wholesaler and retailer do business/sales on mark up basis. • The price realized by the farmer is around 1/4th of the price paid by the consumer. However, the farmer’s margin is only 6 paisa of a consumer rupee. • Though retailer’s share of a consumer rupee is 31 paisa, 50% of the wastage along the chain is accounted for, at this stage because of multiple handling and quality loss in the previous stages. • The wholesaler’s margin is 13 paisa of a consumer rupee. However, in certain cases, it is redistributed between the wholesaler and semi-wholesaler.

6.2 INFRASTRUCTURE ASSESSMENT

6.2.1 Post harvest infrastructure There is no post harvest infrastructure for tomato in the region. All post harvest activities such as sorting, grading etc. are being carried out manually. Farmers grade their produce on the basis of their understanding of pricing for different grades and feedback from the buyers. Secondary grading is done manually at trader’s level on the basis of feedback from consumption market. Though there are pack houses in Nashik region, but none of them is used for tomato. As per the stakeholders, operational cost of pack houses and cold chain becomes expensive and the price recovery for the same becomes difficult. Some corporate owning retail chains such as Reliance Fresh are in discussion with the existing pack houses in the region for using them for cut and packaged vegetables for their retail outlets. However, no such practice has been started so far.

6.2.2 Marketing Infrastructure Pimpalgaon, Sangamner, Niphad, Lasalgaon and Nashik are major APMC markets for tomato. Among the above, pimpalgaon is the biggest market for tomato. Apart from tomato, other major commodities traded in Pimpalgaon APMC are onion and loose grape berries. Details of crop arrival and market fee at Pimpalgaon market are as follows:

Commodity Arrival (MT) % of Commission Tomato 117000 6 Onion 520000 4 Grape 2600 8 There are 96 registered commission agents dealing with tomato and 39 commission agents dealing with onion at Pimpamgaon APMC. 113 labourers are registered for loading/unloading operations and 39 are registered for weighment. Weighment charges fixed by the APMC are Rs. 2.12 per quintal and for loading/unloading Rs. 2.68 per quintal of

58 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT produce. APMC takes a deposit of Rs. 3 lakh from the commission agents as security deposit. Market fee and cess is charged @ 1.05% As mentioned above, APMC has an electronic price display system, which displays the prices of major commodities in all major markets of the country. Other facilities include drinking water, canteen, ambulance etc. APMC Pimpalgaon is spread over 10 acres and the space is inadequate to accommodate daily arrivals in the market. Most of the traders have to take space on rent outside the market premises to carry out the grading, sorting and dispatch operations. Hence, a new market is being developed by the APMC, which is about 7-8 kms from the existing market. An area of 100 acres has been purchased by the APMC for onion and tomato market. The existing premise is proposed to be used for pomegranate market once the existing tomato and onion operations shift to the new market.

6.2.3 Institutional Infrastructure There are more than 3000 Primary Agricultural Credit Societies (PACS) in the region, of which 849 are in Nashik district, 871 in Jalgaon district and 1287 are in Ahmednagar district. These PACS provide credit to the farmers for agricultural purposes. Rate of interest charged by them for crop loans is 6%. Term loan is also given by the societies for purchase of fixed assets such as drip irrigation system. The rate of interest charged by the societies for term loan is 12% for loan up to Rs. 3 lakhs and 14.5% for loan more than Rs. 3 lakhs. There are no cooperative societies working for cultivation and marketing of tomato in Nashik region.

6.3 GAPS IN THE VALUE CHAIN

An assessment of the range of activities under the value chain was undertaken to understand the gaps and inefficiencies in the tomato value chain. A detailed structured questionnaire survey was undertaken to map the existing supply chain and identification of gaps at each stage, with added focus on institutional, infrastructural and logistical barriers. After the detailed field survey, the gaps identified were discussed with a range of key stakeholders to get their feedback on the analysis and understanding of the issues. Some of the gaps identified in the value chain of mango are as follows: • Tomato is graded at farm level, again at trader level and finally at retailer / exporter level also. Grading at each stage involves a cost and time and the produce goes through several hands. This causes loosening of skin and pulp and results in lower shelf life of the produce. • Plastic crates used for tomato are changed at each level of the supply chain. Farmers use their own crates and traders have their own. Thus multiple handling is responsible for major losses in tomato, which manifests mostly at retail level. It is observed that more than 50% of total losses are at retail level but the same is a result of quality deterioration during previous stages.

59 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT • In case of tomatoes, wastages are as high as 30%-40% (in case of worse weather conditions) mainly due to attack of insect pest and disease, erratic climatic conditions and over ripening of fruit due to delayed harvesting.

6.4 POTENTIAL FOR INTERVENTION Based on the need assessment of the tomato value chain, action plan were drawn-up and stakeholder consultations undertaken to identify areas of potential interventions. It is proposed to set up 2 pack houses for tomatoes in Nashik district and 1 pack house for tomatoes in Ahmednagar district. The proposed location for packhouse is Pimplagaon and Nashik Road in Nashik district and Sangamner in Ahmednagar district. It is estimated that the throughput of tomatoes at Pimpalgaon would be around 4000 MT per annum and the other two packhouses would handle 2000 MT/annum of tomatoes each. Besides tomatoes, Pimpalgaon and Nashik Road packhouse would receive grapes and vegetables also. Sangamner APMC would also handle vegetables. The packhouses will have following facilities for tomatoes: • Sorting • Grading • Packaging The details of the facilities have been captured in the subsequent chapter. • Interventions such as timely information dissemination on weather forecast, potential damage to the crop and suggested remedial actions may help reduce losses due to bad weather. Farmers should be educated on right stage of harvesting to prevent fruit over ripening. • Instead of newspaper, there is a scope for using better cushioning material. • There is a need to establish processing facilities for tomatoes in the region. As there is wide fluctuation in price of tomatoes, setting up of processing facilities would provide assured market for farm produces.

60 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

DPR: NASHIK INTEGRATED VALUE CHAIN PROJECT

Description of Hub and Spokes

Spoke Malegaon Spoke Pimpalgaon Hub Nashik Road Spoke Srirampur Spoke Sangamner Spoke Vivra Spoke Chinawal Spoke Kajgaon Spoke Danora

61 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

7 SPOKE: MALEGAON

Malegaon is a major pomegranate producing area of Nashik region. Other major crops in the area are grape, onion, maize and other cereals. It is located at a distance of about 100 km from Nashik on National Highway No.3. The nearest railway station is Manmad (40 Kms) and the nearest airport is Ojhar in Nashik (90 Kms). Malegaon and proximate talukas of Satana, Kalvan and Deola are proposed to feed the spoke at Malegaon. The suggested aggregation points and their approximate distance from the spoke is as follows; Aggregation Points Approximate Distance (Kms) Lakhimpur 22 Nampur 35 Taharabad 50 Satana 38

7.1 FOCUS CROPS AND ESTIMATED THROUGHPUT Pomegranate and grape have been identified as focus crops while designing the facility for the spoke at Malegaon. It was found during the study that most of the farmers have storage facilities for onion at their farms and additional storage may not be required for onion. The existing pack houses in Nashik have a cumulative capacity to process 1000-1200 MT of grapes per day. While some of the larger pack houses such as Freshtrop have a handling capacity of 60 MT/batch, other pack houses handle 5 – 40 MT/batch. Hence the throughput of the spoke has been designed taking into account the present production in the catchment area, the present capacities of existing similar infrastructures/facilities, potential for interventions, financial viability of the proposed infrastructure and stakeholders’ consultations. The estimated annual throughput of the pack house in MT is as follows:

Spoke Grape Pomegranate Malegaon 2000 2000 The arrival pattern of the focus crops in the proposed facility shall be according to the crop season as follows:

Crops Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Grape Pomegranate As shown above, the seasons for grape and pomegranate are different. The proposed cold chain infrastructure shall be used for grape during January to May and for pomegranate thereafter. Though pomegranate is harvested round the year in the catchment area of Malegaon but the export quality fruit and more quantities are harvested in August-October months. Hence it would be economically viable for the spoke to put pomegranate during this period of the year. Utilization of cold chain for pomegranate during remaining months may be decided depending on the market scenario.

62 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 7.2 PROPOSED FACILITIES Facilities have been designed on the basis of requirement of the focus crops with a view to provide better quality to the consumer and enhanced shelf life of the produce. While deciding on the capacities, existing facilities, their capacities and utilization have also been taken into account. The proposed new facilities are as follows:

7.2.1 Pack House The pack house shall have cold chain infrastructure for handling grape and pomegranate. It is assumed that 100% quantity of grape and pomegranate arriving at pack house shall go through the cold chain. The infrastructure has been designed to process and pack 60 MT of produce per day. Facility design complies with EHS regulations and provides segregated amenities by gender. The sub components of the pack house are described in the following sections. As described earlier, the facilities are modular in nature, 4 modules of cold chain infrastructure are proposed ƒ Receiving and Holding Area. ƒ Sorting and Grading Area; mechanized conveyor belts as well as static sorting tables. ƒ Inspection and Packaging area – tables standard stainless steel type. ƒ Weighing and unitization area – certified weighing machines and palletisation equipment. ƒ Buffer Store (Ante room) – holding area for 45 pallets pending pre-cooling. ƒ Pre-cooler – Forced Air Pre-coolers: capacity 20 MT (4 pre-coolers of 5 MT each), each running 3 batches in 18 hour period. In peak season, more than 60 MT will be pre-cooled daily through these pre-coolers. Pre-cooler size of 5MT selected to cater to lean periods and to allow faster batch process from line to cooling. Large pre- coolers of 10MT would imply a longer wait for batch preparation and would reduce flexibility in low volume periods. ƒ Cold Store – 100 MT capacity (4 cold stores of 25 MT each) (daily output plus 40% stock overrun to cater for storing and possible transport delays). The pre-coolers can also be used to supplement contingency storage. Cold Store size can be increased if grapes are intended to be stored locally for seasonal arbitrage (depending on user business plan) in local market. ƒ Both pre-cooler and cold store refrigeration will cater to 0 to 4 ºC temperatures and Relative Humidity between 80-90% ƒ Staging Area (Ante Room) – 24 pallets pending dispatch/transport. ƒ Material handling equipment – pallet movers, trolleys. ƒ Waste disposal systems. ƒ Vehicle waiting areas. ƒ Crate washing system. ƒ Laboratory – for testing pesticide residue and quality parameter control.

63 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT It is expected that the cold chain facility will employ a minimum of 50 persons for handling this volume.

Grape Process flow: Shelf life of grape at room temperature is about 7-8 days, which can be increased up to 6-8 weeks if kept in cold chain. Cold chain technology intervention would extend shelf life and produce quality and hence extend the season of grape. Price realization is better during off season due to limited availability. The process flow for grape handled through cold chain in the pack house is shown here:

Technology Description / Facilities Grading & • Manual method of grading and packaging. Packaging • Generally packed in cardboard boxes (9 ‐10 kg), panets (9 kg) or pouches (4 or 5 kg) for export markets. • For domestic market, packed in 4‐5kg of CFB boxes and plastic crates of 20 kgs. Pre‐cooling • Pre‐cooled for export and sometimes for domestic market. • Forced Air method of pre‐cooling is used in general for grapes • Temp: 1‐2 ºC, RH – 80 to 85% • Duration: within 6‐8 hours of harvest Cold • Pre‐cooled and graded grapes are kept in Cold Storages. Storage • Cold Storage requirement • Temp: 1 ºC, RH: 85‐90% • Storage period: maximum 5 days for export, 3‐8 weeks for domestic Reefer • Reefer transportation is used for export, temperature is maintained at 1 ºC. Transport • In Reefer (8 MT) and non Reefer trucks (9 MT) for domestic market. Others • After Pre‐cooling, cartons containing grapes are wrapped in polythene sheet along with grape guard (SO2 releasing pads) for fungal control.

Pomegranate Process flow: Generally, pomegranate can be kept for 1-2 weeks in ambient conditions, which can be increased up to 12 weeks if kept in cold chain. For export, it is necessary to keep the produce in cold chain. The process flow for pomegranate handled through the cold chain in the pack house is shown in the diagram:

Technology Description / Facilities Grading & • Manual method of grading and packaging. Packaging • Generally packed in cardboard boxes. • For domestic market, packed in 4, 5 and 10 kg of CFB boxes and plastic crates of 20 kgs. • For export markets, packed in 4.5 kg CFB boxes. Pre‐cooling • Pre‐cooled for export. • Forced Air method of pre‐cooling is used • Temp: 5 ºC, RH – 95% • Duration: within 6‐8 hours of harvest Cold • Pre‐cooled and graded fruits are kept in Cold Storages. Storage • Cold Storage requirement

64 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

• Temp: 5‐10 ºC, RH: 90% • Storage period: maximum 1 week for export, 8‐12 weeks for domestic Reefer • Reefer transportation is used for export, temperature is maintained at 5 oC. Transport • In Reefer (8 MT) and non Reefer trucks (9 MT) for domestic market.

Aggregation Mechanism The pack house will establish direct relationship with farmers and provide extension and training support to them for good farming practices, better post harvest handling practices, efficient use of inputs and technology transfer etc. The pack house will develop its aggregation mechanism and send trucks/pick-ups to the aggregation points. Farmers will be encouraged to come together as producer companies, set up and manage aggregation points wherever possible. The pack house may also invest in developing infrastructure at aggregation points such as platforms, sheds, etc.

Pack House Logistics The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, etc. Expected peak arrival of vehicles is about 38, which would include following approximate number of vehicles; ƒ Grapes / pomegranate: 12 ƒ Other commodities: 7 The above number would translate into six refrigerated out-going vehicles for fresh fruits during the peak period. Outgoing vehicles for other commodities would depend on market demand and duration of storage. Small capacity field vehicles (load 800kgs to 1MT), have been incorporated in the project to serve as feeders from local farms or aggregation points for backward integration. These vehicles can have an insulated body deploying pre-cooled chill packs. It is expected that this will increase field reach, and thereby enhance catchment range. Wherever possible, thermal blankets may be used to cover the grapes when transporting them from field to pack house, to provide protection from direct sunlight

7.2.2 Warehouse Storage facilities have been considered for maize pulses and other cereal crops, since these are also the major crops of the area. Capacity of the warehouse has been kept at 2000 MT. The warehouses would plan for sufficient parking and eased traffic flow layout along with waste disposal areas.

7.2.3 Other Facilities Apart from the above, following facilities are proposed in the pack house;

65 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Business Centre A business centre is proposed to house the administrative block for the market. There will also be rooms/sections which may be rented out to reputed NGOs, companies, grass-root level organizations such as microfinance institutions, etc as office spaces.

In addition to the above, the following are also proposed: ƒ Canteen ƒ Solid Waste Management Area ƒ DG Room ƒ Water Supply Facility ƒ Parking Area ƒ Utilities

66 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

8 SPOKE: PIMPALGAON

Pimpalgaon is an important existing market for tomato and onion. It is located at a distance of about 35 km from Nashik on National Highway No. 3. The nearest railway stations are Nashik Road (35 Kms) and Lasalgaon (30 km). It is also proximate to the existing Air and Sea Cargo Centre and airport of Nashik, which is about 12 km from Pimpalgaon. Pimpalgaon and surrounding areas are major producers of grape, tomato, onion and other vegetables. Aggregation points may be located in either direction of Pimpalgaon in a radius of 15-25 km to get sufficient quantities of fruit and vegetables mentioned above. However, based on several criteria, the proposed aggregation points for the proposed spoke are given below, along with their approximate distance from the spoke:

Aggregation Points Approximate Distance (km) Palkhed 15 Vani 25 Vadalibhui 22 Karsul 7

8.1 FOCUS CROPS AND ESTIMATED THROUGHPUT As mentioned above, major fruits and vegetables grown in the catchment of Pimpalgaon are grape, tomato, onion and other vegetables. Pimpalgaon is already serving as a hub for tomato trade from Nashik region and is also a very big market for onion. Traders from all over the country set up their shops during tomato and grape season and supply the produce to several parts of the country. The pack houses in Nashik have a cumulative capacity to process 1000-1200 MT of grapes per day. While some of the larger pack houses such as Freshtrop have a handling capacity of 60 MT/batch, other pack houses handle 5 – 40 MT/batch. Hence the throughput of the spoke has been identified based on present production in the catchment, the existing capacities of similar infrastructures/facilities, potential for interventions, financial viability of the proposed infrastructure and stakeholders’ consultations. Since onion is graded and packed at farm level itself, only storage facilities have been proposed for onion; hence, throughput for onion grading and packing has not been estimated. The estimated annual throughput of the spoke in MT is as follows:

Spoke Grape Tomato Other Vegetables Pimpalgaon 5000 4000 5000 The arrival pattern of the focus crops in the proposed facility shall be according to the crop season as follows:

Crops Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Grape Tomato Other Vegetables

67 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT As shown above, the facility would receive year-round supply of fresh fruit and vegetables ensuring capacity utilization of the pack house throughout the year.

8.2 PROPOSED FACILITIES Facilities have been designed based on the requirements of the identified focus crops, to induce better and efficient handling practices and faster evacuation of fresh produce to the consumption markets, to ensure better quality to the consumer. While deciding on the capacities, existing facilities, their capacities and utilization has also been taken into account. The proposed new facilities are as follows:

8.2.1 Pack House The pack house shall have cold chain infrastructure for handling grapes, which is a high value crop and is economically viable to keep in the cold chain. It is assumed that the entire quantity of grape arriving at the pack house will go through the cold chain. The cold infrastructure has been designed to process and pack 60 MT of produce per day. Facility design complies with EHS regulations and provides segregated amenities by gender. The sub components of the pack house are described in the following sections.

Cold Chain: As described earlier, the facilities are modular in nature, four modules of cold chain infrastructure are proposed for grape ƒ Receiving and holding area. ƒ Sorting and Grading Area; mechanized conveyor belts as well as static sorting tables. ƒ Inspection and Packaging area – tables standard stainless steel type. ƒ Weighing and unitization area – certified weighing machines and palletisation equipment. ƒ Buffer Store (ante room) – holding area for 45 pallets pending pre-cooling. ƒ Pre-cooler – Forced Air Pre-coolers: capacity 20 MT (4 pre-coolers of 5 MT each), each running 3 batches in 18 hour period. In peak season, more than 60 MT will be pre-cooled daily through these pre-coolers. Pre-cooler size of 5Mt selected to cater to lean periods and to allow faster batch process from line to cooling. Large pre-coolers of 10MT would imply a longer wait for batch preparation and would reduce flexibility in low volume periods. ƒ Cold Store – 100 MT capacity (4 cold stores of 25 MT each) (daily output plus 40% stock overrun to cater for storing and possible transport delays). The pre-coolers can also be used to supplement contingency storage. Cold Store size can be increased if grapes are intended to be stored locally for seasonal arbitrage (depending on user business plan) in local market. ƒ Both pre-cooler and cold store refrigeration will cater to 0 to 4 ºC temperatures and Relative Humidity between 80-90% ƒ Staging Area (Ante Room) – 24 pallets pending dispatch/transport. ƒ Material handling equipment – pallet movers, trolleys. ƒ Waste disposal systems.

68 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT ƒ Vehicle waiting areas. ƒ Crate washing system. ƒ Laboratory – for testing pesticide residue and quality parameter control. It is expected that the cold chain facility will employ a minimum of 150 persons for handling this volume.

Grape Process flow: Shelf life of grape at room temperature is about 7-8 days, which can be increased upto 6-8 weeks if kept in cold chain. Cold chain technology intervention would extend shelf life and produce quality and hence extend the season of grape. Price realization is better during off season due to limited availability. The process flow for grape handled through cold chain in the pack house is illustrated:

Technology Description / Facilities

Grading & • Manual method of grading and packaging. Packaging • Generally packed in cardboard boxes (9 ‐10 kg), panets (9 kg) or pouches (4 or 5 kg) for export markets. • For domestic market, packed in 4‐5kg of CFB boxes and plastic crates of 20 kgs. Pre‐cooling • Pre‐cooled for export and sometimes for domestic market. • Forced Air method of pre‐cooling is used in general for grapes • Temp: 1‐2 ºC, RH – 80 to 85% • Duration: within 6‐8 hours of harvest Cold • Pre‐cooled and graded grapes are kept in Cold Storages. Storage • Cold Storage requirement • Temp: 1 ºC, RH: 85‐90% • Storage period: maximum 5 days for export, 3‐8 weeks for domestic o Reefer • Reefer transportation is used for export, temperature is set for 1 C. Transport • In Reefer (8 MT) and non Reefer trucks (9 MT) for domestic market.

Others • After Pre‐cooling, cartons containing grapes are wrapped in polythene sheet along with grape guard (SO2 releasing pads) for fungal control. Bulk storage is recommended closer to consumption markets and thus the last leg of transport to retail centres is at a minimal.

8.2.2 Pack Shed ‐Ambient The ambient infrastructure will cater to tomato and other vegetables, since margins in these crops are relatively low. Also, tomato and other vegetables are grown all over the country and additional cost incurred on cold chain makes the produce non-competitive in distant markets. The ambient pack shed has been designed to handle 50 MT of produce per day. The sub components of the pack shed are as listed below; ƒ Covered Pack shed (open to ambient) with landing area. ƒ Requisite weighing equipment and transaction recording arrangement. ƒ Sorting and grading areas (with tables). ƒ Packaging store and Packing tables.

69 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT ƒ Waste disposal systems (common to both cold chain and ambient). ƒ Vehicle parking areas (common to both cold chain and ambient). ƒ Crate washing system (common to both cold chain and ambient).

Process flow in Pack Shed: Process flow for the produce handled in the pack shed shall be as depicted below:

Aggregation Mechanism The pack house/pack shed will establish direct relationship with farmers and provide extension and training support to them for best farming practices, better post harvest handling practices, efficient use of inputs and technology transfer etc. The pack house/pack shed will develop aggregation mechanism and send trucks/pick-ups to the aggregation points. Farmers will be encouraged to come together as producer companies and set up and manage aggregation points wherever possible. Pack house/pack shed may also invest in developing infrastructure at aggregation points such as platforms, sheds, etc.

Logistics The produce will come to the spoke from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, etc. Expected peak arrival of vehicles is about 38, which would include following approximate number of vehicles; ƒ Grapes: 12 ƒ Tomato & other vegetables: 16 ƒ Onion: 10 The above number would translate into 12 out-going vehicles at peak, of which 6 vehicles would be refrigerated and would be utilized for grape transportation Small capacity field vehicles, load 800kgs to 1MT, are incorporated in the project to serve as feeders from local farms or aggregation points as backward integration. These vehicles can be with insulated body deploying pre-cooled chill packs. This is foreseen to increase field reach, hence enhancing catchment range. Wherever possible, thermal blankets can be used to cover the grapes when travelling from field to pack-house, providing protection from direct sunlight.

8.2.3 Ambient Onion Stores Separate facilities for onion storage are proposed to be part of the facility. Onion stores of 500 MT capacities would be set up. This would be kept as a separate section in the facility to prevent odour contamination in other areas.

70 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT These storehouses would be constructed as per existing guidelines for storage of dry onions, incorporating enclosures that allow ventilation while protecting from overhead inclement weather. The roof would be extended to protect from driving rain while protecting from direct sunlight, boundary walls of mesh material protecting the produce from rodents while allowing adequate ventilation. The base platform would be raised to truck-bed height easing loading and unloading operations.

8.2.4 Other Facilities Apart from the above, following facilities are proposed in the spoke;

Business Centre Business Centre is proposed to house the administrative block for the market. There will also be rooms/sections which may be rented out to reputed NGOs, companies, grass-root level organizations such as microfinance institutions, etc as office spaces.

Other facilities proposed here are: ƒ Canteen ƒ Solid Waste Management Area ƒ DG Room ƒ Water Supply Facility ƒ Parking Area ƒ Utilities

71 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

9 HUB: NASHIK ROAD

The Nashik Road facility has been identified as hub due to its connectivity to major consumption areas such as Mumbai, Pune and Nashik city itself. This facility would also serve as a hub for other proposed spokes in the Nashik region. Nashik is located on Central Railway Line connecting Madhya Pradesh, Uttar Pradesh and Bihar with Mumbai and down south. In terms of road connectivity, two National Highways No. 3 and No. 50 are connecting Nashik from Mumbai-Agra and Pune respectively. State highways link it through Ahmednagar and Aurangabad districts of Maharashtra. Nashik has an air connectivity and houses air and sea cargo handling facilities for faster evacuation of fresh produce from the region.

Apart from the connectivity to the consumption markets, Nashik Road is also proximate to the production clusters of various fruit & vegetable crops. Proposed aggregation points for the hub and their approximate distance is as follows;

Aggregation Points Approximate Distance (Kms) Baragaon Pimpri 30 Sinnar 25 Bhagur 10 Shinde 8

9.1 FOCUS CROPS AND ESTIMATED THROUGHPUT Major fruits and vegetables grown in the catchment of Nashik Road are grape, tomato, cabbage, cauliflower and other vegetables. Vegetables and grape are already being sent to all over the country from Nashik. Grape and vegetables are also exported to Middle East and

72 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT European countries. At present, Nashik APMC is the major aggregation and dispatch point for vegetables produced in the area, whereas fruits are directly sourced from the farms by the traders. Focus crops for the proposed facility in Nashik Road are grape, tomato and other vegetables. As mentioned earlier, Nashik district has 84 APEDA recognized pack houses, which are mainly used for export of grapes. About 7-8 of these pack houses have big cold storage facilities i.e. 2000 MT or above, while others have only about 50-150 MT cold storage capacity. The pack houses in Nashik have a cumulative capacity to process 1000-1200 MT of grapes per day. While some of the larger pack houses such as Freshtrop have a handling capacity of 60 MT/batch, other pack houses handle 5 – 40 MT/batch. Hence the throughput of the hub has been designed taking into account the present production in the catchment area, potential for interventions, financial viability of the proposed infrastructure and stakeholders’ consultations. The estimated annual throughput of the hub in MT is as follows:

Spoke Grape Tomato Other Vegetables Nashik Road 10000 2000 5000 The arrival pattern of the focus crops in the proposed facility shall be according to the crop season as follows:

Crops Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Grape Tomato Other Vegetables As shown above, the facility would receive year round supply of fresh fruit and vegetables and hence, capacity utilization of the facilities would be ensured throughout the year.

9.2 PROPOSED FACILITIES Facilities have been designed on the basis of requirement of the focus crops, to induce better and efficient handling practices and faster evacuation of fresh produce to the consumption markets so as to ensure better quality to the consumer. While deciding on the capacities, existing facilities, their capacities and utilization has also been taken into account. The proposed new facilities are as follows:

9.2.1 Pack House The pack house shall have cold chain infrastructure for handling grapes, which is a high value crop and is economically viable to keep in the cold chain. It is assumed that the entire quantity of grape arriving at the pack house will go through the cold chain. The cold infrastructure has been designed to process and pack 60 MT of produce per day. Facility design complies with EHS regulations and provides segregated amenities by gender. The sub components of the pack house are described in the following sections.

73 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Cold Chain: As described earlier, the facilities are modular in nature, 4 modules of cold chain infrastructure are proposed for grape ƒ Receiving and Holding Area. ƒ Sorting and Grading Area; mechanized conveyor belts as well as static sorting tables. ƒ Inspection and Packaging area – tables standard stainless steel type. ƒ Weighing and unitization area – certified weighing machines and palletisation equipment. ƒ Buffer Store (Ante room) – holding area for 45 pallets pending pre-cooling. ƒ Pre-cooler – Forced Air Pre-coolers: capacity 20 MT (4 pre-coolers of 5 MT each), each running 3 batches in 18 hour period. In peak season, more than 60 MT will be pre-cooled daily through these pre-coolers. Pre-cooler size of 5MT selected to cater to lean periods and to allow faster batch process from line to cooling. Large pre- coolers of 10MT would imply a longer wait for batch preparation reducing flexibility in low volume periods. ƒ Cold Store – 100 MT capacity (4 cold stores of 25 MT each) (daily output plus 40% stock overrun to cater for storing and possible transport delays). The pre-coolers can also be used to supplement contingency storage. Cold Store size can be increased if grapes are intended to be stored locally for seasonal arbitrage (depending on user business plan) in local market. ƒ Both pre-cooler and cold store refrigeration will cater to 0 to 4 ºC temperatures and Relative Humidity between 80-90% ƒ Staging Area (Ante Room) – 24 pallets pending dispatch/transport. ƒ Material handling equipment – pallet movers, trolleys. ƒ Waste disposal systems. ƒ Vehicle waiting areas. ƒ Crate washing system. ƒ Laboratory – for testing pesticide residue and quality parameter control. It is expected that the cold chain facility will employ a minimum of 170 persons for handling this volume.

Grape Process flow: Shelf life of grape at room temperature is about 7-8 days, which can be increased upto 6-8 weeks if kept in cold chain. Cold chain technology intervention would extend shelf life and produce quality and hence extend the season of grape. Price realization is better during off season due to limited availability. The process flow for grape handled through cold chain in the pack house is shown in the diagram:

Technology / Description Facilities

Grading & • Manual method of grading and packaging. • Generally packed in cardboard boxes (9 ‐10 kg), panets (9 kg) or pouches (4 or 5 kg) for Packaging export markets. • For domestic market, packed in 4‐5kg of CFB boxes and plastic crates of 20 kgs. Pre‐cooling • Pre‐cooled for export and sometimes for domestic market. • Forced Air method of pre‐cooling is used in general for grapes

74 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

• Temp: 1‐2 ºC, RH – 80 to 85% • Duration: within 6‐8 hours of harvest

Cold Storage • Pre‐cooled and graded grapes are kept in Cold Storages. • Cold Storage requirement • Temp: 1 ºC, RH: 85‐90% • Storage period: maximum 5 days for export, 3‐8 weeks for domestic o Reefer • Reefer transportation is used for export, temperature is maintained at 1 C. • In Reefer (8 MT) and non Reefer trucks (9 MT) for domestic market. Transport

Others • After Pre‐cooling, cartons containing grapes are wrapped in polythene sheet along with grape guard (SO2 releasing pads) for fungal control. Bulk storage is recommended closer to consumption markets thus the last leg of transport to retail centres is at a minimal.

9.2.2 Pack Shed ‐ Ambient An ambient pack shed is proposed to be setup adjoining the cold chain infrastructure. The ambient infrastructure will cater to tomato and other vegetables, since margins in these crops are relatively low. Also, tomato and other vegetables are grown all over the country and additional cost incurred on cold chain makes the produce non-competitive in distant markets. The ambient pack shed has been designed to handle 50 MT of produce per day. The sub components of the pack shed are as listed below; ƒ Covered Pack shed (open to ambient) with landing area. ƒ Requisite weighing equipment and transaction recording arrangement. ƒ Sorting and grading areas (with tables). ƒ Packaging store and Packing tables. ƒ Waste disposal systems (common to both cold chain and ambient). ƒ Vehicle parking areas (common to both cold chain and ambient). ƒ Crate washing system (common to both cold chain and ambient).

Process flow in Pack Shed: Process flow for the produce handled in the pack shed shall be as depicted below:

Aggregation Mechanism The hub will establish direct relationship with farmers and provide extension and training support to them for best farming practices, better post harvest handling practices, efficient use of inputs and technology transfer etc. The hub will develop aggregation mechanism and send trucks/pick-ups to the aggregation points as well as to other spokes. Farmers will be encouraged to come together as producer companies and set up and manage aggregation

75 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT points wherever possible. The spoke may also invest in developing infrastructure at aggregation points such as platforms, sheds, etc.

Logistics The produce will come to the hub from various spokes, aggregation points and farms in various modes of transport such as trucks (4 MT), vans, etc. Expected peak arrival of vehicles is about 46, which would include following approximate number of vehicles; ƒ Grapes: 12 ƒ Banana: 1 ƒ Tomato & other vegetables: 16 ƒ Onion: 10 ƒ Other commodities: 7 The above numbers add up to 12 out-going vehicles in the peak period of which, six refrigerated vehicles would be utilized for grape transportation Small capacity field vehicles (load 800kgs to 1MT), are incorporated in the project to serve as feeders from local farms or aggregation points as backward integration. These vehicles can be with insulated body deploying pre-cooled chill packs. This is anticipated to increase field reach, hence enhancing catchment range. Wherever possible, thermal blankets may be used to cover the grapes during transport from field to pack-house, to provide protection from direct sunlight.

9.2.3 Banana Ripening Facility A banana ripening facility is proposed in the hub. Capacity of the ripening chamber will be 10 MT per day. The ripening chamber can also be used for other fruits such as mango, if required. Ripening would be done using ethylene as the catalyst (see Annexure for technical details). Ethylene generators would be utilised for appropriate dosing of the catalyst. The Banana ripening facility could adjoin a separate receiving and de-handing shed to allow for locally sourced direct farm produce to be input for local ripening requirements. A waste disposal area to cater to ripening room is specially designated. Material handling pallet mover is provided for the daily operations. The receiving shed is covered to protect from direct sunlight and weather. Though only one chamber will output daily, sufficient space is provided to cater for dispatch staging as well as incoming marshalling of the produce. The ripening facility is envisaged to output into smaller vehicles for tertiary dispatch and a separate designated parking lot for the same is designed.

9.2.4 Ambient Onion Stores Separate facilities for onion storage are proposed to be part of the facility. Onion stores of 500 MT capacities would be set up. This would be kept as a separate section in the facility to prevent odour contamination in other areas. These storehouses would be constructed as per existing guidelines for storage of dry onions, incorporating enclosures that allow ventilation while protecting from overhead inclement

76 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT weather. The roof would be extended to protect from driving rain while protecting from direct sunlight, boundary walls of mesh material protecting the produce from rodents while allowing adequate ventilation. The base platform would be raised to truck bed height easing loading and unloading operations.

9.2.5 Dry Warehouse Storage facilities have been considered for maize and other cereal crops, since these are also the major crops of the area. A dry warehouse of 5000 MT capacity is also proposed. It will used for storage of grains such as rice, wheat, maize or other commodities. The warehouses would plan for sufficient parking and eased traffic flow layout along with waste disposal areas.

9.2.6 Cold Store A multi commodity cold store of 5000 MT is also proposed to store resins, fruits and vegetables, chillies etc.

9.2.7 Other Facilities

Business Centre Business Centre is proposed to house the administrative block for the market. There will also be rooms/sections which may be rented out to reputed NGOs, companies, grass-root level organizations such as microfinance institutions, etc as office spaces.

Knowledge Centre A Knowledge Centre is also proposed in the hub. This space will be utilized for extension services provided to the farmers, traders, aggregators and others in the catchment area. There will also be rooms for trainings, meetings and conferences which will be rented out. There will be demonstration rooms displaying various modern technologies and best practices in agri-business.

Other facilities proposed here are: ƒ Guest House ƒ Canteen ƒ Solid Waste Management Area ƒ DG Room ƒ Water Supply Facility ƒ Parking Area ƒ Utilities

77 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

10 SPOKE: SRIRAMPUR

Srirampur is located amidst onion producing areas of district Ahmednagar, Nashik and Aurangabad. It is about 30 km away from the famous religious place of Shirdi in Ahmednagar district. Distance from Nashik, Ahmednagar and Aurangabad is 110, 70 and 90 km respectively. Srirampur has a railway station known as “Belapur” connecting it from Nashik and Ahmednagar cities. Suggested aggregation points for Srirampur spoke and their approximate distance is as follows;

Aggregation Points Approximate Distance (Kms) Mamdapur 10 Undirgaon 10 Rahata 25 Budrukh 22 Deolali 20

10.1 FOCUS CROPS AND ESTIMATED THROUGHPUT Onion, guava and sapota are the major focus crops grown in the catchment of Srirampur spoke. Since all the crops mentioned here are low value crops with low trade margins, it would not be economically viable to put these crops through cold chain infrastructure. Hence, an ambient pack house is suggested to be established at Srirampur. Estimated throughputs have been identified based on present production in the catchment area, the present capacities of existing similar infrastructures/facilities, potential for interventions, financial viability and stakeholders’ consultations (see value chain analysis). Srirampur and the adjacent taluk Rahata together account for around 12% of the total onion production of the district. They produce around 84000 MT of onions annually. Since onion is graded and packed at farm level itself, only storage facilities have been proposed for onion; hence, throughput for onion grading and packing has not been estimated. The estimated annual throughput of other crops arriving at the pack house in MT is as follows:

Spoke Guava Sapota Srirampur 7000 10000 The arrival pattern of the focus crops in the proposed facility shall be according to the crop season as follows:

Crops Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Guava Sapota The seasonality chart shows that the pack shed at Srirampur shall remain occupied round the year. Guava is harvested from November to May and Sapota is harvested round the year. The facility may also cater to vegetables for the local market.

78 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 10.2 PROPOSED FACILITIES Facilities have been designed on the basis of requirement of the focus crops. As none of the focus crops makes it a viable proposition to be treated into cold chain infrastructure, focus has been laid on better and efficient methods of handling and quicker evacuation to the consumption markets. Since there are no facilities already existing for these crops in the region, the pack house would also serve as a pilot for many more such initiatives. The facility would provide segregated amenities – by gender and working zones. The proposed facilities are as follows:

10.2.1 Pack House An ambient pack house has been designed to handle 50 MT of produce per day. The sub components of the pack house are as listed below; ƒ Sorting and Grading facilities ƒ Inspection and Packaging area – tables standard stainless steel type. ƒ Weighing area – certified weighing machines. ƒ Material handling equipment – pallet movers, trolleys. ƒ Waste disposal systems. ƒ Vehicle waiting areas. ƒ Crate washing system.

Process flow in PackHouse: Process flow for the produce handled in the pack house shall be as depicted below:

Technology / Description Facilities

Quality Check • Quality of the farm produces shall be assessed at the pack house based on certain criteria such as maturity level, size of fruits etc. Sorting and • Manual sorting and grading is suggested, which is cost effective. • Sorting and grading tables are proposed in the pack shed. Grading

Packing • Packaging tables would be provided for manual packing of guava and sapota. • Packaging material used at the pack house would depend on the requirements of the destination markets. Perforated polybags and CFB boxes shall be promoted. • Appropriate packing material store for streamlined material flow. Dispatch • The same area would be offloaded on a daily basis. • The packaged produce would be staged on the raised platform. • Produce is expected be transported in trucks of 10 ‐16 MT capacity.

79 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Guava can be stored for about 10 days at room temperature (180-230 C) in perforated polybags. This fact is especially important when handling winter fruit as ambient temperatures can be taken advantage of. As Guava is susceptible to moisture loss and associated weight loss, the perforated bags trap moisture while still allowing the fruit to breathe and allowing respiratory heat to dissipate. While the shelf life can be extended upto 20 days by keeping them at low temperature of 50 C and 75-85% relative humidity, following of basic packaging guidelines will be sufficient to extend reach of the produce. For distant markets, wooden or corrugated fibre board boxes with cushioning materials viz. paddy straw, dry grass, guava leaves or rough paper also helps in keeping the fruit safe. Given the current market backdrop, no immediate cold chain application is proposed. Sapota is a tropical crop and needs warm (10-38 ºC) and humid climate (70% RH) for growth and can be cultivated throughout the year. Coastal climate is best suited for its cultivation. This fruit is highly perishable but with careful handling can be stored in ordinary conditions for 7-8 days period after harvesting. At a storage temperature of 15 ºC, the shelf life can be increased for a period of 15-20 days. Storage can be further enhanced to 21-25 days by removing ethylene and adding 5-10% CO2 to the storage atmosphere. Yet, in current market dynamics, the associated costs (capital and operating energy expense) are not considered viable. Due to annual availability of the fruit, it fetches minimal domestic price and hence refined handling practices alone are suggested to suffice suitable quality enhancement. The produce must be packaged in stiff bodied cartons or crates and cushioning materials can be interspersed with ethylene absorbents for transport and presale storage.

Aggregation Mechanism The spoke will establish direct relationship with farmers and provide extension and training support to them for best farming practices, better post harvest handling practices, efficient use of inputs and technology transfer etc. The spoke will develop aggregation mechanism and send trucks/pick-ups to the aggregation points. Farmers will be encouraged to come together as producer companies and set up and manage aggregation points wherever possible. The spoke may also invest in developing infrastructure at aggregation points such as platforms, sheds, etc.

Logistics The produce will come to the spoke from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, etc. Expected peak arrival of vehicles is about 26, which would include following approximate number of vehicles; ƒ Guava / Sapota: 16 ƒ Onion: 10 Estimated peak outgoing number of vehicles is 6 trucks per day. No reefer transport has been proposed in the spoke as no cold-chain application is foreseen as produce currently lacks export business linkages. Small capacity field vehicles, load 800 kgs to 1MT, are incorporated in the project to serve as feeders from local farms or aggregation points as backward integration

80 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 10.2.2 Onion Storage Storage facility for onion has been provided at the facility. Capacity of onion storage has been kept to be 500 MT. This would be kept as a separate section in the facility to prevent odour contamination in other areas. These storehouses would be constructed as per existing guidelines for storage of dry onions, incorporating enclosures that allow ventilation while protecting from overhead inclement weather. The roof would be extended to protect from driving rain while protecting from direct sunlight, boundary walls of mesh material protecting the produce from rodents while allowing adequate ventilation. The base platform would be raised to truck bed height easing loading and unloading operations.

10.2.3 Other Facilities

Business Centre Business Centre is proposed to house the administrative block for the market. There will also be rooms/sections which may be rented out to reputed NGOs, companies, grass-root level organizations such as microfinance institutions, etc as office spaces. Other facilities proposed here are: ƒ Canteen ƒ Solid Waste Management Area ƒ DG Room ƒ Water Supply Facility ƒ Parking Area ƒ Utilities

81 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

11 SPOKE: SANGAMNER

Sangamner has been identified as spoke for the Nashik Integrated Value Chain. It has been identified as spoke because it’s major production centre as well as marketing hub of tomato, other vegetables and onion. Sanagamner and the adjoining taluk Akole, which is around 30 km from Sangamner, together accounts for more than 16% of onion production of the district Sangamner has established trade linkages with major consumption markets such as Mumbai, Delhi, Bhubaneswar, Chandigarh, Andhra Pradesh etc and truck loads of tomatoes and onions are sent to these places. Sangamner is well connected by road to production centres and the nearest rail head, which is around 55km away, is at Shrirampur. NH 50 passes through Sangamner, which connects Pune to Nashik. SH 44 connects Sangamner to the adjoining taluks Akole as well as Srirampur. The aggregation points identified for the proposed spoke at Sangamner are:

Aggregation Points Distance from the spoke in Kms Nandur Shingote 20 Talegaon 25 Nimbgaon Jali 20 Akole 30 As evident from above, the aggregation points are located within a radius of 30 km from the proposed spoke at Sangamner. This would ensure that the produce reaches the spoke within 1-2 hours after harvest.

11.1 FOCUS CROPS AND ESTIMATED THROUGHPUT As mentioned earlier, major crops cultivated in the catchments of the proposed spoke are tomatoes, onion, vegetables such as pea, brinjal, cabbage, carrot, cucumber etc. The focus crops and estimated throughputs of the spoke have been identified based on the present production in the catchment areas, financial viability of the proposed infrastructure, potential for interventions and stakeholders’ consultations. The estimated annual throughput of the spoke in MT shall be as follows:

Spoke Tomato Onion Vegetables Sangamner 2000 500 5000 The arrival pattern of the focus crops at the ambient pack shed shall be as follows:

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Tomato Onion Vegetables The arrival pattern shows that there will be round the year availability of produce for the pack shed, which would ensure its operational efficiency and thereby maximize capacity utilization.

82 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 11.2 PROPOSED FACILITIES The facilities at the spoke have been designed to bring synergy with the existing supply chain of farm produces grown in the catchments of the spoke. As the focus crops are onion, tomatoes and vegetables, which are currently handled through the ambient supply chain, hence the facilities proposed at the spoke are ambient only. Also, tomato and vegetables are grown all over the country and hence introduction of cold chain infrastructure for these crops would render them non-competitive in distant markets. The capacity has been planned to target an introductory and viable volume of the two produce types. Facility design caters and complies with EHS regulations and provides segregated amenities – by gender and working zones.

11.2.1 Ambient Pack Shed An ambient pack shed is proposed to be set up at the spoke for handling of tomato and vegetables. The handling capacity of the pack shed will be 50 TPD. In the ambient handling yard, following infrastructure will be provided: ƒ Covered Pack shed (open to ambient) with landing area. ƒ Requisite weighing equipment and transaction recording arrangement. ƒ Sorting and grading areas (with tables). ƒ Packaging store and Packing tables. ƒ Waste disposal systems. ƒ Vehicle parking area.

Ambient Pack Shed Process flow: The process flow of the produces handled in the pack shed is shown below:

Facilities Description

Quality Check • Quality of tomatoes and vegetables shall be assessed at the pack shed.

Sorting& Grading • Manual sorting and grading is suggested, which is cost effective. • Sorting and grading tables are proposed in the pack shed. Packing • Packaging tables would be provided in the pack sheds for manual packing of tomatoes and vegetables in boxes/crates etc. • Appropriate packing material store for streamlined material flow. Dispatch • The same area would be offloaded on a daily basis. • The packaged produce would be staged on the raised platform. • Produce is expected be transported in trucks of 10 ‐16 MT capacity.

83 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Aggregation Mechanism The pack shed will aggregate material from various aggregation points mentioned earlier as well as procure directly from the farms. As the aggregation points are located in radius of 30 km from the proposed spoke, trucks/pick up vans would be used to collect farm produces from the points of aggregation. The pack shed owner will also establish direct relationship with farmers and provide extension and training support to them. This would ensure assured supply of raw material to the pack shed and assured market for the farmers.

Logistics The produce will come to the spoke in various modes of transport such as auto rickshaw, vans and mini trucks etc. It is assumed that around 16 vehicles will bring the tomatoes and vegetables to the pack sheds. As mentioned earlier, the produce may come to the pack shed from various aggregation points as well as directly from the farms. The outbound logistics for the pack shed would be approximately 6 trucks of 10 MT capacities.

11.2.2 Onion Store 10 onion stores of 50MT capacities each are proposed in the spoke. The onion storage structures would be a separate section of the spoke facility to check odour contamination. Since onion is graded and packed at farm level itself, only a storage facility is provided. These storehouses would be constructed as per existing guidelines for storage of dry onions, incorporating enclosures that allow ventilation while protecting from overhead inclement weather. The roof would be extended to protect from driving rain while protecting from direct sunlight, boundary walls of mesh material protecting the produce from rodents while allowing adequate ventilation. The base platform would be raised to truck bed height easing loading and unloading operations.

11.2.3 Other Facilities

Business Centre A Business Centre is proposed in the spoke that would accommodate administrative unit as well as provide space for other offices. The centre will incorporate bank, post office and other office support services. A common testing lab can also be included in the business centre. Local district level government offices will also ensure utility and regular interaction at location. These could include local passport offices, tax centre, land records office, family planning centre, etc. Apart from the above facilities, other amenities proposed in the spoke are: ƒ Parking Area ƒ Canteen ƒ Weigh Bridge ƒ Water Supply Facilities ƒ DG Rooms ƒ Solid Waste Management Area ƒ Other Amenities

84 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

12 SPOKES (BANANA): VIVRA, CHINNAWAL, KAJGAON, DANORA

The district of Jalgaon has been divided into three clusters based on the production estimates of banana, existing market linkages and operational and logistics aspects of the proposed facilities. In these three clusters, four spokes have been identified at Vivra, Chinnawal, Dhanora and Kajgaon. Details of each spokes along with respective aggregation points are provided below:

12.1 FOCUS CROPS AND ESTIMATED THROUGHPUT BY CLUSTER:

12.1.1 Cluster I Raver taluka is the most prominent banana cluster and accounts for about 52 percent of district’s and 36 percent of State’s total production of Banana. Total area under Banana in the cluster is estimated at about 29000 Ha with a total production of 1.76 mn tonnes. On the basis of production base and area spread, two spokes are proposed be set up in the cluster at Vivra and Chinnawal. The details of each spoke and respective aggregation points are as follows.

Spoke I: Chinnawal Chinnawal is located in Raver taluka of Jalgaon district. It is well connected to other villages and is located close to Ankleshwar-Burhanpur state highway. It is proposed to set up eight mobile collection centres which shall cater to proposed pack house at Chinnawal. These aggregation points are spread in a radius of 25 km from Chinnawal.

85 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Spoke II: Vivra Vivra is located in Raver taluka of Jalgaon district. It is well connected to other villages and is located close to Ankleshwar-Burhanpur state highway. It is proposed to set up seven mobile collection centres which shall cater to proposed pack house at Chinnawal. These aggregation points are spread in a radius of 30-35 km from Vivra. The estimated annual throughput of the pack house in MT is as follows:

Targetable Volume Spokes Aggregation Points Crop for Spoke (MT) Cluster Tandalwadi, Palwadi, Nimbora, Dashnur, Chinnawal Banana 10000 I Waghoda, Chinnawal, Kheroda, Rajoda Cluster Nimbol, Einpur, Vitwa, Khirdi, Atware, Rasalpur, Vivra Banana 10000 I Vivra,

12.1.2 Cluster II The cluster comprises of Chopda and Yawal taluka and accounts for about 23 percent of district’s total production and about 16 percent of State’s total production of Banana. This is the second largest cluster followed by Raver in terms of production. The total area under Banana in the cluster is estimated at about 13000 Ha with a total production of 780 thousand tones. The cluster is located along Burhanpur-Ankleshwar highway which further connects to National Highway-3 at Shirpur which is about 50 km from Chopda. The details of spoke and respective aggregation points are as follows.

Spoke: Dhanora Dhanora is located in Yawal taluka of Jalgaon district. It is located along Ankleshwar- Burhanpur state highway and is well connected to other villages in taluka. It is proposed to set up seven mobile collection centres in Yawal taluka and eight mobile collection centres in Chopda which shall cater to proposed pack house at Dhanora. These aggregation points are spread in a radius of 30-35 km from Dhanora. The estimated annual throughput of the pack house in MT is as follows:

Targetable Volume Spokes Aggregation Points Crop for Spoke (MT) Taluka Chopda: Dhanora, Gorgaon, Varoda, Cluster Vitner, Moida, Katora, Sambola Dhanora Banana 10000 II Taluka Yawal: Nhavi, Marul, Amoda, Bamnor, Atrawal, Yawal, Kingaon, Sakri

12.1.3 Cluster III The cluster comprises of Pachora and Bhadgaon taluka and accounts for about 7 percent of district’s total production and about 5 percent of State’s total production of Banana. This is the third largest cluster in Jalgaon in terms of production. The total area under Banana in the cluster is estimated at about 4000 Ha with a total production of 0.24 mn tonnes. The cluster is located at about 30 km from national highway-6 (Mumbai-Nagpur) and 75 km from national highway-3 (Mumbai-Agra) which provides connectivity to potential consumption markets.

86 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Spoke: Kajgaon Kajgaon is located in Bhadgaon taluka of Jalgaon district. It is well connected to other villages and is located close to national highway-6 (Mumbai-Nagpur) and national highway-3 (Mumbai-Agra) which provides connectivity to potential major markets. It is proposed to set up seven mobile collection centres in Bhadgaon taluka and eight mobile collection centres in Pachora taluka which shall cater to proposed pack house at Bhadgaon. These aggregation points are spread in a radius of 50 km from Bhadgaon. The details of spoke and respective aggregation points are outlined below. The estimated annual throughput of the pack house in MT is as follows:

Targetable Volume Spokes Aggregation Points Crop for Spoke(MT) Taluka Bhadgaon: Bhadgaon, Pandhard, Nimbora, Cluster Bodhardi, Korgaon, Gondgaon, Tandulwadi Kajgaon Banana 8000 III Taluka Pachora: Khajola, Pimpri, Vadgaon, Mulane, Nagardevla, Tarkheda, Kinni, Lohtar Seasonality of production of Banana in all three clusters is as follows:

Spokes Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Vivra Chinnawal Dhanora Kajgaon Lean Peak The seasonality of production confirms round-the-year availability of produce which would ensure maximum capacity utilization of proposed facilities at the pack house.

12.2 PROPOSED FACILITIES It is proposed to set up a banana pack house at each spoke. Facilities have been designed on the basis of requirement of the crop, to induce better and efficient handling practices and faster evacuation of fresh produce to the consumption markets so as to ensure better quality to the consumer. While deciding on the capacities, existing facilities, their capacities and utilization has also been taken into account. Details of proposed facilities are as follows:

12.2.1 Pack House A pack house with a capacity of 50 MT per day is proposed at each of the spokes. Various components of proposed facilities in the pack house are outlined below.

3 5

5 3 5

1 2 3 4 5 6 7 8 5 3 5

3 5

87 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 1. Receiving De-handing Area 2. Preliminary Wash Tank 3. Secondary Flotation Tank 4. Air Brush, Weighing 5. Retail Packing, Stickers 6. Box inspection 7. Palletisation Area 8. Dispatch – direct or mobile pre- cooler It is expected that such a facility would employ 165 workers over two shifts. The process flow of material handling at the pack house is outlined below. ƒ Banana incoming in bunches or as pre-cut clusters from farms/aggregation points. ƒ Bunches are cut into hands and crown flower removed. ƒ Treatment of hands in preliminary wash tank to eliminates field dirt, latex overruns and pesticide residue. ƒ Secondary wash tank; fungicide wash is affected- Before treatment in secondary tanks, each bunch is cut into packing clusters and inspected. ƒ At end of secondary wash, bananas shall be placed into trays onto roller conveyors.- Each tray is weighed and holds a packing unit load. ƒ As it moves down the conveyor, material shall be air dried, and stumps can be sealed with paraffin wax. ƒ Thereafter the box packing takes place and palletisation and subsequent staging is done. ƒ A separate box making room is provided – where boxes are formed from collapsed cardboard. Diagrammatic representation of process flow is depicted in the picture below. As banana pack house utilizes water as transport mode (design pack house uses 50,000 ltrs daily), appropriate water treatment and recharge systems are incorporated. The recycled/treated water can be used for sanitary purposes or stored for field irrigation uses. To introduce cable conveyor system, the receiving area would incorporate a rotating cable array. Here the hands would be unloaded and suspended from the cable, leading to the de-handing workers. The stake is returned on cable for subsequent disposal. Organic waste can be returned to banana fields to be converted to humus. A separate passage bypassing the wash tanks is provided, for pre-selected produce that directly leads to weighing and packaging area.

Technology Description / Facilities

Packaging • Post‐harvest handling facility for quality check and wash. • Sorting and grading – On the basis of finger length, shape, color, etc. • Retail package (branded) or unitized transport units are formed. Ripening • Received in small unitized retail packs from pack house.

88 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

• Ripening temperature is 15 ºC ‐20 ºC with 90‐95% RH). • Ethylene is generated in the room to give uniform ripening. Storage • Banana storage is at a temperature of 13 ºC ‐ 14 ºC for a maximum of 3 weeks in ethylene free air. • CA storage is practiced for added shelf life up to 6 weeks at 14 ºC. Transport • For domestic purpose, transportation through both modes – 80% by rail wagons and rest 20% is through road in normal trucks (8‐9MT). • For export, Reefer containers are used for sea transportation.

Pack House Logistics The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4-5 MT), vans, etc. Expected peak arrival of vehicles is about 10 to 12. Typically banana would be pre-cooled only for exports and that too in transit containers. Where bananas are for domestic consumption, they would move to destination ripening centres. Where bananas are meant for local consumption, they would move directly to ripening chambers at spokes.

Aggregation Mechanism The pack house will establish direct relationship with farmers in the catchment area and shall facilitate extension and training support to them for best farming practices, post harvest handling practices, efficient use of inputs and technology transfer etc. The pack house will develop aggregation mechanism and send mobile collection vans to the aggregation points. In addition, farmers in the catchment area of spoke will be encouraged to come together to form producer companies and set up and manage aggregation points wherever possible. Pack house may also invest in developing infrastructure at aggregation points such as platforms, sheds etc

12.2.2 Banana Ripening Facility A banana ripening facility is proposed. Capacity of the ripening chamber will be 10 MT per day. The ripening chamber can also be used for other fruits such as mango, if required. Ripening would be done using ethylene as the catalyst (see Annexure for further technical details). Ethylene generators would be utilized for appropriate dosing of the catalyst. Where ripening facility is located adjoining the pack house, conveyor rollers are optioned to carry the crates directly to ripening area. The Banana ripening facility could adjoin a separate receiving and de-handing shed to allow for locally sourced direct farm produce to be input for local ripening requirements. A waste disposal area to cater to ripening room is specially designated. Material handling pallet mover is provided for the daily operations. The receiving shed is covered to protect from direct sunlight and weather. Though only one chamber will output daily, sufficient space is provided to cater for dispatch staging as well as incoming marshalling of the produce. The ripening facility is envisaged to output into smaller vehicles for tertiary dispatch and a separate designated parking lot for the same is designed.

89 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 12.2.3 Other Facilities

Business Centre A Business Centre is proposed in the spoke that would accommodate administrative unit as well as provide space for other offices. The centre will incorporate bank, post office and other office support services. A common testing lab can also be included in the business centre. Local district level government offices will also ensure utility and regular interaction at location. These could include local passport offices, tax centre, land records office, family planning centre, etc.

Apart from the above facilities, other amenities proposed in the spoke are: ƒ Parking Area ƒ Canteen ƒ Weigh Bridge ƒ Water Supply Facilities ƒ DG Rooms ƒ Solid Waste Management Area ƒ Other Amenities

90 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

13 FINANCIAL ANALYSIS

This chapter contains details of project cost, funding mechanism, projected revenue, assumptions underlying project cost and revenue projections and analysis of financial viability of the projects. The project cost details are based on detailed value chain analysis and market assessment as given in the previous chapters. The cost for external support infrastructure like roads and power and water supply, if required for the locations, have not been included in the cost estimates.

13.1 IVCS IN MAHARASHTRA The IVC projects in Maharashtra would create facilities like dry warehouses, cold packhouses (with pre-cooling and cold store facilities), ambient packhouses and ripening facilities to cater to the need of wholesalers, organized retailers and exporters. These facilities will be leased out to various users on rental basis. While most of these facilities would be leased out on monthly rental basis, for some other facilities it may be done on job work basis. The lands for the facilities have not been identified and the areas assumed for the hub and spokes are indicative and conceptual. The details related to two selected IVCs in Maharashtra are given below:

13.2 NASHIK IVC

13.2.1 Project Details The facilities/infrastructure proposed in the hub and spokes for the IVC and its handling capacities as well as area (in sq meters) are summarized below:

Nasik Road Pimpal Male‐ Sang‐ Sriram‐ Facilities (Hub) gaon gaon amner pur Chinaval Vivra Kajgaon Danora 2000 Warehous 5000 MT ‐ MT ‐ ‐ ‐ ‐ ‐ ‐ e (2300) ( 920) 5000 MT ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Cold Store (2700) Grape 60 60 60 Packhouse MT/day MT/day MT/day ‐ ‐ ‐ ‐ ‐ ‐ ‐Cold (2400) (2400) (2400) Chain 50 50 50 50 Banana MT/D MT/Day ‐ ‐ ‐ ‐ ‐ MT/Day MT/Day Packhouse ay (1350) (1350) (1350) (1350) 10 10 10 10 10 Ripening MT/Day MT/Day MT/ MT/Day MT/Day ‐ ‐ ‐ ‐ Chamber Day (527) (527) (527) (527) (527) Vegetable 50 50 50 50 Packshed‐ MT/day MT/day ‐ MT/day MT/day ‐ ‐ ‐ ‐ Ambient (500) (500) (500) (500)

91 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Onion 500 MT 500 MT 500 MT 500 MT ‐ ‐ ‐ ‐ ‐ Store (540) (540) (540) (540) To support the operations of above facilities, the spokes will also have adequate basic infrastructure and other support infrastructure like power and water supply systems, ETP, solid waste disposal facility, administration block/business centre, canteen, parking space, etc. A list of these basic and support infrastructure facilities (hub and spoke wise) is given below: Nasik Pimpal‐ Male‐ Sangam‐ Sriram‐ Viv‐ Kajg‐ Dan‐ Facilities Road Chinaval gaon gaon ner pur ra aon ora (Hub) Knowledg 400 sqm ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ e centre Business 300 300 300 centre 300 sqm 300 sqm 300 sqm 300 sqm 300 sqm 300 sqm sqm sqm sqm Guest ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ house 300 sqm Power 1500 230 230 230 450 KVA 450 KVA 90 KVA 90 KVA 230 KVA Supply KVA KVA KVA KVA 6440 12700 13000 64400 64400 64400 Water 35250 13300 LPD 13000 LPD 0 LPD LPD LPD LPD LPD Supply LPD LPD 100 sq. 100 sq. m 100 sq. m 100 sq. 100 100 sq. 100 sq. 300 sq. 100 sq. m m m sq. m m Canteen m m 2025 sq. 1215 sq. m 1215 sq. 1620 sq. m 1620 sq. 810 sq. 810 810 sq. 810 sq. m m m m sq. m m Parking m

13.2.2 Project Cost The cost estimates of plant and machinery are based on the information obtained from equipment suppliers including quotations given by them for similar facilities. The civil work and basic infrastructure costs have been worked out by architects/engineers based on layout plans and as per the industry standards. Finally, the costs of land and land development have been assessed mainly based on interactions with industry/stakeholders in the identified locations. The component wise costs of the project are given below:

Amount Amount Items Sr. No. Description Rs Million Million $ A 1 Land 0.00 0.00 2 Land Development 52.25 1.11 3 Buildings 248.85 5.28 4 Plant Machinery & Equipments 283.78 6.02 5 Utilities & other fixed assets 42.30 0.90 Sub Total (A) 627.18 13.31 B Preliminary and Pre‐Operative Expenses 31.36 0.67 C Contingencies 53.48 1.14 D Margin Money for Working Capital 3.34 0.07 Total Project Cost (A+B+C+D) 715.35 15.18

92 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Land Keeping in view the maximum built up area of about 60% and open area of about 40%, the total land requirement for the project is estimated to be about 17.15 Ha. The breakup of land requirement for the hub and spokes is given below.

Location Area (Ha) Nasik Road (Hub) 10.00 Pimpalgaon 1.70 Malegaon 1.70 Sangamner 1.25 Srirampur 1.25 Chinaval 1.25 Vivra 1.25 Kajgaon 1.25 Danora 1.25 Total IVC 17.15 As per the suggested O&M framework for the project the land will be contributed by the state government and hence the cost of land has not been included in the project cost.

Land Development Cost of land development includes boundary wall, road, water drainage, parking etc. The cost of development is taken as Rs 2.5 mn/Ha.

Buildings The estimated costs of construction for various buildings in the projects are given below: Amount in Rs millions Nasik Pimpalg Malega Sanga Sriramp Danor Facility Road aon on mner ur Chinaval Vivra Kajgaon a IVC Warehouse 29.90 ‐ 5.98 ‐ ‐ ‐ ‐ ‐ ‐ 35.88 Cold Store‐ 21.60 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 21.60 5000 MT Grape Packhouse‐ 19.20 19.20 19.20 ‐ ‐ ‐ ‐ ‐ ‐ 57.60 Cold Chain Banana ‐ ‐ ‐ ‐ ‐ 8.10 8.10 8.10 8.10 32.40 Packhouse Ripening 2.76 ‐ ‐ ‐ ‐ 2.76 2.76 2.76 2.76 13.80 Chamber Packshed‐ 3.00 3.00 ‐ 3.00 3.00 ‐ ‐ ‐ ‐ 12.00 Ambient Onion 14.04 3.51 ‐ 3.51 3.51 ‐ ‐ ‐ ‐ 24.57 Store Knowledge 3.60 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 3.60 centre Business 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70 24.30 centre Guest 2.70 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 2.70 house Miscs 4.40 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 20.40 Total 248.8 30.41 29.88 11.21 11.21 15.56 15.56 15.56 15.56 Buildings 103.90 5

93 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The building construction rate for grape packhouse (cold chain) has been estimated to be Rs. 8000/sq. m whereas rate for ambient packsheds for vegetables has been estimated to be Rs. 6000/sq. m. The construction rate for banana packhouse and dry warehouse have been assumed at Rs. 6000/sq. m and Rs. 6500/sq. m respectively. The lumpsum cost of pre- fabricated banana ripening chamber of 40 MT capacity (which is equivalent to 10 MT/day ripening capacity) having an area of 280 sq.m has been taken as Rs. 2.76 million. The rates are in tune to the industry standards and have been verified against quotations received from different industry players. In case of non technical infrastructure, the construction rate has been estimated between Rs. 8000 to Rs. 9000 per sq. m for facilities such as administrative building/business centre, canteen etc.

Equipments The break-up of the estimated costs of major machineries is provided below: Table: Machinery Cost Amount in Rs millions Nasik Pimpal Maleg Sanga Srira China Kajg Dan Facility Road gaon aon mner mpur val Vivra aon ora IVC Ripening ‐ equipments 4.20 ‐ ‐ ‐ 4.20 4.20 4.20 4.20 21.00 Banana

Packhouse ‐ ‐ ‐ ‐ ‐ 3.00 3.00 3.00 3.00 12.00 equipments Refrigeration equipments‐Cold 60.00 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 60.00 Store Refrigeration equipments‐ 5.00 2.50 2.50 ‐ ‐ ‐ ‐ ‐ ‐ 10.00 Packhouse Grape

Packhouse‐ 8.00 8.00 8.00 ‐ ‐ ‐ ‐ ‐ ‐ 24.00 equipments Weigh Bridge‐40 2.50 2.50 2.50 2.50 2.50 2.50 2.50 MT 2.50 2.50 22.50

DG sets 6.00 2.00 2.00 0.40 0.40 1.00 1.00 1.00 1.00 14.80

Crates 4.50 4.13 2.25 1.88 1.88 2.25 2.25 2.25 2.25 23.63

Pallets 0.90 0.90 1.35 ‐ ‐ 1.35 1.35 1.35 1.35 8.55

Refer trucks‐7 mt 18.00 18.00 ‐ ‐ ‐ ‐ ‐ ‐ 18.00 54.00 Normal Pickup 1.50 1.50 0.90 0.90 0.90 1.20 1.20 1.20 1.20 vehicles 10.50 Normal trucks‐15 3.60 2.40 2.40 2.40 2.40 2.40 2.40 MT 2.40 2.40 22.80 Total Plant

Machinery & 17.9 17.9 283.7 114.20 41.93 39.90 8.08 8.08 17.90 17.90 Equipments 0 0 8 The cost wise major components of the project are cold store equipments (Rs. 60 million) and refrigerated trucks (Rs. 54 million). The rates for plant, machinery and equipments are comparable to the industry standards and have been verified with the quotations from different suppliers.

94 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Miscellaneous Fixed Assets / Utilities The breakup of the estimated cost of the miscellaneous fixed assets and utilities is provided below: Amounts in Rs millions Nasik Pimpa Male Sanga Srira Chin Vivr Kajg Dan IVC IVC Facility Road lgaon gaon mner mpur aval a aon ora Mn. Rs Mn. $ Power supply system 25.00 2.00 2.00 0.50 0.50 1.20 1.20 1.20 1.20 34.80 0.74 Water supply system 2.00 0.50 0.50 0.20 0.20 0.50 0.50 0.50 0.50 5.40 0.11 IT system 0.30 0.20 0.20 0.05 0.05 0.20 0.20 0.20 0.20 1.60 0.03 Furniture 0.10 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.50 0.01 Total Misc Fixed Assets 27.40 2.75 2.75 0.80 .80 1.95 1.95 1.95 1.95 42.30 0.90

The power load for the total project has been estimated to be 3500 KVA. DG sets have been taken for each spoke and the capacities vary from 80 KVA to 1200 KVA depending on the requirement. The project would require 0.34 million LPD of water for the operations. The cost of water supply has been distributed among the locations in proportion to their water requirements.

13.2.3 Preliminary & Pre‐operative Expenses The provision towards preliminary & pre-operative expenses includes expenditure towards preliminary expenses like salaries & administrative expenses, travel expenses, market development expenses, interest during construction period etc. It is also assumed that the project will be commissioned over a period of one year. The interest during construction period is capitalized in the project cost. Pre-operative expenses other than interest during construction period are assumed to be 5% of cost of fixed assets.

Working Capital Requirement As the project is meant to create facilities and offer them to various users on rental basis, the WC requirement is assumed to be operating costs like management, maintenance, insurance, power and water. As most of these expenses and the rent receipts are monthly in nature, so to cover these expenses the requirement of working capital is calculated by considering the fund requirement for 30 days.

Contingencies The contingencies related to project implementation are calculated as below:

Physical Price Contingencies Contingencies Contingencies Contingencies Contingencies (Rs Mn) (Mn $) Land 0.0% 0.0% 0.00 0.000 Land Development 5.0% 8.3% 4.55 0.097 Buildings 5.0% 8.3% 21.69 0.460 Plant Machinery & Equipments 0.0% 8.3% 23.55 0.500

95 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Utilities & Other Assets 5.0% 8.3% 3.69 0.078 Total 53.48 1.135 The price contingencies are based on the whole sale price index for FY 2009

13.2.4 Means of Finance The cost of the project is proposed to be financed through a mix of equity and project grant from State government including ADB funds. As mentioned in the implementation framework the promoter’s equity has been taken at 30% of the project cost and the remaining funds required will be contributed by state government as project grant. The table below shows the funding pattern for the project:

Particulars Amount (Mn Rs) Amount (Mn $) Share Asian Development Bank 350.52 7.44 49.00% State Government 150.22 3.19 21.00% Equity‐Private Investor 214.61 4.55 30.00% Total 715 15.18 100.00%

13.2.5 Key Operating Assumptions The key operating assumptions underlying the project’s business plan are described below.

Operating Cost Assumptions: 300 working days per annum are assumed for operations. Power & Fuel Costs The total connected load of the facilities for all locations is estimated at 3500 KVA. The power tariff has been assumed at the prevailing rate of Rs 1.30 per unit for agro based industry in Maharashtra. Average daily requirement of power would be about 12600 KWH. The details of power load assumptions for the facility are given below: Facilities Assumption

Cold Store 1 KVA/ 10 MT Warehouse 1 KVA/ 92 sqm Banana Packhouse 1 KVA/ 45 sqm Ripening Chamber 50 KVA/ 40 MT Grape Packhouse‐Cold Chain 225 KVA/ 60 MT Onion Store 1 KVA/ 100 sqm Packsheds‐Ambient 1 KVA/ 50 sqm Other buildings 1 KVA/ 30 sqm The table below shows the location wise power requirement:

Locations Power Load (KVA) Nasik Road (Hub) 1520 Pimpalgaon 450 Malegaon 450 Sangamner 90 Srirampur 90

96 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Chinaval 230 Vivra 230 Kajgaon 230 Dhanora 230 Total 3500 Taking into account the current power supply scenario in the state it has been assumed that the facilities would run on DG sets for about 2 hrs/day. The average fuel cost for DG set is assumed to be Rs. 35/Lt. Water Cost Daily requirement of water is estimated to be 340 KL/day for all the locations combined. The charges are assumed to be Rs 40/KL. Employee Cost The employee cost has been estimated by considering the man power requirement for managing the facility. The project will be managed by the developer/SPV, who will maintain and operate the facilities in the project. This includes management and 24 hour maintenance of the plant and machineries, management of the canteen, business centre, security, etc. So, a team of technical engineers, support staffs and security personals will be required. The details of manpower and their average costs are given in the following table:

Grade/ Employee Number Salary/ month (Rs.) Total (Rs) Managers 9 20000 180000 Technical Manager 9 20000 180000 Operators 26 10000 260000 Maintenance 26 6000 156000 Account 16 8000 128000 Security 25 4000 100000 Support Staff 32 3000 96000 Total Employee Cost (Per Month) 143 1100000 *Increment in salary is assumed at 5% p.a for 1st five years of operations. Cost of Maintenance The cost of maintenance has been assumed as 1.0% of value of plant & machinery and miscellaneous fixed assets. The maintenance cost will increase by 2.5% every year due to aging of assets. Cost of Insurance The cost of insurance has been assumed as 1.0% of value of plant & machinery and miscellaneous fixed assets. Admin & Marketing Overheads The developer will be responsible for only the management and maintenance of the facilities without any own operations. However, initial tie ups are needed for better capacity utilization of the facilities. Most of the promotional/marketing expenses will be incurred up front with only small recurring expenses afterwards. Hence during operations, marketing and business development expenses will not be significant for the project. The major overheads for the project will be traveling costs, statutory (like audit etc.) costs and communication expenses etc. So, the admin & selling overhead costs have been assumed @ 2.0% of revenue in line with the industry norms for such facilities.

97 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Financial Assumptions Taxes Income Tax rate is assumed to be 33.99% flat (Prevailing Corporate Tax Rate). Income tax is calculated on PBT after adjusting for the difference between the depreciations calculated according to Companies Act, 1956 and Income Tax Act, 1961. Depreciation Rates Depreciation has been calculated by straight-line method, as per the Companies Act, 1956, for book purpose, whereas for tax purpose (As per Rule-5 of Income Tax Act, 1961), written down value method is employed. The rates of depreciation are in tune to the rates that are used in cold storage and warehousing industry. The depreciation rates used for different assets are given below:

Depreciation Rates Book Depr Tax Depr Plant & Machinery 10.34% 15.00% Miscellaneous Fixed Assets 10.34% 15.00% Buildings 3.34% 5.00% The plant & machinery includes refrigeration and cooling systems used for operation of facility, sorting-grading equipments, crates, pallets etc. The noncore equipments like water supply system, transformers etc are included in miscellaneous fixed assets. Buildings include, building for ripening facility, ambient and cold pack-houses, dry warehouse storages, business center, canteen etc.

Revenue Assumptions Rental assumptions Based on the discussion with market players (service providers, food processors, users, traders and wholesalers) the rental charged for various facilities is tabulated below:

Facilities Charges/ Unit Unit of Charge Ambient Packshed‐ Vegetables 60 Rs/sqm/month Banana Packhouse 1000 Rs/sqm/month Banana Ripening Facility 1400 Rs/MT Grape Packhouse‐Cold Chain:‐ Sorting/Grading/Packaging charges 4500 Rs/MT Warehouse 100 Rs/sqm/month Business Centre 100 Rs/sqm/month Crates 7 Rs/cycle/crate Weighbridge 2 Rs/MT Logistics 10 Rs/Km Onion Store 250 Rs/MT/season Cold Store 250 Rs/MT/month The rentals charged for these facilities are comparable to the prevailing market rates.

Capacity Utilization The estimated capacity utilizations are shown in the table below.

Year Capacity utilization

98 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Year I 40% Year II 60% Year III and onwards 80% The capacity utilizations have been assumed conservatively, starting at 40% in the first year.

13.2.6 Financial Performance The estimated financial projections for the project are tabulated:

Income Statement:

(Rs Million)

Year 1 2 3 8 12 16 20 Capacity Utilization 40% 60% 80% 80% 80% 80% 80% Revenue Rental‐Ambient Pack shed 0.24 0.36 0.48 0.48 0.48 0.48 0.48 Rental‐Banana Pack houses 18.00 27.00 36.00 36.00 36.00 36.00 36.00 Rental‐Ripening chambers 7.80 11.70 15.60 15.60 15.60 15.60 15.60 Rental‐Grape pack house‐cold chain 38.88 58.32 77.76 77.76 77.76 77.76 77.76 Rental cold store 5.50 8.25 11.00 11.00 11.00 11.00 11.00 Rental‐Warehouses 1.59 2.38 3.18 3.18 3.18 3.18 3.18 Rental‐Onion Store 0.35 0.53 0.70 0.70 0.70 0.70 0.70 Rental‐Crates 13.23 19.85 26.46 26.46 26.46 26.46 26.46 Rental‐ Logistics 36.45 54.68 72.90 72.90 72.90 72.90 72.90 Rentals Business centre, canteen etc 3.26 4.90 6.53 6.53 6.53 6.53 6.53 Weighbridge 0.14 0.21 0.28 0.28 0.28 0.28 0.28 Revenue 125.45 188.17 250.89 250.89 250.89 250.89 250.89

Expenses Power & Fuel 4.16 6.24 8.32 8.32 8.32 8.32 8.32 Employee Cost 13.20 13.86 14.55 16.85 16.85 16.85 16.85 Water cost 1.66 2.48 3.31 3.31 3.31 3.31 3.31 Maintenance cost 6.27 6.43 6.59 7.46 8.23 9.08 10.03 Insurance 5.55 4.72 4.01 1.78 0.93 0.48 0.25 Admin & Selling Overheads 2.51 3.76 5.02 5.02 5.02 5.02 5.02 Total Expenses 33.34 37.49 41.80 42.73 42.65 43.06 43.77

EBITDA 92.10 150.68 209.09 208.16 208.24 207.83 207.12 Interest Long Term Debt (LTD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Interest Working Capital borrowing 1.35 1.92 2.49 2.50 2.50 2.50 2.51 Depreciation 47.71 47.71 47.71 47.71 9.44 9.44 9.44 PBT 43.04 101.05 158.89 157.95 196.31 195.89 195.17 Tax 0.00 22.28 46.18 59.24 64.36 66.88 68.03 Net Profit (PAT) 43.04 78.77 112.71 98.71 131.94 129.01 127.14

Cash flow to government 25.09 37.63 50.18 50.18 50.18 50.18 50.18 Net profit to Private Developer 17.95 41.13 62.53 48.54 81.76 78.83 76.97 In the above table, it is seen that in the first year of operations with 40% capacity utilization, the revenue from the project is Rs. 125.45 millions which increases to Rs. 250.89 millions at capacity utilization of 80% from 3rd year onwards.

Major Financial Performance Indicators:

Year 1 2 3 4 5 6 7 EBITDA Margin 73.42% 80.08% 83.34% 83.22% 83.06% 82.84% 82.92% 99 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

PAT margin 34.31% 41.86% 44.92% 43.41% 42.07% 40.89% 40.06% Debt‐Equity Ratio 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Debt to EBITDA ratio 0.11 0.09 0.09 0.09 0.09 0.09 0.09 Interest Coverage Ratio 68.16 78.47 83.95 83.75 83.46 83.09 83.23 DSCR 68.16 78.47 83.95 83.75 83.46 83.09 83.23 Average DSCR 81.57 Project IRR 20.29% The above table shows the operational and financial efficiencies of the project. The project is able to achieve an operating margin (EBITDA Margin) of about 70% from the first year of operations itself. From fourth year onwards, the project is able to convert about 40% of its revenue into net profit. The project IRR is coming around 20.00%, which seems attractive from investor point of view.

100 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

14 ECONOMIC ANALYSIS

The need for economic analysis of any project is to assess various intangible costs and benefits which are normally not captured in the financial analysis. Any decision on desirability or otherwise of a project would therefore require to take into consideration such costs and benefits and then arrive at a net impact of the project on the economy as a whole. This is more relevant for projects which have a bearing on large segments of the society such as farmers. The IVCs have been proposed mainly to plug the gaps and deficiencies along the agricultural value chains and the aim is to enlarge the size of the value chains in terms of greater revenue and ensuring a larger share to farmers. The major benefits therefore expected would be in terms of better price realization, wastage reduction and employment generation. The major costs considered are opportunity cost of factors of production viz. land, capital and labour. The above costs and benefits have not been captured in the financial analysis as major assumptions there include all facilities being developed by private developers for leasing out to actual users. Thus, financial analysis has taken revenue in form of rentals only which do not truly reflect above gains. Also, as land for all facilities is to be provided by state governments on BOT model, financial analysis does not include cost of land even as these land parcels may have large opportunity cost to the economy as a whole.

14.1 METHODOLOGY AND ASSUMPTIONS The economic analysis is aimed at calculating EIRR which has been done by identifying the benefits arising due to the proposed practices and infrastructure/facilities and are evaluated by comparing ‘With Project’ and ‘Without Project’ scenarios. The major benefits considered for calculation of EIRR are those which are easily quantifiable and are as follows:

Better Price realization due to quality improvement of the agricultural produces A major impact expected is significant improvement in produces through modern methods of handling, packaging, storage and transportation which would lead to better price realization.

Wastage Reduction The interventions in technological infrastructure such as packaging, storage, temperature controlled transportation and better post harvest management practices will help in increasing the shelf life of the perishable commodities. The improved shelf life will lead to low wastage level even during transportation and marketing to distant places in the country.

101 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Employment Generation Considering the high unemployment rate in India and the seasonal availability of work for agricultural labour the project will provide good opportunity to work throughout the year for the people of surrounding areas.

Large increase in revenue and tax realization The project envisages large investments in agribusiness infrastructure which are likely to generate sufficient revenues and lead to incremental tax realization by the government. Similarly, the major quantifiable costs considered for calculation of EIRR are given below. While opportunity cost of land has been treated as a capital cost for the purpose, opportunity cost of capital (project grant) and labour has been treated as recurring cost.

Opportunity cost of land The land for the IVCs is to be provided by state governments on BOT model. Thus, the cost of land has been taken as the rates prevalent for industrial land in the surrounding areas. The opportunity cost of land is broadly in line with Maharashtra Industrial Development Corporation (MIDC) land rates in the region. ƒ Opportunity cost of capital/ project grant The project provides for large amount of capital grant to private developers, which may range from 90% of project cost in Bihar to 70% of the project cost in Maharashtra. For the purpose of EIRR calculation, the opportunity cost of project grant amount has been considered which was not captured by the financial analysis. Opportunity cost of capital contributed as project grant is assumed at 10% per annum. The assumption is based on the fact that the money invested as grant can be invested elsewhere and a minimum return of 10% per annum has been assumed conservatively. ƒ Opportunity cost of labour The project assumes large employment generation for agricultural labourers and limited employment opportunities for management professionals. For the calculation of EIRR, the opportunity cost of agricultural labourers has been taken assuming that they had options to work on other projects such as National Rural Employment Guarantee Scheme (NREGS). The detailed calculation for above mentioned benefits and costs has been done at IVC level and is given below:

14.2 QUANTIFICATION OF BENEFITS

Quality improvement leads to premium price of commodities The incremental price realization has been calculated based on the price range available in the market for different grades (based on firmness, colour, size etc.) of the produce. The table below compares the ‘without-project’ and ‘with-project’ cases to estimate the incremental benefits due to improved quality of the produce.

Without Project With Project

102 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Estimated Additional Increm Total Price Realization (%) Price ental Quantity Incremental Price Weighted (Rs/MT) Benefit (MT) Benefit (Mn Min Max Crops (Rs/MT) Average (Rs/MT) Rs) Fruits 60000 10% 25% 13.0% 67800 7800 36900 287.82 Banana 16000 10% 15% 11.0% 17760 1760 75000 132.00 Vegetables 6000 5% 7% 5.4% 6324 324 70500 22.84 Grains/pulses 10000 5% 10% 6.0% 10600 600 36000 21.60 Onion 14000 10% 15% 11.0% 15540 1540 3500 5.39 Total 221900 469.65 The incremental benefit due to quality improvement is estimated to be Rs 469.65 million per annum at 100% capacity utilization.

Wastage Reduction The table below shows the assumptions made and calculations of the benefit due to reduction in wastage.

Without Project With Project Wastage Reduction Range (%) Selling Quantity Total Quantity Weighted Price Saved Incremental Min Max Crops Saved (MT) Average (Rs/MT) (MT) Benefit (Mn Rs) Fruits 0 10% 20% 12.0% 67800 4428 300.22 Banana 0 15% 20% 16.0% 17760 12000 213.12 Vegetables 0 10% 15% 11.0% 6324 7755 49.04 Grains 0 5% 8% 5.6% 10600 2016 21.37 Onion 0 10% 15% 11.0% 15540 385 5.98 Total 26584 589.73 The interventions in the IVC would help in reduction in wastage of about Rs 589.73 million per annum with annual saving of about 26500 MT of fruits, vegetables, grains, pulses etc. at 100% capacity utilization.

Employment Generation

Without Project With Project Annual Annual Annual Day/ Incremental No. of amount No. of Day/ amount (Rs Benefit (Rs Mn) Location workers Annum (Rs Mn) workers Annum Mn) Nasik Road 0 0 0.00 328 100 3.94 3.94 Pimpalgaon 0 0 0.00 104 100 1.25 1.25 Malegaon 0 0 0.00 190 100 2.28 2.28 Sangamner 0 0 0.00 104 300 3.74 3.74 Srirampur 0 0 0.00 104 300 3.74 3.74 Chinaval 0 0 0.00 186 300 6.70 6.70 Vivra 0 0 0.00 186 300 6.70 6.70 Kajgaon 0 0 0.00 186 300 6.70 6.70 Dhanora 0 0 0.00 186 300 6.70 6.70 Total 0 0.00 1574 41.74 41.74

103 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The estimated income from incremental employment will be about Rs 41.74 million.

Large increase in revenue and tax realization The income tax calculated for the project is also incremental in nature when compared to the without project scenario hence, considered as an economic benefit. The likely increase in revenue collection has been captured in the projected cost benefit statement for EIRR.

14.3 QUANTIFICATION OF COSTS

Economic Cost of Project

Items Sr. No Particulars Amount (Mn Rs) Amount (Mn $) A 1 Land 422.91 8.98 2 Land & Site Development 52.25 1.11 3 Buildings 248.85 5.28 4 Plant Machinery & Equipments 283.78 6.02 5 Utilities & other Assets 42.30 0.90 Sub Total (A) 1050.09 22.29 B Project Implementation Cost @10% of ADB Funds 35.05 0.74 C Pre‐op expenses 31.36 0.67 D Contingencies 53.48 1.14 E Capacity Building 48.31 1.03 Total Project Cost (A+B+C+D+E) 1218.29 25.86 Based on the assumptions mentioned in the methodology the estimated economic cost of the project would be Rs 1218.29 million of 25.86 million $. The exchange rate of 47.114998 Rs per Dollar is considered for calculation of cost of project in Dollar value.

Recurring Costs ƒ Opportunity cost of labour

Location No. of workers Days/Annum Annual amount (Rs Mn) Nasik Road 328 100 4.10 Pimpalgaon 104 100 1.30 Malegaon 190 100 2.38 Sangamner 104 100 1.30 Srirampur 104 100 1.30 Chinaval 186 100 2.33 Vivra 186 100 2.33 Kajgaon 186 100 2.33 Dhanora 186 100 2.33 Total 1574 19.68 As mentioned earlier the estimates are based on NREGS. According to the scheme the government will provide minimum 100 days of employment to rural families with daily wage of Rs 125 per worker. ƒ Opportunity cost of capital

104 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Opportunity cost of capital contributed as project grant is assumed at 10% per annum. The assumption is based on the fact that the money invested as grant can be invested elsewhere and a minimum return of 10% per annum has been assumed conservatively. ƒ Opportunity cost of other factors Opportunity cost of other factors such as power, water, fuel etc. is not incremental in nature as these factors are available already and will be used from existing sources.

14.4 COST‐BENEFIT STATEMENT

Year 0 1 2 3 4 8 12 16 20 Imp Peri Capacity Utilization od 40% 60% 80% 80% 80% 80% 80% 80% A. Economic Benefits Quality Improvement 187.86 281.79 375.72 375.72 375.72 375.72 375.72 375.72 Wastage Loss 235.89 353.84 471.79 471.79 471.79 471.79 471.79 471.79 Incremental Labour 16.69 25.04 33.39 33.39 33.39 33.39 33.39 33.39 Incremental Income Tax 0.00 22.28 46.18 49.69 59.24 64.36 66.88 68.03 Total Economic Benefits 440.45 682.95 927.08 930.58 940.13 945.26 947.78 948.93 B. Economic Costs Opportunity cost of labour 7.87 11.81 15.74 15.74 15.74 15.74 15.74 15.74 Opportunity cost of Capital 50.07 50.07 50.07 50.07 50.07 50.07 50.07 50.07 Total Economic Cost 57.94 61.88 65.81 65.81 65.81 65.81 65.81 65.81 Net Economic Benefits (AB) 382.50 621.07 861.26 864.77 874.32 879.45 881.97 883.11

14.5 CALCULATION OF ECONOMIC IRR (EIRR) AND NPV Economic IRR (EIRR)

Year Imp Period 1 2 3 4 8 12 16 20 Economic Investment 1218.29 Net Economic Benefits 0.00 382.50 621.07 861.26 864.77 874.32 879.45 881.97 883.11 Net Economic Cash Flow ‐1218.29 382.50 621.07 861.26 864.77 874.32 879.45 881.97 883.11 Economic IRR (EIRR) 53% The economic IRR for the Nasik IVC is estimated to be 53% which is also high. The high level of IRR is again also due to the maximum investment in productive assets and most of the facilities proposed will directly be used for value addition. But it is much lower than the Aurangabad IVC due to higher opportunity cost of land and higher investment in support infrastructure.

105 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 14.6 ECONOMIC APPRAISAL RESULTS

14.6.1 Major Economic Indicators: The major economic indicators considered to assess the economic viability of the project are given in the table below:

NPV (Rs Million) 4,243.45 NPV (Million $) 90.07 Benefit‐Cost Ratio 13.86 NPVI 3.48

NPV: The positive NPV for the project indicates the viability of the project. The NPV is calculated considering the economic life/ concession period of project as 20 years. The discounting rate for calculation of NPV is the Weighted Average Cost of Capital (WACC). The WACC is calculated by assuming the capital cost of 16% for the private investor and 10% for project grant. The calculation of WACC is shown in the below table:

Details Share Cost of Capital Project Grant 90.00% 10% Equity‐Private Investor 10.00% 16% WACC 10.60%

Benefit‐Cost Ratio (BCR): The average BCR over the project life is estimated to be 13.86. The ration indicates that for every one $ of expense it will generate about fourteen times of expense over the life of project. Hence, the project is highly economic viable.

Net Present Value per $ of Investment (NPVI): The NPVI of more than zero is always considered as a good indicator of the economic viability of the project. In this case, the estimated NPVI is 3.48 which is quite high

106 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

AURANGABAD‐AMRAVATI INTEGRATED VALUE CHAIN

Aurangabad‐Amravati region, Maharashtra

Focus Crops

ƒ Sweet Lime ƒ Kesar mango ƒ Orange ƒ Lemon ƒ Banana

DPR: Aurangabad‐Amravati Integrated Value Chain Project

ƒ Description of Hub and Spokes

107 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Aurangabad‐Amravati Region

IL&FS Clusters identified Aurangabad-Amravati region for Integrated Value Chains of high value/volume agricultural/horticulture produce based on combination of several factors such as agricultural production in terms of volume and variety, human and economic development, suitability for development of integrated value chains and commercial viability of infrastructure projects. This region covers Aurangabad, Amrawati, Buldhana, Jalna and Akola districts, in Maharashtra and are shown in the map below

Amravati- Aurangabad Region

The region is known in particular for sweet lime in Aurangabad and Jalna, Kesar mango in Paithan Aurangabad; lemon and banana in Buldhana, and orange in Amravati. The major orange producing districts in the state region are Amravati, Nagpur, Yavatmal and Akola, of which Amravati and Nagpur account for about 940 thousand hectares with production about 500 thousand metric tonnes. This cluster also produces about 87% of the total sweet lime grown in the state. Though the production of mango in the region is small compared to the mango-belt in North India, Kesar mango is fast cornering a niche segment of the market with its distinctive taste. Based on these considerations, and the assessed potential for development, the focus crops identified for the region are: The focus crops in this region are: ƒ Sweet Lime ƒ Kesar mango ƒ Orange ƒ Lemon ƒ Banana

108 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

15 FOCUS CROP: SWEET LIME

Maharashtra ranks second among Indian states in production of sweet lime, producing about 23% of the total production in the country. The state has 98,400 Ha of area under sweet lime cultivation with an annual production of 678,700 MT. The table below provides details of sweet lime grown in the study region.

District Area (Ha) Production (MT) The cluster produces about Aurangabad 21617 302641 87% of the total sweet lime Jalna 19158 268212 produced in the State. The Amravati 1925 19250 Akola 200 2000 major sweet lime producing Buldhana 257 2570 talukas (blocks) in the cluster Total 43157 594673 are Ghansawangi, Ambad and Source: Directorate of Horticulture, Government of Maharashtra (FY 2007-08) Jalna in Jalna district and Aurangabad, Paithan and Kannad in Aurangabad district. The production is spread over two seasons namely Ambia bahar and Mrug bahar. Ambia Bahar accounts for 55-60 % of the production. Arrivals for this season start in the month of August and end in the month of November. Mrug Bahar accounts for the balance 40-45 % of the production and it starts in the month of February and ends in the Month of May. In case of Aurangabad, Ambia Bahar accounts for almost 65-70 % of the production with harvesting period spread between August and end of October. Mrug Bahar accounts for the balance 30- 35% of the production with harvesting period spread between February and May with March and April being the peak season. Sweet limes in the region are propagated by budding. The method of shield budding is the most popular method for propagation. The square system is used for plantation of sweet lime. The distance between plants is generally kept at 18 ft with about 125 plants per acre. The trees start getting economic yield from 3rd year onwards and the economic life of the trees is 12-15 years depending on the maintenance. Intercropping with tur, maize and cotton is carried out generally up to the first 4-5 years.

Farmer 15.1 VALUE CHAIN ANALYSIS Channel 3 Channel 1 Channel 2

The diagram explains the major channels of Pre harvest Contractor trade of sweet lime in the region:

Based on the point of sale, the supply chain Commission agent can be classified into three types:

1. At Farm Gate – Channel 1: Accounts Trader for 80-85% 2. At APMC Mandis within Production Clusters – Channel 2: Accounts for 10- Commission Agent in Distant market Retailer in Local Market 20% of the produce 3. At distant market by some big farmers- Wholesaler

Channel 3: 1-2% CONSUMER Retailer in Distant Market 109 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The major players involved in the trade of sweet lime are farmer, Pre Harvest Contractor, local commission agent, trader, commission agent in distant market, wholesalers and retailer. The roles played by each player in the value chains are given below:

Farmer The average orchard size of sweet lime in the study region is about 1-2 Ha. One Ha of orchard accommodates about 310 plants (18 ft X 18 ft) which are maintained at a height of about 12-15 feet. The cost of establishment of sweet lime orchard is about Rs. 51,0001. The breakup of the cost is given below. Activity Cost per Ha (in Rs) Cost of sapling (310 sapling) 4960 Labour cost (levelling, digging, weeding, sapling plantation, manure spread, filling etc) 4000 Cost of irrigation (drip irrigation) 25220 Compost/fertilizers 3000 Pesticide 3000 Others 2000 Total in Rs 42180 The breakup of annual variable cost of cultivation of sweet lime is given below.

Activity Cost per Ha (Rs.) Irrigation 2500 Fertilizer + Labour 15000 Pesticide + Labour 20000 Labour (Trimming, deweeding, etc) 9000 Harvesting Labour 7500 Miscellaneous 2000 Total 56000 Each plant produces about 80 Kg of fruit and the average productivity of the region is 25 MT per Ha. Based on the existing market scenario, the price received by farmer was approximately Rs 8/Kg in the peak season which went to a high of Rs 30/ kg during lean season at farm level. In Channel 1, the produce is sold to pre harvest contractor (local agent) about 2-3 months before the harvesting. The farmer bears the cost of harvesting and loading indirectly as the pre harvest contractor deducts 10% from the value of produce during the final settlement with farmer. The reason given behind deduction is that the pre harvest contractor buys all the produce without sorting and grading the produce and he also pays for the harvesting. However, he also pays the pre agreed price to farmer irrespective of the market price of the produce. In channel 2; farmer bears the cost of harvesting, loading, un-loading at APMC, weighing, local transport to APMC market yard and commission to commission agent (6.25%).

1 Cost of land has not been taken into account for calculation of total cost of establishment of lemon orchard 110 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Pre Harvest Contractor (PHC) PHC provides assurance to farmer for buying of produce from the field itself by leveraging his linkages in the distant market. He also provides credit to farmer for cultivation. The interest cost of the credit is factored in the prices offered to the farmer and rate of interest varies between 16-20% based on borrower’s individual relation with the PHC. Price fixation between the farmer and the trader (channel-1) is by negotiation. The trader offers a price based on his information of price in the local and distant market. The difference in price in local market and the price offered to the farmer also depends on the distance of the market from the farm. Transportation cost in this case is borne by the PHC. Most of the farmers prefer to sell by this channels as there are no marketing costs, harvesting is the responsibility of the PHC and the risk is with the PHC. Almost 80-85 percent of the produce is marketed through PHC. Though a PHC is able to realize more profit through this system, it also involves a high degree of financial risk. The ownership of the produce lies with the farmers but the PHC is committed to pay a pre-fixed price to growers from whom he has sourced the produce.

Commission Agent (CA) CA facilitates the sale of farmer’s produce for which they charge a commission of 6-8% of the sale value from the farmers. A cess of 1.05% (1% market fee and 0.05% supervision fee) of value of the produce is collected from buyers by CA on behalf of the market committee. Payment is made to the growers typically on 8th day of the harvest. CAs are an important link in the value chain. They bear the financial risk as they pay to the farmer on spot after auction but receive money from wholesaler after some days depending on mutually agreed terms and conditions. They also provide financial support to farmers for cultivation of crops. Like PHC, commission agents also extend credit to growers and the interest costs are factored in the same manner as it is done by PHCs. Sometimes CAs may purchase on their own from the farmer and sell through commission agent in distant markets of Delhi, Hyderabad, Jaipur, Agra, Ludhiana etc. In this case the cost of marketing from local APMC yard to distant wholesale market is borne by CA.

Traders They are the major buyer in the APMC markets. They also bear the price risk as the produce purchased on day-1 takes about 3 days to reach destination markets and during this time price may vary both sides. Price discovery in the APMC market yards is by Open Call Auction method. The traders bear the cost of loading at local APMC yard (Rs 1100-1500/ Truck of 15 MT), market cess (1.05%), weighing charges of truck (Rs 25/ Truck), transportation cost to Delhi (Rs 27000-30000/ 15 MT truck), unloading at distant market in Delhi (Rs 1500/ Truck), Grading (Rs 1200/ Truck) and commission to CA (10%).

Wholesaler The Wholesaler is the major buyer in the distant market and has linkages with the local retailers and markets of surrounding states. He also plays the role of bulk-breaker and sells the produce in smaller units to retailers. Most of the sorting and grading takes place at this point itself.

111 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Retailer The retailer is the point of contact with the final consumer of the produce and bears the cost of local transportation and marketing of the produce. He also bears the risk of losses due to quality deterioration and marketing of the produce. These risks are factored appropriately in the retail prices to cover potential losses. After picking, the fruits are loaded in the trucks as loose by spreading paddy straw in the truck to keep the fruit safe from injuries. There is no farm level grading or packing of produce irrespective of the marketing channel used to market the produce. The fruits are generally loaded into an open truck or tempo/tractor trolley and sent to destination markets for sale. In cases of Channel 2, sweet lime brought from orchards in the APMC markets are heaped properly on the auction platform without causing any damages to the fruit. For this purpose the auction platforms are covered with paddy straw in the market yards and then the produce is auctioned for price discovery. The produce is sold by weight in all marketing channels. The grading and packaging mostly take place in consumption market only. The packaging weight depends on the market place for example the packaging weight per gunny bag is 40 Kg in Jaipur market where as it is 20 Kg/ Bag in Delhi. In all the markets grading is done manually. The grading is done based upon the size and weight of the fruit. Simultaneously, the fruits are sorted where the diseased and bruised fruits are discarded. Based on size, fruits are graded into 4 grades (no. of fruits per kg varying from 4 to 8 fruits). The traders in production clusters do not generally store the product. They operate in such a way that the product reaches the destination market within a maximum of 3 days of harvesting. Transportation is carried out in ambient temperature in open trucks. The fruit is generally not stored for off-season sales. A value chain, indicating the various activities in the value chain, actors performing the given activity and cost build-up at every step has been mapped in this section. This value chain (for 1 Kg of Sweet lime) has been mapped for the supply chain having following characteristics: 1. The marketing chain follows Channel 1, i.e, Farmer to PHC to wholesaler/Commission agent in distant market to retailer to Consumer. 2. The cost of production for the farmer is only the variable cost for maintenance of one acre orchard per year. It does not include the cost for the first five years of orchard where there are no returns. 3. The distant consumption market considered for this case is Azadpur APMC Mandi, in New Delhi 4. Cost of capital and opportunity cost for the all the intermediaries has not been considered in cost build up and for calculating the spread 5. The cost of retailing, which includes the cost of shop, wages, rent etc has not been considered 6. The prices considered are average prices for the month of September in production clusters in Jalna and Aurangabad and destination market at Delhi based on the data corroborated from traders. The same has been cross checked with the data from Agmark.net for the same period

112 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Retailer’s Margin

Transportation

Wholesaler’s Margin Rs 3.603.60 Rs 0.20 Transportation losses @2% Rs 2.10 Packing charges Rs 0.32 Sorting and grading Rs. 23.00 (Retailer’s Price) Rs 0.50 PHC’s Margin Rs 0.08 Rs. 19.00 We ight loss@ 5% (Wholesaler’s Price)

Commission charges Rs 3.50 @ 10% in Delhi Rs 0.80 Unloading Rs 0.80

Rs 1.60 Transportation to Delhi Rs. 16.00 Rs 0.10 (PHC’s Price) Harvesting, loading

Farmer’s Price Rs 2.00

Rs 0.80

Rs 8.00 In the above diagram, the farmer pays for the harvesting and loading labour. The PHC pays for the transportation to destination market, unloading cost in the market, commission and also bears the weight loss occurring during transit. The sorting and grading cost in the destination market is borne by the wholesaler. He also bears the loss in wastages and packing charges. The retailer buys the product from the wholesaler and pays for the transportation cost to the retail stores/points. The price build up can be summarized, as below:

Rs/MT Particular Farmer PHC Wholesaler Retailer Cost of Maintenance of orchard/ Purchase 2240 8000 16000 19000 Cost of Marketing incl. Commission Agent charges, wastages, etc. 800 4502 900 200 Sale Price 8000 16000 19000 22800 Spread 4960 3498 2100 3600 Some of the salient features of the price build up are mentioned below:

• There are four intermediaries between the farmer and the consumer in the sweet lime supply chain (including the commission agent). • The price build up from farmer to consumer is around 3 times. • The farmer earns a margin of Rs. 4960 per MT which is about 22% of the consumer rupee • PHC incurs a cost of around Rs. 4500 per MT in transportation, commission charges, weight loss, etc. The margin of PHC is about Rs. 3500 per MT which is about 15% of consumer rupee • Wholesaler incurs a cost of around Rs 900 per MT in various activities such as labour, packaging, wastages etc. The wholesaler earns a margin of Rs 2100 per MT that is around 9 paisa of a consumer rupee. • The commission paid by the farmer to the commission agent constitutes 7 paisa of a consumer rupee.

113 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT • The share of consumers rupee by various actors in the value chain emerges as shown (in % of consumer’s rupee) :

15.2 INFRASTRUCTURE ASSESSMENT

15.2.1 Post Harvest Infrastructure Sweet lime is treated as a bulk horticulture produce with limited sorting/grading and produce is handled manually throughout the supply chain. The produce is also dumped as loose by spreading paddy straw on the bed of transportation vehicle and sorting/grading in this case is carried out by the wholesaler in destination markets. Manual sorting, grading and packaging is done at the APMC markets under the sheds of the CA shops or at the destination market. Sweet lime is not stored in cold storages and the produce is sent to distant markets on the day of sale itself. There is no farmers’ cooperative or any other institution which is engaged in the marketing of sweet lime in the region. There are no sweet lime processing units in the region at present. After harvesting and packing, the produce is immediately transported to destination market mostly by trucks as the cluster does not have adequate rail connectivity. In very cases, rudimentary sorting, grading and packing at the farm level (in Auragabad district), is carried out by the PHC. The sorted/graded produce is packed mostly in gunny bags with specifications of grade marked on the outer side of bag.

Agri Tech Farm Case Study

Agri Tech India Ltd has set up a 250 acres farm at Issarwadi, Taluka: Paithan on Aurangabad-Paithan road. The company has been promoted by M/S Nath Paper Mills Ltd. The farm is an excellent example of corporate farming and showcases some of the best farm management practices. Total area in the farm has been divided in to various segments like horticulture planting area, floriculture plot, field crop planting area, cash crop planting area, seed multiplication plot, R&D plot and experimental plot. Under horticulture area, there are two large orchards of Mango and Grape has been set up in an area of 36 114 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT acres and 60 acres respectively. Entire area under horticulture crop and floriculture is under drip irrigation. Various experiments of pilot testing of certain crops are carried out under R&D area to assess the viability of commercial cultivation. The orchards are managed scientifically to ensure best yield and reduce the probability of any pest/disease occurrence. The buyers generally visit the farm during harvest period and negotiate with the farm owner for the prices. Most of the times, the owner is able to get a better realization as he is able to offer significant volumes of individual products like Mango and Grapes. Once the prices are finalized, the produce is harvested under the supervision of farm staffs.

15.3 GAPS IN THE VALUE CHAIN An assessment of the range of activities under the value chain was undertaken to understand the gaps and inefficiencies in the sweet lime value chain. A detailed structured survey was undertaken to map the existing supply chain and identification of gaps at each stage, with added focus on institutional, infrastructural and logistical barriers. After the detailed field survey, gaps identified were discussed with a range of key stakeholders to get their feedback on the analysis and understanding of issues. The following gaps are identified in the value chain: • No farm level sorting, grading, washing and other facilities in the region. There are also no de-greening facilities in the region. • There is no requirement from domestic markets for sorted, graded and packaged produce. The export market has not been catered as yet where higher prices may be obtained for these services. There is also a limited opportunity for export as the marketable surplus mostly caters to the domestic demand. • There is no sorting, grading and any type of primary processing taking place in APMC markets in the region. The packaging and grading takes place in consumption market only with only minimal sorting grading at the farm gate. Most of the produce is sold and marketed outside the APMC markets and the arrivals in APMC markets are not very high except for some places. Further, any arrivals in local APMC markets are mostly sold in the local markets by the local merchants. • No processing facility for the fruit exists in the cluster. • Many times, lack of market intelligence of farmers about prices and demand leads to lower price realization

15.4 POTENTIAL INTERVENTIONS

Two pack houses for orange in Aurangabad and Jalna districts are proposed. The proposed locations are Jalna and Paithan. The pack houses will have following facilities for orange:

• Sorting • Grading • Packaging in plastic crates The pack houses at Paithan will cater to mango as well. The details of the facilities have been captured in the subsequent chapter.

115 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

16 FOCUS CROP: KESAR MANGO

Maharashtra produces 5% of the total production of mangoes in the country. Total area under mango cultivation in Maharashtra has marginally increased from 0.44 million Ha in 2006-07 to 0.45 million Ha in 2007-08 and the production also increased from 0.64 million MT to 0.71 million MT during the same period. Productivity of mango in Maharashtra is around 1.6 MT/Ha which is much lower in comparison to the national average, which stands at 6.3MT/Ha. Ratnagiri, Sindhudurg, Raigarh and Aurangabad are the major mango producing districts of Maharashtra. Major varieties cultivated in the state are Alphonso, Kesar and Pairi. In Amravati region, Aurangabad is the major district under mango cultivation and it accounts for 15% of the total production of the state. Total production of mango in Aurangabad district is approximately 0.1 million MT and the productivity is around 6.2 MT/Ha, which is much higher in comparison to the state’s productivity. Paithan, Aurangabad, Sillod and Vaijapur are the major talukas under mango cultivation in Aurangabad district. Among these, Paithan and Aurangabad accounts for about 20 percent of total production in the district.

Area and production of Mango

Districts Area in Ha Production in MT Kesar is the most prevalent variety of Mango in Buldhana 1263 5051 Akola 74 442 major talukas of the district. As per the Amravati 478 1912 information provided by mango growers in the Jalna 450 19 region, area under Kesar mango has increased Aurangabad 17264 108257 in the past few years. Sugarcane has been replaced by mango due to decreasing water resources in the region. Contrary to other varieties of mango such as Dasheri, Langra etc. that follow alternate bearing cycle, Kesar mango bears fruit every year. Harvesting of Kesar Mango begins from mid of April and attains peak during mid of May. It is also being exported to Middle East, USA, UK and Japan etc.

16.1.1 Value chain analysis

Trade channel of mango The following illustration depicts the most commonly observed supply chain mechanism of mango in the region:

Commission Farmer PHC Wholesaler Retailer Agent

Farmer

Various channels of the mango supply chain are mentioned below: • Direct Sourcing at Farm: Pre-harvest contract is the most commonly used sales system of mangoes in the region. Around 80% of the produce from an orchard is sold under pre-harvest contract. The contractors evaluate the orchard during the initial stage of fruiting and payment is done to the farmer on per kg basis. Some of the

116 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT farmers also negotiate price of their orchard on lump sum basis. The quantity, quality and rates are negotiated on the basis of mutual agreement between the farmer and the contractor. Cost of activities such as harvesting, packing and transportation at the farm gate are borne by the contractor. • Purchase by Processing Units: Processing units like Jain Food Park and Uni-Fruity directly procure the raw material at the farm gate. Apart from this, they also procure through agents/suppliers. Processors are more price sensitive and quality is not a major concern for them. They mostly buy grade C & D material which otherwise cannot be sold in fresh retail market. It is estimated that around 15% of Mango produced in the cluster is procured through this system. • APMC Market yards: Farmers in the catchments of nearest APMC bring their produce which is sold under open auction mechanism. It is observed that at times, farmers do not bring the produce to nearest market yards and travel to a bigger market yard in expectation of a better price. Volume of trade through this mechanism is estimated to be about 5% of the total Mango trade. The role played by major stakeholders and the value added at each stage is briefly captured below:

Farmer: Mango saplings are planted by the farmers in pits and the planting distance of 15mx15m is maintained by them. Around 475 plants can be accommodated in a hectare. Farmers incur a cost of around Rs 126252 in the 1st year in establishment of mango orchard. The cost of establishment of orchard in a hectare is represented in table below:

Activity Cost in Rs/Ha The tree starts fruiting from 5th year onwards. pit digging 7125 fertilisers 5000 Yield of the tree increases as the plants grows organic manure 5000 older and reaches up to 15 MT/ha. pesticides 3000 growth hormones for root setting 500 • 5th year: 10 kg per plant interculture operations 25000 • 7th year: 12-15 kg per plant irrigation 3000 planting material 19000 • 10th year: 20-25 kg per plant drip irrigation system 55000 Total 122625 The above trend can be seen in those orchards that are well maintained. However, average yield of mango in the cluster is only about 5-6 MT per hectare. Some farmers who supply to the exporters have Global GAP certified farms. Only 10% of the total production is of export quality and the remaining is as follows:

Grade Average fruit weight (grams) % of total production A 250‐300 20* B 200‐250 30 C <200 50 * about 50% of grade A is of export quality

2 It does not include cost of land. 117 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Besides the initial investment, farmers incur a cost of around Rs 0.15 million to Rs 0.06 million annually on maintenance of mango orchard. It includes cost of pruning of dead and diseased branches, costs involved in plant protection and fertilizer application, irrigation etc. The operational cost per Ha is represented below:

Activity With use of growth hormone Without growth hormone Operational cost per hectare Cost in Rs. Cost in Rs. fertiliser 76000 25000 kaltar (Growth hormone) 38000 0 pesticides 15000 15000 micro‐nutrients 3900 3900 irrigation 3000 3000 labour 15000 15000 Total 150900 61900 As evident from above, cost of fertiliser application constitutes a major chunk of operational cost. As mentioned earlier, orchards are leased by the farmers to the contractors at the time of fruit setting. The price received by the farmer largely depends on the stage of the orchard at which the contract takes place. Pre-harvest contract at the advance stage fetches better price to the farmers as the yield estimates are more realistic at this stage leading to lower output risk. Around 20-50% of the estimated contract value is paid in advance to the farmer.

Pre‐harvest contractor: As mentioned earlier, Pre-harvest contractors visit the farmer’s orchards in February when the fruits are of very small size and they offer a purchase price to the farmer on the basis of their own estimate of quantity and quality of the expected fruit. Due to this, the weather risk remains with farmer only. The time of harvesting is decided by the contractor on the basis of maturity of fruit as well as price prevailing in the market. Harvesting season starts from May and lasts till mid June. Harvesting is done by labourers employed by the contractor. This is done with the help of secateurs in the morning or evening hours from 6:00 a.m. to 8:00 a.m. and after 5:00 p.m. respectively. Stalk of 1-1.5 inches is left attached to the fruit while harvesting. Entire produce is harvested in 3-4 harvestings on weekly interval. 1 person can harvest up to 100 kg of fruits in 4 hours. Fruits are collected in plastic crates, which are either single layer crates or 20 kg crates. In case of export, harvesting is done in the supervision of representative from contractor and plucking is done by trained persons. The fruit is plucked manually. Sorting and grading of fruits is done both in case of export as well as Harvesting at Orchard (Includes plucking, domestic markets. Fruits are packed only after sorting & grading) sorting and grading at the field level. A small packing shed is available on most of the farms where Packaging (in wooden and cardboard boxes fruits are collected on tarpaulin for grading and as per buyers’ specifications) packaging. Fruits are packed in CFB or wooden boxes depending upon buyer’s specification. The Transport to destination markets (mostly transit time for Delhi and Mumbai are estimated at via. road transport) 35-40 and 15-16 hrs respectively up to retail market distribution. The entire post harvest practice, carried Auction at destination market and out by the contractor, is shown in the diagram. procurement by wholesaler

118 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Commission agent: The commission agent facilitates trade between the contractor and the wholesaler and for which they charge 6-8% commission from the contractor.

Wholesaler: The wholesaler is responsible for distribution of produce to various retailers. Second level of sorting/grading has also been observed at the secondary/terminal markets. Accordingly, the produce is sold to retailers based on specific grades.

16.1.2 Price build up along the value chain of mango Value chain of 1 kg of mango indicating the various activities and cost build-up at every step has been mapped, as shown below. Consumer Price

Retailer’s margin

Losses Rs 40

Wholesaler’s margin Rs 6

Wholesaler’s expense Rs 4

Rs 3.5 Contractor’s margin

Rs 3.5 Commission

Wastage Rs 0.9 Rs 30 (Wholesaler’s Price) Harvesting, grading and packaging Rs 1.4

Farm gate price Rs 1.6 Rs 23 (Contractor’s Price)

Rs 1.8

Rs 17

Some of the assumptions of the price build up are: • It is assumed that mango is traded at Azadpur (Delhi) APMC and sold in retail markets of Delhi. • The most commonly observed trade channel has been taken for price build up i.e. Farmer-Contractor-CA-Wholesaler-Retailer. • The cost of retailing has not been taken into consideration. The average cost of mango cultivation comes to around Rs 6/kg. Generally, farmers incur a cost of Rs 60,000 per Ha on maintenance of orchard and the production is around 10 MT/Ha. The farmer realizes Rs 17/kg and his net margin is around Rs 11/kg. The contractor bears the cost of harvesting, grading and packaging of mangoes, which comes to around Rs 1.8/kg. They also pay commission to the commission agent of 6%. Thus the total cost incurred by the contractor is around Rs 5. This includes wastage of around 6-8%. The contractors earn a margin of around Rs 1/kg.

119 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The wholesaler bears the cost of transporting produce as well as loading and unloading charges. He pays a marketing cess of 1.05%. The total expenses at wholesale level is around 3.5/kg and the margin realized by him is Rs 3.5/kg. Around 10% produce is wasted at retail level and the retailers margin is around Rs 6/kg. The consumer price reaches to Rs 40/kg Some of the salient features of the value chain are: • There are 3 intermediaries between the farmer and the consumer. • The marketing of mango in major producing talukas of Aurangabad mostly happens through direct procurement at the farm gate. The local representative of the buyer in destination market acts on his behalf for price fixation and harvesting schedule. Pre Harvest Contractors take care of orchard till maturity and then dispatch the produce to destination market based on demand. • Grading is mainly based on the size and maturity of the fruits. While grading, smaller fruits are separated from the larger ones in order to achieve uniformity in specific grades. Immature, overripe, damaged and diseased fruits are graded separately and are sold to processing units. Transportation is mostly done by normal trucks in domestic markets. • In case of domestic markets, wooden or cardboard boxes are used for packaging and transportation of mango fruits. Size of the box varies to accommodate 5 to 10 kg. of fruit depending on the size. • Fruits harvested at right stage of maturity are stored for about 8-12 days. In case of export, storage life is further extended up to a maximum of three weeks under cold storage at 12◌˚ํ -14˚C. Normally, fruits are not stored beyond 3 weeks as it affects the taste and texture if stored for a period more than 3 weeks. • Post Harvest loss in Mango is estimated to be around 20%. The relatively low post harvest loss is also due to hardy nature of produce and high processability. Grade C & D are generally bought by the processors which would otherwise cannot be sold in fresh retail market. • The price realized by the farmer is around 27 paisa of a consumer rupee. • Wholesaler’s and retailer’s constitute around 9 paisa and 15 paisa of a consumer rupee. The price build up can be summarized, as below: Particulars Farmer Contractor Wholesaler Retailer Cost of maintenance/ Purchase price (Rs/Kg) 6 17 23 30 Cost of marketing, transport, wastage (Rs/Kg) 0 5 3.5 4 Selling price(Rs/Kg) 17 23 30 40 Price spread 11 1 3.5 6

120 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 16.2 INFRASTRUCTURE ANALYSIS

16.2.1 Marketing Infrastructure A pack house by Jai Kisan Cooperative Society was set up in Harsul near Aurangabad, which is closed now. A mango export facility centre has been built by the Maharashtra State Agriculture Marketing Board in Jalna, which is about 60 km from Aurangabad. The pack house was set up in 2005. Various facilities available at the pack house are as follows; • De-sapping tables: 5 nos. • Fork lifts: 2 nos. • Plastic crates: about 370 nos. • Wooden pallets: 120 nos. • Packing tables: 5 nos. • Pre-cooling: 5 MT • Cold storage: 2 nos. of 25 MT each • Ripening chamber: 5 MT Charges for various facilities are as mentioned below;

Activity Charges in Rs During off season, the storage facilities are given Grading & packing Rs. 1 per kg on rent for storage of dry fruits. Charges levied Pre‐cooling Rs. 0.6 per kg are Rs. 12000 per month for each store of 25 MT Storage for 24 hrs. Rs. 0.5 per kg capacities. Ripening chamber is also used as a cold store during off season and charges are Rs. Storage of packing material Rs. 1 per sq. ft. 5500 per month for 5 MT Culling / Sorting capacity.

The facility is being used by mango exporters such as K.B. Exports, Hot water wash MAHYCO, Jai universal etc. Quantity of mango handled by the pack house is mentioned below: Brushing / cleaning

Year Quantity Quantity Exported The table shows that the Processed (MT) (MT) Waxing 2007 61 32 quantity exported is 2008 63 46 lesser than total quantity Drying 2009 13 10 processed in the pack house. This shows the ratio of exportable produce to the total produce Grading procured of grade ‘A’. Remaining produce is sold in the domestic market. The process flow in the pack house is shown in the diagram: Packing Some of the exporters have established their own facilities in the neighbouring districts. For example, K.B. Exports, who was earlier Pre‐cooling using the MSAMB pack house has set up its own facility in Nevasa, Ahmednagar. This has resulted in decrease of capacity utilization of the Ripening MSAMB pack house.

121 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 16.3 GAPS IN THE VALUE CHAIN An assessment of the range of activities under the value chain was undertaken to understand the gaps and inefficiencies in the kesar mango value chain. A detailed structured survey was undertaken to map the existing supply chain and identification of gaps at each stage, with added focus on institutional, infrastructural and logistical barriers. After the detailed field survey, the gaps identified were discussed with a range of key stakeholders to get their feedback on the analysis and understanding of issues. Some of the gaps identified in the value chain are: • Most of the mangoes produced in the region are plucked, graded and packed manually at farm level. The quantity handled at the pack house is very less w.r.t to the total production of mangoes in the district. • Chemical use for ripening in Mango is very limited as fruits automatically get ripened if stored in ambient condition. However, to accelerate the ripening process, fruits are dipped in “Ethral” solution, which helps in fruit ripening in 36-48 hrs. • Mango farmers are highly dependent on contractors for marketing their produce as well as for credit/ advance payments, which reduces their bargaining power. • Farmers’ lack of market information about prices and demand of mango results in lower value realization for them

16.4 POTENTIAL FOR INTERVENTION The following interventions are proposed: • Setting up of a pack house for mangoes at Paithan spoke in Aurangabad district. The pack house may have facilities for: o De-sapping o Washing: may include hot water treatment and fungicidal application. o Sorting/grading o Packing in corrugated boxes o Pre-cooling o Cold storage • Modern cold stores may be set up to store unripe mangoes. Mature green mangoes may be stored at 13 degree Celsius and RH of 90-95%, which increases its shelf life by 1-2 weeks. • Ripening chambers may be set up at hub for uniform ripening of mangoes. • Mango should be transported in reefer vans to avoid physical and quality loss during transit

122 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

17 FOCUS CROP: ORANGE

Maharashtra produced 796,100 MT of orange in 2007-08 and the total area under cultivation is 125,700 Ha making it the largest orange producing state of India. Maharashtra produces about 55% of India’s total orange production. The state production of orange grew from 723,700 MT to 796,100 MT in 2006-07 and 2007-08 respectively. The average productivity of orange in the state is 6.34 MT/Ha, which is close to the national average of 6.7 MT/Ha. In Maharashtra, the major orange producing districts are Amravati, Nagpur, Yavatmal and Akola, of which Amravati and Nagpur account for about 0.94 lakh hectares with production about 5 lakh metric tonnes. The area and production of major orange growing districts in the study region are as follows: AREA AND PRODUCTION (2007‐2008) Production # District Area (ha) (million MT) 1 Amaravati 51648 408584 2 Akola 4000 37768 TOTAL 55648 446352 Source: Directorate of Horticulture, Government of Maharashtra (FY 2007‐08) The major orange producing blocks in Amravati district are Warud, Morshi, Achalpur, Anjangaon and Chandur Bazaar. The major block in Akola is Akot in terms of orange production. The variety is known as Nagpur orange and it is of a loose skin variety. The variety can be processed into concentrate, jam, juice, etc. although technology (which is available) is needed for the extraction of the seeds. The production of orange is spread over two seasons namely Ambia bahar and Mrug bahar. Ambia Bahar accounts for 30-40 % of the production. Arrivals for this seaons start in the month of October and end in the month of January. Mrug Bahar accounts for the balance 60- 70 % of the production and it starts in the month of February and ends in the Month of April. The quality of fruit in Mrug Bahar is reportedly superior and is suitable for long distance transportation. Fruits are harvested when they attain full size and develop suitable colour (75% fruit surface colour changes from dark greenish into yellowish). Picking of fruits is generally done manually either in the morning or in the evening hours without damaging the fruits. Generally harvesting is carried out in either two plucking phases or single plucking phase.

17.1 VALUE CHAIN ANALYSIS The supply chain of orange in the study region with the three different marketing channels is depicted below:

123 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The various players involved Farmer in the value chain are farmers, Channel 3 Channel 1 Channel 2 pre-harvest Pre harvest Contractor contractors/aggregators, commission agents, traders Commission agent and retailers. There is very less export directly from this Trader region to other countries. Some small volume is Commission Agent in Distant market Retailer in Local Market exported to Bangladesh and

Nepal through Kolkata and Trader Patna markets. CONSUMER Based on the point of sale, the Retailer in Distant Market above supply chains can be classified into three types: • At farm gate (Channel 1) – Accounts for 60% of the produce • At APMC Mandis within production clusters (Channel 2) - Accounts for 35% • At Distant consumption market (Channel 3) – Accounts for 5% of the trade

17.1.1 Value Chain Actors and Functions

Value Chain Actor Physical Functions Financial Functions Farmer 1. Cultivation 1. Pre‐harvest contracts with PHCs Pre‐harvest 1. Harvesting 1. Price communication to the farmer Contractor 2. Loading and Transportation of 2. Price risk between harvesting to sale in the produce to the market the Mandi or distant consumption market 3. Payment to the farmer 3. Transit losses Commission Agent 1. Payment to the farmer 1. Price discovery by auction 2. Weighing 2. Credit to the buyer 3. Cash Advances to the farmers during production 4. Payment of cess to APMC Trader 1. Sorting and grading of the 1. Price risk in the distant market as there is produce a 3 day gap between buying and reselling 2. Packaging 2. Sorting grading and moisture loss 3. Loading and transportation to 3. Transit losses consumption markets 4. Credit risk in the distant consumption market Oranges in the region are propagated by budding. The method of shield budding is the most popular method for propagation. The square system is used for plantation of oranges. The distance between plants is generally kept 20 ft. An intensive care is taken of the planted nursery up to 5 years. The trees start getting economic yield from 6th year onwards and the economic life of the trees is 12-15 years depending on the maintenance. Intercropping with pulses, soya bean, ground nut and chillies is carried out generally up to the first 5 years. The production of orange from a Ha of orchard is about 25-26 MT. The cost of establishment of orange orchard is about Rs.

124 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 52,0003 per Ha. The breakup of the cost is given below.

Activity Cost per Ha (in Rs) Cost of sapling (277 sapling) 2770 Labour cost (levelling, digging, weeding, sapling plantation, manure spread, filling etc) 6970 Cost of irrigation (drip irrigation) 35000 Compost and fertlilizers 4825 Pesticide application 1000 Others 1500 Total in Rs 52065 The breakup of annual variable cost of cultivation of orange per Ha is given below. S# Field Operations Cost per Ha (Rs.) 1 Irrigation 14000 2 Fertilizer + Labour 26400 3 Pesticide + Labour 4375 4 Labour (Trimming, deweeding, etc) 22000 5 Intercultivation 3750 6 Miscellaneous 3750 Total 74275 There is no farm level grading or packing of orange irrespective of the marketing channel used to market the product unless the farmers plan to sell their product in distant consumption markets like Delhi, Mumbai etc by themselves. The fruits are generally loaded into an open truck or tempo and sent to mandi for sale. In the cases of Channel 1 and Channel 2, oranges brought from orchards by various means of transport are properly heaped without causing any damages on the auction platforms covered with paddy straw in the market yards and auctioned for price discovery. Oranges are traded either in numbers or by weight. Each market has its own unit of trade. For example, in Kalamna APMC Market yard in Nagpur District, oranges are traded by weight while in Warud APMC Market yard in Amaravati district they are traded in numbers. The unit of trade in distant consumption markets is generally by boxes or crates. Price fixation between the farmer and the Pre harvest Contractor (PHC) is done by negotiation. The PHCs offer a price based on their information on price in the market and on their understanding of the expected supply. Generally, the unit of trade between the farmer and PHC is in numbers. The PHC visits the orchards and randomly selects some trees and the number of fruits are counted and then extrapolated for the entire

3 3 Cost of land has not been taken into account for calculation of total cost of establishment of orange orchard 125 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT garden. Though there is high approximation in this method, most of the farmers prefer to sell through this channel as there are no marketing costs; harvesting is the responsibility of the PHC and the price risk is with the PHC. Price discovery in the APMC market yards is by Open Call Auction method. In all the markets grading is done manually. The grading is done based upon the size of the fruit. While grading is done based on size, sorting is carried out based on other physical properties like colour, shape (oblong, high collared, deformed), maturity, puffiness, blemishes, physical damage (bruised and diseased). Once the diseased and bruised fruits are discarded, fruits are graded into 7 grades based on size. Traditionally, the seven grades have been identified on the basis of number of fruits of a particular size that will fill exactly a standard wooden box (details given below). After grading the fruits are packed in either wooden boxes or in plastics crates. The standard size of a wooden box is 18” x 12” x 12”. This standard wooden box can carry 22-24 kgs of fruit. The wooden box is fabricated on the spot by specially appointed box makers. The fruits are stacked in layers in the wooden box. Depending on the size of the fruit, the number of layers vary from 4-6. To avoid friction between the layers of fruits and to avoid moisture loss during transit each layer is separated from the other with paddy straw and waste papers. Once the fruits are filled, the top of the box is closed with the same wooden sheets using iron nails. The box is then fastened using coconut fibre ropes. They are then marked using water soluble permanent colour with the name of the trader so that it can be identified in the destination market. Nearly 40% of the trade at present is happening through wooden boxes.

As per trade, the use of plastic crates has increased in the last 4-5 years. Mostly, plastic crates of 542 mm x 360 mm x 300 mm (outer diameter) are in use. This standard crate can carry 22- 25 kg of fruit. Though the return logistics cost adds to the cost of the product, the ease of usage, easy availability and acceptance by trade in the destination markets has increased the usage of plastic crates. Unlike wooden boxes, in case of the plastic crates, the fruit is not arranged in layers. The fruits are loosely packed in the crate and the sides and top are covered with waste paper. Then the paper is tied to the crate using nylon thread. The traders have their brand name/ trade name stencilled on the sides of the crates for identification. Apart from packing the fruits in wooden boxes and crates, oranges are transported in loose without any packing to some markets like Hyderabad and Bangalore which are 400 Km to 500 Km from Nagpur market. When fruits are packed in truck directly, they are sorted only for culling the bruised and damaged fruits. There is no size based grading. The fruits are packed in layers in the truck with paddy straw, casuarina poles and bamboo mats on the sides and in between the layers to avoid friction and pressure damage. The fruits are graded as per

126 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

size in the distant consumption market. The cost of packing for each truck is around Rs. 7500 per truck.

17.1.2 Grades in Orange

Grade name Actual number # Grade as per trade of fruits Layers of fruits Size in mm 1 Extra Large 96 Dana 96 4 layers of 24 each 75‐80 4 layers of 30 each and one 2 Large ‐ 1 141 Dana 148 layer of 28 70‐75 4 layers of 35 each and one 3 Large ‐2 171 Dana 173 layer of 33 65‐70 4 Medium ‐ 1 191 Dana 195 4 layers of 39 each 60‐65 5 Medium ‐2 205 Dana 210 4 layers of 45 each 55‐60 6 Small 245 Dana 288 6 layers of 48 each 50‐55 7 Waste All other The traders in production clusters do not generally store the product. They operate in such a way that the product reaches the destination market within 3 days of harvesting. Transportation is carried out in ambient temperature in open trucks. Orange is generally not stored for off-season sales in production clusters. If any trader wishes to store the product for off season sale, the same is done in the distant consumption market. A value chain, indicating the various activities in the value chain, actors performing the given activity and cost build-up at every step has been mapped in this section. This value chain (for 1 Kg of orange) has been mapped for the supply chain having following characteristics:

• The marketing chain follows Channel 2, i.e, Farmer to PHC to Commission Agent to Trader to Commission agent in distant market to Trader/ retailer to Consumer. • The cost of production for the farmer is only the variable cost for maintenance of one acre orchard per year. It does not include the cost for the first five years of orange orchard where there are no returns. • The distant consumption market considered for this case is Azadpur APMC Mandi, in New Delhi • The packing material is wooden box of standard dimension 18” x 12” x 12” • Net weight of oranges in each box is 24 kg • Cost of capital and opportunity cost for the all the intermediaries has not been considered in cost build up and for calculating the spread • The cost of retailing, which includes the cost of shop, wages, rent etc has not been considered

127 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT • The prices considered are average prices for the month of October in Nagpur and Delhi Market based on the data corroborated from traders. The same has been cross checked with the data from National Horticulture Board 2007-08 statistics • Wastages have been accounted at the level of packaging only. The next level of wastage is at the level of retailer, where data is not available

Retailer’s Margin Market cess, loading, transportation Rs 3.00 Wholesaler’s Margin Rs 0.50 Commission charges@ 8%

Loading, unloading, Rs 1.89 transportation to Delhi Rs. 24.04 Rs 1.67 (Retailer’s Price) Wastage

Market cess, Sorting, Rs 2.50 grading, packaging Rs. 21.00 Rs 0.60 (Whole saler’s Price) PHC’s Margin

Rs 2.25 Commission charges@ 6%

Harvesting, loading, Rs 1.12 transportation, unloading

Rs 0.72 Farmer’s Price Rs 0.65

Rs 9.60

In the above value chain, after the sale of produce by the farmer, the harvesting, loading, transportation to local market and unloading charges and commission are borne by the PHC. The wholesaler bears the cost of sorting, grading and packaging along with the commission in the distant market. The retailer pays for the final transportation, loading and market cess. The above diagram can be summarized as below:

Rs/MT Trader/ Particular Farmer PHC wholesaler Retailer Cost of Production/ Buying 2857 9500 12000 20925 Sale Price 9500 12000 20925 24463 Cost of Marketing incl. Commission Agent charges, wastages, etc. 0 1380 7032 503 Spread 6643 1120 1893 3035 • The price buildup from Farmer to Consumer is almost two and half times. • There are 5 intermediaries in this case • While the intermediaries are making decent profits, the cost benefit ratio for orange farmer at 1:2.3 is also good. • The APMC mandi cess accounts for close to Rs. 335 per MT, which is close to 1.5 % of the final price paid by the consumer • The share of consumers rupee by various actors in the value chain emerges as below (in % of

128 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT consumer’s rupee) :

17.2 POST HARVEST INFRASTRUCTURE AND INSTITUTIONAL ARRANGEMENTS

There are very few farm level sorting, grading, washing and waxing facilities in the region. In the entire study area, there are two orange related facilities. They have facilities for sorting- washing-waxing-grading lines, primarily set up for handling of fresh oranges for domestic and export markets. The summary of these two facilities is provided in the table below:

Particulars Warud Morshi District Amaravati Amaravati Ownership Owned by APMC, Warud Owned by APMC, Morshi sorting‐washing‐ One line of 2 MT per hour One line of 5 MT per hour waxing‐grading line Pre‐cooling 5 MT per batch yes, capacity not known Cold storage 30 MT yes, capacity not known Pack house Present Present Loading‐ unloading bay Present Present Backup power Not available Not Available Weigh bridge Not available Not Available Worker Quarters Not available Available, but in dilapidated state The facility was lying idle for many years. The facility was created by a However, the facility was used by one trader, private entrepreneur in 2006 SKC and Co, of Warud at a nominal price in and sold to APMC, Warud at Rs. 2008‐09. Interaction with the trader revealed 22 lakhs. Last year, the facility that the manual grading is both cost Usage was given out lease to Reliance effective, and more efficient. The mechanical Retail and a charge of Rs. 65 per grading line separates fruits on the basis of quintal was collected from size only, while the manual grading takes into Reliance. Approximately 200 MT account other physical parameters of the of produce was handled fruit as well. Cold Storage installations in the above facilities utilises both ammonia based and Freon DX refrigeration systems. Pre coolers were all forced air type and evidenced minimal or no use. The existing cold chain implementation is mostly unutilised.

Case: Warud Pack House In case of the Warud facility, whilst the technology worked perfectly well there were a number of barriers to its use in the market: • Insufficient export business was identified as a key impediment in full utilisation of the facility; • The customers who would buy from this facility were not correctly identified. The main target customers were domestic traders/wholesalers. An exporter would want graded, packaged and pre‐ cooled produce but this wasn’t required by domestic traders and local markets; • Local traders do not need pre‐cooled orange as they were not using refrigerated transport; • Local APMC markets did not want to handle already graded oranges as traders preferred to grade themselves. Consequently the facility was sold to the APMC market authority and has been used in previous years by a supermarket chain for washing, waxing and grading. The pre‐cooler and cold store was not used.

In terms of institutional mechanism for orange in the region, the growers’ cooperatives in the region are in the nascent stage. MahaOrange is a marketing co-operative society registered under the Maharashtra State Co-operative Societies Rules 1961. It is a federal body of orange cultivators in the state of Maharashtra. It was formed in March 2008, with headquarters at Nagpur. At present 11 block level co-operative societies are members of MahaOrange. Till now, very limited volume of orange has been marketed by MahaOrange and the member cooperative societies are also very small having 15-20 members in each society.

129 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Case: Direct Marketing to Organized Retail Chain by Farmers’ Group

In one location in Amravati district, visited during the field study, farmers had organised themselves into a group to supply to a large supermarket chain. This relationship had lasted only for a season mostly due to the following reasons:

• The supermarkets wanted only the top quality orange making it difficult to sell only the low quality to the local APMC market;

• Whilst prices paid from the supermarkets were originally acceptable, they later reduced the prices making it unattractive to the farmers.

17.3 GAPS IN THE VALUE CHAIN Based on stakeholders consultation, assessment of the orange value chain and existing post harvest infrastructure present in the region, the following gaps were identified in the value chain: • Very few farm level sorting, grading, washing, fungicidal treatment and waxing facilities in the region. The existing facilities have a total capacity of about 20,000 MT which accounts for less than 5% of the total production in the region. Existing cold chain infrastructure in these facilities is mostly unutilized. There are no de-greening facilities in the region. • Even the existing facilities are not operating at full capacity as the requirement for domestic markets do not require such sorted, graded and packaged produce. The export market has not been catered as yet, where higher prices may be obtained for these services. • At APMC markets and other trading points in the region, packaging of orange is done in wooden boxes for a substantial volume. This practice is costlier in the long term and also has an adverse affect on the environment. • Packaging in wooden boxes and loose in trucks leads to wastage and loss of quality. As per trade, the loss is in the range of 5-10%, which also includes loss in moisture during transit. This loss is borne by the buyer in the distant consumption market, which is factored into his buying price. While, similar level of loss is not reported in produce packed in plastic crates • Orange processing has also not picked up in the region.

17.4 POTENTIAL FOR INTERVENTION Based on the gaps identified in the value chain process and understanding the needs of the various stakeholders, interventions have been identified. As mentioned earlier, the existing pack houses with pre-cooling and cold store facilities have not been successfully functional mainly due to reasons such as inadequate marketing/export linkages, cheap manual labour, lack of refrigerated vehicles, etc. Hence, considering the present scenario in the region, interventions are proposed keeping in mind the practicality of such interventions. As the first step, 4 pack houses for orange in Amravati district are proposed. The proposed locations are Warud, Morshi, Achalpur and Anjangaon. In case of Warud and Morshi, the existing facilities

130 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT may be refurbished and leased out to private players for the operations. The pack houses will have following facilities for tomatoes: • Sorting • Grading • Packaging in plastic crates The pack houses at Achalpur and Anjangaon will handle banana as well. The details of the facilities have been captured in the subsequent chapter.

131 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

18 FOCUS CROP: LEMON

Maharashtra produced about 153000 MT of lemon in 2007-08 and the total area under cultivation is 37300 Ha. The state ranks fifth in terms of production of lemon among Indian states producing about 6.3% of India’s total production of lemon. The state production of lemon grew from 139000 MT to 153000 MT in 2006-07 and 2007-08 respectively. The average productivity of lemon in the state is 4.1 MT/Ha which is much lower than the national average of 8.5 MT/Ha. The crop wise area and production in the major districts in the region is given below:

Crops Lemon The main lemon cluster identified for the project Districts Area (Ha) Production (MT) covers the blocks of Nandura and Khamgaon in Aurangabad 304 4864 Buldhana district and Balapur block in Akola Buldhana 908 8172 Amravati 500 4500 district. These are contiguous blocks and together Akola 521 4689 account for about 70-75% of the total production Total 2233 22225 of lemon in these two districts. Source: Directorate of Horticulture, Government of Maharashtra (FY 2007‐08 Lemon is harvested throughout the year but peak seasons are during the month of March-May (30% of total production), August- October (30% of total production) and December- January (20% of total production). The marketable surplus of lemon in the region is about 96%.

18.1 VALUE CHAIN ANALYSIS Operations relating to the movement of lemon shown in the pictures. The diagram below explains the major channels of trade of Llemon in the Amravati-Aurangabad region: Based on the points of sale, the Farmer

Commission agent/Trader Channel 1 Channel 2 Channel 3

Commission Agent in Distant Market above supply chain can be classified into Wholesaler (Trader) Retailer in Local Market two types: 1. At APMC Mandis– Channels 1 Retailer in Distant Consumer Market (65-70% of the trade) and 2 (20-

132 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 25% of the trade) – Accounts for 90-95% of the produce 2. At local consumption market – Channel 3 – Accounts for 5-10 % of the trade

The major players involved in the trade of lemon are farmer, commission agent (local), commission agent (distant market), wholesaler/trader and retailer. The major consumption centres for the lemon for this region are Delhi, Mumbai and Raipur, which accounts for about 90% of the total export from this region. The roles played by each player in the value chains are given below:

Farmer The average orchard size of lemon in the study region is about 0.8 Ha. A Ha of orchard accommodates about 250 plants (20 ft X 20 ft) which are maintained at a height of about 10- 12 feet. The plants start bearing fruit from the 3rd year. The cost of establishment of lemon orchard is about Rs. 51,0004. The breakup of the cost is given below.

Cost per Activity Ha (in Rs) Cost of sapling (250 sapling) 12500 Labour cost (levelling, digging, weeding,sapling plantation, manure spread, filling etc) 5000 Cost of irrigation (drip irrigation) 25600 Compost and fertlilizers 4800 Pesticide application 1000 Others 2000 Total in Rs 50900 The breakup of annual variable cost of cultivation of lemon is given below.

Per Ha yearly variable cost for Lemon in Buldhana S# Field Operations Cost (Rs.) 1 Irrigation 1000 2 Fertilizer + Labour 5000 3 Pesticide + Labour 3000 4 Labour (Trimming, deweeding, etc) 18000 5 Harvesting Labour 25000 6 Miscellaneous 5000 Total 57000 Each plant produces about 100 kgs of lemon annually and per Ha average productivity of lemon in the region is about 25 MT per annum in suitable conditions. After harvesting of the matured fruit, farmers do the packaging in small gunny bag having a capacity of about 15 kgs. There is no sorting or grading done at the farm level. The bags are loaded in mini trucks/ auto-rickshaws/ pick-up trucks and brought to the commission agent in the nearest APMC market. The cost of harvesting, local transport and commission to Commission Agent (CA) (which is 5%) is paid by the farmer. The gunny bags used by farmers to bring the produce in the market are taken back by him after sale of the produce and hence the packaging cost for the farmer is negligible. The harvesting is done in the evening of the previous day of sale in the market. The farmer stores the bags for the night at his home.

4 4 Cost of land has not been taken into account for calculation of total cost of establishment of lemon orchard 133 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Commission Agent (CA) There are about 8-9 CA cum traders operating in the region. In channel 1, CA acts as buyer on behalf of the wholesaler (distant market). Orders are placed with him from the wholesaler for specified quantity and quality of the produce. For facilitating trade between the farmer and the wholesaler, the CA charges a commission of 5% of the value of the produce from the farmers and collects APMC market cess of 1.05% from the wholesaler. In channel 2, CA acts as buyer himself and sell through the commission agent in distant market to the traders/ wholesaler present there. In this case he bears the marketing and other expenses such as grading, packing, loading, transport, unloading and 7% commission to the CA present in the distant market (Delhi). In channel 2 he also bears the price risk. The price discovery in the APMC markets is through open auction, where CA/traders quote their prices on per bag basis. Before quoting the price the CA/traders randomly open 2-3 bags from the lot to check the quality of the produce based on which quotes are made. The CA/traders quote their prices on the basis of information of price in the distant markets. Auctions are generally over by 11:00 AM. After procurement from farmers CA/trader pays money to farmer on the spot. He receives the amount from the distant traders after 2-3 days of sale depending upon the mutually agreed terms and conditions between CA and trader/wholesaler. After the trade, all the bags are emptied in a heap under a shed in front of the shop area of the CA/trader. The bags are then returned to the farmers. The lemon is then sorted and graded based on colour and size. After the grading, the lemon is packed in gunny bags again having a capacity of 15 kgs and then weighed. The inside of the bags are lined with newspaper to hinder moisture loss and also to reduce physical damage during transport. Then the produce is loaded on trucks (10 MT) for transportation to the distant markets.

CA in Distant Market He facilitates the sale of produce by the local CA and the wholesaler/trader. For his service of organising the auction and market information, he charges 7% commission from the seller.

Wholesaler/ Traders They are the main buyers in the markets. Trader further sells the produce to the local retailers. In channel 1, he bears the cost of grading, packing, loading, transport, unloading and commission to CA.

Retailers He is the major buyer in the consumption market and the direct point of contact with customers. Retailer bears the cost of local transport from market to consumption point.

18.1.1 Price build up along the value chain of Lemon A value chain indicating the various activities and cost build-up at every step has been mapped for 1 kg of lemon. Some of the assumptions for the price build up are: ƒ The most commonly observed trade channel has been selected for the price build up of lemon, i.e. Farmer-CA-Wholesaler-Retailer.

134 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT ƒ Farmer’s margin has been calculated based on his annual cost of maintenance of orchard. The cost of establishment of orchard has not been taken into account. ƒ The cost of interstate transportation has been calculated for New Delhi. ƒ The cost of retailing, which includes the cost of shop, wages, rent etc, has not been considered.

Retailer’s Margin

Wastages @ 5%

Transportation Rs 5.20

Trader’s Margin Rs 1.23 Rs 0.20 Loading & unloading Rs 4.00 Wastages* @ 4% Rs. 24.60 (Retailer’s Price) Rs 0.16 Transportation to Delhi

Rs 0.72 Packaging Rs 2.00 Rs. 18.00 Sorting and grading (Trader’s Pr ic e) Rs 0.67 Market cess @ 1.05% Commission charges@ 5% Rs 0.33

Rs 0.10

Harvesting, loading, Rs 0.50 unloading Rs 0.50

Farmer’s Price Rs 0.33

Rs 0.80

Rs 10.00 In the above diagram, the farmer pays for the harvesting, local transport to APMC yard and commission to CA. The farmer receives a price of Rs 10-12/kg (in peak season) and he spends around Rs 2.3/kg in maintenance of the orchard. The net margin, which he gets after bearing the marketing and other expenses, is about Rs. 6.00/kg. The commission agent facilitates trade between farmer and wholesaler, for which it charges a commission of 5%. The trader/wholesaler pays for the packaging, sorting, grading, APMC cess, loading, transport and unloading. The trader/wholesaler also bears the wastages as moisture loss (2%) and physical damage during transportation (another 2%). He gets a margin of about Rs. 4.00/kg. From them, the retailer buys the products and bears the cost for labour and transport to their retail outlets. At this level the wastage is about 5%. The price build up can be summarized, as below:

Rs/MT Particular Farmer Trader/Wholesaler Retailer Cost of Production/ Purchase 2286 10000 18000 Cost of Marketing incl. Commission Agent charges, wastages, etc. 1633 3992 1432 Sale Price 10000 18000 24632 Spread 6081 4008 5200 Some of the salient features of the price build up are mentioned below:

ƒ There are 3 intermediaries between the farmer and the consumer in the lemon supply chain (including the commission agent). ƒ The price build up from farmer to consumer is around 2.5 times. ƒ The farmer earns a margin of Rs. 6081 which is about 25% of the consumer rupee

135 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT ƒ Trader/wholesaler incurs a cost of around Rs 4000 per MT in various activities such as labour, packaging, transportation, wastages etc. The wholesaler earns a margin of Rs 4008 per MT that is around 16 paisa of a consumer rupee. ƒ The commission paid by the farmer to the commission agent constitutes 2 paisa of a consumer rupee. ƒ The share of consumers rupee by various actors in the value chain emerges as shown in the diagram (in % of consumer’s rupee) :

18.2 INFRASTRUCTURE ASSESSMENT

18.2.1 Post Harvest/Marketing Infrastructure There is no post harvest infrastructure in the region for lemon. The initial packaging is done at the farm level by the farmers. Manual sorting, grading and packaging is done at the APMC markets under the sheds of the CA shops. Lemon is not stored in cold storages and the produce is sent to distant markets on the day of sale itself. There is no farmers’ cooperative or any other institution which is engaged in the marketing of lemon in the region. There are no lemon processing units in the region at present.

18.3 GAPS IN THE VALUE CHAIN On the basis of findings of field survey and stakeholders consultation, some of the gaps identified in the value chain are: ƒ No farm level sorting, grading and packaging facilities in the region. Packaging is done in the open. Existing cold chain infrastructure in the region is not utilized for storage of lemon. There are also no de-greening facilities in the region. ƒ Sorting and grading at the APMC markets are done manually. ƒ Packaging of lemon is done in gunny bags and it is done twice (once at farm level and once at APMC markets). This practice is time consuming and the packaging is inappropriate resulting in higher losses. ƒ Lemon processing has not picked up in the region. As mentioned, there is no processing facility in the region.

18.4 POTENTIAL FOR INTERVENTION Based on need-gap assessment and exploring the opportunities for future growth, potential areas for intervention for lemon in the region are: ƒ Considering the distribution of production clusters in the region, Buldhana and Akola (total production of lemon in these two districts is about 13000 MT annually) are the two

136 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT districts where value addition of lemon can be done in a significant scale. Assuming 20% of the produce in these two districts is subject to value addition, there is a need to create infrastructure to handle 2,000-3,000 MT of lemon annually. ƒ Significant volume of production happens during the rainy season and creation of farm level platforms and sheds may be a suitable intervention to protect the produce from rain during packaging. ƒ Potential for setting up sorting and grading facilities at spoke level.

137 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

19 FOCUS CROP: BANANA

While Jalgaon, Hingoli, Nanded, Beed, Parbhani and Pune are the major districts in banana production, Amaravati, Akola and Buldhana, the three districts of Aurangabad- Amaravati region also have some banana production. The area and production of banana in the catchment region of this region are presented in the table below:

# District Area (Ha) Production (MT) The main banana growing 1 Amaravati 394 23640 cluster in Amravati region 2 Akola 600 30000 consists of Anjangaon block 3 Buldhana 700 42000 which covers about 80% of the Source: Directorate of Horticulture, Govt of Maharashtra (FY ‘07‐08 total production of the district. Sangrampur block in Buldhana is again the largest banana growing cluster in the district having about 80% of the total production of the district. In Akola, Akot block is the main banana growing cluster.

19.1 VALUE CHAIN ANALYSIS The supply chain of banana in the study region is depicted below:

The various players involved in the value chain are Farmer farmers, pre-harvest contractors/aggregators, commission agents, Wholesalers and retailers. When the fruits are ready for harvest, the farmers Pre‐harvest contractor visit the banana supplying company/commission agent and requests for the price. The board price, Banana Supply which is the price linked to the price declared by Co/Commission agent Banana Marketing Federation, Raver, Jalgoan district is declared to the farmers. The farmer, then Wholesaler in Consumption market requests the commission agent to visit the farm and inspect the quality of the fruits. The commission Retailer agent in turn sends the pre-harvest contractor in the village/block of the farmer to visit the farm and Consumer report the quality of the fruit. This chain of activity starts with the farmer requesting the pre-harvest contractor in his village to visit his farm and who in turn contacts the commission agent for price and requirement for the day. The commission agent is in contact with the wholesalers in the consumption markets who place the orders depending on demand in their markets. The commission agent on getting a confirmed order from the wholesaler, in turn instructs the pre harvest contractor to visit the farm to match the supply (quality and quantity of produce) with demand and to arrange for harvesting. The commission charges of the commission agent vary from region to region and market to market. In case of Anjangaon in Amaravati district, the commission agent charges 6.25% as commission charges to the farmer and Rs. 16.25 per quintal as service charge to the buyer. The service charges are independent of the prevailing price in the market. Harvesting cost, transportation to the main road for loading into the vehicle, weighing charges, pre-

138 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT harvest contractor expenses are borne by the farmer. A typical cost build up for one Kg of banana in the region is indicated below:

Retailer’s Margin

Wastages

Transportat ion Rs 2.20 Rs 1.05 Wholesaler’s Margin Rs 0.25 Value addition‐ Rs 0.25 Ripening Rs 1.33 Labour charges Rs. 14.50‐ Rs 1.00 15.50 (Retailer’s Weight losses & other Price) losses Rs 0.17 Secondary Transport Rs 0.96 Rs. 11.75 Commission Charges (Wholesaler’s Price) from Buyer Rs 2.20 APMC Cess

Commission Charges Rs 0.16 from farmer Rs 0.02 PHC Service Charges Rs 0.28 Harvesting & Transport Rs 0.16 Farmer’s Price

Rs 0.25

Rs 5. 90

*The cost of cultivation is lower in this region as compared to Jalgaon region due to lower land lease rentals and non-inclusion of harvesting cost

19.1.1 Value Chain Actors and Functions

Value Chain Actor Physical Functions Financial Functions Pre‐harvest ƒ Part of the information network for the ƒ Price communication to the farmer Contractor commission agent ƒ Guarantor of payment to the farmer ƒ Arranging labour for harvesting as he is the local person ƒ Loading and Transportation ƒ Responsible for delivery of quality of the product as required by the buyer ƒ Weighment Commission ƒ Supply of banana as per the quality and ƒ Price Communication Agent quantity requirements of the buyer ƒ Credit to the buyer ƒ Payment to the farmer ƒ Payment of cess to APMC collected from the buyer ƒ Arranging labour and vehicles for transport Wholesaler ƒ Transportation to the consumption ƒ Price risk in the distant market as markets there is a 3-6 day gap between ƒ Unloading buying and reselling ƒ Ripening ƒ Losses during ripening and other processes ƒ Transit losses ƒ Credit risk to the retailers There are some ripening units in the region (details given in the following section). In case of ripening units, the wholesalers in consumption markets like Nagpur, Buldhana, Warud contact the ripening unit and place order indicating the quality requirements and delivery date. On receipt of order from the wholesalers, the ripening unit contacts the farmers through the pre-harvest contractors to identify farm(s) of suitable quality. At present the ripening units are catering to markets within 300 to 400 Kms radius from Amaravati.

139 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The board price is communicated to the farmer and if the farmer agrees to the price, the ripening unit arranges for harvesting, de- handing, washing in alum solution, treatment with 2% Bavistin solution and loading into crates. Water for washing the fruits is provided by the farmer at the farm and the utensils, which are large aluminium vessels, for washing are provided by the ripening unit. Once, the fruits are washed and treated each crate is loaded with 20 kg of de-handed banana. The crates are lined with plastic felt to avoid abrasions to the produce during transportation. The cost of harvesting is borne by the farmer. The commission Ethrel Spraying Pump to pre-harvest contractor is borne by the wholesaler. The cost of treatment is borne by the ripening unit and factored into the service cost. The cost of transportation is borne by the wholesaler and is fixed based on distance. The cost of transportation in a radius of 70 km is Rs. 10 per crate. The rent for crates is borne by the wholesaler and is factored in the ripening cost. However, if the wholesaler provides his own crates, then a discount of Rs. 7 is given in the ripening services cost. The service cost for ripening is Rs. 55 per crate of 20 kg. The breakup of the service charges for one 20 kg crate is as below:

Parameter (Rs.) Once the produce reaches the ripening unit, the crates 1 Local Transport 10 2 Farm operations – 10 containing fruits are arranged on the floor and ethrel Washing, de‐handing and solution is sprayed on the fruits using an insecticide fungicide treatment spraying hand pump. The fruits are then shifted to the 3 Loading, unloading and 3 delivery charges cold room, which is kept at 18 degrees Celsius. The 4 Telephone charges 1 crates are arranged one over the other till the roof, 5 Kitchen Charges 1 leaving a space for one crate and are then covered by 6 Power charges 2 7 Stationery charges 1 a plastic sheet. The fruits are left covered with the 8 Rent for crates 7 plastic sheet for one day and then shifted to another 9 Maintenance Charges 1 cold room at 18 degrees Celsius. The fruits are kept 10 Chemical costs 1 11 Lodging and other charges 1 for 3 to 4 days depending on the customers’ 12 Cost of plastic felt 5 requirement. The fruits turn golden yellow on the 4th 13 Profit for Ripening unit 10 day and are then loaded into trucks and transported to Total 55 the consumption markets.

Utensils used for washing fruits Fruits Arranged in Crates

140 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT These ripening units have positioned themselves as service providers and do not take any risks of quality of the product and the price risk. Further, there is a moisture loss of 0.5 kg per box (box of 20 kg) during the ripening and post ripening handling which is borne by the

Crates Ar ranged in the Crates covered with plastic Plastic Cover removed and Ripening Chamber cold room cover ‐ 1 day old the lot has been labelled wholesaler. The ripening units encourage the wholesaler to appoint his own person to oversee the buying, transportation and ripening activities. When such a person is appointed by the wholesaler they give a discount of Rs.2 per crate on the ripening service charges. The ripening units collect a security deposit from the wholesalers to avoid any risk on account of non-lifting of the ripened product. While it may appear that the pre-harvest contractors are not adding any value, the trade feels that being local people they form an important link to establish credibility of the farmers. As per trade, the wholesalers are able to sell the bananas ripened in ripening chambers at a premium of Rs.1 to 2 per Kg as compared to produce ripened by traditional methods. The trade also feels that the product quality is better because of lesser handling and better ripening method. The fruit remains on the pedicel longer by two days and hence, the losses at retailer level are lower in comparison to traditional Ripened Bananas ‐ 4 day old methods. Since the fruit has better colour and finishing, the product gets a premium over other bananas. The retailers are able to sell the product at a premium of Rs.1 to 2 per kg. However, the marketing of these bananas has not been welcomed by all. Retailers of bananas ripened through traditional methods have reportedly damaged the crates of such retailers and they are not being allowed to sell the produce in Nagpur. While, the ripening chambers are a vast improvement compared to the traditional methods, there is scope for improvement in ripening process and handling methods followed by the ripening chambers. For ripening, the ripening units are still using ethrel solution to induce ethylene production, which is not safe. Ethylene generators can be used by these units. Further, there is no palletisation. All the crates are handled individually, which increases the cost of labour. Palletisation can bring more efficiency in the handling. A typical cost build up in the region for one Kg of banana ripened using ripening chambers is indicated below: Comparing the ripening chamber method with traditional ripening methods, one ripening unit of 20 MT per day can achieve the following: • Ripening facility for produce of 120 Ha

141 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT • Alternative market linkages for over 150 farmers (assuming average land for banana production per farmer is around 1 Ha) • Handle 6000 MT of banana annually (assuming 300 working days) • Reduce the losses on account of moisture loss and transit losses from 25% to 12% • Increase the farmer realisation by 12% compared to traditional market linkages • Create additional employment for over 200 people • Increase the realisation of retailers, who typically use push cart for retailing and earn less than Rs.150 per day, by over 100% Retailer’s Margin

Wastages Rs 3.10 Tertiary Transport Rs 0.60 Wholesaler’s Margin Rs 0.30 Transport to Consumption Market Rs 3.50 Rs. 16‐17 Weight losses (Retailer’s Price) Rs 0.75 Profit of Ripening Unit Rs 0.32 Service charges by Ripening Unit Rs. 13.50 Rs 0.50 APMC Cess (Wholesaler’s Price) Rs 1.75 Transport to Ripening Unit

Rs 0.02 PHC Service Charges Rs 0.50 Harvesting

Farmer’s Price Rs 0.16

Rs 0.05

Rs 6.00

19.2 INFRASTRUCTURE ASSESSMENT

19.2.1 Post Harvest Infrastructure There is not much post harvest infrastructure present in the region for banana. There is no storing facilities and almost negligible cold chain infrastructure. Sorting and grading is minimal and mostly done manually. There are two private banana ripening units in the study region. They are Mittal Fruit Ripening Services and Utsav Kela Suppliers and Ripening services. Mittal Fruit Ripening Services has been the pioneer in the region. They had set up the banana ripening chambers in 2005 and have standardised the process. At present they have a ripening capacity of 40 MT per day. Seeing the success of Mittal Fruit ripening services, Utsav Kela Suppliers and Ripening Services has been set up in May 2009 with a ripening capacity of 20 MT per day. As per trade, there is one more ripening unit under construction in Anjangaon. There is no farmers’ cooperative or any other institution which is engaged in the marketing of banana in the region.

142 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 19.3 GAPS IN THE VALUE CHAIN Based on the need gap analysis and stakeholder’s consultation, the following gaps are identified in the value chain: ƒ As in Jalgoan area, in this region too, traditional methods of post harvest mechanism leads to damage of fingers. Similarly, there is a lack of farm level collection centres and pack houses ƒ There is no contract farming system in the region. Pre-harvest contractor can be replaced, with contract farming arrangements. Capacity building of farmers and ripening units to enter into contract farming system may be taken up ƒ The existing ripening chambers use dated technologies. They can be upgraded with ethylene generators, ethylene scrubbers, automated temperature control, palletisation facilities etc

19.4 POTENTIAL INTERVENTIONS The interventions proposed here are similarly to that proposed in the Jalgaon area. There is a good potential of integrated pack hoses with de-handing, washing and de-sapping, sorting, grading, fungicidal treatment and packaging facilities. Two pack houses for banana in are proposed in the region with the above facilities. The proposed locations are Anjangaon in Amravati district and Sangrampur in Buldhana district.

143 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

DPR: AURANGABAD‐ AMRAVATI INTEGRATED VALUE CHAIN PROJECT

Description of Hub and Spokes

Spoke Warud Spoke Anjangaon Spoke Akola Spoke Sangrampur Spoke Jalna Spoke Paithan

Spoke locations Warud

Sangrampur Anjangaon

Akola

Jalna

Paithan

144 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

20 SPOKE: WARUD

Warud has been identified as a spoke due to its proximity to the major orange growing regions in Amravati district. It is also well connected by roads to major cities such as Nagpur and Amravati and hence can act as feeder to these major orange trading hubs. It lies on the intersection of State Highways 10, 244 and 248. State Highway 10 connects Warud to Amravati and State Highway 248 connects it o Nagpur. Proposed aggregation points are as follows: Aggregation Points Focus Crop Jarud Orange Bihoda Orange Themburkheda Orange Loni Orange Rajurbazar Orange Jamgaon Orange Morshi Orange All the aggregation points are within a radius of 15 Km from the spoke except Morshi which is at a distance of about 30 Kms.

20.1 FOCUS CROPS AND ESTIMATED THROUGHPUT The major fruit grown in the catchment of Warud is orange. Warud block in Amravati is the largest orange growing clusters in the district. Focus crop for the proposed facility in Warud are orange and banana. Throughputs have been estimated based on present production in the catchment area, the present capacities of existing similar infrastructures/facilities, potential for interventions, and stakeholders’ consultations. The spoke and its catchment area produce about 0.2 million MT of oranges annually, which accounts for around 50% of the total production of oranges in the district. The spoke is expected to handle 10,000 MT of the focus crop which is less than 1% of the total production in the catchment areas. The estimated annual throughput of the pack house in MT is as follows:

Spoke Orange Warud 10000 The arrival pattern of the focus crops in the proposed facility shall be according to the crop season as follows:

Crops Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Orange

20.2 PROPOSED FACILITIES Facilities have been designed on the basis of requirement of the focus crops, to induce better and efficient handling practices and faster evacuation of fresh produce to the consumption markets so as to ensure better quality to the consumer. While deciding on the capacities,

145 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT existing facilities, their capacities and utilization has also been taken into account. The proposed new facilities are as follows:

20.2.1 Ambient Orange Pack house As mentioned earlier, the existing pack houses in the region with pre-cooling and cold store facilities have not been successfully functional mainly due to reasons such as inadequate marketing/export linkages, cheap manual labour, lack of refrigerated vehicles, etc. Hence, considering the present scenario in the region, ambient interventions are proposed keeping in mind the practicality of such interventions. In the ambient packing house for orange following infrastructure will be provided: ƒ Covered Pack shed (open to ambient) with landing area. ƒ Requisite weighing equipment and transaction recording arrangement. ƒ Sorting and grading areas (with tables). ƒ Packaging store and Packing tables. ƒ Waste disposal systems. ƒ Vehicle Parking areas. The capacity of the pack house will be 100 MT/day and it would employ for than 60 labourers for the operations.

Orange Process Flow: Process flow for the orange in the pack house shall be as shown:

Technology / Description Facilities

Quality Check • Quality of the farm produces shall be assessed at the pack house based on certain criteria such as maturity level, size of fruits etc. Sorting and • Manual sorting and grading is suggested. Sorting and grading tables are proposed in the pack house. Grading

Packing • Packaging tables would be provided for manual packing of orange. Plastic crates would be used for packing. Transport • Produce shall be transported in normal trucks of 10/15 MT capacity.

Aggregation Mechanism for the Pack house The pack house shall receive material from various aggregation points as well as directly from the farms. The pack house will develop an aggregation mechanism and send trucks/pick-ups to the aggregation points for collection of produce. It will establish direct relationship with farmers and provide extension and training support to them for best farming practices, better post harvest handling practices, efficient use of inputs and technology transfer etc. Farmers will be encouraged to come together as producer companies and set up and manage aggregation points wherever possible. Pack house may also invest in developing infrastructure at aggregation points such as platforms, sheds, etc.

146 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Pack house Logistics The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, tractor trolleys, etc. Expected peak arrival of vehicles is about 20 per day. The average out-going vehicles at peak of 10/15 MT capacity will be 8-9 per day. Small capacity field vehicles, load 800kgs to 1MT, are incorporated in the project to serve as feeders from local farms or aggregation points as backward integration. These vehicles can be with insulated body deploying pre-cooled chill packs. This is foreseen to increase field reach, hence enhancing catchment range.

20.2.2 Dry Warehouse A dry warehouse of 2000 MT capacity is also proposed. It will be used for storage of pulses and soyabean which is abundantly produced in catchment of cluster. The warehouses would plan for sufficient parking and eased traffic flow layout along with waste disposal areas.

20.2.3 Add on/Commercial Facilities There will be other facilities/amenities: ƒ Business Centre ƒ Parking Area ƒ Canteen ƒ Weigh Bridge ƒ Water Supply Facilities ƒ DG Rooms ƒ Solid Waste Management Area ƒ Other amenities

147 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

21 SPOKE: ANJANGAON

Anjangaon has been identified as a spoke due to its proximity to the major orange and banana growing region in Amravati district. It is well connected by road to cities such as Amravati (76 km) and Akola (75 km) which are in turn connected by good road and railway network to big destination markets of Mumbai, Pune, Kolhapur, Nagpur, Indore and also to distant markets such as Rajkot, Delhi, Kolkata and other cities. Anjangaon is also connected to Murtijapur, which is a station on Bhusaval–Nagpur section of Central Railway. Proposed aggregation points and their distances from the spoke are as follows: Aggregation Points Focus Crop Distance (in Kms) Pathroth Banana and Orange 10 Pandri Banana and Orange 5 Anjangaon Banana 1 Karla Orange and Banana 10 Bhandaraj Orange 7 Lokhed Orange 4 Nimkhed Bajar Orange 8 All the aggregation points are within a radius of 15 Km from the spoke.

21.1 FOCUS CROPS AND ESTIMATED THROUGHPUT Major fruits grown in the catchment of Anjangaon are orange and banana. Anjangaon block in Amravati is the largest banana growing cluster in the district having about 80% of the total production of the district. As per the field survey, the spoke and its catchment produces around 60,000 MT of banana annually. Focus crops for the proposed facility in Anjangaon are orange and banana. Since the spoke is located in the fruit producing belt, a viable volume (that is less than 1% of the district’s production) has been targeted. Estimated throughputs have been identified based on present production in the catchment area, the present capacities of existing similar infrastructures/facilities, potential for interventions, and stakeholders’ consultations. The estimated annual throughput of the pack house in MT is as follows:

Spoke Orange Banana Anjangaon 10000 5000 The arrival pattern of the focus crops in the proposed facility shall be according to the crop season as follows:

Crops Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Orange Banana As shown above, the facility would receive year round supply of fresh fruit and hence, capacity utilization of the pack house would be ensured throughout the year.

148 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 21.2 PROPOSED FACILITIES Facilities have been designed on the basis of requirement of the focus crops, to induce better and efficient handling practices and faster evacuation of fresh produce to the consumption markets so as to ensure better quality to the consumer. While deciding on the capacities, existing facilities, their capacities and utilization has also been taken into account. The proposed new facilities are as follows:

21.2.1 Banana Pack House A pack house with a capacity of 40 MT per day is proposed at each of the spokes. 1. Receiving De- 3 5 handing Area 5 2. Preliminary 3 5 Wash Tank 3. Secondary 7 1 2 3 4 5 6 8 Flotation Tank 5 4. Air Brush, 3 5 Weighing 5. Retail Packing, 3 5 Stickers 6. Box inspection 7. Palletisation Area 8. Dispatch – direct or pre-cooler

It is expected that such a facility would employ 165 workers over two shifts. ƒ Banana incoming in bunches or as precut clusters from farms/aggregation points. ƒ Bunches are cut into hands and crown flower removed (as required). ƒ Water is used as transport mode (pumps with high pressure nozzles on one end are used). ƒ Hands preliminary wash tank; wash eliminates field dirt, latex overruns and pesticide residue. ƒ Before second tanks, each bunch is cut into packing clusters and inspected. ƒ Secondary wash tank; fungicide wash is affected. ƒ At end of secondary wash, bananas are removed and placed into trays onto roller conveyors. Each tray is weighed and holds a packing unit load. ƒ As it moves down the conveyor, they are air dried (hand held nozzle), and stumps can be sealed with paraffin wax. Currently stump sealing practice not prevalent for local market in India. ƒ Thereafter the box packing takes place. Carrier trays are returned to weighing table ƒ After boxing or loading onto transport crates, the palletisation and subsequent staging is done. ƒ Enough space is provided in this area to allow extension of previous lines in future. ƒ The staging area can also later be extended (per need). ƒ While optimally, the boxes can travel on conveyors to spread across width of facility for more packers, to keep cost low, this plan is suggested for initial use. ƒ A separate box making room is provided – where boxes are formed from collapsed cardboard.

149 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Banana Process Flow: ƒ Typically banana would be pre-cooled only for exports and that too in transit containers. ƒ Where bananas are for domestic consumption, they would move to destination ripening centres. ƒ Where bananas are for local consumption, they would move directly to ripening chambers at HUB (possibly on conveyors) from here to ripening room on same facility. As banana pack house utilizes water as transport mode (design pack house uses 50,000 ltrs daily), appropriate water treatment and recharge systems are incorporated. The recycled/treated water can be used for sanitary purposes or stored for field irrigation uses. To introduce cable conveyor system, the receiving area would incorporate a rotating cable array. Here the hands would be unloaded and suspended from the cable, leading to the de-handing workers. The stake is returned on cable for subsequent disposal. Organic waste can be returned to banana fields to be converted to humus. A separate passage bypassing the wash tanks is provided, for pre-selected produce that directly leads to weighing and packaging area.

Technology Description / Facilities

Packaging • Post‐harvest handling facility for quality check and wash. • Sorting and grading basis finger length, shape, colour, etc. • Retail package (branded) or unitized transport units are formed. Ripening • Received in small unitized retail packs from pack house. • Ripening temperature is 15 ºC ‐20 ºC with 90‐95% RH). • Ethylene is generated in the room to give uniform ripening. Storage • Banana storage is at a temp of 13 ºC ‐ 14 ºC for a period of 3 weeks in ethylene free air. • CA storage is practiced for added shelf life up to 6 weeks at 14 ºC. Transport • For domestic purpose, transportation through both modes – 80% by rail wagons and rest of 20% is through road in normal trucks (8‐9MT). • For export, Reefer containers are used for sea transportation.

Aggregation Mechanism for the Pack house The pack house shall receive material from various aggregation points as well as directly from the farms. The pack house will develop an aggregation mechanism and send trucks/pick-ups to the aggregation points for collection of produce. It will establish direct relationship with farmers and provide extension and training support to them for best farming practices, better post harvest handling practices, efficient use of inputs and technology transfer etc. Farmers will be encouraged to come together as producer companies and set up and manage aggregation points wherever possible. Pack house may also invest in developing infrastructure at aggregation points such as platforms, sheds, etc.

150 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Pack House Logistics The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT/10 MT), vans, tractor trolleys, etc. Expected peak arrival of vehicles is about 10 per day. The average out-going vehicles at peak of 10/15 MT capacity will be 5-6 per day. Small capacity field vehicles, load 800kgs to 1MT, are incorporated in the project to serve as feeders from local farms or aggregation points as backward integration. These vehicles can be with insulated body deploying pre-cooled chill packs. This is expected to increase field reach, hence enhancing catchment range.

21.2.2 Ambient Orange Pack house As mentioned earlier, the existing pack houses in the region with pre-cooling and cold store facilities have not been successfully functional mainly due to reasons such as inadequate marketing/export linkages, cheap manual labour, lack of refrigerated vehicles, etc. Hence, considering the present scenario in the region, ambient interventions are proposed keeping in mind the practicality of such interventions. In the ambient packing house for orange following infrastructure will be provided: ƒ Covered Pack shed (open to ambient) with landing area. ƒ Requisite weighing equipment and transaction recording arrangement. ƒ Sorting and grading areas (with tables). ƒ Packaging store and Packing tables. ƒ Waste disposal systems. ƒ Vehicle Parking areas. The capacity of the pack house will be 100 MT/day and it would employ for than 60 labourers for the operations.

Orange Process Flow: Process flow for the orange in the pack house shall be as depicted in the diagram:

Technology Description / Facilities

Quality • Quality of the farm produces shall be assessed at the pack house based on certain criteria Check such as maturity level, size of fruits etc.

Sorting and • Manual sorting and grading is suggested. Sorting and grading tables are proposed in the Grading pack house.

Packing • Packaging tables would be provided for manual packing of orange. Plastic crates would be used for packing.

Transport • Produce shall be transported in normal trucks of 10/15 MT capacity.

The ambient pack house will also have aggregation mechanism similar to the banana pack house. Here, the average number of incoming vehicales at peak season would be 20 per day. The average out-going vehicles per day at peak season would be 8-9 per day.

151 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 21.2.3 Banana Ripening Facility A banana ripening facility is proposed. Capacity of the ripening chamber will be 10 MT per day. The ripening chamber can also be used for other fruits such as mango, if required. Ripening would be done using ethylene as the catalyst (see Annexure for further technical details). Ethylene generators would be utilised for appropriate dosing of the catalyst. The Banana ripening facility could adjoin a separate receiving and de-handing shed to allow for locally sourced direct farm produce to be input for local ripening requirements. A waste disposal area to cater to ripening room is specially designated. Material handling pallet mover is provided for the daily operations. The receiving shed is covered to protect from direct sunlight and weather. Though only one chamber will output daily, sufficient space is provided to cater for dispatch staging as well as incoming marshalling of the produce. The ripening facility is envisaged to output into smaller vehicles for tertiary dispatch and a separate designated parking lot for the same is designed.

21.2.4 Dry Warehouse A dry warehouse of 2000 MT capacity is also proposed. It will be used for storage of pulses which is abundantly produced in catchment of cluster. The warehouses would plan for sufficient parking and eased traffic flow layout along with waste disposal areas.

21.2.5 Other facilities There will be other facilities/amenities such as: ƒ Business Centre ƒ Parking Area ƒ Canteen ƒ Weigh Bridge ƒ Water Supply Facilities ƒ DG Rooms ƒ Solid Waste Management Area ƒ Other Amenities

152 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

22 SPOKE: AKOLA

Akola has been identified as a spoke due to its strategic location in the middle of a major pulses and soyabean growing region. It is also well connected by road and railway network to Mumbai, Pune, Kolhapur, Nagpur, Indore and also to distant markets such as Rajkot, Delhi, Kolkata and other cities. The National Highway- 6 which connects Hajira (Surat) to Kolkata runs through Akola. Akola railway junction is situated on Mumbai-Wardha-Nagpur-Howrah railway line.

22.1 FOCUS CROPS AND ESTIMATED THROUGHPUT Akola region is a major producer of pulses such as arhar (pigeon pea), Bengal gram and mung (green gram) and soyabean and it acts as a major trading centre of the same as well. The district produces around 89,000 MT of pulses annually. Since the region does not produce substantial volumes of perishables, pulses and soyabean have been considered as the focus crop for this spoke. The focus crops and estimated throughputs have been identified based on present production in the catchment area, the present capacities of existing similar infrastructures/facilities, potential for interventions, and stakeholders’ consultations. The spoke is targeted to handle less than 1% of the total production in the catchments, which would ensure financial viability of the project. The focus crops and the estimated annual throughput of the spoke in MT are as follows: Arhar Bengal Gram Moong Soyabean 3500 2500 1000 3000 The arrival pattern of the focus crops for the spoke will be as follows:

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Arhar Bengal Gram Moong Soyabean

22.2 PROPOSED FACILITIES The region has a shortage of dry warehouses and the farmers/traders/millers face a shortage of storage facilities during peak season. Moreover, there are almost no modern warehouses in the region with proper de-humidification facilities, ventilation system or vermin proof guards. Also, the existing warehouses are all conventional in nature with no proper de-humidification facilities, ventilation system or vermin proof guards. Most of the buildings observed may not have passed a HACCP certifying process. Moreover, there are very few modern grading and packaging facilities in the region. Considering these aspects, the following facilities are proposed in the spoke.

153 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 22.2.1 Dry Warehouse A modern dry warehouse of 5000 MT is proposed at the spoke. It will be used for storing of mainly arhar, bengal gram, moong and soyabean depending on the season and demand.

22.2.2 Ambient Packing Shed In the ambient packing shed following infrastructure will be provided: ƒ Covered Pack shed (open to ambient) with landing area. ƒ Requisite weighing equipment and transaction recording arrangement. ƒ Cleaning and grading areas ƒ Packaging area and store ƒ Waste disposal systems. ƒ Vehicle Parking areas. The option of the warehouse facilitating HACCP certification and increasing the value of the product will be explored. To aid operational and process compliances, funds have been allocated towards HACCP certification.

Process Flow: The process flow of the produces handled in the pack house is depicted below:

Technology / Description Facilities

Quality • Quality of the farm produces shall be assessed at the pack Check shed mainly based on moisture content. The ideal moisture content for pulses is 12%. Anything more than that would require drying before further processing.

Drying (if • Drying of the produce would be done using mechanized required) drier

Cleaning/De‐ • Produce will be cleaned of stones, leaves and other stoning impurities in a mechanized cleaner/de‐stoner

Grading • Mechanized grading would be carried out based on size of the grain

Packaging • Manual packing of the produce in 50/100 Kg gunny bags

Pack Shed/Warehouse Logistics Farmers will bring the produce from pack shed/warehouse in various modes of transport such as trucks (4 MT), vans, tractor trolleys, etc. At peak of operations, about 8-10 incoming tucks/vehicles of an average of 4 M capacity will be coming to the pack shed/warehouse. The outbound trucks would include about 3-4 normal trucks of 10/15 MT. Inefficient logistics flow also hampers waste removal and other internal services. The master plan caters to such peak traffic flow as it has been observed that bottlenecks in existing infrastructure were largely due to under capacity parking and road network within facilities.

154 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 22.2.3 Business Centre A Business Centre is proposed in the spoke which will have the administrative rooms. There will also be some rooms/sections which may be rented out to reputed NGOs or local organizations etc as office spaces. Local district level government offices will also ensure utility and regular interaction at location. These could include local passport offices, tax centre, land records office, family planning centre, etc. There will be also other facilities/amenities such as: ƒ Parking Area ƒ Canteen ƒ Weigh Bridge ƒ Water Supply Facilities ƒ DG Rooms ƒ Solid Waste Management Area ƒ Other Amenities Given the nature of establishment, appropriate fire hazard proofing in form of CO2 smothering systems, fire alarms and evacuation routes are also proposed

155 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

23 SPOKE: SANGRAMPUR

Sangrampur has been identified as spoke location due to its connectivity to major consumption areas. Sangrampur falls in Buldhana district and is located at about 90 km from district headquarter and is connected to all thirteen talukas by all weather road. It is connected to state capital by road. It is also located close to important consumption markets like Aurangabad, Pune, Amravati and Nagpur. Apart from the connectivity to the consumption markets, Sangrampur is also proximate to the production clusters of Banana and Lemon. Proposed aggregation points for the spoke and their approximate distance is as follows;

Aggregation Points Focus Crop Approximate Distance (Kms)

Kakanwada Banana 6 Nandura Lemon 40 Khamgaon Lemon 50

23.1 FOCUS CROPS AND ESTIMATED THROUGHPUT Major fruits grown in the catchment of Sangrampur are banana and lemon. Sangrampur block in Buldhana is again the largest banana growing cluster in the district and accounts for about 80% of the total production of the district. Focus crops for the proposed facility in Sangrampur are banana, lemon and pulses. Estimated throughputs have been identified based on production statistics in the catchment area, capacities of existing similar infrastructures/facilities, potential for interventions, and stakeholders’ consultations. The estimated annual throughput of the pack house in MT is as follows:

Spoke Banana Lemon Sangrampur 5000 2000 The arrival pattern of the focus crops in the proposed facility shall be according to the crop season as follows:

Crops Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Banana Lemon As shown above, the facility would receive year round supply of fresh fruit and hence, optimum capacity utilization of the pack house would be ensured throughout the year.

23.2 PROPOSED FACILITIES It is proposed to set up Banana pack house at the spoke. Facilities have been designed on the basis of requirement of the crop, to induce better and efficient handling practices and faster evacuation of fresh produce to the consumption markets so as to ensure better quality to the

156 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT consumer. While deciding on the capacities, existing facilities, their capacities and utilization has also been taken into account. Details of proposed facilities are as follows:

23.2.1 Pack House A pack house with a capacity of 40 MT per day is proposed at the spokes. Various components of proposed facilities in the pack house are outlined below. 1. Receiving 3 5 De-handing Area 5 2. Preliminary 3 5 Wash Tank 3. Secondary 1 2 3 4 5 6 7 8 Flotation 5 Tank 3 4. Air Brush, 5 Weighing 5. Retail 3 5 Packing, Stickers 6. Box inspection 7. Palletisation Area 8. Dispatch – direct or mobile pre- cooler It is expected that such a facility would employ 164 workers over two shifts. The process flow of material handling at the pack house is outlined below. ƒ Banana incoming in bunches or as pre-cut clusters from farms/aggregation points. ƒ Bunches are cut into hands and crown flower removed. ƒ Treatment of hands in preliminary wash tank to eliminates field dirt, latex overruns and pesticide residue. ƒ Secondary wash tank; fungicide wash is affected- Before treatment in secondary tanks, each bunch is cut into packing clusters and inspected. ƒ At end of secondary wash, bananas shall be placed into trays onto roller conveyors.- Each tray is weighed and holds a packing unit load. ƒ As it moves down the conveyor, material shall be air dried, and stumps can be sealed with paraffin wax. ƒ Thereafter the box packing takes place and palletisation and subsequent staging is done. ƒ A separate box making room is provided – where boxes are formed from collapsed cardboard. Diagrammatic representation of process flow is alongside. As banana pack house utilizes water as transport mode (design pack house uses 50,000 litres daily), appropriate water treatment and recharge systems are incorporated. The recycled/treated water can be used for sanitary purposes or stored for field irrigation uses.

157 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT To introduce cable conveyor system, the receiving area would incorporate a rotating cable array. Here the hands would be unloaded and suspended from the cable, leading to the de- handing workers. The stake is returned on cable for subsequent disposal. Organic waste can be returned to banana fields to be converted to humus. A separate passage bypassing the wash tanks is provided, for pre-selected produce that directly leads to weighing and packaging area.

Technology Description / Facilities

Packaging • Post‐harvest handling facility for quality check and wash. • Sorting and grading – On the basis of finger length, shape, colour, etc. • Retail package (branded) or unitized transport units are formed. Ripening • Received in small unitized retail packs from pack house. • Ripening temperature is 15 ºC ‐20 ºC (with 90‐95% RH). • Ethylene is generated in the room to give uniform ripening. Storage • Banana storage is at a temperature of 13 ºC ‐ 14 ºC for a maximum of 3 weeks in ethylene free air. • CA storage is practiced for added shelf life up to 6 weeks at 14 ºC. Transport • For domestic purpose, transportation through both modes – 80% by rail wagons and rest 20% is through road in normal trucks (8‐9MT). • For export, Reefer containers are used for sea transportation.

Pack House Logistics The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, etc except for pulses where produce may also come in trucks of 10 MT capacity. Expected peak arrival of vehicles is about 18-20, which would include following approximate number of vehicles: ƒ Pulses: 7 ƒ Lemon: 10 ƒ Banana: 2 The above number would translate into 10 out-going vehicles at peak. Small capacity field vehicles, with load capacity of 0.8 MT to 1 MT, are incorporated in the project to serve as feeders from local farms or aggregation points as backward integration. These vehicles can be with insulated body deploying pre-cooled chill packs. This is foreseen to increase field reach, hence enhancing catchment range.

Aggregation Mechanism The pack house will establish direct relationship with farmers and provide extension and training support to them for best farming practices, better post harvest handling practices, efficient use of inputs and technology transfer etc. The pack house will develop appropriate aggregation mechanism and send trucks/pick-ups to the aggregation points. Farmers will be encouraged to come together as producer companies and set up and manage aggregation points wherever possible. Pack house may also invest in developing infrastructure at aggregation points such as platforms, sheds, etc

158 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 23.2.2 Banana Ripening Facility A banana ripening facility is proposed. Capacity of the ripening chamber will be 10 MT per day. The ripening chamber can also be used for other fruits such as mango, if required. Ripening would be done using ethylene as the catalyst (see Annexure for further technical details). Ethylene generators would be utilized for appropriate dosing of the catalyst. Where ripening facility is located adjoining the pack house, conveyor rollers are optioned to carry the crates directly to ripening area. The Banana ripening facility could adjoin a separate receiving and de-handing shed to allow for locally sourced direct farm produce to be input for local ripening requirements. A waste disposal area to cater to ripening room is specially designated. Material handling pallet mover is provided for the daily operations. The receiving shed is covered to protect from direct sunlight and weather. Though only one chamber will output daily, sufficient space is provided to cater for dispatch staging as well as incoming marshalling of the produce. The ripening facility is envisaged to output into smaller vehicles for tertiary dispatch and a separate designated parking lot for the same is designed.

23.2.3 Dry Warehouse A dry warehouse of 2000 MT capacity is also proposed. It will be used for storage of pulses which is abundantly produced in catchment area of spoke. The warehouses would plan for sufficient parking and eased traffic flow layout along with waste disposal areas.

23.2.4 Other Facilities Apart from the above, following facilities are proposed in the pack house;

Business Centre Business Centre is proposed to house the administrative block for the market. There will also be rooms/sections which may be rented out to reputed NGOs, companies, grass-root level organizations such as microfinance institutions, etc as office spaces.

Other facilities proposed for this location are: ƒ Canteen ƒ Solid Waste Management Area ƒ DG Room ƒ Water Supply Facility ƒ Parking Area ƒ Utilities

159 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

24 SPOKE: JALNA

Jalna has been identified as the spoke for the Amravati Aurangabad Integrated Value Chain. It has been identified as spoke because it’s major production as well as marketing centre of sweet lime. For sweet lime, Jalna has established trade linkages with Delhi, Jaipur and other markets of the country. Apart from the connectivity to the consumption markets, Jalna is well connected with state highway and other link roads to production clusters. The railway station is at Jalna itself. The aggregation points identified for the spoke at Jalna and their approximate distance from the spoke are:

Aggregation Points Distance from the spoke in Kms Ghansavangi 80 Ambad 50 Badnapur 20 As evident from above, the aggregation points are located within a radius of 100 km from Jalna. The aggregation points have been identified keeping in view the time required for evacuation of sweet lime after harvest.

24.1 FOCUS CROP AND ESTIMATED THROUGHPUT As mentioned in the previous chapter, Amravati Aurangabad region accounts for 87% of the total sweet lime production of Maharashtra. Out of this, Jalna district alone produces 0.26 million MT of sweet lime annually. It accounts for around 40% of the total sweet lime production of the state. Ghansawangi, Ambad and Badnapur are the major taluks under sweet lime cultivation in the district and they are located in a radius of around 80-100 km from Jalna. The estimated throughput of the spoke has been identified based on the present production in the catchment areas, potential for interventions and stakeholders’ consultations. The estimated annual throughput of the spoke in MT will be as follows:

Spoke Throughput of Sweet lime in MT Jalna 12000 The arrival pattern of the focus crop at the spoke will be as follows:

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sweet Lime As evident from above, Sweet lime is available for around 8 months; hence the spoke at Jalna will be operational for around 250 days in a year.

24.2 PROPOSED FACILITIES The spoke at Jalna has been designed on the basis of requirement of the focus crop. Sweet lime is treated as a bulk horticulture produce in the region and limited sorting/grading is

160 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT carried out at market end. The produce is handled manually throughout the supply chain and there is no facility available for the focus crop in this region. As the produce is currently handled through the ambient supply chain, hence introduction of cold chain infrastructure will not be viable because of increased cost. The objective is to improve current handling practice and quicker evacuation to the consumption markets. It is also envisaged that the pack house would serve as a pilot for many more such initiatives. Facility design caters and complies with EHS regulations and provides segregated amenities – by gender and working zones. Following facility has been proposed at the spoke:

24.2.1 Ambient Pack House An ambient pack house is proposed to be set up for handling of 80 TPD of sweet lime. In the ambient pack house, following infrastructure will be provided: ƒ Covered Pack shed (open to ambient) with landing area. ƒ Requisite weighing equipment and transaction recording arrangement. ƒ Sorting and grading areas (with tables). ƒ Packaging store and Packing tables. ƒ Waste disposal systems. ƒ Vehicle parking area.

Ambient Pack House Process flow: The process flow of sweet lime handled in the pack house is depicted below:

Facilities Description

Quality Check • Quality assessment of sweet lime on the basis of size, ripening stage etc.

Sorting and • Manual sorting and grading is suggested, which is cost effective. Grading • Sorting and grading tables are proposed in the pack shed.

Packing • Packaging tables to be provided in the pack sheds. • Manual packing of sweet lime in crates. The packaging material may change depending upon the requirements of the destination market. Dispatch • The same area would be offloaded on a daily basis. • The packaged produce would be staged on the raised platform. • Produce is expected to be transported in trucks of 15 MT capacities.

Aggregation Mechanism The spoke will develop an aggregation mechanism for assured supply of produces to the pack house. As 80% of the sweet lime is sold at farm itself, hence the pack house owner will try to establish direct relationship with farmers. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment

161 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT areas. Since farmers are unwilling to take marketing risk because of price fluctuation and fewer selling scope for them, setting up of pack house in the region will provide assured market to the sweet lime growers. The pack houseowner may also invest in setting up of basic infrastructure such as shed at the aggregation points. The produces will be collected through pick up vans/trucks from various points of aggregation.

Logistics At the peak of operations, the daily inbound logistics to the spoke would be 16 and outbound logistics would be 6. Sweet lime will come to the spoke in various modes of transport such vans, tempos, trucks etc. and the onward dispatch to destination markets will be through trucks of 15 MT capacities.

24.2.2 Other facilities Apart from the pack house, other facilities proposed in the spoke are: ƒ Business Centre ƒ Parking Area ƒ Canteen ƒ Weigh Bridge ƒ Water Supply Facilities ƒ DG Rooms ƒ Solid Waste Management Area ƒ Other Amenities

162 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

25 SPOKE: PAITHAN

Paithan has been identified as the spoke for Amravati Aurangabad integrated value chain. Paithan is well connected by road to major consumption markets such as Mumbai, Delhi etc. and it is also proximate to the production clusters of sweet lime and Mango. The nearest airport and railway station is located at Aurangabad, which is around 80 km away from Paithan. As Paithan is well connected to production areas, mobile collection centres are proposed for aggregation of produces. The identified aggregation points are: Crops Taluka Aggregation Points Approximate Distance (Kms) Sweet Paithan Apegaon, Pachod, Gharegaon, Ektuni, Katpur, Located in a radius of lime Balanagar, Rahatgaon, Dawarwadi, Thergao, Sonwadi 30‐35 kms Aurangabad Pimpriraja, Adul, Devgaon, Kachner, Nilajgaon Located in a radius of 60‐70 kms Mango Paithan Bidkin, Sonwadi, Isarwadi, Logaon, Prabhuwadgaon, Located in a radius of Dhakefal, Dhorkin 30‐35 kms Aurangabad Pimpriraja, Devgaon, Kachner, Located in a radius of 60‐70 kms

25.1 FOCUS CROPS AND ESTIMATED THROUGHPUT As mentioned earlier, mango and sweet lime are the major crops grown in the catchments of the proposed spoke. Paithan and Aurangabad talukas account for around 80% of the total mango production of the state. Kesar mango, which is a specialty of this region, is grown in abundance in both the talukas. Paithan is not only a production centre of these crops but also an established marketing hub for domestic market. As mentioned in the previous chapter, a mango export facility centre, located at around 60kms from Aurangabad, is operational and it has a capacity to pre-cool 5 MT/batch of mango; hence similar capacity has been proposed for the mango pack house and accordingly the pack house is expected to target 4000 MT of mango. The focus crops and estimated throughputs have been identified based on the present production in the catchment area, the present capacities of existing similar infrastructures/facilities, potential for interventions, and stakeholders’ consultations. The estimated annual throughput of the pack house in MT is as follows:

Spoke Sweet Lime Mango Paithan 12000 4000 The arrival pattern of the focus crops for the spoke will be as follows:

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Mango Sweet Lime The arrival pattern shows that the spoke will be operational for about 8 months in a year.

163 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 25.2 PROPOSED FACILITIES The spoke at Paithan has been designed on the basis of requirements of the focus crops. The objective is to improve the current handling practices, enhance shelf life and faster evacuation to the consumption markets. The capacity of the proposed facilities has been planned taking into account the existing facilities, their capacities and utilization. Facility design caters and complies with EHS regulations and provides segregated amenities – by gender and working zones. Following facilities has been proposed at the spoke:

25.2.1 Pack House The pack house will have cold chain infrastructure as well as space for ambient handling for produce. The cold chain infrastructure will cater to kesar mango, which is regarded as a premium fruit. Keeping synergy with existing ambient supply chain practices, infrastructure space is also provided that will cater to sweet lime and remaining volumes of mango. As sweet lime is treated as a bulk horticultural produce and currently handled through the ambient supply chain, hence introduction of cold chain infrastructure for sweet lime will not be economically viable. Facility design caters and complies with EHS regulations and provides segregated amenities – by gender and working zones.

Cold chain: Mango The peak arrival of mango has been estimated to be 50 TPD, out of which 30% i.e. 15 MT will pass through the cold chain. The basic sub components of the pack house will be as follows: ƒ Sorting and grading facilities o For mangos – complete mechanized line: ƒ De-sapping racks. ƒ Hot water dip/vapor treatment system. ƒ Waxing and drying system. ƒ Grading system. ƒ Inspection and Packaging area – tables standard stainless steel type. ƒ Weighing and unitization area – certified weighing machines and palletisation equipment. ƒ Buffer Store (Ante room) – holding area for 24 pallets pending cold application. ƒ Pre-cooler – Forced Air Pre-coolers: capacity 5 MT, each running 3 batches in 18 hour period. In peak season, more than 15 MT will be pre-cooled daily through these pre-coolers. ƒ Cold Store - 25MT capacity (daily output plus 50% stock overrun to cater for transport delays). The pre-coolers can also be used to supplement contingency storage. ƒ Both pre-cooler and cold store refrigeration will cater to 2 to 12 ºC temperatures ƒ Staging Area (Ante Room) – 24 pallets pending dispatch/transport. ƒ Material handling equipment – pallet movers, trolleys. ƒ Waste disposal systems. ƒ Vehicle waiting areas. ƒ Crate washing system.

164 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Mango Process Flow: Cold Chain The process flow for mango handled through cold chain in the pack house is depicted.

Technology / Facilities Description

Quality Check • The mango that comes from the field will undergo quality check.

De-sapping • Mangoes will be placed on de‐sapping racks for removal of latex

Washing and Drying • The fruit will be washed and air dried.

Sorting and Grading • Manual sorting and grading of mango is proposed. • Mangoes to be packed in CFB boxes of varying capacities depending upon the requirement of the destination markets. Boxes will then be palletized. o Pre-cooling • Pre cooling will be done at 12 C at 90% RH by forced air method.

o Cold Storage • Storage is done at 12‐15 C, 85‐90% RH for 2‐3 weeks.

Transport • For transportation of the produce, refrigerated vehicles will be used.

In the long run, farmers may be educated to reduce pre cooling time and to carry out de- sapping at field level itself. This can be done by keeping mangoes in water troughs (bore well water, which is 10-15 degree below ambient) at farm itself, pending transport and thus removing field heat (reducing pre-cooling time) and washing off latex which minimizes chances of latex burns. Where hot dip or vapour treatment is needed (recommended for mango) 52 ºC for 5 mins, solar thermal panels with electric heaters as back up can be used.

Ambient Supply Chain: Mango The remaining volumes of mango that does not pass through the cold chain will be handled in ambient handling yard and only sorting, grading and packing will be carried out. In the pack house adjoining the cold chain facility, following infrastructure will be provided: ƒ Covered Pack shed (open to ambient) with landing area. ƒ Requisite weighing equipment and transaction recording arrangement. ƒ Sorting and grading areas (with tables). ƒ Packaging store and Packing tables. ƒ Waste disposal systems. ƒ Vehicle Parking areas. In season, about 35 MT of mango will be handled in ambient temperature in the pack house. For ambient handling, a separate space will be provided in the pack house. Here, after

165 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT receiving the produce from field they will be sorted, graded and packed in CFB boxes manually and dispatched to markets in normal trucks of 9-10 MT capacities.

Aggregation Mechanism: Mango The spoke will develop an aggregation mechanism for assured supply of produces to the pack house. The produces will be collected through pick up vans/trucks from various points of aggregation. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment areas.

Logistics: Mango The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, etc. At the peak of operations, around 10 vehicles are expected to arrive at the spoke on daily basis. The total number of outgoing vehicles would be 5, out of this 2 would be refrigerated and 3 would be normal trucks.

25.2.2 Sweet lime Ambient Pack House An ambient pack house is proposed to be set up for handling of 80 TPD of sweet lime. In the ambient pack house, following infrastructure will be provided: ƒ Covered Pack shed (open to ambient) with landing area. ƒ Requisite weighing equipment and transaction recording arrangement. ƒ Sorting and grading areas (with tables). ƒ Packaging store and Packing tables. ƒ Waste disposal systems. ƒ Vehicle parking area.

Ambient Pack House Process flow: The process flow of sweet lime handled in the pack house is depicted below:

Facilities Description

Quality Check • Quality assessment of sweet lime on the basis of size, ripening stage etc.

Sorting and • Manual sorting and grading is suggested, which is cost effective. Grading • Sorting and grading tables are proposed in the pack shed.

Packing • Packaging tables to be provided in the pack sheds. • Manual packing of sweet lime in crates. The packaging material may change depending upon the requirements of the destination market. Dispatch • The same area would be offloaded on a daily basis. • The packaged produce would be staged on the raised platform. • Produce is expected to be transported in trucks of 15 MT capacities.

166 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Aggregation Mechanism: Sweet Lime The spoke will develop an aggregation mechanism for assured supply of produces to the pack house. As 80% of the sweet lime is sold at farm itself, hence the pack house owner will try to establish direct relationship with farmers. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment areas. Since farmers are unwilling to take marketing risk because of price fluctuation and fewer selling scope for them, setting up of pack house in the region will provide assured market to the sweet lime growers. The pack house owner may also invest in setting up of basic infrastructure such as shed at the aggregation points. The produces will be collected through pick up vans/trucks from various points of aggregation.

Logistics: Sweet Lime At the peak of operations, the daily inbound logistics to the spoke would be 16 and outbound logistics would be 6. Sweet lime will come to the spoke in various modes of transport such vans, tempos, trucks etc. and the onward dispatch to destination markets will be through trucks of 15 MT capacities.

25.2.3 Dry Warehouse A dry warehouse of 2000 MT capacity is proposed, which will be used for storage of pulses. The warehouses would plan for sufficient parking and eased traffic flow layout along with waste disposal areas.

25.2.4 Other facilities Apart from the pack shed, other facilities proposed in the spoke are: ƒ Business Centre ƒ Parking Area ƒ Canteen ƒ Weigh Bridge ƒ Water Supply Facilities ƒ DG Rooms ƒ Solid Waste Management Area ƒ Other Amenities

167 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

26 FINANCIAL ANALYSIS

26.1 AURANGABAD‐AMRAVATI IVC

26.1.1 Project Details The facilities/infrastructure proposed in the spokes for the IVC and its handling capacities as well as area (in sq meters) are summarized below:

Facilities Paithan Warud Anjangaon Akola Sangrampur Jalna 2000 MT 2000 MT 2000 MT 5000 MT 2000 MT ‐ Dry Warehouse (920) (920) (920) (2300) (920) 100 100 Orange Packhouse ‐ MT/Day MT/Day ‐ ‐ ‐ (1700) (1700) 40 MT/Day 40 MT/Day Banana Packhouse ‐ ‐ ‐ ‐ (1350) (1350) 10 MT/Day 10 MT/Day Ripening Chamber ‐ ‐ ‐ ‐ (527) (527) Mango Packhouse‐Cold 15 MT/Day ‐ ‐ ‐ ‐ ‐ Chain (700) Mango Packhouse‐ 35 MT/Day ‐ ‐ ‐ ‐ ‐ Ambient (603) 80 80 Sweet lime Ambient MT/Day ‐ ‐ ‐ MT/Day Packhouse (500) (500) 35 MT/Day Grain pack shed (750) To support the operations of above facilities, the spokes will also have adequate basic infrastructure and other support infrastructure like power and water supply systems, ETP, solid waste disposal facility, administration block/business centre, canteen, parking space, etc. A list of these basic and support infrastructure facilities (spoke wise) is given below: Basic and Other Unit Support Infrastructure Paithan Warud Anjangaon Akola Sangrampur Jalna Administrative Sq. m building/business centre 300 300 300 300 300 300 Parking Sq. m 810 810 1620 810 810 810 Canteen Sq. m 50 50 100 50 100 50 Power Supply KVA 200 130 260 150 210 50 Water Supply LPD 5550 3550 63050 3550 57950 4450 Total 1160 1160 2020 1160 1210 1160

26.1.2 Project Cost The cost estimates of plant and machinery are based on the information obtained from equipment suppliers including quotations given by them for similar facilities. The civil work and basic infrastructure costs have been worked out by architects/engineers based on layout plans and as per the industry standards. Finally, the costs of land and land development have been assessed mainly based on interactions with industry/stakeholders in the identified locations. The component wise costs of the project are given below: Item Sr. No. Description Amount (Mn Rs) Amount (Mn $) A 1 Land 0.00 0.00

168 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 2 Land Development 16.00 0.34 3 Buildings 122.61 2.60 4 Plant Machinery & Equipments 96.25 2.04 5 Utilities & other fixed assets 8.15 0.17 Sub Total (A) 243.01 5.16 B Contingencies 20.78 0.44 C Pre‐operative expenses 12.15 0.26 D Margin Money for Working capital 1.14 0.02 Total Project Cost (A+B+C+D) 277.08 5.88

Land Keeping in view the maximum built up area of about 60% and open area of about 40%, the total land requirement for the project is estimated to be about 6.4 Ha. The breakup of land requirement for the spokes is given below.

Location Area (Ha) Paithan 1.0 Warud 1.0 Anjangaon 1.7 Akola 1.1 Sangrampur 1.1 Jalna 0.5 Total IVC 6.4 The land cost has not been considered as part of project cost because according to the implementation framework suggested the land will be given by the state government..

Land Development Cost of land development includes boundary wall, road, water drainage, parking etc. The cost of development is taken as Rs 2.5 mn/Ha.

Buildings The estimated costs of construction for various buildings in the projects are given below: Amount in Rs millions Facility Paithan Warud Anjangaon Akola Sangrampur Jalna IVC Orange Packhouse ‐ 10.20 10.20 ‐ ‐ ‐ 20.40 Warehouse 5.98 5.98 5.98 14.95 5.98 ‐ 38.87 Banana Packhouse ‐ ‐ 8.10 ‐ 8.10 ‐ 16.20 Ripening Chamber ‐ ‐ 2.76 ‐ 2.76 ‐ 5.52 Mango Packhouse‐Cold Chain 5.60 ‐ ‐ ‐ ‐ ‐ 5.60 Mango Packhouse‐Ambient 3.60 ‐ ‐ ‐ ‐ ‐ 3.60 Packhouse‐Ambient 3.00 ‐ ‐ ‐ 3.00 6.00 Packshed‐ Ambient 4.50 4.50 Business Centre 2.70 2.70 2.70 2.70 2.70 2.70 16.20 Miscs 0.80 0.80 1.68 0.80 1.00 0.64 5.72 Total Buildings 21.68 19.68 31.42 22.95 20.54 6.34 122.61 The building construction rate for mango packhouse (cold chain) has been estimated to be Rs. 8000/sq. m. Rate for ambient packhouse for orange and sweet lime and ambient packshed for grains has been estimated to be Rs. 6000/sq. m. The construction rate for banana packhouse and dry warehouse have been assumed at Rs. 6000/sq. m and Rs. 6500/sq. m respectively. The lumpsum cost of pre-fabricated banana ripening chamber of 40 MT capacity (which is equivalent to 10 MT/day ripening capacity) having an area of 280 sq.m has been taken as Rs. 2.76 million. The rates are in tune to the industry standards and have been verified against quotations received from different industry players.

169 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT In case of non technical infrastructure, the construction rate has been estimated between Rs. 8000 to Rs. 9000 per sq. m for facilities such as administrative building/business centre, canteen etc.

Equipments The break-up of the estimated costs of major machineries is provided below: Table: Machinery Cost Amount in Rs millions Plant Machinery and Equipments Paithan Warud Anjangaon Akola Sangrampur Jalna IVC Ripening equipments ‐ ‐ 4.20 ‐ 4.20 ‐ 8.40 Banana Packhouse equipments ‐ ‐ 3.00 ‐ 3.00 ‐ 6.00 Refrigeration equipments 2.50 ‐ ‐ ‐ ‐ ‐ 2.50 Mango Grading line 8.00 ‐ ‐ ‐ ‐ ‐ 8.00 Grains‐Cleaning, grading line ‐ ‐ ‐ 1.50 ‐ ‐ 1.50 Weigh Bridge‐40 MT 2.50 2.50 2.50 2.50 2.50 2.50 15.00 DG sets 0.90 0.50 1.20 0.50 1.00 0.20 4.30 Crates 1.88 3.75 5.63 ‐ 1.88 ‐ 13.13 Pallets 1.13 ‐ 3.38 ‐ 1.13 ‐ 5.63 Refer trucks‐7 mt 6.00 ‐ ‐ ‐ ‐ ‐ 6.00 Normal Pickup vehicles 0.90 1.50 2.40 1.50 1.20 1.50 9.00 Normal trucks‐15 MT 2.40 2.40 4.80 2.40 2.40 2.40 16.80 Total Plant Machinery & Equipments 26.20 10.65 27.10 8.40 17.30 6.60 96.25 The cost wise major components of the project are normal pickup vehicles and trucks (Rs. 25.80 mn), weigh bridges (Rs. 15 mn) and crates and pallets (Rs. 18.46 mn). The rates for plant, machinery and equipments are comparable to the industry standards and have been verified with the quotations from different suppliers.

Miscellaneous Fixed Assets / Utilities The breakup of the estimated cost of the miscellaneous fixed assets and utilities is provided below: Amounts in Rs millions Misc Fixed Assets Paithan Warud Anjangaon Akola Sangrampur Jalna IVC Power supply system 1.20 0.50 1.50 0.50 1.20 0.20 5.10 Water supply system 0.50 0.15 0.50 0.15 0.50 0.10 1.90 IT system 0.20 0.10 0.20 0.10 0.20 0.05 0.85 Furniture 0.05 0.05 0.05 0.05 0.05 0.05 0.30 Total Misc Fixed Assets 1.95 0.80 2.25 0.80 1.95 0.40 8.15 The power load for the total project has been estimated to be 1000 KVA. DG sets have been taken for each spoke and the capacities vary from 50 KVA to 250 KVA depending on the requirement. The project would require 0.14 million LPD of water for the operations. The

170 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT cost of water supply has been distributed among the locations in proportion to their water requirements.

26.1.3 Preliminary & Pre‐operative Expenses The provision towards preliminary & pre-operative expenses includes expenditure towards preliminary expenses like salaries & administrative expenses, travel expenses, market development expenses, interest during construction period etc. It is also assumed that the project will be commissioned over a period of one year. The interest during construction period is capitalized in the project cost. Pre-operative expenses other than interest during construction period are assumed to be 5% of cost of fixed assets.

Working Capital Requirement As the project is meant to create facilities and offer them to various users on rental basis, the WC requirement is assumed to be operating costs like management, maintenance, insurance, power and water. As most of these expenses and the rent receipts are monthly in nature, so to cover these expenses the requirement of working capital is calculated by considering the fund requirement for 30 days.

Contingencies The contingencies related to project implementation are calculated as below: Physical Price Contingencies Contingencies Contingencies Contingencies Contingencies (Rs Mn) (Mn $) Land 0.0% 0.0% 0.00 0.000 Land Development 5.0% 8.3% 1.39 0.030 Buildings 5.0% 8.3% 10.69 0.227 Plant Machinery & Equipments 0.0% 8.3% 7.99 0.170 Utilities & Other Assets 5.0% 8.3% 0.71 0.015 Total 20.78 0.441 The price contingencies are based on the whole sale price index for FY 2009.

26.1.4 Means of Finance The cost of the project is proposed to be financed through a mix of equity and project grant from State government including ADB funds. As mentioned in the implementation framework the promoter’s equity has been taken at 30% of the project cost and the remaining funds required will be contributed by state government as project grant. The table below shows the funding pattern for the project: Particulars Amount Amount Share Rs Million Million $ Asian Development Bank 135.77 2.88 49.0% State Government 58.19 1.23 21.0% Equity‐Private Investor 83.12 1.76 30.0% Total 277.08 5.88 100.0%

171 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 26.1.5 Key Operating Assumptions The key operating assumptions underlying the project’s business plan are described below.

Operating Cost Assumptions: 300 working days per annum are assumed for operations. Power & Fuel Costs The total connected load of the facilities for all locations is estimated at 1000 KVA. The power tariff has been assumed at the prevailing rate of Rs 1.30 per unit for agro based industry in Maharashtra. Average daily requirement of power would be about 3600 KWH. The details of power load assumptions for the facility are given below: Facilities Assumption Orange/ Sweetlime Packhouse 1 KVA/ 60 sqm Warehouse 1 KVA/ 92 sqm Banana Packhouse 1 KVA/ 45 sqm Ripening Chamber 50 KVA/ 40 MT Mango Packhouse‐Cold Chain 50 KVA/ 15 MT Mango Packhouse‐Ambient 1 KVA/ 40 sqm Packsheds‐Grains (including grading line) 75 KVA/ 35 MT Business Centre & Misc facilities 1 KVA/ 30 sqm The table below shows the location wise power requirement: Locations Power Load (KVA) Warud 130 Anjangaon 260 Akola 150 Sangrampur 210 Jalna 50 Paithan 200 Total 1000 Taking into account the current power supply scenario in the state it has been assumed that the facilities would run on DG sets for about 2 hrs/day. The average fuel cost for DG set is assumed to be Rs. 35/Lt. Water Cost Daily requirement of water is estimated to be 140 KL/day for all the locations combined. The charges are assumed to be Rs 40/KL. Employee Cost The employee cost has been estimated by considering the man power requirement for managing the facility. The project will be managed by the developer/SPV, who will maintain and operate the facilities in the project. This includes management and 24 hour maintenance of the plant and machineries, management of the canteen, business centre, security, etc. So, a team of technical engineers, support staffs and security personals will be required. The details of manpower and their average costs are given in the following table:

Grade/ Employee Number Salary/ month (Rs) Managers 6 20000 Technical Manager 7 20000 Operators 12 10000 Maintenance 12 6000 Account 6 8000 Security 18 4000 Support Staff 18 3000 Total Employee Cost (Per Month) 79

172 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT *Increment in salary is assumed at 5% p.a for 1st five years of operations. Cost of Maintenance The cost of maintenance has been assumed as 1.0% of value of plant & machinery and miscellaneous fixed assets. The maintenance cost will increase by 2.5% every year due to aging of assets. Cost of Insurance The cost of insurance has been assumed as 1.0% of value of plant & machinery and miscellaneous fixed assets. Admin & Marketing Overheads The developer will be responsible for only the management and maintenance of the facilities without any own operations. However, initial tie ups are needed for better capacity utilization of the facilities. Most of the promotional/marketing expenses will be incurred up front with only small recurring expenses afterwards. Hence during operations, marketing and business development expenses will not be significant for the project. The major overheads for the project will be traveling costs, statutory (like audit etc.) costs and communication expenses etc. So, the admin & selling overhead costs have been assumed @ 2.0% of revenue in line with the industry norms for such facilities.

Financial Assumptions Taxes Income Tax rate is assumed to be 33.99% flat (Prevailing Corporate Tax Rate). Income tax is calculated on PBT after adjusting for the difference between the depreciations calculated according to Companies Act, 1956 and Income Tax Act, 1961. Depreciation Rates Depreciation has been calculated by straight-line method, as per the Companies Act, 1956, for book purpose, whereas for tax purpose (As per Rule-5 of Income Tax Act, 1961), written down value method is employed. The rates of depreciation are in tune to the rates that are used in cold storage and warehousing industry. The depreciation rates used for different assets are given below:

Depreciation Rates Book Depr Tax Depr Plant & Machinery 10.34% 15.00% Miscellaneous Fixed Assets 10.34% 15.00% Buildings 3.34% 5.00% The plant & machinery includes refrigeration and cooling systems used for operation of facility, sorting-grading equipments, crates, pallets etc. The noncore equipments like water supply system, transformers etc are included in miscellaneous fixed assets. Buildings include, building for ripening facility, ambient and cold pack-houses, dry warehouse storages, business center, canteen etc.

Revenue Assumptions Rental assumptions Based on the discussion with market players (service providers, food processors, users, traders and wholesalers) the rental charged for various facilities is tabulated below:

Facilities Charges/ Unit Unit of Charge Ambient Packhouses‐Orange/Sweetlime 60 Rs/sqm/month

173 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Banana Packhouse 1000 Rs/sqm/month Banana Ripening Facility 1400 Rs/MT Mango Packhouse‐Cold Chain:‐ Sorting/Grading/Packaging charges 1000 Rs/MT Cold Store & Pre‐cooling charges 600 Rs/MT Mango Packhouse‐Ambient 60 Rs/sqm/month Warehouse 100 Rs/sqm/month Business Centre 100 Rs/sqm/month Crates 7 Rs/cycle/crate Weighbridge 2 Rs/MT Logistics 10 Rs/Km Grain Packshed Sorting, grading, cleaning, Packing charges 500 Rs/MT The rentals charged for these facilities are comparable to the prevailing market rates.

Capacity Utilization The estimated capacity utilizations are shown in the table below. Year Capacity utilization Year I 40% Year II 60% Year III and onwards 80% The capacity utilizations have been assumed conservatively, starting at 40% in the first year.

26.1.6 Financial Performance The estimated financial projections for the project are tabulated below: Income Statement: (Rs Million)

Year 1 2 3 8 12 16 20 Capacity Utilization 40% 60% 80% 80% 80% 80% 80% Revenue Rental‐Orange/lime Pack houses 0.24 0.37 0.49 0.49 0.49 0.49 0.49 Rental‐Banana Pack houses 7.20 10.80 14.40 14.40 14.40 14.40 14.40 Rental‐Ripening chambers 3.12 4.68 6.24 6.24 6.24 6.24 6.24 Rental‐Mango pack house‐cold chain 0.45 0.68 0.90 0.90 0.90 0.90 0.90 Rental‐Mango pack house‐Ambient 0.02 0.03 0.04 0.04 0.04 0.04 0.04 Rental‐Warehouses 1.72 2.42 3.11 3.44 3.44 3.44 3.44 Rental‐Crates 7.35 11.03 14.70 14.70 14.70 14.70 14.70 Rental‐ Logistics 16.92 24.75 32.58 33.84 33.84 33.84 33.84 Rental‐cleaning grading line ‐ Grains 1.35 1.69 2.03 2.70 2.70 2.70 2.70 Rental‐ Business centre 1.20 1.77 2.33 2.40 2.40 2.40 2.40 Rental‐Pre‐cooler 0.27 0.41 0.54 0.54 0.54 0.54 0.54 Rental Pack shed 0.04 0.05 0.07 0.07 0.07 0.07 0.07 Weighbridge 0.07 0.11 0.15 0.15 0.15 0.15 0.15 Revenue 39.96 58.77 77.58 79.91 79.91 79.91 79.91

Expenses Power & Fuel 1.24 1.86 2.49 2.49 2.49 2.49 2.49 Employee Cost 7.51 7.89 8.28 9.59 9.59 9.59 9.59 Water cost 0.66 0.99 1.33 1.33 1.33 1.33 1.33 Maintenance cost 2.43 2.49 2.55 2.89 3.19 3.52 3.88 Insurance 2.19 1.86 1.58 0.70 0.37 0.19 0.10 Admin & Selling Overheads 0.80 1.18 1.55 1.60 1.60 1.60 1.60 Total Expenses 14.84 16.27 17.78 18.59 18.55 18.71 18.98

174 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

EBITDA 25.12 42.49 59.79 61.33 61.36 61.21 60.93 Interest Long Term Debt (LTD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Interest Working Capital borrowing 0.46 0.63 0.80 0.83 0.83 0.83 0.83 Depreciation 16.90 16.90 16.90 16.90 4.65 4.65 4.65 PBT 7.76 24.96 42.09 43.60 55.88 55.73 55.45 Tax 0.00 0.00 10.56 16.35 18.38 19.37 19.83 Net Profit (PAT) 7.76 24.96 31.53 27.24 37.51 36.35 35.62

Cash flow to government 7.99 11.75 15.52 15.98 15.98 15.98 15.98 Net profit to private developer ‐0.23 13.21 16.02 11.26 21.52 20.37 19.64 In the above table, it is seen that in the first year of operations with 40% capacity utilization, the revenue from the project is Rs. 39.96 millions which increases to Rs. 77.58 millions at capacity utilization of 80% from sixth year onwards. The net income from the project during 1st year of operation is expected to be Rs. 7.76 millions (at 40% capacity utilization).

Major Financial Performance Indicators:

Year 1 2 3 4 5 6 7 EBITDA Margin 62.87% 72.31% 77.08% 77.08% 77.02% 76.58% 76.67% PAT margin 19.42% 42.47% 40.65% 38.98% 37.59% 36.01% 34.98% Debt‐Equity Ratio 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Debt to EBITDA ratio 0.14 0.11 0.10 0.10 0.10 0.10 0.10 Interest Coverage Ratio 54.33 67.11 74.32 74.33 74.22 73.53 73.68 DSCR 54.33 67.11 74.32 74.33 74.22 73.53 73.68 Average DSCR 71.43 Project IRR 16.55% The above table shows the operational and financial efficiencies of the project. The project is able to achieve an operating margin (EBITDA Margin) of about 62% from the first year of operations itself. From fourth year onwards, the project is able to convert about 35% of its revenue into net profit. The project IRR is coming around 16.55%, which seems attractive from investor point of view.

175 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

27 ECONOMIC ANALYSIS: IVC AMRAVATI‐AURANGABAD

The need for economic analysis of any project is to assess various intangible costs and benefits which are normally not captured in the financial analysis. Any decision on desirability or otherwise of a project would therefore require to take into consideration such costs and benefits and then arrive at a net impact of the project on the economy as a whole. This is more relevant for projects which have a bearing on large segments of the society such as farmers. The IVCs have been proposed mainly to plug the gaps and deficiencies along the agricultural value chains and the aim is to enlarge the size of the value chains in terms of greater revenue and ensuring a larger share to farmers. The major benefits therefore expected would be in terms of better price realization, wastage reduction and employment generation. The major costs considered are opportunity cost of factors of production viz. land, capital and labour. The above costs and benefits have not been captured in the financial analysis as major assumptions there include all facilities being developed by private developers for leasing out to actual users. Thus, financial analysis has taken revenue in form of rentals only which do not truly reflect above gains. Also, as land for all facilities is to be provided by state governments on BOT model, financial analysis does not include cost of land even as these land parcels may have large opportunity cost to the economy as a whole.

27.1 METHODOLOGY AND ASSUMPTIONS The economic analysis is aimed at calculating EIRR which has been done by identifying the benefits arising due to the proposed practices and infrastructure/facilities and are evaluated by comparing ‘With Project’ and ‘Without Project’ scenarios. The major benefits considered for calculation of EIRR are those which are easily quantifiable and are as follows:

Better Price realization due to quality improvement of the agricultural produces A major impact expected is significant improvement in produces through modern methods of handling, packaging, storage and transportation which would lead to better price realization.

Wastage Reduction The interventions in technological infrastructure such as packaging, storage, temperature controlled transportation and better post harvest management practices will help in increasing the shelf life of the perishable commodities. The improved shelf life will lead to low wastage level even during transportation and marketing to distant places in the country.

176 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Employment Generation Considering the high unemployment rate in India and the seasonal availability of work for agricultural labour the project will provide good opportunity to work throughout the year for the people of surrounding areas.

Large increase in revenue and tax realization The project envisages large investments in agribusiness infrastructure which are likely to generate sufficient revenues and lead to incremental tax realization by the government. Similarly, the major quantifiable costs considered for calculation of EIRR are given below. While opportunity cost of land has been treated as a capital cost for the purpose, opportunity cost of capital (project grant) and labour has been treated as recurring cost.

Opportunity cost of land The land for the IVCs is to be provided by state governments on BOT model. Thus, the cost of land has been taken as the rates prevalent for industrial land in the surrounding areas. The opportunity cost of land is broadly in line with Maharashtra Industrial Development Corporation (MIDC) land rates in the region. ƒ Opportunity cost of capital/ project grant The project provides for large amount of capital grant to private developers, which may range from 90% of project cost in Bihar to 70% of the project cost in Maharashtra. For the purpose of EIRR calculation, the opportunity cost of project grant amount has been considered which was not captured by the financial analysis. Opportunity cost of capital contributed as project grant is assumed at 10% per annum. The assumption is based on the fact that the money invested as grant can be invested elsewhere and a minimum return of 10% per annum has been assumed conservatively. ƒ Opportunity cost of labour The project assumes large employment generation for agricultural labourers and limited employment opportunities for management professionals. For the calculation of EIRR, the opportunity cost of agricultural labourers has been taken assuming that they had options to work on other projects such as National Rural Employment Guarantee Scheme (NREGS). The detailed calculation for above mentioned benefits and costs has been done at IVC level and is given below:

27.2 QUANTIFICATION OF BENEFITS

Quality improvement leads to premium Price of the commodities The incremental price realization is calculated based on the price range available in the market for different grades (firmness, color, size etc.) of the produce. The table below compares the ‘Without Project’ and ‘With Project’ cases to estimate the incremental benefits due to improved quality of the produce.

Withou t Project With Project

177 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Estimated Additional Price Total Realization (%) Incremental Price Quantity Incremental Benefit Weighte (Rs/MT) (MT) Benefit (Mn (Rs/MT) Price Min Max d Rs) Crops (Rs/MT) Average Fruits 23000 10% 20% 12.0% 25760 2760 32400 89.42 Banana 16000 10% 15% 11.0% 17760 1760 30000 52.80 Mango 40000 15% 20% 16.0% 46400 6400 3750 24.00 Grains/ pulses 40000 10% 15% 11.0% 44400 4400 43500 191.40 Total 109650 357.62 The incremental benefit due to quality improvement is estimated to be Rs 357.62 million per annum at 100% capacity utilization.

Wastage Reduction The range of wastage reduction depends on the grade of produce and the distance of final market from source of production. The table below shows the assumptions made and calculations of the benefit due to reduction in wastage.

Without Project With Project Wastage Reduction Range (%) Selling Total Quantity Price Incremental Saved (MT) Crops Quantity saved Min Max Average (Rs/MT) Benefit (Mn Rs) Fruits 0 10% 15% 11.0% 25760 3564 91.81 Banana 0 15% 20% 16.0% 17760 4800 85.25 Mango 0 10% 15% 11.0% 46400 413 19.14 Grains 0 5% 8% 5.6% 44400 2436 108.16 Onion 0 10% 15% 11.0% 0 0 0.00 Total 11212.5 304.36 The project help in saving of estimated quantity of agricultural produce of about 11000 MT valued at Rs 304.36 million.

Employment Generation The spoke wise number of workers and for how many days in year the labour will be employed has been estimated based on the capacity of the facilities and the seasonality of crops handled. The wage rate for the labour is taken at prevailing market rate of Rs 120 per day. Being a green field project, the entire labour for the project is incremental in nature and the monetary value of income to the labour is given as below:

Without Project With Project Annual Annual Annual Incremental No. of Days/ amount No. of Days/ amount Benefit (Rs Mn) Location workers Annum (Rs Mn) workers Annum (Rs Mn) Warud 0 0 0.00 94 180 2.03 2.03 Anjangaon 0 0 0.00 280 300 10.08 10.08 Akola 0 0 0.00 40 180 0.86 0.86 Sangrampur 0 0 0.00 196 300 7.06 7.06 Jalna 0 0 0.00 84 180 1.81 1.81 Paithan 0 0 0.00 135 200 3.24 3.24

178 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Total 0 0.00 829 25.08 25.08

Large increase in revenue and tax realization The income tax calculated for the project is also incremental in nature when compared to the without project scenario hence, considered as an economic benefit. The likely increase in revenue collection has been captured in the projected cost benefit statement for EIRR.

27.3 QUANTIFICATION OF COSTS

Economic Cost of Project

Amount Amount Items Sr. No Particulars (Mn Rs) (Mn $) A 1 Land 25.90 0.55 2 Land & Site Development 16.00 0.34 3 Buildings 122.61 2.60 4 Plant Machinery & Equipments 96.25 2.04 5 Utilities & other Assets 8.15 0.17 Sub Total (A) 268.91 5.71 B Project Implementation Cost @10% of ADB Funds 13.58 0.29 C Pre‐op expenses 12.15 0.26 D Contingencies 20.78 0.44 E Capacity Building 32.21 0.68 Total Project Cost (A+B+C+D+E) 347.63 7.38 All the capital expenses such as land &site development, buildings, plant machinery & equipments, utilities & other assets are incremental in nature and thus considered as various components of economic cost of the project. The opportunity cost of land is assumed to be paid upfront and is therefore treated as capital cost. The project implementation cost (technical assistance etc.) is assumed as 10% of funds contributed by ADB. The pre-op expenses and contingencies related to project implementation are also taken as economic cost of the project. Further, the cost related to environmental impact has also been treated as one time expenditure in terms of equipments and facilities provided under the project. The environmental assessment for the project has not indicated any long term impact which would have significant cost implications. Finally, the social cost also would be mainly towards capacity building efforts and does not envisage any other cost like resettlement etc. Based on the above assumptions the estimated economic cost of the project is Rs 347.63 million or 7.38 million $. The exchange rate of 47.114998 Rs per Dollar is considered for calculation of cost of project in Dollar value.

Recurring Costs ƒ Opportunity cost of labour

Location No. of workers Day/Annum Annual amount (Rs Mn) Warud 94 100 1.18

179 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Anjangaon 280 100 3.50 Akola 40 100 0.50 Sangrampur 196 100 2.45 Jalna 84 100 1.05 Paithan 135 100 1.69 Total 829 10.36 As mentioned earlier the estimates are based on NREGS. According to the scheme the government will provide minimum 100 days of employment to rural families with daily wage of Rs 125 per worker. ƒ Opportunity cost of capital Opportunity cost of capital contributed as project grant is assumed at 10% per annum. The assumption is based on the fact that the money invested as grant can be invested elsewhere and a minimum return of 10% per annum has been assumed conservatively. ƒ Opportunity cost of other factors Opportunity cost of other factors such as power, water, fuel etc. is not incremental in nature as these factors are available already and will be used from existing sources.

27.4 COST‐BENEFIT STATEMENT

Year 0 1 2 3 4 8 12 16 20 Imp Capacity Utilization Period 40% 60% 80% 80% 80% 80% 80% 80% A. Economic Benefits Quality Improvement 143.05 214.57 286.10 286.10 286.10 286.10 286.10 286.10 Wastage Loss 121.74 182.61 243.48 243.48 243.48 243.48 243.48 243.48 Incremental Labour 10.03 15.05 20.07 20.07 20.07 20.07 20.07 20.07 Incremental Income Tax 0.00 0.00 10.56 12.29 16.35 18.38 19.38 19.83 Total Economic Benefits 274.83 412.24 560.21 561.94 566.00 568.03 569.03 569.48 B. Economic Costs Opportunity cost of labour 4.15 6.22 8.29 8.29 8.29 8.29 8.29 8.29 Opportunity cost of Capital 19.40 19.40 19.40 19.40 19.40 19.40 19.40 19.40 Total Economic Cost 23.54 25.61 27.69 27.69 27.69 27.69 27.69 27.69 Net Economic Benefits (A‐B) 251.28 386.63 532.53 534.25 538.32 540.34 541.34 541.80 The table above shows the annual cost and benefits arising from the project.

27.5 CALCULATION OF ECONOMIC IRR (EIRR) Economic IRR (EIRR)

Imp Year Period 1 2 3 4 8 12 16 20 Economic Investment 347.63 251.2 386.6 532.5 534.2 538.3 540.3 541.3 541.8 Net Economic Benefits 0.00 8 3 3 5 2 4 4 0 Net Economic Cash ‐347.63 251.2 386.6 532.5 534.2 538.3 540.3 541.3 541.8

180 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Flow 8 3 3 5 2 4 4 0 Economic IRR (EIRR) 102% The economic IRR for the project is estimated to be 102% which appears to be high. This high level of IRR is due to the high investment in productive assets and most of the facilities proposed will directly be used for value addition.

27.6 ECONOMIC APPRAISAL RESULTS

27.6.1 Major Economic Indicators: The major economic indicators considered to assess the economic viability of the project are given in the table below:

NPV (Rs Million) 2,989.46 NPV (Million $) 63.45 Benefit‐Cost Ratio 19.89 NPVI 8.60

NPV: The positive NPV for the project indicates the viability of the project. The NPV is calculated considering the economic life/ concession period of project as 20 years. The discounting rate for calculation of NPV is the Weighted Average Cost of Capital (WACC). The WACC is calculated by assuming the capital cost of 16% for the private investor and 10% for project grant. The calculation of WACC is shown in the below table:

Details Share Cost of Capital Project Grant 70.00% 10% Equity‐Private Investor 30.00% 16% WACC 11.80%

Benefit‐Cost Ratio (BCR): The average BCR over the project life is estimated to be 19.89. The ratio indicates that for every one $ of expense it will generate about twenty times of expense over the life of project. Hence, the project is highly economic viable.

Net Present Value per $ of Investment (NPVI): The NPVI of more than zero is always considered as a good indicator of the economic viability of the project. The estimated NPVI for Aurangabad-Amravati IVC is 8.60 which is quite high.

181 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

MAHARASHTRA: INTEGRATED VALUE CHAINS

Nashik Integrated Value Chain

and

Aurangabad‐Amravati Integrated Value Chain

ƒ Conceptual plans of facilities ƒ Stakeholder consultation ƒ Market Assessment ƒ Impact Assessment ƒ Capacity building support ƒ Policy and regulatory aspects ƒ Implementation framework ƒ Project Implementation Structure

182 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

28 CONCEPTUAL PLANS FOR FACILITIES

In Maharashtra the sites for the proposed facilities have not been identified. The planning for the proposed facilities has been carried out conceptually for different locations of the IVCs based on the sizes and numbers of the proposed facilities as per the requirements envisaged as well as essential support infrastructure such as business centre, canteen and parking etc. A Greenfield development approach has been considered and the Master Plans have been evolved accordingly. Conceptual Master Plans for 4 representative locations viz. Nashik Road, Anjangaon, Paithan and Vivra (two from each IVC) have been prepared. Nashik Road has been identified as the Hub location for Nashik IVC and the facilities include cold chain infrastructure such as grape pack house and cold store and ambient facilities such as dry warehouse, onion store. Banana ripening facility is also envisaged in the hub. Hence, the location gives a representation of most of the envisaged facilities/infrastructure in the IVC. The Master Plan of the Vivra has also been prepared which is also in the same IVC. Vivra spoke is expected to focus mainly on banana crop and hence the facilities are mostly focused towards handling of banana such as packhouse and ripening facility. This represents a spoke which mostly focuses on one fruit crop. Paithan which is in Aurangabad-Amravati IVC is another spoke which is expected to cater to multi crops such as mango and sweet lime. Both cold and ambient facilities are envisaged for the spoke and hence may be taken as a representative spoke. Master Plan of Anjangaon has also been prepared. Anjangaon would handle products such as orange and banana having facilities catering to both the products. The four locations, which have been selected for the Master Plan preparation, hence cover a wide range of crops and corresponding facilities which are fairly representative for both the IVCs. Adequate provision of basic infrastructure such as access roads, water supply facilities for domestic industrial and fire fighting, effluents carriage and treatment, solid waste management, internal electrical distribution and communication lines has been kept in mind at the proposed facilities. Concepts of proper green areas for aesthetics and a pleasant ambience have been used besides adequate and efficient vehicular traffic access and parking to create a modern facility in an eco-friendly manner. . Broad planning concepts for the master planning and the design of the main components, are as follows:

28.1 PLANNING CONCEPT ƒ The concept of the proposed Facilities is derived based on the requirements of the functions with self contained facilities. The proposed facilities shall be environment friendly facility comprising of physical and common infrastructure components interwoven with green spaces. ƒ The concept is guided by the applicable development guidelines of the Site Planning, Spatial Planning norms and principals and prudent practices. The design philosophy revolves around prioritizing various aspects viz., circulation, land suitability, environmental sustainability.

183 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT ƒ The master plan is based on modern planning concepts of providing good and efficient internal movement, efficient layout of services with supporting infrastructure and facilities in an aesthetic environment. ƒ Considering the Greenfield approach has been considered to provide fresh, modern, eco-friendly places of conducting business replete with all necessary infrastructure facilities that provide a sanitized and pleasant ambience.

28.1.1 Master Plan The guiding principle of the master plans is to incorporate the principles of an eco-industrial facility by maximizing green space and open spaces, and provision of green belts. The design envisages functional and accessible work places by incorporating prudent and scientific planning principles and includes the following: 1. Provision of Basic Infrastructure to the proposed facility adequate for the proposed usage with anticipated vehicular traffic and other service requirements 2. Location of process and non-process activities 3. Location of process activities with requirement of mechanical services 4. Providing efficient access to the main road from all buildings 5. A central common facility center interwoven with green spaces 6. Provision of services area with ease of connecting with main service lines.

28.1.2 Buildings

1. Shed building are planned with dimensions optimized for economic structure. 2. Building are placed at the longer axis to provide long loading / unloading dock 3. All building are provided with proper parking and circulation area for heavy vehicles 4. Building which require mechanical services cold storage are clustered together 5. The structural design shall cater to the usage for the proposed life with wind and earthquake resistance

28.1.3 Services

1. Adequate space has been provided to cater to the proposed usage of the facilities such as water supply, sewerage/effluent carriage and treatment, power and telecom distribution 2. Water supply and Electrical Room are provided near the main road to provide easy access to operation and maintenance also provides provision connect with main external infrastructure 3. Sewerage, Storm water drainage are planned considering the outlet towards the entrance to facilitate easy connection with external storm water drainage system.

28.1.4 Road & Parking

1. The proposed internal roads are of sufficient width and adequate parking as per requirements along with pedestrian paved path 2. The proper signage system is adopted to make sure the smooth traffic movement

184 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT inside the market complex 3. The main access to the facility center is taken from at least 15mt wide road. 4. The proposed access to the facility shall connect with the existing access roads with a well-defined access to the development 5. No road shall be less than 6 meters in width of paved top 6. The secondary roads within the markets, where the movement of HMV is not required and the transportation can be done by LMV only, the proposed road widths are 4.5 M. 7. The pedestrian walkway 2.0 m wide is also provided from Main entrance to different blocks of markets. 8. Adequate parking spaces are provided for weigh-bridge, covered Platform, shops, Godown etc. 9. A centralized parking is proposed along with driver’s rest room, toilets and canteen 10. Every Building is proposed with an apron of paved area where the vehicle can park away from main road and loading/unloading can be done 11. Signage systems are proposed to clearly indicate Vehicular and pedestrian movement along with buildings, parking space and other utilities

28.1.5 Green Area

1. The green areas planned as centralized open space to provide access from all around which provide visual relief. 2. The extent of open space shall not be less than 10 percent of the total area of the facility 3. Conceptual Master Plans along with sectional drawings for 2 market complexes, one in each zone, have been provided based on the facilities proposed as per the specific requirements.

28.2 LINK INFRASTRUCTURE The proposals for the various locations have been framed considering the requirements of the specific location. The basic support infrastructure like roads, power, telecom, water supply, sewerage system, storm water drainage, solid waste management has been provisioned considering the planning norms and the specific business requirements. But the proposed market complexes with modern infrastructure facilities cannot function in isolation. Efforts have been made and possibility has been explored to propose self contained facilities where possible such as solid waste management and water supply and waste water disposal. With regards to the large quantum of agricultural waste expected to be generated composting centers have been proposed which may function even without the corresponding external solid waste collection and disposal arrangements. Irrespective of the standalone facilities planned the internal infrastructure has to be matched with adequate infrastructure outside the proposed complexes and linked by suitable means for smooth functioning as planned.

28.2.1 Approach and Accessibility

185 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 1. Approach and accessibility play a vital role in proper functioning of the proposed complexes. 2. There are expected a significant number of HMV and LMV traffic coming and going out to the markets along with pedestrian movement. 3. The approach roads to the market complexes are required be of sufficient width along with proper signage. 4. The main approach road should be of minimum 9m Width with proper turning radius to the Complex along with some buffer space between main road and Entrance Gate so that if required one or two HMV could wait for some time. 5. The external approach roads has been considered to be wide enough. A ‘slip road’ has to be proposed so that entry/exit to and from the markets do not lead to congestion of general traffic, as would be the case in the present condition. 6. Proper Signages are proposed and recommended regarding the Entry/Exits of Markets along with the approach lane to follow.

28.2.2 Linkages for Power, Water, Storm Water etc. A detailed study of the available infrastructure outside the proposed marketing complexes has not been undertaken in the scope of work of the present study. However, generally there is a need to augment the external infrastructure in all fields such as roads, water and waste water, storm water drainage, power and telecom etc. The basic infrastructure facilities are generally lacking even in bigger cities. For smaller locations it becomes all the more important that suitable basic infrastructure be provided which can integrate in itself the internal provisions at the proposed locations. For e.g. the storm water drain outside of the proposed location shall be adequate to take in the expected storm water flow from the market without causing water logging or flooding.

28.2.3 Design Considerations The proposals have been drafted considering the prudent engineering practices in provision of the various infrastructure as well building facilities. The proposals for 4 locations in Maharashtra have been formed in detail considering the requirements and provisioning of the required facilities. The master plans have been drawn and the cost estimates have been prepared accordingly. The cost estimates of the remaining facilities in Maharashtra have been prepared according to the requirements and prevalent costing norms as done for similar proposals. The major technical considerations are as follows:

Electricals Electrical services are one of the most important services of any complex. Various Electrical facilities for the building have been envisaged considering the usage of area, patterns of electrical load and relevant Indian Standards / Codes. Power supply for the complex shall be catered at 11 KV from the State Electricity Board and stepped down to 415 V using distribution transformers for further distribution. This report gives the brief design criterion proposed to be adopted on the various facilities of the

186 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Electrical System. The design shall be based on Indian Standards, IE rules, NBC and NEC, CPWD Specifications and all the statutory requirements shall be complied with.

Power Supply And Sub‐Station :

D.G. SETS: 1. Considering the chronic power shortage in the country it is essential to have alternative power source to meet electrical requirements under power failure / break down conditions. DG Sets of adequate capacity shall be provided to meet all the requirements of the building in non-availability of power grid 2. Considering 80% loading on DG Sets, 90% load of Cold storage various sizes of DG Sets with AMF facilities are proposed as an emergency power supply for the complex. 3. The Transformers and DG Sets shall be connected in parallel so that operational flexibility shall be available in case of break down in Transformer or DG Sets.

L.T. Panels: The LT Panels shall be provided with sufficient number of ACBs/ MCCBs, through which required number of feeders shall be catered for various purposes. The panel shall be in compartmentalized design and it shall be totally enclosed floor standing and cubical type, accessible from front preferably with cable entry from top/as per site condition. The bus bar of the panel shall be made of High Electrolytic Conductivity Aluminum strips. The transformer and the panel shall be connected through adequate sized 415 V, 3 phase, 4 wire cables. Power Correction System: 1. As per the condition of supply of Electricity Board, consumers are advised to improve and maintain the power factor of their installation 0.9 or above because of various advantages. Improvement in the power factor would affect savings in the energy bill. Also the life of individual apparatus can be increased considerably by high power factor. For the improvement of power factor, suitable size of capacitor panel banks shall be provided. The Capacitor Banks shall be a part of LT Panel. 2. Automatic power factor correction relay of reputed make shall be provided to sense the power factor of the system and switch on the capacitors depending on the system requirements. The power factor shall be maintained around 0.95 to 0.98 through this system. Lighting: 1. Lighting shall be designed according to the required illumination levels as per Indian Standard / NBC Code. Generally, energy efficient CFL light fixtures matching with the internal layout have been proposed for the each building. Special emphasis shall be given on low energy consumption light fittings especially in the Corridors and in Walk-ways where suitable make light fitting with compact fluorescent 26/18/14W lamps are proposed to be provided. Light fixtures shall be used with electronic ballast for energy savings. 2. Similarly, energy efficient CFL Lamps fitting shall be provided for External Lighting. All the light fittings shall be provided with energy saving devices. The final selection

187 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT of the light fittings shall be made in consultation with Architect / Client/ Consultant. 3. The number of light points and socket shall be based on the accepted norms usually followed for this type of Building. The Illumination levels or Lux levels of different areas have been based on the NBC Code and are as follows: S.No. Description Lux Level 1. Common Areas 250 – 350 lux 2. Office Areas 350 – 400 lux 3. Pump Rooms / Sub Station 200 lux 4. Parking Areas 70 – 100 lux 5. Lobbies / Corridors 200 lux 6. Staircase Landings 200 lux 7. Cold Storage 350 – 400 lux 8. Covered platform in Mandi Area 200 lux Cabling: All MV Power Cables provided for power distribution shall be armoured PVC sheathed and XLPE insulated Aluminium Conductor, 1.1 KV grade, conforming to IS:1554. Appropriate Screened Copper cables / wires shall be used for all special purposed and Communication Systems. Earthing System: Considering the hazardous nature of electrical energy, safety measures in using this energy is of paramount importance. Earthing System is one of such safety systems. It is proposed to provide effective Earthing System conforming to IS : 3043 – 1987. All non current carrying metal parts forming the Electrical System shall be connected to the Earthing System as per the requirements of Indian Electricity Rules and local Statutory requirements. The Earthing System shall be so designed that the resistance of the Earthing Network shall be less than 1.0 ohm at any point of the system. The Earthing System is proposed as follows: Sub - Station Equipments: a. Transformer Neutral Earthing Copper (600x 600 x 3.15mm) Plate Earthing b. Transformer Body Earthing G.I. (600 x 600 x 6mm) Plate Earthing c. H.T. Switch-Gear Earthing Copper (600 x 600 x 3.15mm) Plate Earthing d. D. G. Set Neutral Earthing Copper (600 x 600 x 3.15mm) Plate Earthing e, D.G. Set Body Earthing G.I. (600 x 600 x 6mm) Plate Earthing Panel Earthing: a. L.T. Panels Earthing G.I. Plate Earthing b. Distribution Boards Earthing PVC Insulated Copper wire with sub mains. c. Equipment Earthing G.I. Plate Earthing d. Lighting / Power Point Circuits 1.5/2/4.0/6.0 Sq mm PVC insulated Single Core Green Wire e. Laboratory Equipment/UPS/ Copper Plate Earthing

188 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT f Server/EPABX Earthing

28.2.4 Sanitary Installation, Water Supply and Fire Fighting Systems The objective of the design is to achieve the most efficient and high quality system to meet the required standards. It is therefore essential to spell out and understand the basic objectives of design of all the services. This would assist in the detailed engineering and preparation of final working drawings for execution. The sanitary engineering services covered in this project for which detailed engineering handled are :

Plumbing

• Sanitary fixtures, chromium plated fixtures and accessories. • Soil, waste and vent pipe systems. • Cold water supply. • Rainwater pipes and disposal ,Rain water harvesting. • External sewerage disposal including connection up to existing manhole. • Municipal water connection, storage tanks and overhead tanks. • Construction of tubewell, pumps and accessories. • Garden irrigation system. • Sewage treatment plant

Fire Protection System

1. External Fire hydrant system. 2. Under ground and overhead fire reserves. 3. Fire pumps and ancillaries. In the planning of all the above services following objectives have been kept in view. 1. Effective and efficient disposal of all wastes from the building quickly. 2. Prevention of back flow of waste waters from external sewer or other sources and minimizing the possibility of encroachment of rats, insects from main sewers or manholes by adequate trapping of all fixtures. 3. Easy access to all services for proper maintenance with adequate number of cleanouts, door bends and access points. 4. Protection of pipe lines from corrosion and accidental damage. 5. Prevention of pollution of surrounding environment. 6. Supply of water in adequate quantity and pressures in all areas on 24 hour basis. 7. Selection of materials and equipment of best indigenous makes requiring minimum maintenance and repairs. 8. Piping system to be so designed as to prevent, as far as possible and practical, any obstruction to normal movement of men and materials and be generally aesthetically pleasing.

189 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 9. Statutory requirements of all the services 10. All sanitary services shall be designed as per Indian Standard code of practice relevant to the service and the services are modified to suit local conditions, architectural and structural considerations of this particular project.

Soil, Waste And Vent Pipe Systems The system shall be designed on “TWO PIPE SYSTEM” as recommended in code of practice for soil and waste pipes above ground (IS: 5329 -1969).

External Sewerage Sewerage from the building will be collected by means of underground sewerage system and connected to the Sewage Treatment plant. Manholes would be provided at all junctions and turning points and generally not exceeding 30 mt. in distance. Material a. All soil, waste and vent pipes shall be CI spun Iron pipes with drip seal/lead joints. b. The waste pipes used for wash basins and sinks shall be GI /uPVC of designated class. c. Pipes used for external sewerage system shall be CILA pipe due to uneven and rocky soil.

Disposal All the rain water from the building roof and area around the building shall be connected separately taken up to open surface drain with grating and gully grating chambers and covered peripheral drains. These drains shall be further connected to rain water re-charge pits and the overflow shall be connected to the municipal storm water disposal system/Nallah. Material 1. Pipes used for rain water inside the building shall be uPVC 6kg/cm2 pipes with drip seal joints. 2. Pipes used for storm water drainage shall be RCC.

Water Supply System

a. Owing to shortage of Municipal water supply, it would be necessary to augment the same by providing tubewells within the site. b. Untreated tubewell water shall be utilized for garden supply. c. The estimated total population, requirement of water supply and the proposed storage capacity for the project is given in separate Annexures.

Potable Water (Non‐Flushing):

a. The water supply from City Water Supply (Municipal Main), Borewells & Truck fill point shall be brought to underground fire storage tank and overflow from fire storage tank shall be taken to raw water storage tank in order to

190 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT replenish the fire storage water. b. The water from Raw Water Storage Tank shall be pumped through dual media pressure sand filter, activated carbon filter Softener Cum brine tank & taken into underground Treated water storage tank (Soft).

Flushing Water System (Recycled from STP): Recycled water from Flushing cum Irrigation Water Storage Tank located at Sewage Treatment Plant (STP) shall be pumped through battery of two pumps (One working & one Standby) to over head Flushing Water Storage Tank.

Distribution System Water from the tubewell and Municipal supply are connected to a fire reserve. The overflow is collected in to raw water tank. Water from this raw water will then be passed through filter and polishing softener as required and stored in domestic treated water tank. The entire site is divided into two wings for easy running and maintenance.

Irrigation System The premises comprises of irrigable area such as planter, lawns etc, hydrant system is proposed as per Landscape/ plantation design. Source of Water: The irrigation water shall be made available from treated effluent of sewage treatment plant (STP).

Sewerage: Drainage system for soil & waste is based on the most efficient, functional design, minimum maintenance after installation and available side topography to minimize the excavation work in laying the pipes; two pipe system (soil and waste) is proposed to carry soil and waste separately from the building under gravity. Waste pipes are connected to manhole through gully trap and soil pipes are to be directly connected to the manhole. The main drainage is carried through a battery of manholes and finally discharged into Sewage Treatment Plant (STP).

Sewage Treatment Plant: Sewage Treatment Plant of capacity shall be provided in the final requirement of 80% domestic water. The Waste Water Treatment System will be treated using an extended aeration activated sludge type system consisting of following system:- Component – I [Pre Treatment]: • Screen Chambers • Collection cum Equalization Tank • Solids handling sewage transfer pumps. • Bypass pump from equalization tank to municipal sewe • Component – II [Secondary / Biological Treatment] : • Aeration Tank

191 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT • Clarifier Tank (Secondary settling tank) • Chlorine Contact Tank\ • Chlorine Dosing System • Aerobic Sludge Digester cum Thickener Tank • Sludge Disposal Pump • Sludge Recirculation Pump • Component – III [Tertiary Treatment] : • Filter Feed/Backwash Pumps • Pressure Sand Filter • Activated Carbon Filter • Softener cum brine tank • Soft Water Storage Tank • Soft Water Transfer Pumps • Irrigation cum Flushing Tank • Irrigation Water Transfer pump • Flushing Water Transfer Pump.

Storm Water Drainage System : Storm water drainage systems will be designed based on a rainfall intensity of 70 mm per hour. Rainwater harvesting pit of size 3m dia x 3.5m effective depth shall be provided. Storm water drainage system will be provided for the building roof drainage and the site drainage. The Storm water will be collected by gravity through catch basin, storm water manhole and RCC pipe and finally discharge to the Rainwater Harvesting Pit. Overflow of rainwater harvesting pit shall be discharged to city storm water drain/storm water sump.

28.2.5 Fire Protection Measures

1 Type Of Risk 1.1. Since the project is mainly used as Mandi, the type of risk can be categorized as under NBC / TAC. 2. Proposals 2.1 It is proposed to have a total protection system best suited for this Project and also as per the directives of NBC/ TAC Fire Service. These shall include the following. a. External Fire Hydrant system b. Automatic pumping set for the systems. c. 2,00,000 ltrs underground fire reserve in one compartment accessible for hydrant systems. d. Fire fighting hand appliances of various categories to be located throughout the Campus. 3. Fire Reserve

192 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 3.1 It is proposed to have an underground storage tank of 2,00,000 ltrs, in one compartment exclusively for firefighting purposes. The tank is located in such a way that it is readily accessible to fire appliances. Necessary manholes shall be provided in this tank to enable the fire brigade to draw water from the tank in case of necessity. A three way fire service inlet shall be provided for the underground storage tank. 4. Source Of Water Supply a. For underground tank: From Municipal mains with additional supply from tubewells at site. 5. External Hydrant System 5.1 It is proposed to have External hydrant system throughout the Campus. Yard fire hydrant shall be provided on the main fire line The minimum outlet pressure at the top most hydrant would be 6.5 kg/sqcm. 5.2 The system would be permanently connected to the fire pump outlets by a common header of 200 mm dia. 5.3 External hydrants connected to the fire line have been proposed in the proposed complex.

28.3 COST ESTIMATES FOR IVCS IN MAHARASHTRA

28.3.1 NASIK IVC:

Land Development: Cost of land development includes boundary wall, internal roads, drainage system, parking facilities etc. The cost of development is taken as Rs 2.5 mn/Ha. It is based on the prevailing market norms and rates.

Buildings: The cost of proposed buildings of all spokes in Nasik IVC is given below: In Rupees Mn. Nasik Pimpal Maleg Sanga Srira China Vivr Kajg Dan IVC Facility Road gaon aon mner mpur val a aon ora IVC (Mn $) Warehouse 29.90 ‐ 5.98 ‐ ‐ ‐ ‐ ‐ ‐ 35.88 0.76 Cold Store‐ 5000 MT 21.60 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 21.60 0.46 Grape Packhouse‐ Cold Chain 19.20 19.20 19.20 ‐ ‐ ‐ ‐ ‐ ‐ 57.60 1.22 Banana Packhouse ‐ ‐ ‐ ‐ ‐ 8.10 8.10 8.10 8.10 32.40 0.69 Ripening Chamber 2.76 ‐ ‐ ‐ ‐ 2.76 2.76 2.76 2.76 13.80 0.29 Packshed‐ Ambient 3.00 3.00 ‐ 3.00 3.00 ‐ ‐ ‐ ‐ 12.00 0.25 Onion Store 14.04 3.51 ‐ 3.51 3.51 ‐ ‐ ‐ ‐ 24.57 0.52 Knowledge centre 3.60 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 3.60 0.08 Business 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70 24.30 0.52

193 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT centre Guest house 2.70 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 2.70 0.06

Misc. 4.40 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 20.40 0.43 Total Buildings 103.90 30.41 29.88 11.21 11.21 15.56 15.56 15.56 15.56 248.85 5.28 The above costs have been calculated based on the conceptual master plan and drawings prepared by industrial infrastructure and cold chain experts. The total construction areas required for various facilities in each spoke of the IVC and rates of construction are given below:

Nasik Pimpal Maleg Sanga Srira Chin Viv Kajg Dan Rate/ Facility Road gaon aon mner mpur aval ra aon ora Unit in Sq. m. Rs Warehouse 4,600 ‐ 920 ‐ ‐ ‐ ‐ ‐ ‐ 6,500 Cold Store‐5000 MT 2,700 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 8,000 Grape Packhouse‐ Cold Chain 2,400 2,400 2,400 ‐ ‐ ‐ ‐ ‐ ‐ 8,000

Banana 1,3 1,35 Packhouse ‐ ‐ ‐ ‐ ‐ 1,350 50 1,350 0 6,000 Ripening Chamber 540 ‐ ‐ ‐ ‐ 540 540 540 540 LS Packshed‐ Ambient 500 500 ‐ 500 500 ‐ ‐ ‐ ‐ 6,000 Onion Store 2,160 540 ‐ 540 540 ‐ ‐ ‐ ‐ 6,500 Guest House 300 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 9,000 Knowledge centre 400 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 9,000

Business Centre 300 300 300 300 300 300 300 300 300 9,000

Misc 550 250 250 250 250 250 250 250 250 8,000

Total Buildings 2,44 2,4 2,44 2,44 14,450 3,990 3,870 1,590 1,590 0 40 0 0

Miscellaneous Fixed Assets / Utilities The requirements of power and water have been estimated based on industry norms. The estimates have been prepared based on market rates and similar projects costing norms. The breakup of the estimated cost of the miscellaneous fixed assets and utilities at each spoke is provided below: Amounts in Rs millions Nasik Pimpal Male Sanga Sriram China Kajga Dan IVC IVC Facility Road gaon gaon mner pur val Vivra on ora Mn. Rs Mn. $ Power supply system 25.00 2.00 2.00 0.50 0.50 1.20 1.20 1.20 1.20 34.80 0.74 Water supply system 2.00 0.50 0.50 0.20 0.20 0.50 0.50 0.50 0.50 5.40 0.11 IT system 0.30 0.20 0.20 0.05 0.05 0.20 0.20 0.20 0.20 1.60 0.03 Furniture 0.10 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.50 0.01 Total Misc Fixed Assets 27.40 2.75 2.75 0.80 0.80 1.95 1.95 1.95 1.95 42.30 0.90

194 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 28.3.2 Amravati‐Aurangabad IVC The engineering cost estimates of Amravati-Aurangabad IVC, based on the specifications given earlier, are given below:

Land Development: Cost of land development includes boundary wall, internal roads, drainage system, parking facilities etc. The cost of development is taken as Rs 2.5 mn/Ha. It is based on the prevailing market norms and rates.

Buildings: The cost of proposed buildings of all spokes in Amravati-Aurangabadad IVC is given as below: In Rupees Mn. Facility Paithan Warud Anjangaon Akola Sangrampur Jalna IVC IVC(Mn $) Orange Packhouse ‐ 10.20 10.20 ‐ ‐ ‐ 20.40 0.43 Warehouse 5.98 5.98 5.98 14.95 5.98 ‐ 38.87 0.83 Banana Packhouse ‐ ‐ 8.10 ‐ 8.10 ‐ 16.20 0.34 Ripening Chamber ‐ ‐ 2.76 ‐ 2.76 ‐ 5.52 0.12 Mango Packhouse‐ Cold Chain 5.60 ‐ ‐ ‐ ‐ ‐ 5.60 0.12 Mango Packhouse‐ Ambient 3.60 ‐ ‐ ‐ ‐ ‐ 3.60 0.08 Packsheds‐ Ambient 3.00 ‐ ‐ 4.50 ‐ 3.00 10.50 0.22 Business Centre 2.70 2.70 2.70 2.70 2.70 2.70 16.20 0.34 Miscs 0.80 0.80 1.68 0.80 1.00 0.64 5.72 0.12 Total Buildings 21.68 19.68 31.42 22.95 20.54 6.34 122.61 2.60 The above costs have been calculated based on the conceptual master plan and drawings prepared by industrial infrastructure and cold chain experts. The total construction areas required for various facilities in each spoke of the IVC and rates of construction are given below: Facility Paithan Warud Anjangaon Akola Sangrampur Jalna Rate/ Sqm in Sq. m. Rs Orange Packhouse ‐ 1,700 1,700 ‐ ‐ ‐ 6,000 Warehouse 920 920 920 2,300 920 ‐ 6,500 Banana Packhouse ‐ ‐ 1,350 ‐ 1,350 ‐ 6,000 Ripening Chamber ‐ ‐ 540 ‐ 540 ‐ LS Mango Packhouse‐ Cold Chain 700 ‐ ‐ ‐ ‐ ‐ 8,000 Mango Packhouse‐ Ambient 600 ‐ ‐ ‐ ‐ ‐ 6,000 Packsheds‐Ambient 500 ‐ ‐ 750 ‐ 500 6,000 Business Centre 300 300 300 300 300 300 9,000 Miscs 100 100 210 100 125 80 8,000 Total Buildings 3,120 3,020 5,020 3,450 3,235 880

195 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Miscellaneous Fixed Assets / Utilities The requirements of power and water have been estimated based on industry norms. The estimates have been prepared based on market rates and similar projects costing norms. The breakup of the estimated cost of the miscellaneous fixed assets and utilities at each spoke is provided below: Amounts in Rs million

Paithan Warud Anjangaon Akola Sangrampur Jalna IVC Misc Fixed Assets Power supply system 1.20 0.50 1.50 0.50 1.20 0.20 5.10 Water supply system 0.50 0.15 0.50 0.15 0.50 0.10 1.90 IT system 0.20 0.10 0.20 0.10 0.20 0.05 0.85 Furniture 0.05 0.05 0.05 0.05 0.05 0.05 0.30 Total Misc Fixed Assets 1.95 0.80 2.25 0.80 1.95 0.40 8.15

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29 STAKEHOLDER CONSULTATIONS

During the course of the preparation of the Detailed Project Reports, various stakeholder consultations were carried out in both the states of Maharashtra and Bihar. Consultations with various stakeholders were conducted mainly during the phases II (during detailed field surveys and analysis and consultations were held mainly with farmers, traders, cold store/warehouse/packhouse owners and other intermediaries in the value chains) and III (which mainly consisted of stakeholders’ consultations with food processors, organized retailers, exporters, and others) of the study. During the field surveys, in-depth interviews and Focus Group Discussions (FGDs) with farmers, traders/wholesalers, cold store/warehouse/packhouse owners etc were held in most of the important locations of the value chains. The stakeholders were asked about the details of the value/supply chains of the identified crops in the regions, trade practices, constraints faced by them as crucial members of the chains, gaps and market dynamics. Through such meetings and discussions, validation of data was also done at all major locations along with identifications of major clusters in the regions. In case of the consultations with food processing and agri-business industries, exporters, organized retail chains, potential investors, government representatives, etc, interviews, group meetings and brain storming sessions were held in Delhi, Mumbai, Patna and some other major cities in the states of Maharashtra and Bihar.

29.1 IVCS IN MAHARASHTRA In case of Maharashtra, the focus of the project will be development of agricultural infrastructure with higher involvement of private sector. The IVCs in Maharashtra will be green-field projects with development of brand new infrastructure which would boost the agriculture sector growth in the state. The role of private players/investors will be very important and higher association of the private players is envisaged. Accordingly, due importance has been given to the private sector during the stakeholder consultations. The summary of the stakeholder consultations (per major stakeholder groups) in Maharashtra are given below:

29.1.1 Farmers Several interviews and FGDs were conducted in the course of the field surveys in all the selected districts of Maharashtra. Issues related to farming and trading practices, availability of primary processing facilities and post harvest infrastructure, marketing and other aspects of the value chains were discussed in details. Here also, both orchard owners/cultivators and farm owners/cultivators have been covered during the consultations to get an understanding of the value chain dynamics of fruits, vegetables and grains in the indentified regions. The Post Harvest Contractors (PHCs) were also consulted at different stages of the study with the objective of understanding their role in the value chain along with their modes of operations. Their relationship with the farmers and traders were also studied.

221 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The main concerned raised by the farmers and PHCs during those meetings and discussions are as follows: ƒ Lack of irrigation and dependence on rains for cultivation ƒ In case of perishables, high wastages/distress sale due to lack of post harvest infrastructure ƒ Non-availability of quality tissue cultures leads to lower quality plant/produce ƒ Lack of access to formal credit leads to dependency on traders/wholesalers/cold store owners which reduces the profit margin of the farmers in many cases due to high interest rates (many times which are hidden as lower than market rates offered to farmers, etc.) ƒ Asymmetry in market intelligence about price and demand of produce in the markets which does not allow the farmers/PHCs to gain on temporal/locational arbitrage.

29.1.2 Traders/Wholesalers/Local processors/Cold Chain Owners Several in-depth interviews and meetings with traders/local processors/cold chain and packhouse owners were in the course of the study. Various aspects of the project were discussed with them and their views and opinion were received. The discussions provided a good understanding of the market perspective of the identified focus crops and existing trade practices. The current status of food processing sector, cold infrastructure and warehouses in the identified districts was also discussed. The main feedbacks received are as follows: ƒ Many of the traders/wholesalers/processors are willing to invest in post harvest infrastructure such as sorting, grading and storage, ripening facilities, pack houses, etc provided there are good subsidies/government support ƒ Non-availability of labour is a constraint faced by local processors in many parts of the identified districts ƒ Limited knowledge about modern cold technologies available ƒ Limited access to finance ƒ Lack of awareness about different government schemes, subsidies, etc.

29.1.3 Industry Players Interviews and meetings with large food processors, organized retail chains, exporters, banks and agri-business houses were conducted for explaining the project and getting their feedback. Several pertaining issues were discussed such as issues related to utilization of existing facilities, experiences of conducting business in the sector, challenges faced and expectations from the project. The discussions helped in getting a detailed understanding of the potential investors and financers of the project. Also, detailed consultations were held with the potential private investors about their roles in the development in the project. The ownership, viability, operation and & management issues were discussed with them for considering in the project design and implementation framework. Some of the major issues which came up during the discussions are as follows:

222 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT ƒ Requirement of a single window approval system for the entire state for procurement and storage ƒ Allowing dovetailing of different appropriate schemes (both central and state schemes) in a project ƒ Lack of awareness about available government assistance and incentives ƒ Long gestation periods of projects in agri-sector ƒ Upper cap on subsidies acts as a disincentive to the promoters for making large investments ƒ Capacity building at the grass root level is required to reduce losses and for production of higher quality produces which would adhere by the specifications given by the procuring companies ƒ Requirement of portable packhouses at the farm/collection centre level which would facilitate quick evacuation of the produces. The locations of the spokes should also be close to the farms. Some Major Stakeholder Consultations in Maharashtra:

29.2 STAKEHOLDERS’ MEETING AT MUMBAI A stakeholder consultation was conducted at Mumbai Cricket Club and Recreation Centre, BKC on 5th December, 2009. The participants of the meet included the following: ƒ Representatives of the Department of Marketing and Cooperation, Government of Maharashtra ƒ Representatives of Maharashtra State Agricultural Marketing Board ƒ Food Processors Agri-business Companies ƒ Organized Retail Chains ƒ Infrastructure Developers and Supply Chain Companies ƒ IL&FS Clusters representatives The discussion focused on policy related and other issues faced by the stakeholders and potential investors. Feedbacks from the stakeholders about the proposed interventions were also received during the meeting.

29.2.1 Suggestions from Stakeholders on Policy Issues: 1. Single unified license should be issued to corporate to operate in agri trade 2. Private markets should be allowed to set up collection centres 3. Private markets should be given parity with APMCs in terms of notified area etc. 4. Power cost for agro/food processing should be charged at agricultural rates and not at industrial rates, as it comprises of a huge portion of operational cost 5. Limits on storage quantity of agri produce should be waived 6. Single window approval for the entire state should be given for procurement and storage, which at present has to be taken at every Taluka level 7. Waiver of market fee on direct procurement from farmers

223 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 8. Subsidies should not be essentially credit linked 9. Information products should also be subsidized so that more information could be made available to farmers 10. An investor should be allowed to dovetailing of the schemes in one project and should be made eligible to get both central as well as state assistance 11. Upper cap on subsidies discourages investors for making large investments and hence should be removed 12. Information on available government assistance and incentives should be widely publicized 13. Investments in agri sector has relatively long gestation period and hence tax subsidies/holidays etc. are required

29.2.2 Suggestions on Proposed Interventions: 1. Credit should be made more easily accessible to the farmers so that they do not have to take credit from the traders, who in turn try to control the price of produce. 2. More on-farm facilities and farmer’s own retail centres should be promoted 3. Portable pack houses should be set up at farm level and produce packed at farm should come to spokes for storage or dispatch to consumption markets 4. Location of spokes should be at a minimum possible distance from the production areas to reduce losses 5. More investment should go into procurement infrastructure, which should be small scale and more in numbers 6. Education and awareness on pre-harvest activities is equally important particularly in crops like banana, as it determines the quality of the produce 7. Farmers should be trained in better pre-harvest and post harvest practices to cultivate good quality produce 8. More emphasis should be given on capacity building at grass root level 9. Developing long term relationship between farmer and the corporate is very important 10. An assessment of losses should be done at different levels in value chain and identification of areas of maximum loss as potential area for development 11. Spokes should be set up in partnership between farmers groups and corporate 12. Corporate should work on profit sharing model with farmers 13. Stakeholders, particularly farmers should be made aware and sensitized about the benefits of proposed interventions

29.3 STAKEHOLDER’S MEETING AT RAHEJA CENTRE POINT, MUMBAI A stakeholder consultation was conducted at Raheja Centre Point, Mumbai on 19th January, 2010. The participants of the meet included the following: ƒ Organized Retail Chains

224 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT ƒ Food Processors ƒ Financial Institution ƒ Representatives of Asian Development Bank (ADB) ƒ IL&FS Clusters representatives The project was discussed and feedback of the stakeholders about the project and the sector in general were received; key issues are mentioned below: 1. Some unorganized retail chains have reduced their packhouses because of less demand of value added agri products (although demand for such products is increasing). 2. Large organized retailers are not willing invest in infrastructure at farm level/collection centres or even at spoke level. Instead they would prefer to have those facilities operated for them by private operators initially. They may make investments and take up operations in these kinds of facilities in future. 3. Large food processors are of the opinion that more incentives from the government is required for the sector. They also had a similar view as organized retailers about investment and operations of farm level/spoke level infrastructure. 4. The financial institutions stated that programs such AIDP give them a higher comfort level for lending to the projects. 5. Bigger players who own most of the facilities in the IVCs are preferable to FIs for lending instead of many small players owning individual facilities. 6. First Loss Default Guarantee (FLDG) offered to the banks would increase their comfort level for lending in the discussed projects

29.4 LIST OF POTENTIAL INVESTORS In AIDP model the potential investors may be the organized retail chain companies, 3PL companies and large food processors.. The lists of potential investors for Maharashtra are given below: The potential investors who have been contacted/ consulted during the AIDP study are given below: • Mr. Dnyandeo G Mahajan, President, Maha Banana

• Mr. T T Pathrikar Secretary Mango Growers Association, Aurangabad

• Mr. V Kiran Kumar, CEO HALCON, Nashik

• Dr. J S Yadav, COO Premium Farm Fresh Produce Ltd.

• Mr. Santosh Dadheech, Sr. Vice President

225 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT NBHC Ltd.

• Mr. Ajay Kumar Prusty, Director Frutech Agro Industries Pvt. Ltd.

• Mr. Madhukar B Chobe, Director Akruti City Ltd.

• Mr. Vinit Kumar, Chairman and Mr. Shyam Mahale Temptation Foods Ltd.

• Mr. Arvind Jhamb, CEO Ruchi Infrastructure Ltd.

• Mr. Rajnikant Rai, Executive Vice President (Operations) ITC Ltd. (Agri Business Division)

• Mr. Deepak Mundra, Vice President Finance Jain Irrigation Systems Ltd.

• Managing Director, Godrej Agrovet

• Mr. Ashok Motiani, Managing Director Freshtrop Fruits Ltd.

• Mr. Rajeev Bhanawat, Asst. Vice President Aditya Birla Retail Limited

• Mr. Prem Saboo, CFO Reuter's Market Light

• Mr. Pravin, Utsav Banana

• Mr. A. Srinivasa Ramanujam, AVP - Operations • Adani Agrifresh Ltd.

• Chairman, Pomegranate growers association (Nashik division)

• MALTA Grape Growers Association

226 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

30 ASSESSMENT OF MARKET DEMAND

India is the world 4th largest economy on purchasing power parity basis. India is also the second fastest growing major economy in the world, with a GDP growth rate of 6.7 percent in 2008-09. India’s economic growth has accelerated significantly over the past two decades. Real average household disposable income has almost doubled since 1985. With rising income levels, household consumption has increased manifold with the emergence of a re- defined middle class. The country is on the brink of becoming an economic powerhouse and it is gaining huge attention from global players as an excellent investment destination. Indians with an ability to spend over US$ 30, 000 per annum on PPP basis account for around 3 percent of the country’s total population. With a population base of 1.07 billion, this segment amounts to 20 million people. High economic growth has led to increased disposable income for the booming Indian middle class, which is estimated to reach a size of 582 million from its current size of 50 million by 20151. Accordingly, the disposable incomes are set to rise at an average rate of 8.5 percent by 2015.2 Maharashtra is the largest economy in the country with a high per capita income of US $ 6213. It is also among the most industrialized states, which is coupled with availability of skilled manpower, enabling infrastructure and a strong institutional framework. Maharashtra is the second most populous state in the country with a population of 96.9 million4. It is also the second most urbanized state in the country, with 42 per cent of the people living in urban areas. Bihar, on the other hand, has a per capita income of US $ 1395, which is much below the national average of US $512. The total population of Bihar is 82.88 million. Unregistered units dominate the industrial sector of the state and the major industries are Tea and dairy.

30.1 ASSESSMENT OF FOOD MARKET IN INDIA The size of the Global Food Industry is estimated at around US $3.6 trillion and India accounts for less than 1.5 percent of the international food trade. India currently produces about 50 million MT of fruits, which is about 9 percent of the world’s total production of fruits and 90 million MT of vegetables, which accounts for 11 percent of the world’s total vegetable production. Despite its large size, only 6 percent of the processed foods are traded across India’s borders as compared to 16 percent of major bulk commodities. Hence there is huge scope for export of value added food products in the international market.

1 NACER Research 2 Ernst & Young Research, 2008 3 Data: 2004‐05 4 2001 census 5 IBEF

227 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The Indian food market in 2007 has been estimated at around US$ 200 billion6 and is slated to reach US$ 310 billion7 in 2015. Food products are the single largest component of household consumption expenditure. Food and beverages (including tobacco) accounts for one third of the household expenditure. A survey done by NCAER reveals that food and beverages accounts for 35 percent and 32 percent of household expenditure in mega cities and boomtowns. It is estimated that by 2025, food and beverages segment will still be the biggest category in terms of consumer spends, though its share would drop from existing 35-40% to 25%. Food and Grocery contributes to around 41 percent of private consumption expenditure and about 74 percent of total retail revenue. Broad category-wise expenditure for each category of cities is shown in the table below. It is evident from above that more than one third of the monthly household expenditure is on Food and beverages segment. There is also an increasing shift from price consideration to quality, branded and hygienic products. The number of working women, as a percentage of the total female population, has risen from 15 percent in Source: NCAER Research, 2008 1991 to close to 25 percent in 2005. This has resulted in growing disposable income, which in turn, leads to increasing spend on convenience food, value added food products and grocery items.

30.2 GROWTH DRIVERS OF VALUE ADDED FOOD PRODUCTS India possesses the advantage of having a large young population. It is estimated that around 35 percent of India’s population is under 14 years of age and more than 50 percent of the population is estimated to constitute the working age group. The large population of working age group forms a wide consumer base. Rapidly changing demographic profiles and increased disposable income are changing the face of Indian consumers. The swelling middle class is redefining the consuming pattern with a shift towards branded and value added food products. With the country’s income pyramid changing rapidly, a definite shift is observed from saving to spending attitude. Discretionary spending has seen 16 percent rise for the urban upper and middle classes and the number of high income households has grown by 20 percent year-on-

6 Food Processing: Market and opportunities by KPMG 7 McKinsey & Company

228 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT year since 1995-96.8 The self employed segment of the population has also grown significantly. Growth drivers for emerging markets of value added food products are summarized below: Food and grocery dominates total retail spend: While rural consumers spend around 53%9 of their total consumption expenditure on food, urban India spends 40% of their retail spend on food items thus offering huge opportunity for value added food products. Higher disposable income: High economic growth has led to increased disposable income for the Indian middle class, which is switching over to healthy and value added food products. It is estimated that disposable income is set to rise at an average rate of 8.5 % by 201510. Also, the middle class is estimated to reach a size of 582 million from its current size of 50 million by 201511. Shift in demographic profile: The median age of Indian population is 24 years and approximately 65% of Indian population is below 35 years of age. The large population of working age group forms a wider consumer base for food products. Emergence of organized food retail: It is estimated that the total food and grocery retail space will grow at a CAGR of 6% over 2006-2011, with the organized share likely to increase from less than 1% currently to 6-6.5%12. This will translate into more business opportunity for value added food products.

30.3 ASSESSMENT OF FOOD RETAIL INDUSTRY Traditionally, the Indian retail sector has been dominated by large number of small and medium sized retailers, who account for more than 95 percent of the total retail business. In categories like food & grocery, fresh fruits and vegetables, their share is as high as 98 percent. Over twelve million small and medium retail outlets exist in India, the highest across the world. More than eighty percent of them are run as family owned businesses and the exemplary mom-and-pop retail outlets constitute a major part of country’s retail store formats. Modern retailing in India is evolving rapidly, with consumer spending growing by unprecedented rates and with increasing number of domestic and global companies investing in this sector.

8 Ernst & Young Research, 2008 9 NSS 62nd round 10 E&Y Research, 2008 11 NCAER Research 12 Retail Edelweiss report, 2008

229 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

43.8 2010-11 460.6

16.5 2006-07 Org. Retail 337.3 Total Retail

12.9 2005-06 311.7

0 50 100 150 200 250 300 350 400 450 500

Source: Data Monitor, 2007, Sales in US $ Billion, Exchange Rate: US $ 1: INR 41 The size of Indian retail Industry was estimated at US$ 385 billion13 in 2007–08. In 2006-07, the retail market size was US$ 337.3 billion. In 2007, organized retail stood at US$ 16.5 billion, implying a share of 4% of the total retail revenue. Organized retail revenues are expected to increase from US$ 12.9 billion in 2005-06 to more than US$ 43.8 billion by 2010-11. Today, top eight cities (four metros, Pune, Ahmedabad, Bangalore and Hyderabad) together account for almost 80 percent of the total organized retail. Food retail, dominated by around 5 million retail outlets in India, is currently estimated at US$ 160 billion. Within this, organized food retail grew from US$ 391 million in 2002 to US$ 1624 million in 2007 with a CAGR of about 33 percent. India tops the AT Kearney's annual Global Retail Development Index (GRDI) for the third consecutive year, maintaining its position as the most attractive market for retail investment. Furthermore, a report by Price Waterhouse Coopers foresees India and China to continue as the top sourcing hubs in retail and consumer sector in the coming years. Driven by the huge potential in the sector a number of large corporations, both domestic and global, have forayed in to the market recently. It includes Reliance, AV Birla, RPG, Bharti- Walmart, Future Group, Big Apple, Godrej, Heritage and Wadhan Group (Spinach) to name a few. A few more global players like TESCO, Carrefour and Landmark are also expected to enter in the market. The growth in organized retail sector has been Source: KPMG spearheaded by the food & beverages segment and they are also likely to see a higher growth rate in future. The figure below depicts the responses of retailers about the fastest growing retail segments in India. This clearly shows that food and grocery is by far the

13 IBEF

230 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT fastest growing segment in the Indian retail sector. India has one of the largest numbers of retail outlets in the world. Of the 12 million retail outlets, nearly 5 million sell food and related products. Nearly two third of the food retail outlets in India are located in rural areas, which is also being reflected in the graph below:

Figure: Category wise Distribution of Retail Outlets

Source: NSSO 5th round, KPMG and Cygnus Research

The retail sector in India is primarily characterized by different SKUs rather than different retail formats in operation. It is envisaged that modern retail will adapt and absorb some of the traditional retail formats in subsequent years. Also, with the rural retail constituting the largest share of total retail revenues, the existing players are now looking at rural markets to tap the opportunity. A few players like ITC Limited, Godrej and DSCL have already started the venture under the brand name of Choupal Sagaar, Aadhaar and Hariyali Kisaan Bazaar respectively.

30.4 MAJOR PLAYERS IN ORGANIZED FOOD AND GROCERY SEGMENT Major players in organized food and grocery segment are Pantaloon Retail, Reliance Retail, RPG, Aditya Birla Retail etc. None of the organized retailers have presence in Bihar. However, Maharashtra is one of the leading states in terms of growth of retail space. Besides Mumbai, organized retailers are also present in tier I and tier II cities of Maharashtra. The table below shows the food and grocery sales (2008) as well as no of stores of major players in organized retail segment:

Sl No. Name of retailer Food and grocery sales ($ million) No of stores 1. Pantaloon Retail 1593 456 2. Reliance Retail 432 688 3. RPG 427 420 4. Aditya Birla Retail 251 645 5. Dairy Farm 100 67 Source: IGD, excludes cash and carry formats

A brief profile of the major retailers is given below: • Pantaloon Retail (India) Limited: Pantaloon has established strong presence across multiple consumption categories in a bid to capture maximum consumer wallet share. It has widened its format offerings from a single format to over 15 formats, which captures almost 75% of the consumption basket. Food Bazar, Big Bazar and KB’s Fairprice are the various banners under which Pantaloon Retail operates in the food and grocery segment. Out of these three, Food Bazar mainly caters to fruit and vegetable, staples, dairy

231 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT products etc. Pantaloon often combines its Food Bazaar (food supermarket) and Big Bazaar (Grocery and other items) formats to create a hypermarket format.

Name of retailer Area in sqm No of stores Food Bazar 102,752 152 Big Bazar 380,695 149 KB’s Fairprice 17,980 155 Source: IGD • Reliance Retail: Reliance Retail is part of Reliance Industries Limited, which is one of the India’s largest conglomerates. It ventured into organized retailing in November 2006. Reliance Fresh (Supermarket) and Reliance Mart (Hypermarket) are the two banners under which reliance operates in retailing business. The company invested heavily to build a nationwide network of procurement centers, cold storages and distribution hubs to improve supply chain efficiency of perishables. In 2008, 678 stores of Reliance Fresh and 10 stores of Reliance Mart were operating in the country. • RPG: Spencer’s (Supermarket) and Spencer’s Hyper (Hypermarket) are the two formats of RPG group involved into food and grocery retailing. Around 60% items in a RPG store comprises of fresh and dry groceries. Around 370 stores of Spencer’s and 50 stores of Spencer’s Hyper are functional in the country. • Aditya Birla retail: It is part of Aditya Birla group. The company forayed into retailing business in 2006 via the acquisition of Trinethra Super Retail. more. for you and more. MEGASTORES are the two banners. more. for you is a superstore format and the other one is hypermarket format. Both of them together account for presence of around 645 stores in the country. Out of this, 639 stores are in superstore format. The company focuses on private labels with presence of around 350 labels in food and non-food category.

30.5 ASSESSMENT OF MAJOR CONSUMPTION MARKETS As mentioned earlier, the major consumption markets for fruits and vegetables grown in Bihar are Patna, neighbouring states of Jharkhand, Orissa and West Bengal. For certain fruit crops such as Litchi and Mango, the state has established linkages with major metros like New Delhi, Mumbai, Hyderabad, Bangalore, Lucknow and Nagpur. In case of Maharashtra, Mumbai itself is a huge consumption market for fresh fruits and vegetables. The table below shows the crop wise major consumption markets of fruits and vegetables grown in Maharashtra:

Sl No Fruits/Vegetables Major consumption markets 1. Pomegranate Delhi, Kolkata, Jaipur 2. Grapes Delhi, Kolkata, Hyderabad 3. Banana Delhi, Chandigarh, Amritsar, Lucknow 4. Tomato Delhi, Kolkata, Surat, Ahmedabad 5. Sweet lime Delhi, Jaipur 6 Kesar mango Delhi Orange Delhi, Kolkata, Bangalore Lemon Delhi

232 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT As evident from table above, Delhi, Kolkata and Mumbai are the major consumption markets for fresh fruit and vegetables grown in Maharashtra; however, in case of Bihar, Delhi, Kolkata and Patna are the major consumption markets. Azadpur APMC, which is located in Delhi, is one of the largest fresh produce wholesale markets in South East Asia Region. It is also an important distribution hub for various markets of North India such as Chandigarh, Jaipur and Jalandhar etc. It witnesses huge arrivals from various parts of country on a daily basis. Azadpur Mandi is spread over in an area of around 40 hectares, which includes both fruit and vegetable market yards. A detailed analysis of the above mentioned cities (Delhi, Kolkata, Mumbai and Patna) have been undertaken to assess the consumer demand. Various parameters such as demography, income and expenditure pattern, penetration of organized retail, economic indices of respective cities have been taken into account to understand the market demand of food products.

30.5.1 Delhi With a population base of 19.73 million and median age of 22.8 years, Delhi has a young population with a high propensity to consume. Around 15% of the female population is working, which means a higher number of double income families, which have higher income and propensity to spend.

Demography ‐ Delhi Population 19.73 million Median age 22.8 years Per cent of working women 14.7 % Per capita income of Delhi has been estimated to be Rs 43,155. Around 54% of the households generate income from monthly salaries and the average HH income is Rs 183,000, which is higher than any other metros except Mumbai. Distribution of Income in Delhi Per Capita Income Rs 43155 Per cent of salaried household (HH) 53.8 % Average HH income from salary in Rs ‘000 per annum 183 Per cent of business and professional HH 32.3 % Average HH income from business in Rs ‘000 per annum 299 Source: How India Earns, Spends and Saves, The Max New York Life‐ NCAER India Financial Protection Survey, 2007 (Estimated data for 2004‐05) As there is no detailed data on the market size (especially of the food and beverages segment) of different cities, hence market size has been estimated using data from different sources. In terms of growth of organized retail, Delhi has an estimated retail space of 6.5 million sq ft which shows that retail boom has come up in big way in Delhi among all the Indian cities. The average monthly per capita expenditure (MPCE) in Delhi is Rs 1803.8614. Out of this, Rs 673.73 is spent on food items i.e. around 37% of the consumer spending is on food products and around 6% is spent on perishables. Estimation of Market size of food products in Delhi Estimated retail space in million Sq ft15 6.5 million sq ft

14 NSS report (2006‐07)

233 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Unit retail space (Sq Ft/HH) 4 Annual expenditure on food in Rs billion Rs 159.5 billion Monthly per capita expenditure on food in Rs Rs 673.73 The table below shows the distribution of MPCE on broad category of food items. Per cent distribution of MPCE on Food items in Urban Delhi Cereals 7% Milk & milk products 10% Vegetables 5% Fresh fruits 1% Other food items 14% Total 37% Source: NSS report (2006‐07) For the purpose of estimating the market size of food in Delhi, estimation of the total annual expenditure on food items was done using data on per capita expenditures on food items. It was found that NCR16’s annual expenditure on food is about Rs. 159.5 billion. As 6 % of monthly per capita consumption expenditure (MPCE) is spent on fruits and vegetables, the estimated annual expenditure on fruits and vegetables in Delhi comes out to Rs 9.6 billion. This clearly shows that Delhi is a large consumer market of food products.

30.5.2 Mumbai The total population of Mumbai is 19.23 million and the median age of population is 25.7 years, which clearly shows that city has a relatively young population that falls in the working age group. Demography ‐ Mumbai Population 19.23 million Median age 25.7 years Per cent of working women 10.9 % Per capita income of Mumbai is Rs 40,768 and the monthly per capita consumption expenditure of urban Maharashtra is Rs 1673.48. Out of this, Rs 587.95 is spent on food items, which constitutes 35% of MPCE.

Distribution of Income in Mumbai Per Capita Income Rs 40,768 Per cent of salaried household (HH) 57.8% Average HH income from salary in Rs ‘000 per annum 205 Per cent of business and professional HH 31.7% Average HH income from business in Rs ‘000 / annum 204 Source: How India Earns, Spends and Saves, The Max New York Life‐ NCAER India Financial Protection Survey, 2007 (Estimated data for 2004‐05) Mumbai is leading the retail revolution in the country with an estimated retail space of 6.6 million sq ft. All the major food and grocery retailers of the country such as Pantaloon, Reliance and AV Birla are present in the city. The annual expenditure on food is around Rs 135.6 billion.

15 Images retail 2005 16 NCR means Delhi, Noida, Gaziabad, Gurgaon and Faridabad

234 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Estimation of Market size of food products in Mumbai Estimated retail space in million Sq ft 6.6 million sq ft Unit retail space (Sq Ft/HH) 1.4 Annual expenditure on food in Rs billion Rs 135.6 billion Monthly per capita expenditure on food in urban Maharashtra Rs 587.95 Source: DES, Govt of Maharashtra Out of 35% of MPCE spent on food products, cereals and milk products constitute 13% of the total consumer spending. Fresh fruits and vegetables constitute around 6% of MPCE, which is almost similar to Delhi. Per cent distribution of MPCE on Food items in Urban Maharashtra Cereals 7% Milk & milk products 6% Vegetables 4% Fresh fruits 2% Other items 16.% Total 35% The estimated annual expenditure on fresh fruits and vegetables in Mumbai comes to around Rs 8.1 billion. In comparison to Delhi, Mumbai is a smaller market for perishables.

30.5.3 Kolkata Kolkata is a major market of eastern India and a large market for fruits and vegetables of Bihar. The total population of the city is 13.1 million. Around 10.6% of the female population is working and hence contribute in household income. Demography ‐ Kolkata Population 13.1million Per cent of working women 10.6 % Per capita income of urban west Bengal has been estimated to be Rs 27,868 and the monthly per capita consumption expenditure of urban West Bengal is Rs 1371.26. Out of this, Rs 551.40 is spent on food items, which constitutes 40% of MPCE. Distribution of Income in Kolkata Per Capita Income Rs 27,868 Per cent of salaried household (HH) 37.7 % Average HH income from salary in Rs ‘000 per annum 135 Per cent of business and professional HH 41.6 % Average HH income from business in Rs ‘000 / annum 146 As per images retail report, Kolkata has an estimated retail space of 0.7 million sq ft. It is much less in comparison to Delhi and Mumbai. Estimation of Market size of food products in Kolkata Estimated retail space in million Sq ft 0.7 million sq ft Unit retail space (Sq Ft/HH) 0.4 Annual expenditure on food in Rs billion Rs 86.6 billion Monthly per capita expenditure on food in Rs Rs 551.40 Fresh fruits and vegetables constitute around 7% of MPCE. Per cent distribution of MPCE on Food items in Urban West Bengal Cereals 10% Milk & milk products 4% Vegetables 6% Fresh fruits 1% Other items 19% Total 40%

235 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The annual expenditure on food in Kolkata is around Rs 86.6 billion. Hence the annual expenditure on fresh fruits and vegetables in Kolkata comes to around Rs 6 billion. Though the market size is relatively less in comparison to Mumbai and Delhi markets, still if offers huge scope for fruits and vegetables grown in Bihar and Maharashtra.

30.5.4 Patna Patna is the largest town and capital of Bihar. Total population of the district is 47.18 Lakh as per 2001 census with an urban population of approximately 30 lakhs. Patna, being the capital of the state and the largest town, offers a big market for fresh vegetable and fruits. Per capita income of Patna is Rs 6958, which is highest in the state. As per NSS report 2006-07, monthly per capita expenditure of urban areas in Bihar is Rs 864.96, which is lowest in the country. Out of this, Rs 435.56 is spent on food items, which constitutes 50% of the total consumer spending. The share of vegetables and fruits in total consumer expenditure of urban consumers of Bihar is around 7.8%. On the basis of above facts and figures, the estimated annual market size for fresh fruits and vegetables in Patna (urban) is estimated to be 2.5 Lakh MT.

It can be assumed based on the overall assessment here that the market size of fruits and vegetables, as also milk, milk products and cereals, in the metro cities, is a growing one and has scope for greater absobtion from organised supply centres. Other large metros and tier two metro cities are also markets ripe for tapping, given the needed organisation at the supply side.

236 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

AURANGABAD‐AMRAVATI INTEGRATED VALUE CHAIN

Aurangabad‐Amravati region, Maharashtra

sFocus Crop

. Sweet Lime . Kesar mango . Orange . Lemon . Banana

DPR: Aurangabad‐Amravati Integrated Value Chain Project

. Description of Hub and Spokes

107 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Aurangabad‐Amravati Region

IL&FS Clusters identified Aurangabad-Amravati region for Integrated Value Chains of high value/volume agricultural/horticulture produce based on combination of several factors such as agricultural production in terms of volume and variety, human and economic development, suitability for development of integrated value chains and commercial viability of infrastructure projects. This region covers Aurangabad, Amrawati, Buldhana, Jalna and Akola districts, in Maharashtra and are shown in the map below

Amravati- Aurangabad Region

The region is known in particular for sweet lime in Aurangabad and Jalna, Kesar mango in Paithan Aurangabad; lemon and banana in Buldhana, and orange in Amravati. The major orange producing districts in the state region are Amravati, Nagpur, Yavatmal and Akola, of which Amravati and Nagpur account for about 940 thousand hectares with production about 500 thousand metric tonnes. This cluster also produces about 87% of the total sweet lime grown in the state. Though the production of mango in the region is small compared to the mango-belt in North India, Kesar mango is fast cornering a niche segment of the market with its distinctive taste. Based on these considerations, and the assessed potential for development, the focus crops identified for the region are: The focus crops in this region are: . Sweet Lime . Kesar mango . Orange . Lemon . Banana

108 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

15 FOCUS CROP: SWEET LIME

Maharashtra ranks second among Indian states in production of sweet lime, producing about 23% of the total production in the country. The state has 98,400 Ha of area under sweet lime cultivation with an annual production of 678,700 MT. The table below provides details of sweet lime grown in the study region.

District Area (Ha) Production (MT) The cluster produces about Aurangabad 21617 302641 87% of the total sweet lime Jalna 19158 268212 produced in the State. The Amravati 1925 19250 Akola 200 2000 major sweet lime producing Buldhana 257 2570 talukas (blocks) in the cluster Total 43157 594673 are Ghansawangi, Ambad and Source: Directorate of Horticulture, Government of Maharashtra (FY 2007-08) Jalna in Jalna district and Aurangabad, Paithan and Kannad in Aurangabad district. The production is spread over two seasons namely Ambia bahar and Mrug bahar. Ambia Bahar accounts for 55-60 % of the production. Arrivals for this season start in the month of August and end in the month of November. Mrug Bahar accounts for the balance 40-45 % of the production and it starts in the month of February and ends in the Month of May. In case of Aurangabad, Ambia Bahar accounts for almost 65-70 % of the production with harvesting period spread between August and end of October. Mrug Bahar accounts for the balance 30- 35% of the production with harvesting period spread between February and May with March and April being the peak season. Sweet limes in the region are propagated by budding. The method of shield budding is the most popular method for propagation. The square system is used for plantation of sweet lime. The distance between plants is generally kept at 18 ft with about 125 plants per acre. The trees start getting economic yield from 3rd year onwards and the economic life of the trees is 12-15 years depending on the maintenance. Intercropping with tur, maize and cotton is carried out generally up to the first 4-5 years.

Farmer 15.1 VALUE CHAIN ANALYSIS Channel 3 Channel 1 Channel 2

The diagram explains the major channels of Pre harvest Contractor trade of sweet lime in the region:

Based on the point of sale, the supply chain Commission agent can be classified into three types:

1. At Farm Gate – Channel 1: Accounts Trader for 80-85% 2. At APMC Mandis within Production Clusters – Channel 2: Accounts for 10- Commission Agent in Distant market Retailer in Local Market 20% of the produce 3. At distant market by some big farmers- Wholesaler

Channel 3: 1-2% CONSUMER Retailer in Distant Market 109 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The major players involved in the trade of sweet lime are farmer, Pre Harvest Contractor, local commission agent, trader, commission agent in distant market, wholesalers and retailer. The roles played by each player in the value chains are given below:

Farmer The average orchard size of sweet lime in the study region is about 1-2 Ha. One Ha of orchard accommodates about 310 plants (18 ft X 18 ft) which are maintained at a height of about 12-15 feet. The cost of establishment of sweet lime orchard is about Rs. 51,0001. The breakup of the cost is given below. Activity Cost per Ha (in Rs) Cost of sapling (310 sapling) 4960 Labour cost (levelling, digging, weeding, sapling plantation, manure spread, filling etc) 4000 Cost of irrigation (drip irrigation) 25220 Compost/fertilizers 3000 Pesticide 3000 Others 2000 Total in Rs 42180 The breakup of annual variable cost of cultivation of sweet lime is given below.

Activity Cost per Ha (Rs.) Irrigation 2500 Fertilizer + Labour 15000 Pesticide + Labour 20000 Labour (Trimming, deweeding, etc) 9000 Harvesting Labour 7500 Miscellaneous 2000 Total 56000 Each plant produces about 80 Kg of fruit and the average productivity of the region is 25 MT per Ha. Based on the existing market scenario, the price received by farmer was approximately Rs 8/Kg in the peak season which went to a high of Rs 30/ kg during lean season at farm level. In Channel 1, the produce is sold to pre harvest contractor (local agent) about 2-3 months before the harvesting. The farmer bears the cost of harvesting and loading indirectly as the pre harvest contractor deducts 10% from the value of produce during the final settlement with farmer. The reason given behind deduction is that the pre harvest contractor buys all the produce without sorting and grading the produce and he also pays for the harvesting. However, he also pays the pre agreed price to farmer irrespective of the market price of the produce. In channel 2; farmer bears the cost of harvesting, loading, un-loading at APMC, weighing, local transport to APMC market yard and commission to commission agent (6.25%).

1 Cost of land has not been taken into account for calculation of total cost of establishment of lemon orchard 110 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Pre Harvest Contractor (PHC) PHC provides assurance to farmer for buying of produce from the field itself by leveraging his linkages in the distant market. He also provides credit to farmer for cultivation. The interest cost of the credit is factored in the prices offered to the farmer and rate of interest varies between 16-20% based on borrower’s individual relation with the PHC. Price fixation between the farmer and the trader (channel-1) is by negotiation. The trader offers a price based on his information of price in the local and distant market. The difference in price in local market and the price offered to the farmer also depends on the distance of the market from the farm. Transportation cost in this case is borne by the PHC. Most of the farmers prefer to sell by this channels as there are no marketing costs, harvesting is the responsibility of the PHC and the risk is with the PHC. Almost 80-85 percent of the produce is marketed through PHC. Though a PHC is able to realize more profit through this system, it also involves a high degree of financial risk. The ownership of the produce lies with the farmers but the PHC is committed to pay a pre-fixed price to growers from whom he has sourced the produce.

Commission Agent (CA) CA facilitates the sale of farmer’s produce for which they charge a commission of 6-8% of the sale value from the farmers. A cess of 1.05% (1% market fee and 0.05% supervision fee) of value of the produce is collected from buyers by CA on behalf of the market committee. Payment is made to the growers typically on 8th day of the harvest. CAs are an important link in the value chain. They bear the financial risk as they pay to the farmer on spot after auction but receive money from wholesaler after some days depending on mutually agreed terms and conditions. They also provide financial support to farmers for cultivation of crops. Like PHC, commission agents also extend credit to growers and the interest costs are factored in the same manner as it is done by PHCs. Sometimes CAs may purchase on their own from the farmer and sell through commission agent in distant markets of Delhi, Hyderabad, Jaipur, Agra, Ludhiana etc. In this case the cost of marketing from local APMC yard to distant wholesale market is borne by CA.

Traders They are the major buyer in the APMC markets. They also bear the price risk as the produce purchased on day-1 takes about 3 days to reach destination markets and during this time price may vary both sides. Price discovery in the APMC market yards is by Open Call Auction method. The traders bear the cost of loading at local APMC yard (Rs 1100-1500/ Truck of 15 MT), market cess (1.05%), weighing charges of truck (Rs 25/ Truck), transportation cost to Delhi (Rs 27000-30000/ 15 MT truck), unloading at distant market in Delhi (Rs 1500/ Truck), Grading (Rs 1200/ Truck) and commission to CA (10%).

Wholesaler The Wholesaler is the major buyer in the distant market and has linkages with the local retailers and markets of surrounding states. He also plays the role of bulk-breaker and sells the produce in smaller units to retailers. Most of the sorting and grading takes place at this point itself.

111 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Retailer The retailer is the point of contact with the final consumer of the produce and bears the cost of local transportation and marketing of the produce. He also bears the risk of losses due to quality deterioration and marketing of the produce. These risks are factored appropriately in the retail prices to cover potential losses. After picking, the fruits are loaded in the trucks as loose by spreading paddy straw in the truck to keep the fruit safe from injuries. There is no farm level grading or packing of produce irrespective of the marketing channel used to market the produce. The fruits are generally loaded into an open truck or tempo/tractor trolley and sent to destination markets for sale. In cases of Channel 2, sweet lime brought from orchards in the APMC markets are heaped properly on the auction platform without causing any damages to the fruit. For this purpose the auction platforms are covered with paddy straw in the market yards and then the produce is auctioned for price discovery. The produce is sold by weight in all marketing channels. The grading and packaging mostly take place in consumption market only. The packaging weight depends on the market place for example the packaging weight per gunny bag is 40 Kg in Jaipur market where as it is 20 Kg/ Bag in Delhi. In all the markets grading is done manually. The grading is done based upon the size and weight of the fruit. Simultaneously, the fruits are sorted where the diseased and bruised fruits are discarded. Based on size, fruits are graded into 4 grades (no. of fruits per kg varying from 4 to 8 fruits). The traders in production clusters do not generally store the product. They operate in such a way that the product reaches the destination market within a maximum of 3 days of harvesting. Transportation is carried out in ambient temperature in open trucks. The fruit is generally not stored for off-season sales. A value chain, indicating the various activities in the value chain, actors performing the given activity and cost build-up at every step has been mapped in this section. This value chain (for 1 Kg of Sweet lime) has been mapped for the supply chain having following characteristics: 1. The marketing chain follows Channel 1, i.e, Farmer to PHC to wholesaler/Commission agent in distant market to retailer to Consumer. 2. The cost of production for the farmer is only the variable cost for maintenance of one acre orchard per year. It does not include the cost for the first five years of orchard where there are no returns. 3. The distant consumption market considered for this case is Azadpur APMC Mandi, in New Delhi 4. Cost of capital and opportunity cost for the all the intermediaries has not been considered in cost build up and for calculating the spread 5. The cost of retailing, which includes the cost of shop, wages, rent etc has not been considered 6. The prices considered are average prices for the month of September in production clusters in Jalna and Aurangabad and destination market at Delhi based on the data corroborated from traders. The same has been cross checked with the data from Agmark.net for the same period

112 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Retailer’s Margin

Transportation

Wholesaler’s Margin Rs 3.603.60 Rs 0.20 Transportation losses @2% Rs 2.10 Packing charges Rs 0.32 Sorting and grading Rs. 23.00 (Retailer’s Price) Rs 0.50 PHC’s Margin Rs 0.08 Rs. 19.00 We ight loss@ 5% (Wholesaler’s Price)

Commission charges Rs 3.50 @ 10% in Delhi Rs 0.80 Unloading Rs 0.80

Rs 1.60 Transportation to Delhi Rs. 16.00 Rs 0.10 (PHC’s Price) Harvesting, loading

Farmer’s Price Rs 2.00

Rs 0.80

Rs 8.00 In the above diagram, the farmer pays for the harvesting and loading labour. The PHC pays for the transportation to destination market, unloading cost in the market, commission and also bears the weight loss occurring during transit. The sorting and grading cost in the destination market is borne by the wholesaler. He also bears the loss in wastages and packing charges. The retailer buys the product from the wholesaler and pays for the transportation cost to the retail stores/points. The price build up can be summarized, as below:

Rs/MT Particular Farmer PHC Wholesaler Retailer Cost of Maintenance of orchard/ Purchase 2240 8000 16000 19000 Cost of Marketing incl. Commission Agent charges, wastages, etc. 800 4502 900 200 Sale Price 8000 16000 19000 22800 Spread 4960 3498 2100 3600 Some of the salient features of the price build up are mentioned below:

 There are four intermediaries between the farmer and the consumer in the sweet lime supply chain (including the commission agent).  The price build up from farmer to consumer is around 3 times.  The farmer earns a margin of Rs. 4960 per MT which is about 22% of the consumer rupee  PHC incurs a cost of around Rs. 4500 per MT in transportation, commission charges, weight loss, etc. The margin of PHC is about Rs. 3500 per MT which is about 15% of consumer rupee  Wholesaler incurs a cost of around Rs 900 per MT in various activities such as labour, packaging, wastages etc. The wholesaler earns a margin of Rs 2100 per MT that is around 9 paisa of a consumer rupee.  The commission paid by the farmer to the commission agent constitutes 7 paisa of a consumer rupee.

113 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT  The share of consumers rupee by various actors in the value chain emerges as shown (in % of consumer’s rupee) :

15.2 INFRASTRUCTURE ASSESSMENT

15.2.1 Post Harvest Infrastructure Sweet lime is treated as a bulk horticulture produce with limited sorting/grading and produce is handled manually throughout the supply chain. The produce is also dumped as loose by spreading paddy straw on the bed of transportation vehicle and sorting/grading in this case is carried out by the wholesaler in destination markets. Manual sorting, grading and packaging is done at the APMC markets under the sheds of the CA shops or at the destination market. Sweet lime is not stored in cold storages and the produce is sent to distant markets on the day of sale itself. There is no farmers’ cooperative or any other institution which is engaged in the marketing of sweet lime in the region. There are no sweet lime processing units in the region at present. After harvesting and packing, the produce is immediately transported to destination market mostly by trucks as the cluster does not have adequate rail connectivity. In very cases, rudimentary sorting, grading and packing at the farm level (in Auragabad district), is carried out by the PHC. The sorted/graded produce is packed mostly in gunny bags with specifications of grade marked on the outer side of bag.

Agri Tech Farm Case Study

Agri Tech India Ltd has set up a 250 acres farm at Issarwadi, Taluka: Paithan on Aurangabad-Paithan road. The company has been promoted by M/S Nath Paper Mills Ltd. The farm is an excellent example of corporate farming and showcases some of the best farm management practices. Total area in the farm has been divided in to various segments like horticulture planting area, floriculture plot, field crop planting area, cash crop planting area, seed multiplication plot, R&D plot and experimental plot. Under horticulture area, there are two large orchards of Mango and Grape has been set up in an area of 36 114 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT acres and 60 acres respectively. Entire area under horticulture crop and floriculture is under drip irrigation. Various experiments of pilot testing of certain crops are carried out under R&D area to assess the viability of commercial cultivation. The orchards are managed scientifically to ensure best yield and reduce the probability of any pest/disease occurrence. The buyers generally visit the farm during harvest period and negotiate with the farm owner for the prices. Most of the times, the owner is able to get a better realization as he is able to offer significant volumes of individual products like Mango and Grapes. Once the prices are finalized, the produce is harvested under the supervision of farm staffs.

15.3 GAPS IN THE VALUE CHAIN An assessment of the range of activities under the value chain was undertaken to understand the gaps and inefficiencies in the sweet lime value chain. A detailed structured survey was undertaken to map the existing supply chain and identification of gaps at each stage, with added focus on institutional, infrastructural and logistical barriers. After the detailed field survey, gaps identified were discussed with a range of key stakeholders to get their feedback on the analysis and understanding of issues. The following gaps are identified in the value chain:  No farm level sorting, grading, washing and other facilities in the region. There are also no de-greening facilities in the region.  There is no requirement from domestic markets for sorted, graded and packaged produce. The export market has not been catered as yet where higher prices may be obtained for these services. There is also a limited opportunity for export as the marketable surplus mostly caters to the domestic demand.  There is no sorting, grading and any type of primary processing taking place in APMC markets in the region. The packaging and grading takes place in consumption market only with only minimal sorting grading at the farm gate. Most of the produce is sold and marketed outside the APMC markets and the arrivals in APMC markets are not very high except for some places. Further, any arrivals in local APMC markets are mostly sold in the local markets by the local merchants.  No processing facility for the fruit exists in the cluster.  Many times, lack of market intelligence of farmers about prices and demand leads to lower price realization

15.4 POTENTIAL INTERVENTIONS

Two pack houses for orange in Aurangabad and Jalna districts are proposed. The proposed locations are Jalna and Paithan. The pack houses will have following facilities for orange:

 Sorting  Grading  Packaging in plastic crates The pack houses at Paithan will cater to mango as well. The details of the facilities have been captured in the subsequent chapter.

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16 FOCUS CROP: KESAR MANGO

Maharashtra produces 5% of the total production of mangoes in the country. Total area under mango cultivation in Maharashtra has marginally increased from 0.44 million Ha in 2006-07 to 0.45 million Ha in 2007-08 and the production also increased from 0.64 million MT to 0.71 million MT during the same period. Productivity of mango in Maharashtra is around 1.6 MT/Ha which is much lower in comparison to the national average, which stands at 6.3MT/Ha. Ratnagiri, Sindhudurg, Raigarh and Aurangabad are the major mango producing districts of Maharashtra. Major varieties cultivated in the state are Alphonso, Kesar and Pairi. In Amravati region, Aurangabad is the major district under mango cultivation and it accounts for 15% of the total production of the state. Total production of mango in Aurangabad district is approximately 0.1 million MT and the productivity is around 6.2 MT/Ha, which is much higher in comparison to the state’s productivity. Paithan, Aurangabad, Sillod and Vaijapur are the major talukas under mango cultivation in Aurangabad district. Among these, Paithan and Aurangabad accounts for about 20 percent of total production in the district.

Area and production of Mango

Districts Area in Ha Production in MT Kesar is the most prevalent variety of Mango in Buldhana 1263 5051 Akola 74 442 major talukas of the district. As per the Amravati 478 1912 information provided by mango growers in the Jalna 450 19 region, area under Kesar mango has increased Aurangabad 17264 108257 in the past few years. Sugarcane has been replaced by mango due to decreasing water resources in the region. Contrary to other varieties of mango such as Dasheri, Langra etc. that follow alternate bearing cycle, Kesar mango bears fruit every year. Harvesting of Kesar Mango begins from mid of April and attains peak during mid of May. It is also being exported to Middle East, USA, UK and Japan etc.

16.1.1 Value chain analysis

Trade channel of mango The following illustration depicts the most commonly observed supply chain mechanism of mango in the region:

Commission Farmer PHC Wholesaler Retailer Agent

Farmer

Various channels of the mango supply chain are mentioned below:  Direct Sourcing at Farm: Pre-harvest contract is the most commonly used sales system of mangoes in the region. Around 80% of the produce from an orchard is sold under pre-harvest contract. The contractors evaluate the orchard during the initial stage of fruiting and payment is done to the farmer on per kg basis. Some of the

116 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT farmers also negotiate price of their orchard on lump sum basis. The quantity, quality and rates are negotiated on the basis of mutual agreement between the farmer and the contractor. Cost of activities such as harvesting, packing and transportation at the farm gate are borne by the contractor.  Purchase by Processing Units: Processing units like Jain Food Park and Uni-Fruity directly procure the raw material at the farm gate. Apart from this, they also procure through agents/suppliers. Processors are more price sensitive and quality is not a major concern for them. They mostly buy grade C & D material which otherwise cannot be sold in fresh retail market. It is estimated that around 15% of Mango produced in the cluster is procured through this system.  APMC Market yards: Farmers in the catchments of nearest APMC bring their produce which is sold under open auction mechanism. It is observed that at times, farmers do not bring the produce to nearest market yards and travel to a bigger market yard in expectation of a better price. Volume of trade through this mechanism is estimated to be about 5% of the total Mango trade. The role played by major stakeholders and the value added at each stage is briefly captured below:

Farmer: Mango saplings are plan ted by the farmers in pits and the planting distance of 15mx15m is maintained by them. Around 475 plants ca n be accommodated in a hectare. Farmers incur a cost of around Rs 126252 in the 1st year in establishment of mango orchard. The cost of establishment of orchard in a hectare is repr esented in table below:

Activity Cost in Rs/Ha The tree starts fruiting from 5th year onwards. pit digging 7125 fertilisers 5000 Yield of the tree increases as the plants grows organic manure 5000 older and reaches up to 15 MT/ha. pesticides 3000 growth hormones for root setting 500  5th year: 10 kg per plant interculture operations 25000  7th year: 12-15 kg per plant irrigation 3000 planting material 19000  10th year: 20-25 kg per plant drip irrigation system 55000 Total 122625 The above trend can be seen in those orchards that are well maintained. However, average yield of mango in the cluster is only about 5-6 MT per hectare. Some farmers who supply to the exporters have Global GAP certified farms. Only 10% of the total production is of export quality and the remaining is as follows:

Grade Average fruit weight (grams) % of total production A 250‐300 20* B 200‐250 30 C <200 50 * about 50% of grade A is of export quality

2 It does not include cost of land. 117 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Besides the initial investment, farmers incur a cost of around Rs 0.15 million to Rs 0.06 million annually on maintenance of mango orchard. It includes cost of pruning of dead and diseased branches, costs involved in plant protection and fertilizer application, irrigation etc. The operational cost per Ha is represented below:

Activity With use of growth hormone Without growth hormone Operational cost per hectare Cost in Rs. Cost in Rs. fertiliser 76000 25000 kaltar (Growth hormone) 38000 0 pesticides 15000 15000 micro‐nutrients 3900 3900 irrigation 3000 3000 labour 15000 15000 Total 150900 61900 As evident from above, cost of fertiliser application constitutes a major chunk of operational cost. As mentioned earlier, orchards are leased by the farmers to the contractors at the time of fruit setting. The price received by the farmer largely depends on the stage of the orchard at which the contract takes place. Pre-harvest contract at the advance stage fetches better price to the farmers as the yield estimates are more realistic at this stage leading to lower output risk. Around 20-50% of the estimated contract value is paid in advance to the farmer.

Pre‐harvest contractor: As mentioned earlier, Pre-harvest contractors visit the farmer’s orchards in February when the fruits are of very small size and they offer a purchase price to the farmer on the basis of their own estimate of quantity and quality of the expected fruit. Due to this, the weather risk remains with farmer only. The time of harvesting is decided by the contr actor on the basis of maturity of fruit as well as price prevailing in the market. Harvesting s eason starts from May and lasts till mid June. Harvesting is done by labourers employed b y the contractor. This is done with the help of secateurs in the morning or evening hours from 6:00 a.m. to 8:00 a.m. and after 5:00 p.m. respectively. Stalk of 1-1.5 inches is left attached to the fruit while harvesting. Entire produce is harvested in 3-4 harvestings on weekly interval. 1 person can harvest up to 100 kg of fruits in 4 hours. Fruits are collected in plastic crates, which are either single layer crates or 20 kg crates. In case of export, harvesting is done in the supervision of representative from contractor and plucking is done by trained persons. The fruit is plucked manually. Sorting and grading of fruits is done both in case of export as well as Harvesting at Orchard (Includes plucking, domestic markets. Fruits are packed only after sorting & grading) sorting and grading at the field level. A small packing shed is available on most of the far ms where Packaging (in wooden and cardboard boxes fruits are collected on tarpaulin for grading and as per buyers’ specifications) packaging. Fruits are packed in CFB or wooden boxes depending upon buyer’s specification. The Transport to destination markets (mostly transit time for Delhi and Mumbai are estimated at via. road transport) 35-40 and 15-16 hrs respectively up to retail market distribution. The entire post harvest practice, carried Auction at destination market and out by the contractor, is shown in the diagram. procurement by wholesaler

118 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Commission agent: The commission agent facilitates trade between the contractor and the wholesaler and for which they charge 6-8% commission from the contractor.

Wholesaler: The wholesaler is responsible for distribution of produce to various retailers. Sec ond level of sorting/grading has also been observed at the secondary/terminal markets. Accordingly, the produce is sold to retailers based on specific grades.

16.1.2 Price build up along the value chain of mango Value chain of 1 kg of mango indicating the various activities and cost build-up at every step has been mapped, as shown below. Consumer Price

Retailer’s margin

Losses Rs 40

Wholesaler’s margin Rs 6

Wholesaler’s expense Rs 4

Rs 3.5 Contractor’s margin

Rs 3.5 Commission

Wastage Rs 0.9 Rs 30 (Wholesaler’s Price) Harvesting, grading and packaging Rs 1.4

Farm gate price Rs 1.6 Rs 23 (Contractor’s Price)

Rs 1.8

Rs 17

Some of the assumptions of the price build up are:  It is assumed that mango is traded at Azadpur (Delhi) APMC and sold in retail markets of Delhi.  The most commonly observed trade channel has been taken for price build up i.e. Farmer-Contractor-CA-Wholesaler-Retailer.  The cost of retailing has not been taken into consideration. The average cost of mango cultivation comes to around Rs 6/kg. Generally, farmers incur a cost of Rs 60,000 per Ha on maintenance of orchard and the production is around 10 MT/Ha. The farmer realizes Rs 17/kg and his net margin is around Rs 11/kg. The contractor bears the cost of harvesting, grading and packaging of mangoes, which comes to around Rs 1.8/kg. They also pay commission to the commission agent of 6%. Thus the total cost incurred by the contractor is around Rs 5. This includes wastage of around 6-8%. The contractors earn a margin of around Rs 1/kg.

119 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The wholesaler bears the cost of transporting produce as well as loading and unloading charges. He pays a marketing cess of 1.05%. The total expenses at wholesale level is around 3.5/kg and the margin realized by him is Rs 3.5/kg. Around 10% produce is wasted at retail level and the retailers margin is around Rs 6/kg. The consumer price reaches to Rs 40/kg Some of the salient features of the value chain are:  There are 3 intermediaries between the farmer and the consumer.  The marketing of mango in major producing talukas of Aurangabad mostly happens through direct procurement at the farm gate. The local representative of the buyer in destination market acts on his behalf for price fixation and harvesting schedule. Pre Harvest Contractors take care of orchard till maturity and then dispatch the produce to destination market based on demand.  Grading is mainly based on the size and maturity of the fruits. While grading, smaller fruits are separated from the larger ones in order to achieve uniformity in specific grades. Immature, overripe, damaged and diseased fruits are graded separately and are sold to processing units. Transportation is mostly done by normal trucks in domestic markets.  In case of domestic markets, wooden or cardboard boxes are used for packaging and transportation of mango fruits. Size of the box varies to accommodate 5 to 10 kg. of fruit depending on the size.  Fruits harvested at right stage of maturity are stored for about 8 -12 days. In case of export, storage life is further extended up to a maximum of three weeks under cold storage at 12 ํ˚-14˚C. Normally, fruits are not stored beyond 3 weeks as it affects the taste and texture if stored for a p eriod more than 3 weeks.  Post Harvest loss in Mango is estimated to be around 20%. The relatively low post harvest loss is also due to h ardy nature of produce and h igh pro cessability. Grade C & D are generally bought by the processors which would otherwise cannot be sold in fresh retail market.  The price realized by the farmer is around 27 paisa of a consumer rupee.  Wholesaler’s and retailer’s constitute around 9 paisa and 15 paisa of a consumer rupee. The price build up can be summarized, as below:

Particulars Farmer Contractor Wholesaler Retailer Cost of maintenance/ Purchase price (Rs/Kg) 6 17 23 30 Cost of marketing, transport, wastage (Rs/Kg) 0 5 3.5 4 Selling price(Rs/Kg) 17 23 30 40 Price spread 11 1 3.5 6

120 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 16.2 INFRASTRUCTURE ANALYSIS

16.2.1 Marketing Infrastructure A pack house by Jai Kisan Cooperative Society was set up in Harsul near Aurangabad, which is closed now. A mango export facility centre has been built by the Maharashtra State Agriculture Marketing Board in Jalna, which is about 60 km from Aurangabad. The pack house was set up in 2005. Various facilities available at the pack house are as follows;  De-sapping tables: 5 nos.  Fork lifts: 2 nos.  Plastic crates: about 370 nos.  Wooden pallets: 120 nos.  Packing tables: 5 nos.  Pre-cooling: 5 MT  Cold storage: 2 nos. of 25 MT each  Ripening chamber: 5 MT Charges for various facilities are as mentioned below;

Activity Charges in Rs During off season, the storage facilities are given Grading & packing Rs. 1 per kg on rent for storage of dry fruits. Charges levied Pre‐cooling Rs. 0.6 per kg are Rs. 12000 per month for each store of 25 MT Storage for 24 hrs. Rs. 0.5 per kg capacities. Ripening chamber is also used as a cold store during off season and charges are Rs. Storage of packing material Rs. 1 per sq. ft. 5500 per month for 5 MT Culling / Sorting capacity.

The facility is being used by mango exporters such as K.B. Exports, Hot water wash MAHYCO, Jai universal etc. Quantity of mango handled by the pack house is mentioned below: Brushing / cleaning

Year Quantity Quantity Exported The table shows that the Processed (MT) (MT) Waxing 2007 61 32 quantity exported is 2008 63 46 lesser than total quantity Drying 2009 13 10 processed in the pack house. This shows the ratio of exportable produce to the total produce Grading procured of grade ‘A’. Remaining produce is sold in the domestic market. The process flow in the pack house is shown in the diagram: Packing Some of the exporters have established their own facilities in the neighbouring districts. For example, K.B. Exports, who was earlier Pre‐cooling using the MSAMB pack house has set up its own facility in Nevasa,

Ahmednagar. This has resulted in decrease of capacity utilization of the Ripening MSAMB pack house.

121 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 16.3 GAPS IN THE VALUE CHAIN An assessment of the range of activities under the value chain was undertaken to understand the gaps and inefficiencies in the kesar mango value chain. A detailed structured survey was undertaken to map the existing supply chain and identification of gaps at each stage, with added focus on institutional, infrastructural and logistical barriers. After the detailed field survey, the gaps identified were discussed with a range of key stakeholders to get their feedback on the analysis and understanding of issues. Some of the gaps identified in the value chain are:  Most of the mangoes produced in the region are plucked, graded and packed manually at farm level. The quantity handled at the pack house is very less w.r.t to the total production of mangoes in the district.  Chemical use for ripening in Mango is very limited as fruits automatically get ripened if stored in ambient condition. However, to accelerate the ripening process, fruits are dipped in “Ethral” solution, which helps in fruit ripening in 36-48 hrs.  Mango farmers are highly dependent on contractors for marketing their produce as well as for credit/ advance payments, which reduces their bargaining power.  Farmers’ lack of market information about prices and demand of mango results in lower value realization for them

16.4 POTENTIAL FOR INTERVENTION The following interventions are propos ed:  Setting up of a pack house for mangoes at Paithan spoke in Aurangabad district. The pack house may have facilities for: o De-sapping o Washing: may include hot water treatment and fungicidal application. o Sorting/grading o Packing in corrugated boxes o Pre-cooling o Cold storage  Modern cold stores may be set up to store unripe mangoes. Mature green mangoes may be stored at 13 degree Celsius and RH of 90-95%, which increases its shelf life b y 1-2 weeks.  Ripening chambers may be set up at hub for uniform ripening of mangoes.  Mango should be transported in reefer vans to avoid physical and quality loss du ring transit

122 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

17 FOCUS C:OROP RANGE

Maharashtra produced 796,100 MT of orange in 2007-08 and the total area under cultivation is 125,700 Ha making it the largest orange producing state of India. Maharashtra produces about 55% of India’s total orange production. The state production of orange grew from 723,700 MT to 796,100 MT in 2006-07 and 2007-08 respectively. The average productivity of orange in the state is 6.34 MT/Ha, which is close to the national average of 6.7 MT/Ha. In Maharashtra, the major orange producing districts are Amravati, Nagpur, Yavatmal and Akola, of which Amravati and Nagpur account for about 0.94 lakh hectares with production about 5 lakh metric tonnes. The area and production of major orange growing districts in the study region are as follows: AREA AND PRODUCTION (2007‐2008) Production # District Area (ha) (million MT) 1 Amaravati 51648 408584 2 Akola 4000 37768 TOTAL 55648 446352 Source: Directorate of Horticulture, Government of Maharashtra (FY 2007‐08) The major orange producing blocks in Amravati district are Warud, Morshi, Achalpur, Anjangaon and Chandur Bazaar. The major block in Akola is Akot in terms of orange production. The variety is known as Nagpur orange and it is of a loose skin variety. The variety can be processed into concentrate, jam, juice, etc. although technology (which is available) is needed for the extraction of the seeds. The production of orange is spread over two seasons namely Ambia bahar and Mrug bahar. Ambia Bahar accounts for 30-40 % of the production. Arrivals for this seaons start in the month of October and end in the month of January. Mrug Bahar accounts for the balance 60- 70 % of the production and it starts in the month of February and ends in the Month of April. The quality of fruit in Mrug Bahar is reportedly superior and is suitable for long distance transportation. Fruits are harvested when they attain full size and develop suitable colour (75% fruit surface colour changes from dark greenish into yellowish). Picking of fruits is generally done manually either in the morning or in the evening hours without damaging the fruits. Generally harvesting is carried out in either two plucking phases or single plucking phase.

17.1 VALUE CHAIN ANALYSIS The supply chain of orange in the study region with the three different marketing channels is depicted below:

123 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The various players involved Farmer in the value chain are farmers, Channel 3 Channel 1 Channel 2 pre-harvest Pre harvest Contractor contractors/aggregators, commission agents, traders Commission agent and retailers. There is very less export directly from this Trader region to other countries. Some small volume is Commission Agent in Distant market Retailer in Local Market exported to Bangladesh and

Nepal through Kolkata and Trader Patna markets. CONSUMER Based on the point of sale, the Retailer in Distant Market above supply chains can be classified into three types:  At farm gate (Channel 1) – Accounts for 60% of the produce  At APMC Mandis within production c l usters (Channel 2) - Accounts for 35%  At Distant consumpti on market (Channel 3) – Accounts for 5% of the trade

17.1.1 nValue Chai Actors and Functions

Value Chain Actor Physical Functions Financial Functions Farmer 1. Cultivation 1. Pre‐harvest contracts with PHCs Pre‐harvest 1. Harvesting 1. Price communication to the farmer Contractor 2. Loading and Transportation of 2. Price risk between harvesting to sale in the produce to the market the Mandi or distant consumption market 3. Payment to the farmer 3. Transit losses Commission Agent 1. Payment to the farmer 1. Price discovery by auction 2. Weighing 2. Credit to the buyer 3. Cash Advances to the farmers during production 4. Payment of cess to APMC Trader 1. Sorting and grading of the 1. Price risk in the distant market as there is produce a 3 day gap between buying and reselling 2. Packaging 2. Sorting grading and moisture loss 3. Loading and transportation to 3. Transit losses consumption markets 4. Credit risk in the distant consumption market Oranges in the region are propagated by budding. The method of shield budding is the most popular method for propagation. The square system is used for plantation of oranges. The distance between plants is generally kept 20 ft. An intensive care is taken of the planted nursery up to 5 years. The trees start getting economic yield from 6th year onwards and the economic life of the trees is 12-15 years depending on the maintenance. Intercropping with pulses, soya bean, ground nut and chillies is carried out generally up to the first 5 years. The production of orange from a Ha of orchard is about 25-26 MT. The cost of establishment of orange orchard is about Rs.

124 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 52,0003 per Ha. The breakup of the cost is given below.

Activity Cost per Ha (in Rs) Cost of sapling (277 sapling) 2770 Labour cost (levelling, digging, weeding, sapling plantation, manure spread, filling etc) 6970 Cost of irrigation (drip irrigation) 35000 Compost and fertlilizers 4825 Pesticide application 1000 Others 1500 Total in Rs 52065 The breakup of annual variable cost of cultivation of orange per Ha is given below. S# Field Operations Cost per Ha (Rs.) 1 Irrigation 14000 2 Fertilizer + Labour 26400 3 Pesticide + Labour 4375 4 Labour (Trimming, deweeding, etc) 22000 5 Intercultivation 3750 6 Miscellaneous 3750 Total 74275 There is no farm level grading or packing of orange irrespective of the marketing channel used to market the product unless the farmers plan to sell their product in distant consumption markets like Delhi, Mumbai etc by themselves. The fruits are generally loaded into an open truck or tempo and sent to mandi for sale. In the cases of Channel 1 and Channel 2, oranges brought from orchards by various means of transport are properly heaped without causing any damages on the auction platforms covered with paddy straw in the market yards and auctioned for price discovery. Oranges are traded either in numbers or by weight. Each market has its own unit of trade. For example, in Kalamna APMC Market yard in Nagpur District, oranges are traded by weight while in Warud APMC Market yard in Amaravati district they are traded in numbers. The unit of trade in distant consumption markets is generally by boxes or crates. Price fixation between the farmer and the Pre harvest Contractor (PHC) is done by negotiation. The PHCs offer a price based on their information on price in the market and on their understanding of the expected supply. Generally, the unit of trade between the farmer and PHC is in numbers. The PHC visits the orchards and randomly selects some trees and the number of fruits are counted and then extrapolated for the entire

3 3 Cost of land has not been taken into account for calculation of total cost of establishment of orange orchard 125 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT garden. Though there is high approximation in this method, most of the farmers prefer to sell through this channel as there are no marketing costs; harvesting is the responsibility of the PHC and the price risk is with the PHC. Price discovery in the APMC market yards is by Open Call Auction method. In all the markets grading is done manually. The grading is done based upon the size of the fruit. While grading is done based on size, sorting is carried out based on other physical properties like colour, shape (oblong, high collared, deformed), maturity, puffiness, blemishes, physical damage (bruised and diseased). Once the diseased and bruised fruits are discarded, fruits are graded into 7 grades based on size. Traditionally, the seven grades have been identified on the basis of number of fruits of a particular size that will fill exactly a standard wooden box (details given below). After grading the fruits are packed in either wooden boxes or in plastics crates. The standard size of a wooden box is 18” x 12” x 12”. This standard wooden box can carry 22-24 kgs of frui t. The wooden box is fabricated on the spo t by specially app ointed box makers. The fruits are stacked in layers in the wo oden box. Depending on the size of the fruit, the number of layers vary from 4-6. To avoid friction between the layers of fruits and to avoid moisture loss during transit each layer is separated from the other with paddy straw and waste papers. Once the fruits are filled, the top of the box is closed with the same wooden sheets using iron nails. The box is then fastened using coconut fibre ropes. They are then marked using water soluble permanent colour with the name of the trader so that it can be identified in the destination market. Nearly 40% of the trade at present is happening through wooden boxes.

As per trade, the use of plastic crates has increased in the last 4-5 years. Mostly, plastic crates of 542 mm x 360 mm x 300 mm (outer diameter) are in use. This standard crate can carry 22- 25 kg of fruit. Though the return logistics cost adds to the cost of the product, the ease of usage, easy availability and acceptance by trade in the destination markets has increased the usage of plastic crates. Unlike wooden boxes, in case of the plastic crates, the fruit is not arranged in layers. The fruits are loosely packed in the crate and the sides and top are covered with waste paper. Then the paper is tied to the crate using nylon thread. The traders have their brand name/ trade name stencilled on the sides of the crates for identification. Apart from packing the fruits in wooden boxes and crates, oranges are transported in loose without any packing to some markets like Hyderabad and Bangalore which are 400 Km to 500 Km from Nagpur market. When fruits are packed in truck directly, they are sorted only for culling the bruised and damaged fruits. There is no size based grading. The fruits are packed in layers in the truck with paddy straw, casuarina poles and bamboo mats on the sides and in between the layers to avoid friction and pressure damage. The fruits are graded as per

126 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

size in the distant consumption market. The cost of packing for each truck is around Rs. 7500 per truck.

17.1.2 Grades in Orange

Grade name Actual number # Grade as per trade of fruits Layers of fruits Size in mm 1 Extra Large 96 Dana 96 4 layers of 24 each 75‐80 4 layers of 30 each and one 2 Large ‐ 1 141 Dana 148 layer of 28 70‐75 4 layers of 35 each and one 3 Large ‐2 171 Dana 173 layer of 33 65‐70 4 Medium ‐ 1 191 Dana 195 4 layers of 39 each 60‐65 5 Medium ‐2 205 Dana 210 4 layers of 45 each 55‐60 6 Small 245 Dana 288 6 layers of 48 each 50‐55 7 Waste All other The traders in production clusters do not generally store the product. They operate in such a way that the product reaches the destination market within 3 days of harvesting. Transportation is carried out in ambient temperature in open trucks. Orange is generally not stored for off-season sales in production clusters. If any trader wishes to store the product for off season sale, the same is done in the distant consumption market. A value chain, indicating the various activities in the value chain, actors performing the given activity and cost build-up at every step has been mapped in this section. This value chain (for 1 Kg of orange) has been mapped for the supply chain having following characteristics:

 The marketing chain follows Channel 2, i.e, Farmer to PHC to Commission Agent to Trader to Commission agent in distant market to Trader/ retailer to Consumer.  The cost of production for the farmer is only the variable cost for maintenance of one acre orchard per year. It does not include the cost for the first five years of orange orchard where there are no returns.  The distant consumption market considered for this case is Azadpur APMC Mandi, in New Delhi  The packing material is wooden box of standard dimension 18” x 12” x 12”  Net weight of oranges in each box is 24 kg  Cost of capital and opportunity cost for the all the intermediaries has not been considered in cost build up and for calculating the spread  The cost of retailing, which includes the cost of shop, wages, rent etc has not been considered

127 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT  The prices considered are average prices for the month of October in Nagpur and Delhi Market based on the data corroborated from traders. The same has been cross checked with the data from National Horticulture Board 2007-08 statistics  Wastages have been accounted at the level of packaging only. The next level of wastage is at the level of retailer, where data is not available

Retailer’s MarginMargin Market cess, loading, transportation Rs 3.00 Wholesaler’s Margin Rs 0.50 Commission charges@ 8%

Loading, unloading, Rs 1.89 transportation to Delhi Rs. 24.04 Rs 1.67 (Retailer’s Price) Wastage

Market cess, Sorting, Rs 2.50 grading, packaging Rs. 21.00 Rs 0.60 (Wholesaler’s Price) PHC’s Margin

Rs 2.25 Commission charges@ 6%

Harvesting, loading, Rs 1.12 trans portation, unloading

Rs 0.72.72 Farmer’s Price Rs 0.65

Rs 9.60

In the above value chain, after the sale of produce by the farmer, the harvesting, loading, transportation to local market and unloading charges and commission are borne by the PHC. The wholesaler bears the cost of sorting, grading and packaging along with the commission in the distant market. The retailer pays for the final transportation, loading and market cess. The above diagram can be summarized as below:

Rs/MT Trader/ Particular Farmer PHC wholesaler Retailer Cost of Production/ Buying 2857 9500 12000 20925 Sale Price 9500 12000 20925 24463 Cost of Marketing incl. Commission Agent charges, wastages, etc. 0 1380 7032 503 Spread 6643 1120 1893 3035  The price buildup from Farmer to Consumer is almost two and half times.  There are 5 intermediaries in this case  While the intermediaries are making decent profits, the cost benefit ratio for orange farmer at 1:2.3 is also good.  The APMC mandi cess accounts for close to Rs. 335 per MT, which is close to 1.5 % of the final price paid by the consumer  The share of consumers rupee by various actors in the value chain emerges as below (in % of

128 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT consumer’s rupee) :

17.2 POST HARVEST INFRASTRUCTURE AND INSTITUTIONAL ARRANGEMENTS

There are very few farm level sorting, grading, washing and waxing facilities in the region. In the entire study area, there are two orange related facilities. They have facilities for sorting- washing-waxing-grading lines, primarily set up for handling of fresh oranges for domestic and export markets. The summary of these two facilities is provided in the table below:

Particulars Warud Morshi District Amaravati Amaravati Ownership Owned by APMC, Warud Owned by APMC, Morshi sorting‐washing‐ One line of 2 MT per hour One line of 5 MT per hour waxing‐grading line Pre‐cooling 5 MT per batch yes, capacity not known Cold storage 30 MT yes, capacity not known Pack house Present Present Loading‐ unloading bay Present Present Backup power Not available Not Available Weigh bridge Not available Not Available Worker Quarters Not available Available, but in dilapidated state The facility was lying idle for many years. The facility was created by a However, the facility was used by one trader, private entrepreneur in 2006 SKC and Co, of Warud at a nominal price in and sold to APMC, Warud at Rs. 2008‐09. Interaction with the trader revealed 22 lakhs. Last year, the facility that the manual grading is both cost Usage was given out lease to Reliance effective, and more efficient. The mechanical Retail and a charge of Rs. 65 per grading line separates fruits on the basis of quintal was collected from size only, while the manual grading takes into Reliance. Approximately 200 MT account other physical parameters of the of produce was handled fruit as well. Cold Storage installations in the above facilities utilises both ammonia based and Freon DX refrigeration systems. Pre coolers were all forced air type and evidenced minimal or no use. The existing cold chain implementation is mostly unutilised.

Case: Warud Pack House In case of the Warud facility, whilst the technology worked perfectly well there were a number of barriers to its use in the market:  Insufficient export business was identified as a key impediment in full utilisation of the facility;  The customers who would buy from this facility were not correctly identified. The main target customers were domestic traders/wholesalers. An exporter would want graded, package d and pre‐ cooled produce but this wasn’t required by domestic traders and local markets;  Local traders do not need pre‐cooled orange as they were not using refrigerated transport;  Local APMC markets did not want to handle already graded oranges as traders preferred to grade themselves. Consequently the facility was sold to the APMC market authority and has been used in previous years by a supermarket chain for washing, waxing and grading. The pre‐cooler and cold store was not used.

In terms of institutional mechanism for orange in the region, the growers’ cooperatives in the region are in the nascent stage. MahaOrange is a marketing co-operative society registered under the Maharashtra State Co-operative Societies Rules 1961. It is a federal body of orange cultivators in the state of Maharashtra. It was formed in March 2008, with headquarters at Nagpur. At present 11 block level co-operative societies are members of MahaOrange. Till now, very limited volume of orange has been marketed by MahaOrange and the member cooperative societies are also very small having 15-20 members in each society.

129 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Case: Direct Marketing to Organized Retail Chain by Farmers’ Group

In one location in Amravati district, visited during the field study, farmers had organised themselves into a group to supply to a large supermarket chain. This relationship had lasted only for a season mostly due to the following reasons:

 The supermarkets wanted only the top quality orange making it difficult to sell only the low quality to the local APMC market;

 Whilst prices paid from the supermarkets were originally acceptable, they later reduced the prices making it unattractive to the farmers.

17.3 GAPS IN THE VALUE CHAIN Based on stakeholders consultation, assessment of the orange value chain and existing post harvest infrastructure present in the region, the following gaps were identified in the value chain:  Very few farm level sorting, grading, washing, fun gicidal treatment and waxing facilities in the region. The ex isting facilities have a total capacity of about 20,000 MT which accounts for less than 5% of the total production in the region. Existing cold chain infrastructure in these facilities is mostly unutilized. There are no de-greening facilities in the region.  Even the existing facilities are not operating at full capacity as the requirement for domestic markets do not require such sorted, graded and packaged produce. The export market has not been catered as yet, where higher prices may be obtained for these services.  At APMC markets and other trading points in the region, packaging of orange is done in wooden boxes for a substantial volume. This practice is costlier in the long term and also has an adverse affect on the environment.  Packaging in wooden boxes and loose in trucks leads to wastage and loss of quality. As per trade, the loss is in the range of 5-10%, which also includes loss in moisture during transit. This loss is borne by the buyer in the distant consumption market, which is factored into his buying price. While, similar level of loss is not reported in produce packed in plastic crates  Orange processing has also not picked up in the region.

17.4 POTENTIAL FOR INTERVENTION Based on the gaps identified in the value chain process and understanding the needs of the various stakeholders, interventions have been identified. As mentioned earlier, the existing pack houses with pre-cooling and cold store facilities have not been successfully functional mainly due to reasons such as inadequate marketing/export linkages, cheap manual labour, lack of refrigerated vehicles, etc. Hence, considering the present scenario in the region, interventions are proposed keeping in mind the practicality of such interventions. As the first step, 4 pack houses for orange in Amravati district are proposed. The proposed locations are Warud, Morshi, Achalpur and Anjangaon. In case of Warud and Morshi, the existing facilities

130 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT may be refurbished and leased out to private players for the operations. The pack houses will have following facilities for tomatoes:  Sorting  Grading  Packaging in plastic crates The pa c k houses at Achalpur and Anjangaon will handle banana as well. The details of the facilities have been captured in the subsequent chapter.

131 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

18 FOCUS CROP: LEMON

Maharashtra produced about 153000 MT of lemon in 2007-08 and the total area under cultivation is 37300 Ha. The state ranks fifth in terms of production of lemon among Indian states producing about 6.3% of India’s total production of lemon. The state production of lemon grew from 139000 MT to 153000 MT in 2006-07 and 2007-08 respectively. The average productivity of lemon in the state is 4.1 MT/Ha which is much lower than the national average of 8.5 MT/Ha. The crop wise area and production in the major districts in the region is given below:

Crops Lemon The main lemon cluster identified for the project Districts Area (Ha) Production (MT) covers the blocks of Nandura and Khamgaon in Aurangabad 304 4864 Buldhana district and Balapur block in Akola Buldhana 908 8172 Amravati 500 4500 district. These are contiguous blocks and together Akola 521 4689 account for about 70-75% of the total production Total 2233 22225 of lemon in these two districts. Source: Directorate of Horticulture, Government of Maharashtra (FY 2007‐08 Lemon is harvested throughout the year but peak seasons are during the month of March-May (30% of total production), August- October (30% of total production) and December- January (20% of total production). The marketable surplus of lemon in the region is about 96%.

18.1 VALUE CHAIN ANALYSIS Operations relating to the movement of lemon shown in the pictures. The diagram below explains the major channels of trade of lemon in the Amravati-Aurangabad region: Based on the points of sale, the Farmer

Commission agent/Trader Channel 1 Channel 2 Channel 3

Commission Agent in Distant Market

Wholesaler (Trader) Retailer in Local Market above supply chain can be classified into two types:

Retailer in Distant Consumer 1. At APMC Mandis– Channels 1 Market (65-70% of the trade) and 2 (20-

132 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 25% of the trade) – Ac c ounts for 90-95% of the produce 2. At local consumption market – Channel 3 – Accounts for 5-10 % of the trade

The major players involved in the trade of lemon are farmer, commission agent (local), commission agent (distant market), wholesaler/trader and retailer. The major consumption centres for the lemon for this region are Delhi, Mumbai and Raipur, which accounts for about 90% of the total export from this region. The roles played by each player in the value chains are given below:

Farmer The average orchard size of lemon in the study region is about 0.8 Ha. A Ha of orchard accommodates about 250 plants (20 ft X 20 ft) which are maintained at a height of about 10- 12 feet. The plants start bearing fruit from the 3rd year. The cost of establishment of lemon orchard is about Rs. 51,0004. The breakup of the cost is given below.

Cost per Activity Ha (in Rs) Cost of sapling (250 sapling) 12500 Labour cost (levelling, digging, weeding,saplin g plantation, manure spread , filling etc) 5000 Cost of irrigation (drip irrigation) 25600 Compost and fertlilizers 4800 Pesticide application 1000 Others 2000 Total in Rs 50900 The breakup of annual variable cost of cultivation of lemon is given below.

Per Ha yearly variable cost for Lemon in Buldhana S# Field Operations Cost (Rs.) 1 Irrigation 1000 2 Fertilizer + Labour 5000 3 Pesticide + Labour 3000 4 Labour (Trimming, deweeding, etc) 18000 5 Harvesting Labour 25000 6 Miscellaneous 5000 Total 57000 Each plant produces about 100 kgs of lemon annually and per Ha average productivity of lemon in the region is about 25 MT per annum in suitable conditions. After harvesting of the matured fruit, farmers do the packaging in small gunny bag having a capacity of about 15 kgs. There is no sorting or grading done at the farm level. The bags are loaded in mini trucks/ auto-rickshaws/ pick-up trucks and brought to the commission agent in the nearest APMC market. The cost of harvesting, local transport and commission to Commission Agent (CA) (which is 5%) is paid by the farmer. The gunny bags used by farmers to bring the produce in the market are taken b ack by him after sale of the produce and hence the packaging cost for the farmer is negligibl e. The harvesting is done in the evening of the previous day of sale in the market. The farm er stores the bags for the night at his home.

4 4 Cost of land has not been taken into account for calculation of total cost of establishment of lemon orchard 133 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Commission Agent (CA) There are about 8-9 CA cum traders operating in the region. In channel 1, CA acts as buyer on behalf of the wholesaler (distant market). Orders are placed with him from the wholesaler for specified quantity and quality of the produce. For facilitating trade between the farmer and the wholesaler, the CA charges a commission of 5% of the value of the produce from the farmers and collects APMC market cess of 1.05% from the wholesaler. In channel 2, CA acts as buyer himself and sell through the commission agent in distant market to the traders/ wholesaler present there. In this case he bears the marketing and other expenses such as grading, packing, loading, transport, unloading and 7% commission to the CA present in the distant market (Delhi). In channel 2 he also bears the price risk. The price discovery in the APMC markets is through open auction, where CA/traders quote their prices on per bag basis. Before quoting the price the CA/traders randomly open 2-3 bags from the lot to check the quality of the produce based on which quotes are made. The CA/traders quote their prices on the basis of information of price in the distant markets. Auctions are generally over by 11:00 AM. After procurement from farmers CA/trader pays money to farmer on the spot. He receives the amount from the distant traders after 2-3 days of sale depending upon the mutually agreed terms and conditions between CA and trader/wholesaler. After the trade, all the bags are emp tied in a heap under a shed in front of the shop area of the CA/trader. The bags are then returned to the farmers. The lemon is then sorted and graded based on colour and size. After the g rading, the lemon is packed in gunny bags again having a capacity of 15 kgs and then weighed. The inside of the bags are lined with newspaper to hinder moisture loss and also to reduce ph ysical damage during transport. Then the produce is loaded on trucks (10 MT) for transportation to the distant markets.

CA in Distant Market He facilitates the sale of produce by the local CA and the wholesaler/trader. For his service of org anising the auction and market information, he charges 7% commission from the seller.

Wh olesaler/ Traders They are the main buyers in the markets. Trader further sells the produce to the local retailers. In channel 1, he bears the cost of grading, packing, loading, transport, unloading and commission to CA.

Retailers He is the major buyer in the consumption market and the direct point of contact with customers. Retailer bears the cost of local transport from market to consumption point.

18.1.1 Price build up along the value chain of Lemon A value chain indicating the various activities and cost build-up at every step has been mapped for 1 kg of lemon. Some of the assumptions for the price build up are: . The most commonly observed trade channel has been selected for the price build up of lemon, i.e. Farmer-CA-Wholesaler-Retailer.

134 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT . Farmer’s margin has been calculated based on his annual cost of maintenance of orchard. The cost of establishment of orchard has not been taken into account. . The cost of interstate transportation has been calculated for New Delhi. . The cost of retailing, which includes the cost of shop, wages, rent etc, has not been considered.

Retailer’s Margin

Wastages @ 5%

Transportation Rs 5.20

Trader’s Margin Rs 1.23 Rs 0.20 Loading & unloading Rs 4.00 Wastages* @ 4% Rs. 24.60 (Retailer’s Price) Rs 0.16 Transportation to Delhi

Rs 0.72 Packaging Rs 2.00 Rs. 18.00 Sorting and grading (Trader’s Pr ic e) Rs 0.67 Market cess @ 1.05% Commission charges@ 5% Rs 0.33

Rs 0.10

Harvesting, loading, Rs 0.50 unloading Rs 0.50

Farmer ’s PricePrice Rs 0.33

Rs 0.80

Rs 10.00 In the above diagram, the farmer pays for the harvesting, local transport to APMC yard and commission to CA. The farmer receives a price of Rs 10-12/kg (in peak season) and he spends around Rs 2.3/kg in maintenance of the orchard. The net margin, which he gets after bearing the marketing and other expenses, is about Rs. 6.00/kg. The commission agent facilitates trade between farmer and wholesaler, for which it charges a commission of 5%. The trader/wholesaler pays for the packaging, sorting, grading, APMC cess, loading, transport and unloading. The trader/wholesaler also bears the wastages as moisture loss (2%) and physical damage during transportation (another 2%). He gets a margin of about Rs. 4.00/kg. From them, the retailer buys the products and bears the cost for labour and transport to their retail outlets. At this level the wastage is about 5%. The price build up can be summarized, as below:

Rs/MT Particular Farmer Trader/Wholesaler Retailer Cost of Production/ Purchase 2286 10000 18000 Cost of Marketing incl. Commission Agent charges, wastages, etc. 1633 3992 1432 Sale Price 10000 18000 24632 Spread 6081 4008 5200 Some of the salient features of the price build up are mentioned below:

. There are 3 intermediaries between the farmer and the consumer in the lemon supply chain (including the commission agent). . The price build up from farmer to consumer is around 2.5 times. . The farmer earns a margin of Rs. 6081 which is about 25% of the consumer rupee

135 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT . Trader/wholesaler incurs a cost of around Rs 4000 per MT in various activities such as labour, packaging, transportation, wastages etc. The wholesaler earns a margin of Rs 4008 per MT that is around 16 paisa of a consumer rupee. . The commission paid by the farmer to the commission agent constitutes 2 paisa of a consumer rupee. . The share of consumers rupee by various actors in the value chain emerges as shown in the diagram (in % of consumer’s rupee) :

18.2 INFRASTRUCTURE ASSESSMENT

18.2.1 Post Harvest/Marketing Infrastructure There is no post harvest infrastructure in the region for lemon. The initial packaging is done at the farm level by the farmers. Manual sorting, grading and packaging is done at the APMC markets under the sheds of the CA shops. Lemon is not stored in cold storages and the produce is sent to distant markets on the day of sale itself. There is no farmers’ cooperative or any other institution which is engaged in the marketing of lemon in the region. There are no lemon processing units in the region at present.

18.3 GAPS IN THE VALUE CHAIN On the basis of findings of field survey and stakeholders consultation, some of the gaps identified in the value chain are: . No farm level sorting, grading and packaging facilities in the region. Packaging is done in the open. Existing cold chain infrastructure in the region is not utilized for storage of lemon. There are also no de-greening facilities in the region. . Sorting and grading at the APMC markets are done manually. . Packaging of lemon is done in gunny bags and it is done twice (once at farm level and once at APMC markets). This practice is time consuming and the packaging is inappropriate resulting in higher losses. . Lemon processing has not picked up in the region. As mentioned, there is no processing facility in the region.

18.4 POTENTIAL FOR INTERVENTION Based on need-gap assessment and exploring the opportunities for future growth, potential areas for intervention for lemon in the region are: . Considering the distribution of production clusters in the region, Buldhana and Akola (total production of lemon in these two districts is about 13000 MT annually) are the two

136 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT districts where value addition of lemon can be done in a significant scale. Assuming 20% of the produce in these two districts is subject to value addition, there is a need to create infrastructure to handle 2,000-3,000 MT of lemon annually. . Significant volume of production happens during the rainy season and creation of farm level platforms and sheds may be a suitable intervention to protect the produce from rain during packaging. . Potential for setting up sorting and grading facilities at spoke level.

137 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

19 FOCUS CROP: BANANA

While Jalgaon, Hingoli, Nanded, Beed, Parbhani and Pune are the major districts in banana production, Amaravati, Akola and Buldhana, the three districts of Aurangabad- Amaravati region also have some banana production. The area and production of banana in the catchment region of this region are presented in the table below:

# District Area (Ha) Production (MT) The main banana growing 1 Amaravati 394 23640 cluster in Amravati region 2 Akola 600 30000 consists of Anjangaon block 3 Buldhana 700 42000 which covers about 80% of the Source: Directorate of Horticulture, Govt of Maharashtra (FY ‘07‐08 total production of the district. Sangrampur block in Buldhana is again the largest banana growing cluster in the district having about 80% of the total production of the district. In Akola, Akot block is the main banana growing cluster.

19.1 VALUE CHAIN ANALYSIS The supply chain of banana in the study region is depicted below:

The various players involved in the value chain are Farmer farmers, pre-harvest contractors/aggregators, commission agents, Wholesalers and retailers. When the fruits are ready for harvest, the farmers Pre‐harvest contractor visit the banana supplying company/commission agent and requests for the price. The board price, Banana Supply which is the price linked to the price declared by Co/Commission agent Banana Marketing Federation, Raver, Jalgoan district is declared to the farmers. The farmer, then Wholesaler in Consumption market requests the commission agent to visit the farm and inspect the quality of the fruits. The commission Retailer agent in turn sends the pre-harvest contractor in the village/block of the farmer to visit the farm and Consumer report the quality of the fruit. This chain of activity starts with the farmer requesting the pre-harvest contractor in his village to visit his farm and who in turn contacts the commission agent for price and requirement for the day. The commission agent is in contact with the wholesalers in the consumption markets who place the orders depending on demand in their markets. The commission agent on getting a confirmed order from the wholesaler, in turn instructs the pre harvest contractor to visit the farm to match the supply (quality and quantity of produce) with demand and to arrange for harvesting. The commission charges of the commission agent vary from region to region and market to market. In case of Anjangaon in Amaravati district, the commission agent charges 6.25% as commission charges to the farmer and Rs. 16.25 per quintal as service charge to the buyer. The service charges are independent of the prevailing price in the market. Harvesting cost, transportation to the main road for loading into the vehicle, weighing charges, pre-

138 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT harvest contractor expenses a r e b orn e by the farmer. A typical cost build up for one Kg of banana in the region is indicated below:

Retailer’s Margin

Wastages

Transportat ion Rs 2.20 Rs 1.05 Wholesaler’s Margin Rs 0.25 Value addition‐ Rs 0.25 Ripening Rs 1.33 Labour charges Rs. 14.50‐ Rs 1.00 15.50 (Retailer’s Weight losses & other Price) losses Rs 0.17 Secondary Transport Rs 0.96 Rs. 11.75 Commission Charges (Wholesaler’s Price) from Buyer Rs 2.20 APMC Cess

Commission Charges Rs 0.16 from farmer Rs 0.02 PHC Service Charges Rs 0.28 Harvesting & Transport Rs 0.16 Farm er’s Price

Rs 0.25

Rs 5.5. 90

*The cost of cultivation is lower in this region as compared to Jalgaon region due to lower land lease rentals and non-inclusion of harvesting cost

19.1.1 nValue Chai Actors and Functions

Value Chain Actor Physical Functions Financial Functions Pre‐harvest . Part of the information network for the . Price communication to the farmer Contractor commission agent . Guarantor of payment to the farmer . Arranging labour for harvesting as he is the local person . Loading and Transportation . Responsible for delivery of quality of the product as required by the buyer . Weighment Commission . Supply of banana as per the quality and . Price Communication Agent quantity requirements of the buyer . Credit to the buyer . Payment to the farmer . Payment of cess to APMC collected from the buyer . Arranging labour and vehicles for transport Wholesaler . Transportation to the consumption . Price risk in the distant market as markets there is a 3-6 day gap between . Unloading buying and reselling . Ripening . Losses during ripening and other processes . Transit losses . Credit risk to the retailers There are some ripening units in the region (details given in the following section). In case of ripening units, the wholesalers in consumption markets like Nagpur, Buldhana, Warud contact the ripening unit and place order indicating the quality requirements and delivery date. On receipt of order from the wholesalers, the ripening unit contacts the farmers through the pre-harvest contractors to identify farm(s) of suitable quality. At present the ripening units are catering to markets within 300 to 400 Kms radius from Amaravati.

139 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The board price is communicated to the farmer and if the farmer agrees to the price, the ripening unit arranges for harvesting, de- handing, washing in alum solution, treatment with 2% Bavistin solution and loading into crates. Water for washing the fruits is provided by the farmer at the farm and the utensils, which are large aluminium vessels, for washing are provided by the ripening unit. Once, the fruits are washed and treated each crate is loaded with 20 kg of de-handed banana. The crates are lined with plastic felt to avoid abrasions to the produce during transportation. The cost of harvesting is borne by the farmer. The commission Ethrel Spraying Pump to pre-harvest contractor is borne by the wholesaler. The cost of treatment is borne by the ripening unit and factored into the service cost. The cost of transportation is borne by the wholesaler and is fixed based on distance. The cost of transportation in a radius of 70 km is Rs. 10 per crate. The rent for crates is borne by the wholesaler and is factored in the ripening cost. However, if the wholesaler provides his own crates, then a discount of Rs. 7 is given in the ripening services cost. The service cost for ripening is Rs. 55 per crate of 20 kg. The breakup of the service charges for one 20 kg crate is as below:

Parameter (Rs.) Once the produce reaches the ripening unit, the crates 1 Local Transport 10 2 Farm operations – 10 containing fruits are arranged on the floor and ethrel Washing, de‐handing and solution is sprayed on the fruits using an insecticide fungicide treatment spraying hand pump. The fruits are then shifted to the 3 Loading, unloading and 3 delivery charges cold room, which is kept at 18 degrees Celsius. The 4 Telephone charges 1 crates are arranged one over the other till the roof, 5 Kitchen Charges 1 leaving a space for one crate and are then covered by 6 Power charges 2 7 Stationery charges 1 a plastic sheet. The fruits are left covered with the 8 Rent for crates 7 plastic sheet for one day and then shifted to another 9 Maintenance Charges 1 cold room at 18 degrees Celsius. The fruits are kept 10 Chemical costs 1 11 Lodging and other charges 1 for 3 to 4 days depending on the customers’ 12 Cost of plastic felt 5 requirement. The fruits turn golden yellow on the 4th 13 Profit for Ripening unit 10 day and are then loaded into trucks and transported to Total 55 the consumption markets.

Utensils used for washing fruits Fruits Arranged in Crates

140 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT These ripening units have positioned themselves as service providers and do not take any risks of quality of the product and the price risk. Further, there is a moisture loss of 0.5 kg per box (box of 20 kg) during the ripening and post ripening handling which is borne by the

Crates Ar ranged in the Crates covered with plastic Plastic Cover removed and Ripening Chamber cold room cover ‐ 1 day old the lot has been labelled wholesaler. The ripening units encourage the wholesaler to appoint his own person to oversee the buying, transportation and ripening activities. When such a person is appointed by the wholesaler they give a discount of Rs.2 per crate on the ripening service charges. The ripening units collect a security deposit from the wholesalers to avoid any risk on account of non-lifting of the ripened product. While it may appear that the pre-harvest contractors are no t adding any value, the trade feels that being local people they form an important link to establish credibility of th e f arm ers. As per trade, the wholesalers are able to sell the ban anas ripene d in ripening chamb ers at a premium of Rs.1 to 2 per Kg as compared to produce ripened by traditional methods. The trade also feels that the pro duct quality is better because of lesser handling and better ripening method. The fr uit remains on the ped icel longer by two days and he nce, the losses at retai ler level are lower in compar ison to traditional Ripened Bananas ‐ 4 day old met hods. Since the fruit has bette r colour and finishing, the product gets a premium over othe r bananas. The retailers are ab le to sell the product at a premium of Rs.1 to 2 per kg. How ever, the marketing of these ba nanas has not been welcomed by all. Retailers of bananas ripened through traditional methods have reportedly damaged the crates of such retailers and they are not being allowed to sell the produce in Nagpur. While, the ripening chambers are a vast improvement compared to the traditional methods, there is scope for improvement in ripening process and handling methods followed by the ripening chambers. For ripening, the ripening units are still using ethrel solution to induce ethylene production, which is not safe. Ethylene generators can be used by these units. Further, there is no palletisation. All the crates are handled individually, which increases the cost of labour. Palletisation can bring more efficiency in the handling. A typical cost build up in the region for one Kg of banana ripened using ripening chambers is indicated below: Comparing the ripening chamber method with traditional ripening methods, one ripening unit of 20 MT per day can achieve the following:  Ripening facility for produce of 120 Ha

141 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT  Alternative market linkages for over 150 farmers (assuming average land for banana production per farmer is around 1 Ha)  Handle 6000 MT of banana annually (assuming 300 working days)  Reduce the losses on account of moisture loss and transit losses from 25% to 12%  Increase the farmer realisation by 12% compared to traditional market linkages  Create additional employment for over 200 people  Increase the realisation of retailers, who typically use push cart for retailing and earn less than Rs.150 per day, by over 100% Retailer’s Margin

Wastages Rs 3.10 Tertiary Transport Rs 0.60 Wholesaler’sWholesaler’s Margin Rs 0.30 Transport to Consumption Market Rs 3.50 Rs. 16‐17 WeightWeight losses (Retailer’s Price) Rs 0.75 Profit of Ripening Unit Rs 0.32 Service charges by Ripening Unit Rs. 13.50 Rs 0.50 APMC Cess (Wholesaler’s Price) Rs 1.75 TrTransportansport to Ripening Unit

Rs 0.02 PHC Service Charges Rs 0.50 Harvesting

Farmer’s Price Rs 0.16

Rs 0.05

Rs 6.00

19.2 INFRASTRUCTURE ASSESSMENT

19.2.1 Post Harvest Infrastructure There is not much post harvest infrastructure present in the region for banana. There is no storing facilities and almost negligible cold chain infrastructure. Sorting and grading is minimal and mostly done manually. There are two private banana ripening units in the study region. They are Mittal Fruit Ripening Services and Utsav Kela Suppliers and Ripening services. Mittal Fruit Ripening Services has been the pioneer in the region. They had set up the banana ripening chambers in 2005 and have standardised the process. At present they have a ripening capacity of 40 MT per day. Seeing the success of Mittal Fruit ripening services, Utsav Kela Suppliers and Ripening Services has been set up in May 2009 with a ripening capacity of 20 MT per day. As per trade, there is one more ripening unit under construction in Anjangaon. There is no farmers’ cooperative or any other institution which is engaged in the marketing of banana in the region.

142 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 19.3 GAPS IN THE VALUE CHAIN Based on the need gap analysis and stakeholder’s consultation, the following gaps are identified in the value chain: . As in Jalgoan area, in this region too, traditional methods of post harvest mechanism leads to damage of fingers. Similarly, there is a lack of farm level collection centres and pack houses . There is no contract farming system in the region. Pre-harvest contractor can be replaced, with contract farming arrangements. Capacity building of farmers and ripening units to enter into contract farming system may be taken up . The existing ripening chambers use dated technologies. They can be upgraded with ethylene generators, ethylene scrubbers, automated temperature control, palletisation facilities etc

19.4 POTENTIAL INTERVENTIONS The interventions proposed here are similarly to that proposed in the Jalgaon area. There is a good potential of integrated pack hoses with de-handing, washing and de-sapping, sorting, grading, fungicidal treatment and packaging facilities. Two pack houses for banana in are proposed in the region with the above facilities. The proposed locations are Anjangaon in Amravati district and Sangrampur in Buldhana district.

143 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

DPR: AURANGABAD‐ AMRAVATI INTEGRATED VALUE CHAIN PROJECT

Description of Hub and Spokes

Spoke Warud Spoke Anjangaon Spoke Akola Spoke Sangrampur Spoke Jalna Spoke Paithan

Spoke locations Warud

Sangrampur Anjangaon

Akola

Jalna

Paithan

144 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

20 SPOKE: WARUD

Warud has been identified as a spoke due to its proximity to the major orange growing regions in Amravati district. It is also well connected by roads to major cities such as Nagpur and Amravati and hence can act as feeder to these major orange trading hubs. It lies on the intersection of State Highways 10, 244 and 248. State Highway 10 connects Warud to Amravati and State Highway 248 connects it o Nagpur. Proposed aggregation points are as follows: Aggregation Points Focus Crop Jarud Orange Bihoda Orange Themburkheda Orange Loni Orange Rajurbazar Orange Jamgaon Orange Morshi Orange All the aggregation points are within a radius of 15 Km from the spoke except Morshi which is at a distance of about 30 Kms.

20.1 FOCUS CROPS AND ESTIMATED THROUGHPUT The major fruit grown in the catchment of Warud is orange. Warud block in Amravati is the largest orange growing clusters in the district. Focus crop for the proposed facility in Warud are orange and banana. Throughputs have been estimated based on present production in the catchment area, the present capacities of existing similar infrastructures/facilities, potential for interventions, and stakeholders’ consultations. The spoke and its catchment area produce about 0.2 million MT of oranges annually, which accounts for around 50% of the total production of oranges in the district. The spoke is expected to handle 10,000 MT of the focus crop which is less than 1% of the total production in the catchment areas. The estimated annual throughput of the pack house in MT is as follows:

Spoke Orange Warud 10000 The arrival pattern of the focus crops in the proposed facility shall be according to the crop season as follows:

Crops Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Orange

20.2 PROPOSED FACILITIES Facilities have been designed on the basis of requirement of the focus crops, to induce better and efficient handling practices and faster evacuation of fresh produce to the consumption markets so as to ensure better quality to the consumer. While deciding on the capacities,

145 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT existing facilities, their capacities and utilization has also been taken into account. The proposed new facilities are as follows:

20.2.1 Ambient Orange Pack house As mentioned earlier, the existing pack houses in the region with pre-cooling and cold store facilities have not been successfully functional mainly due to reasons such as inadequate marketing/export linkages, cheap manual labour, lack of refrigerated vehicles, etc. Hence, considering the present scenario in the region, ambient interventions are proposed keeping in mind the practicality of such interventions. In the ambient packing house for orange following infrastructure will be provided: . Covered Pack shed (open to ambient) with landing area. . Requisite weighing equipment and transaction recording arrangement. . Sorting and grading areas (with tables). . Packaging store and Packing tables. . Waste disposal systems. . Vehicle Parking areas. The capacity of the pack house will be 100 MT/day and it would employ for than 60 labourers for the operations.

Orange Process Flow: Process flow for the orange in the pack house shall be as shown:

Technology / Description Facilities

Quality Check  Quality of the farm produces shall be assessed at the pack house based on certain criteria such as maturity level, size of fruits etc. Sorting and  Manual sorting and grading is suggested. Sorting and grading tables are proposed in the pack house. Grading

Packing  Packaging tables would be provided for manual packing of orange. Plastic crates would be used for packing. Transport  Produce shall be transported in normal trucks of 10/15 MT capacity.

Aggregation Mechanism for the Pack house The pack house shall receive material from various aggregation points as well as directly from the farms. The pack house will develop an aggregation mechanism and send trucks/pick-ups to the aggregation points for collection of produce. It will establish direct relationship with farmers and provide extension and training support to them for best farming practices, better post harvest handling practices, efficient use of inputs and technology transfer etc. Farmers will be encouraged to come together as producer companies and set up and manage aggregation points wherever possible. Pack house may also invest in developing infrastructure at aggregation points such as platforms, sheds, etc.

146 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Pack house Logistics The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, tractor trolleys, etc. Expected peak arrival of vehicles is about 20 per day. The average out-going vehicles at peak of 10/15 MT capacity will be 8-9 per day. Small capacity field vehicles, load 800kgs to 1MT, are incorporated in the project to serve as feeders from local farms or aggregation points as backward integration. These vehicles can be with insulated body deploying pre-cooled chill packs. This is foreseen to increase field reach, hence enhancing catchment range.

20.2.2 Dry Warehouse A dry warehouse of 2000 MT capacity is also proposed. It will be used for storage of pulses and soyabean which is abundantly produced in catchment of cluster. The warehouses would plan for sufficient parking and eased traffic flow layout along with waste disposal areas.

20.2.3 Add on/Commercial Facilities There will be other facilities/amenities: . Business Centre . Parking Area . Canteen . Weigh Bridge . Water Supply Facilities . DG Rooms . Solid Waste Management Area . Other amenities

147 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

21 SPOKE: ANJANGAON

Anjangaon has been identified as a spoke due to its proximity to the major orange and banana growing region in Amravati district. It is well connected by road to cities such as Amravati (76 km) and Akola (75 km) which are in turn connected by good road and railway network to big destination markets of Mumbai, Pune, Kolhapur, Nagpur, Indore and also to distant markets such as Rajkot, Delhi, Kolkata and other cities. Anjangaon is also connected to Murtijapur, which is a station on Bhusaval–Nagpur section of Central Railway. Proposed aggregation points and their distances from the spoke are as follows: Aggregation Points Focus Crop Distance (in Kms) Pathroth Banana and Orange 10 Pandri Banana and Orange 5 Anjangaon Banana 1 Karla Orange and Banana 10 Bhandaraj Orange 7 Lokhed Orange 4 Nimkhed Bajar Orange 8 All the aggregation points are within a radius of 15 Km from the spoke.

21.1 FOCUS CROPS AND ESTIMATED THROUGHPUT Major fruits grown in the catchment of Anjangaon are orange and banana. Anjangaon block in Amravati is the largest banana growing cluster in the district having about 80% of the total production of the district. As per the field survey, the spoke and its catchment produces around 60,000 MT of banana annually. Focus crops for the proposed facility in Anjangaon are orange and banana. Since the spoke is located in the fruit producing belt, a viable volume (that is less than 1% of the district’s production) has been targeted. Estimated throughputs have been identified based on present production in the catchment area, the present capacities of existing similar infrastructures/facilities, potential for interventions, and stakeholders’ consultations. The estimated annual throughput of the pack house in MT is as follows:

Spoke Orange Banana Anjangaon 10000 5000 The arrival pattern of the focus crops in the proposed facility shall be according to the crop season as follows:

Crops Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Orange Banana As shown above, the facility would receive year round supply of fresh fruit and hence, capacity utilization of the pack house would be ensured throughout the year.

148 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 21.2 PROPOSED FACILITIES Facilities have been designed on the basis of requirement of the focus crops, to induce better and efficient handling practices and faster evacuation of fresh produce to the consumption markets so as to ensure better quality to the consumer. While deciding on the capacities, existing facilities, their capacities and utilization has also been taken into account. The proposed new facilities are as follows:

21.2.1 Banana Pack House A pack house with a capacity of 40 MT per day is proposed at each of the spokes. 1. Receiving De- 3 5 handing Area 5 2. Preliminary 3 5 Wash Tank 3. Secondary 7 1 2 3 4 5 6 8 Flotation Tank 5 4. Air Brush, 3 5 Weighing 5. Retail Packing, 3 5 Stickers 6. Box inspection 7. Palletisation Area 8. Dispatch – direct or pre-cooler

It is expected that such a facility would employ 165 workers over two shifts. . Banana incoming in bunches or as precut clusters from farms/aggregation points. . Bunches are cut into hands and crown flower removed (as required). . Water is used as transport mode (pumps with high pressure nozzles on one end are used). . Hands preliminary wash tank; wash eliminates field dirt, latex overruns and pesticide residue. . Before second tanks, each bunch is cut into packing clusters and inspected. . Secondary wash tank; fungicide wash is affected. . At end of secondary wash, bananas are removed and placed into trays onto roller conveyors. Each tray is weighed and holds a packing unit load. . As it moves down the conveyor, they are air dried (hand held nozzle), and stumps can be sealed with paraffin wax. Currently stump sealing practice not prevalent for local market in India. . Thereafter the box packing takes place. Carrier trays are returned to weighing table . After boxing or loading onto transport crates, the palletisation and subsequent staging is done. . Enough space is provided in this area to allow extension of previous lines in future. . The staging area can also later be extended (per need). . While optimally, the boxes can travel on conveyors to spread across width of facility for more packers, to keep cost low, this plan is suggested for initial use. . A separate box making room is provided – where boxes are formed from collapsed cardboard.

149 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Banana Process Flow: . Typically banana would be pre-cooled only for exports and that too in transit containers. . Where bananas are for domestic consumption, they would move to destination ripening centres. . Where bananas are for local consumption, they would move directly to ripening chambers at HUB (possibly on conveyors) from here to ripening room on same facility. As banana pack house utilizes water as transport mode (design pack house uses 50,000 ltrs daily), appropriate water treatment and recharge systems are incorporated. The recycled/treated water can be used for sanitary purposes or stored for field irrigation uses. To introduce cable conveyor system, the receiving area would incorporate a rotating cable array. Here the hands would be unloaded and suspended from the cable, leading to the de-handing workers. The stake is returned on cable for subsequent disposal. Organic waste can be returned to banana fields to be converted to humus. A separate passage bypassing the wash tanks is provided, for pre-selected produce that directly leads to weighing and packaging area.

Technology Description / Facilities

Packaging  Post‐harvest handling facility for quality check and wash.  Sorting and grading basis finger length, shape, colour, etc.  Retail package (branded) or unitized transport units are formed. Ripening  Received in small unitized retail packs from pack house.  Ripening temperature is 15 ºC ‐20 ºC with 90‐95% RH).  Ethylene is generated in the room to give uniform ripening. Storage  Banana storage is at a temp of 13 ºC ‐ 14 ºC for a period of 3 weeks in ethylene free air.  CA storage is practiced for added shelf life up to 6 weeks at 14 ºC. Transport  For domestic purpose, transportation through both modes – 80% by rail wagons and rest of 20% is through road in normal trucks (8‐9MT).  For export, Reefer containers are used for sea transportation.

Aggregation Mechanism for the Pack house The pack house shall receive material from various aggregation points as well as directly from the farms. The pack house will develop an aggregation mechanism and send trucks/pick-ups to the aggregation points for collection of produce. It will establish direct relationship with farmers and provide extension and training support to them for best farming practices, better post harvest handling practices, efficient use of inputs and technology transfer etc. Farmers will be encouraged to come together as producer companies and set up and manage aggregation points wherever possible. Pack house may also invest in developing infrastructure at aggregation points such as platforms, sheds, etc.

150 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Pack House Logistics The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT/10 MT), vans, tractor trolleys, etc. Expected peak arrival of vehicles is about 10 per day. The average out-going vehicles at peak of 10/15 MT capacity will be 5-6 per day. Small capacity field vehicles, load 800kgs to 1MT, are incorporated in the project to serve as feeders from local farms or aggregation points as backward integration. These vehicles can be with insulated body deploying pre-cooled chill packs. This is expected to increase field reach, hence enhancing catchment range.

21.2.2 Ambient Orange Pack house As mentioned earlier, the existing pack houses in the region with pre-cooling and cold store facilities have not been successfully functional mainly due to reasons such as inadequate marketing/export linkages, cheap manual labour, lack of refrigerated vehicles, etc. Hence, considering the present scenario in the region, ambient interventions are proposed keeping in mind the practicality of such interventions. In the ambient packing house for orange following infrastructure will be provided: . Covered Pack shed (open to ambient) with landing area. . Requisite weighing equipment and transaction recording arrangement. . Sorting and grading areas (with tables). . Packaging store and Packing tables. . Waste disposal systems. . Vehicle Parking areas. The capacity of the pack house will be 100 MT/day and it would employ for than 60 labourers for the operations.

Orange Process Flow: Process flow for the orange in the pack house shall be as depicted in the diagram:

Technology Description / Facilities

Quality  Quality of the farm produces shall be assessed at the pack house based on certain criteria Check such as maturity level, size of fruits etc.

Sorting and  Manual sorting and grading is suggested. Sorting and grading tables are proposed in the Grading pack house.

Packing  Packaging tables would be provided for manual packing of orange. Plastic crates would be used for packing.

Transport  Produce shall be transported in normal trucks of 10/15 MT capacity.

The ambient pack house will also have aggregation mechanism similar to the banana pack house. Here, the average number of incoming vehicales at peak season would be 20 per day. The average out-going vehicles per day at peak season would be 8-9 per day.

151 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 21.2.3 Banana Ripening Facility A banana ripening facility is proposed. Capacity of the ripening chamber will be 10 MT per day. The ripening chamber can also be used for other fruits such as mango, if required. Ripening would be done using ethylene as the catalyst (see Annexure for further technical details). Ethylene generators would be utilised for appropriate dosing of the catalyst. The Banana ripening facility could adjoin a separate receiving and de-handing shed to allow for locally sourced direct farm produce to be input for local ripening requirements. A waste disposal area to cater to ripening room is specially designated. Material handling pallet mover is provided for the daily operations. The receiving shed is covered to protect from direct sunlight and weather. Though only one chamber will output daily, sufficient space is provided to cater for dispatch staging as well as incoming marshalling of the produce. The ripening facility is envisaged to output into smaller vehicles for tertiary dispatch and a separate designated parking lot for the same is designed.

21.2.4 Dry Warehouse A dry warehouse of 2000 MT capacity is also proposed. It will be used for storage of pulses which is abundantly produced in catchment of cluster. The warehouses would plan for sufficient parking and eased traffic flow layout along with waste disposal areas.

21.2.5 Other facilities There will be other facilities/amenities such as: . Business Centre . Parking Area . Canteen . Weigh Bridge . Water Supply Facilities . DG Rooms . Solid Waste Management Area . Other Amenities

152 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

22 SPOKE: AKOLA

Akola has been identified as a spoke due to its strategic location in the middle of a major pulses and soyabean growing region. It is also well connected by road and railway network to Mumbai, Pune, Kolhapur, Nagpur, Indore and also to distant markets such as Rajkot, Delhi, Kolkata and other cities. The National Highway- 6 which connects Hajira (Surat) to Kolkata runs through Akola. Akola railway junction is situated on Mumbai-Wardha-Nagpur-Howrah railway line.

22.1 FOCUS CROPS AND ESTIMATED THROUGHPUT Akola region is a major producer of pulses such as arhar (pigeon pea), Bengal gram and mung (green gram) and soyabean and it acts as a major trading centre of the same as well. The district produces around 89,000 MT of pulses annually. Since the region does not produce substantial volumes of perishables, pulses and soyabean have been considered as the focus crop for this spoke. The focus crops and estimated throughputs have been identified based on present production in the catchment area, the present capacities of existing similar infrastructures/facilities, potential for interventions, and stakeholders’ consultations. The spoke is targeted to handle less than 1% of the total production in the catchments, which would ensure financial viability of the project. The focus crops and the estimated annual throughput of the spoke in MT are as follows: Arhar Bengal Gram Moong Soyabean 3500 2500 1000 3000 The arrival pattern of the focus crops for the spoke will be as follows:

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Arhar Bengal Gram Moong Soyabean

22.2 PROPOSED FACILITIES The region has a shortage of dry warehouses and the farmers/traders/millers face a shortage of storage facilities during peak season. Moreover, there are almost no modern warehouses in the region with proper de-humidification facilities, ventilation system or vermin proof guards. Also, the existing warehouses are all conventional in nature with no proper de-humidification facilities, ventilation system or vermin proof guards. Most of the buildings observed may not have passed a HACCP certifying process. Moreover, there are very few modern grading and packaging facilities in the region. Considering these aspects, the following facilities are proposed in the spoke.

153 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 22.2.1 Dry Warehouse A modern dry warehouse of 5000 MT is proposed at the spoke. It will be used for storing of mainly arhar, bengal gram, moong and soyabean depending on the season and demand.

22.2.2 Ambient Packing Shed In the ambient packing shed following infrastructure will be provided: . Covered Pack shed (open to ambient) with landing area. . Requisite weighing equipment and transaction recording arrangement. . Cleaning and grading areas . Packaging area and store . Waste disposal systems. . Vehicle Parking areas. The option of the warehouse facilitating HACCP certification and increasing the value of the product will be explored. To aid operational and process compliances, funds have been allocated towards HACCP certification.

Process Flow: The process flow of the produces handled in the pack house is depicted below:

Technology / Description Facilities

Quality  Quality of the farm produces shall be assessed at the pack Check shed mainly based on moisture content. The ideal moisture content for pulses is 12%. Anything more than that would require drying before further processing.

Drying (if  Drying of the produce would be done using mechanized required) drier

Cleaning/De‐  Produce will be cleaned of stones, leaves and other stoning impurities in a mechanized cleaner/de‐stoner

Grading  Mechanized grading would be carried out based on size of the grain

Packaging  Manual packing of the produce in 50/100 Kg gunny bags

Pack Shed/Warehouse Logistics Farmers will bring the produce from pack shed/warehouse in various modes of transport such as trucks (4 MT), vans, tractor trolleys, etc. At peak of operations, about 8-10 incoming tucks/vehicles of an average of 4 M capacity will be coming to the pack shed/warehouse. The outbound trucks would include about 3-4 normal trucks of 10/15 MT. Inefficient logistics flow also hampers waste removal and other internal services. The master plan caters to such peak traffic flow as it has been observed that bottlenecks in existing infrastructure were largely due to under capacity parking and road network within facilities.

154 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 22.2.3 Business Centre A Business Centre is proposed in the spoke which will have the administrative rooms. There will also be some rooms/sections which may be rented out to reputed NGOs or local organizations etc as office spaces. Local district level government offices will also ensure utility and regular interaction at location. These could include local passport offices, tax centre, land records office, family planning centre, etc. There will be also other facilities/amenities such as: . Parking Area . Canteen . Weigh Bridge . Water Supply Facilities . DG Rooms . Solid Waste Management Area . Other Amenities Given the nature of establishment, appropriate fire hazard proofing in form of CO2 smothering systems, fire alarms and evacuation routes are also proposed

155 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

23 SPOKE: SANGRAMPUR

Sangrampur has been identified as spoke location due to its connectivity to major consumption areas. Sangrampur falls in Buldhana district and is located at about 90 km from district headquarter and is connected to all thirteen talukas by all weather road. It is connected to state capital by road. It is also located close to important consumption markets like Aurangabad, Pune, Amravati and Nagpur. Apart from the connectivity to the consumption markets, Sangrampur is also proximate to the production clusters of Banana and Lemon. Proposed aggregation points for the spoke and their approximate distance is as follows;

Aggregation Points Focus Crop Approximate Distance (Kms)

Kakanwada Banana 6 Nandura Lemon 40 Khamgaon Lemon 50

23.1 FOCUS CROPS AND ESTIMATED THROUGHPUT Major fruits grown in the catchment of Sangrampur are banana and lemon. Sangrampur block in Buldhana is again the largest banana growing cluster in the district and accounts for about 80% of the total production of the district. Focus crops for the proposed facility in Sangrampur are banana, lemon and pulses. Estimated throughputs have been identified based on production statistics in the catchment area, capacities of existing similar infrastructures/facilities, potential for interventions, and stakeholders’ consultations. The estimated annual throughput of the pack house in MT is as follows:

Spoke Banana Lemon Sangrampur 5000 2000 The arrival pattern of the focus crops in the proposed facility shall be according to the crop season as follows:

Crops Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Banana Lemon As shown above, the facility would receive year round supply of fresh fruit and hence, optimum capacity utilization of the pack house would be ensured throughout the year.

23.2 PROPOSED FACILITIES It is proposed to set up Banana pack house at the spoke. Facilities have been designed on the basis of requirement of the crop, to induce better and efficient handling practices and faster evacuation of fresh produce to the consumption markets so as to ensure better quality to the

156 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT consumer. While deciding on the capacities, existing facilities, their capacities and utilization has also been taken into account. Details of proposed facilities are as follows:

23.2.1 ePack Hous A pack house with a capacity of 40 MT per day is proposed at the spokes. Various components of proposed facilities in the pack house are outlined below. 1. Receiving 3 5 De-handing Area 5 2. Preliminary 3 5 Wash Tank 3. Secondary 1 2 3 4 5 6 7 8 Flotation 5 Tank 3 4. Air Brush, 5 Weighing 5. Retail 3 5 Packing, Stickers 6. Box inspection 7. Palletisation Area 8. Dispatch – direct or mobile pre- cooler It is expected that such a facility would employ 164 workers over two shifts. The process flow of material handling at the pack house is outlined below. . Banana incoming in bunches or as pre-cut clusters from farms/aggregation points. . Bunches are cut into hands and crown flower removed. . Treatment of hands in preliminary wash tank to eliminates field dirt, latex overruns and pesticide residue. . Secondary wash tank; fungicide wash is affected- Before treatment in secondary tanks, each bunch is cut into packing clusters and inspected. . At end of secondary wash, bananas shall be placed into trays onto roller conveyors.- Each tray is weighed and holds a packing unit load. . As it moves down the conveyor, material shall be air dried, and stumps can be sealed with paraffin wax. . Thereafter the box packing takes place and palletisation and subsequent staging is done. . A separate box making room is provided – where boxes are formed from collapsed cardboard. Diagrammatic representation of process flow is alongside. As banana pack house utilizes water as transport mode (design pack house uses 50,000 litres daily), appropriate water treatment and recharge systems are incorporated. The recycled/treated water can be used for sanitary purposes or stored for field irrigation uses.

157 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT To introduce cable conveyor system, the receiving area would incorporate a rotating cable array. Here the hands would be unloaded and suspended from the cable, leading to the de- handing workers. The stake is returned on cable for subsequent disposal. Organic waste can be returned to banana fields to be converted to humus. A separate passage bypassing the wash tanks is provided, for pre-selected produce that directly leads to weighing and packaging area.

Technology Description / Facilities

Packaging  Post‐harvest handling facility for quality check and wash.  Sorting and grading – On the basis of finger length, shape, colour, etc.  Retail package (branded) or unitized transport units are formed. Ripening  Received in small unitized retail packs from pack house.  Ripening temperature is 15 ºC ‐20 ºC (with 90‐95% RH).  Ethylene is generated in the room to give uniform ripening. Storage  Banana storage is at a temperature of 13 ºC ‐ 14 ºC for a maximum of 3 weeks in ethylene free air.  CA storage is practiced for added shelf life up to 6 weeks at 14 ºC. Transport  For domestic purpose, transportation through both modes – 80% by rail wagons and rest 20% is through road in normal trucks (8‐9MT).  For export, Reefer containers are used for sea transportation.

Pack House Logistics The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, etc except for pulses where produce may also come in trucks of 10 MT capacity. Expected peak arrival of vehicles is about 18-20, which would include following approximate number of vehicles: . Pulses: 7 . Lemon: 10 . Banana: 2 The above number would translate into 10 out-going vehicles at peak. Small capacity field vehicles, with load capacity of 0.8 MT to 1 MT, are incorporated in the project to serve as feeders from local farms or aggregation points as backward integration. These vehicles can be with insulated body deploying pre-cooled chill packs. This is foreseen to increase field reach, hence enhancing catchment range.

Aggregation Mechanism The pack house will establish direct relationship with farmers and provide extension and training support to them for best farming practices, better post harvest handling practices, efficient use of inputs and technology transfer etc. The pack house will develop appropriate aggregation mechanism and send trucks/pick-ups to the aggregation points. Farmers will be encouraged to come together as producer companies and set up and manage aggregation points wherever possible. Pack house may also invest in developing infrastructure at aggregation points such as platforms, sheds, etc

158 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 23.2.2 Banana Ripening Facility A banana ripening facility is proposed. Capacity of the ripening chamber will be 10 MT per day. The ripening chamber can also be used for other fruits such as mango, if required. Ripening would be done using ethylene as the catalyst (see Annexure for further technical details). Ethylene generators would be utilized for appropriate dosing of the catalyst. Where ripening facility is located adjoining the pack house, conveyor rollers are optioned to carry the crates directly to ripening area. The Banana ripening facility could adjoin a separate receiving and de-handing shed to allow for locally sourced direct farm produce to be input for local ripening requirements. A waste disposal area to cater to ripening room is specially designated. Material handling pallet mover is provided for the daily operations. The receiving shed is covered to protect from direct sunlight and weather. Though only one chamber will output daily, sufficient space is provided to cater for dispatch staging as well as incoming marshalling of the produce. The ripening facility is envisaged to output into smaller vehicles for tertiary dispatch and a separate designated parking lot for the same is designed.

23.2.3 Dry Warehouse A dry warehouse of 2000 MT capacity is also proposed. It will be used for storage of pulses which is abundantly produced in catchment area of spoke. The warehouses would plan for sufficient parking and eased traffic flow layout along with waste disposal areas.

23.2.4 Other Facilities Apart from the above, following facilities are proposed in the pack house;

Business Centre Business Centre is proposed to house the administrative block for the market. There will also be rooms/sections which may be rented out to reputed NGOs, companies, grass-root level organizations such as microfinance institutions, etc as office spaces.

Other facilities proposed for this location are: . Canteen . Solid Waste Management Area . DG Room . Water Supply Facility . Parking Area . Utilities

159 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

24 SPOKE: JALNA

Jalna has been identified as the spoke for the Amravati Aurangabad Integrated Value Chain. It has been identified as spoke because it’s major production as well as marketing centre of sweet lime. For sweet lime, Jalna has established trade linkages with Delhi, Jaipur and other markets of the country. Apart from the connectivity to the consumption markets, Jalna is well connected with state highway and other link roads to production clusters. The railway station is at Jalna itself. The aggregation points identified for the spoke at Jalna and their approximate distance from the spoke are:

Aggregation Points Distance from the spoke in Kms Ghansavangi 80 Ambad 50 Badnapur 20 As evident from above, the aggregation points are located within a radius of 100 km from Jalna. The aggregation points have been identified keeping in view the time required for evacuation of sweet lime after harvest.

24.1 FOCUS CROP AND ESTIMATED THROUGHPUT As mentioned in the previous chapter, Amravati Aurangabad region accounts for 87% of the total sweet lime production of Maharashtra. Out of this, Jalna district alone produces 0.26 million MT of sweet lime annually. It accounts for around 40% of the total sweet lime production of the state. Ghansawangi, Ambad and Badnapur are the major taluks under sweet lime cultivation in the district and they are located in a radius of around 80-100 km from Jalna. The estimated throughput of the spoke has been identified based on the present production in the catchment areas, potential for interventions and stakeholders’ consultations. The estimated annual throughput of the spoke in MT will be as follows:

Spoke Throughput of Sweet lime in MT Jalna 12000 The arrival pattern of the focus crop at the spoke will be as follows:

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sweet Lime As evident from above, Sweet lime is available for around 8 months; hence the spoke at Jalna will be operational for around 250 days in a year.

24.2 PROPOSED FACILITIES The spoke at Jalna has been designed on the basis of requirement of the focus crop. Sweet lime is treated as a bulk horticulture produce in the region and limited sorting/grading is

160 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT carried out at market end. The produce is handled manually throughout the supply chain and there is no facility available for the focus crop in this region. As the produce is currently handled through the ambient supply chain, hence introduction of cold chain infrastructure will not be viable because of increased cost. The objective is to improve current handling practice and quicker evacuation to the consumption markets. It is also envisaged that the pack house would serve as a pilot for many more such initiatives. Facility design caters and complies with EHS regulations and provides segregated amenities – by gender and working zones. Following facility has been proposed at the spoke:

24.2.1 Ambient Pack House An ambient pack house is proposed to be set up for handling of 80 TPD of sweet lime. In the ambient pack house, following infrastructure will be provided: . Covered Pack shed (open to ambient) with landing area. . Requisite weighing equipment and transaction recording arrangement. . Sorting and grading areas (with tables). . Packaging store and Packing tables. . Waste disposal systems. . Vehicle parking area.

Ambient Pack House Process flow: The process flow of sweet lime handled in the pack house is depicted below:

Facilities Description

Quality Check  Quality assessment of sweet lime on the basis of size, ripening stage etc.

Sorting and  Manual sorting and grading is suggested, which is cost effective. Grading  Sorting and grading tables are proposed in the pack shed.

Packing  Packaging tables to be provided in the pack sheds.  Manual packing of sweet lime in crates. The packaging material may change depending upon the requirements of the destination market. Dispatch  The same area would be offloaded on a daily basis.  The packaged produce would be staged on the raised platform.  Produce is expected to be transported in trucks of 15 MT capacities.

Aggregation Mechanism The spoke will develop an aggregation mechanism for assured supply of produces to the pack house. As 80% of the sweet lime is sold at farm itself, hence the pack house owner will try to establish direct relationship with farmers. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment

161 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT areas. Since farmers are unwilling to take marketing risk because of price fluctuation and fewer selling scope for them, setting up of pack house in the region will provide assured market to the sweet lime growers. The pack houseowner may also invest in setting up of basic infrastructure such as shed at the aggregation points. The produces will be collected through pick up vans/trucks from various points of aggregation.

Logistics At the peak of operations, the daily inbound logistics to the spoke would be 16 and outbound logistics would be 6. Sweet lime will come to the spoke in various modes of transport such vans, tempos, trucks etc. and the onward dispatch to destination markets will be through trucks of 15 MT capacities.

24.2.2 Other facilities Apart from the pack house, other facilities proposed in the spoke are: . Business Centre . Parking Area . Canteen . Weigh Bridge . Water Supply Facilities . DG Rooms . Solid Waste Management Area . Other Amenities

162 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

25 SPOKE: PAITHAN

Paithan has been identified as the spoke for Amravati Aurangabad integrated value chain. Paithan is well connected by road to major consumption markets such as Mumbai, Delhi etc. and it is also proximate to the production clusters of sweet lime and Mango. The nearest airport and railway station is located at Aurangabad, which is around 80 km away from Paithan. As Paithan is well connected to production areas, mobile collection centres are proposed for aggregation of produces. The identified aggregation points are: Crops Taluka Aggregation Points Approximate Distance (Kms) Sweet Paithan Apegaon, Pachod, Gharegaon, Ektuni, Katpur, Located in a radius of lime Balanagar, Rahatgaon, Dawarwadi, Thergao, Sonwadi 30‐35 kms Aurangabad Pimpriraja, Adul, Devgaon, Kachner, Nilajgaon Located in a radius of 60‐70 kms Mango Paithan Bidkin, Sonwadi, Isarwadi, Logaon, Prabhuwadgaon, Located in a radius of Dhakefal, Dhorkin 30‐35 kms Aurangabad Pimpriraja, Devgaon, Kachner, Located in a radius of 60‐70 kms

25.1 FOCUS CROPS AND ESTIMATED THROUGHPUT As mentioned earlier, mango and sweet lime are the major crops grown in the catchments of the proposed spoke. Paithan and Aurangabad talukas account for around 80% of the total mango production of the state. Kesar mango, which is a specialty of this region, is grown in abundance in both the talukas. Paithan is not only a production centre of these crops but also an established marketing hub for domestic market. As mentioned in the previous chapter, a mango export facility centre, located at around 60kms from Aurangabad, is operational and it has a capacity to pre-cool 5 MT/batch of mango; hence similar capacity has been proposed for the mango pack house and accordingly the pack house is expected to target 4000 MT of mango. The focus crops and estimated throughputs have been identified based on the present production in the catchment area, the present capacities of existing similar infrastructures/facilities, potential for interventions, and stakeholders’ consultations. The estimated annual throughput of the pack house in MT is as follows:

Spoke Sweet Lime Mango Paithan 12000 4000 The arrival pattern of the focus crops for the spoke will be as follows:

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Mango Sweet Lime The arrival pattern shows that the spoke will be operational for about 8 months in a year.

163 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 25.2 PROPOSED FACILITIES The spoke at Paithan has been designed on the basis of requirements of the focus crops. The objective is to improve the current handling practices, enhance shelf life and faster evacuation to the consumption markets. The capacity of the proposed facilities has been planned taking into account the existing facilities, their capacities and utilization. Facility design caters and complies with EHS regulations and provides segregated amenities – by gender and working zones. Following facilities has been proposed at the spoke:

25.2.1 ePack Hous The pack house will have cold chain infrastructure as well as space for ambient handling for produce. The cold chain infrastructure will cater to kesar mango, which is regarded as a premium fruit. Keeping synergy with existing ambient supply chain practices, infrastructure space is also provided that will cater to sweet lime and remaining volumes of mango. As sweet lime is treated as a bulk horticultural produce and currently handled through the ambient supply chain, hence introduction of cold chain infrastructure for sweet lime will not be economically viable. Facility design caters and complies with EHS regulations and provides segregated amenities – by gender and working zones.

Cold chain: Mango The peak arrival of mango has been estimated to be 50 TPD, out of which 30% i.e. 15 MT will pass through the cold chain. The basic sub components of the pack house will be as follows: . Sorting and grading facilities o For mangos – complete mechanized line: . De-sapping racks. . Hot water dip/vapor treatment system. . Waxing and drying system. . Grading system. . Inspection and Packaging area – tables standard stainless steel type. . Weighing and unitization area – certified weighing machines and palletisation equipment. . Buffer Store (Ante room) – holding area for 24 pallets pending cold application. . Pre-cooler – Forced Air Pre-coolers: capacity 5 MT, each running 3 batches in 18 hour period. In peak season, more than 15 MT will be pre-cooled daily through these pre-coolers. . Cold Store - 25MT capacity (daily output plus 50% stock overrun to cater for transport delays). The pre-coolers can also be used to supplement contingency storage. . Both pre-cooler and cold store refrigeration will cater to 2 to 12 ºC temperatures . Staging Area (Ante Room) – 24 pallets pending dispatch/transport. . Material handling equipment – pallet movers, trolleys. . Waste disposal systems. . Vehicle waiting areas. . Crate washing system.

164 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Mango Process Flow: Cold Chain The process flow for mango handled through cold chain in the pack house is depicted.

Technology / Facilities Description

Quality Check  The mango that comes from the field will undergo quality check.

De-sapping  Mangoes will be placed on de‐sapping racks for removal of latex

Washing and Drying  The fruit will be washed and air dried.

Sorting and Grading  Manual sorting and grading of mango is proposed.  Mangoes to be packed in CFB boxes of varying capacities depending upon the requirement of the destination markets. Boxes will then be palletized. o Pre-cooling  Pre cooling will be done at 12 C at 90% RH by forced air method.

o Cold Storage  Storage is done at 12‐15 C, 85‐90% RH for 2‐3 weeks.

Transport  For transportation of the produce, refrigerated vehicles will be used.

In the long run, farmers may be educated to reduce pre cooling time and to carry out de- sapping at field level itself. This can be done by keeping mangoes in water troughs (bore well water, which is 10-15 degree below ambient) at farm itself, pending transport and thus removing field heat (reducing pre-cooling time) and washing off latex which minimizes chances of latex burns. Where hot dip or vapour treatment is needed (recommended for mango) 52 ºC for 5 mins, solar thermal panels with electric heaters as back up can be used.

Ambient Supply Chain: Mango The remaining volumes of mango that does not pass through the cold chain will be handled in ambient handling yard and only sorting, grading and packing will be carried out. In the pack house adjoining the cold chain facility, following infrastructure will be provided: . Covered Pack shed (open to ambient) with landing area. . Requisite weighing equipment and transaction recording arrangement. . Sorting and grading areas (with tables). . Packaging store and Packing tables. . Waste disposal systems. . Vehicle Parking areas. In season, about 35 MT of mango will be handled in ambient temperature in the pack house. For ambient handling, a separate space will be provided in the pack house. Here, after

165 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT receiving the produce from field they will be sorted, graded and packed in CFB boxes manually and dispatched to markets in normal trucks of 9-10 MT capacities.

Aggregation Mechanism: Mango The spoke will develop an aggregation mechanism for assured supply of produces to the pack house. The produces will be collected through pick up vans/trucks from various points of aggregation. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment areas.

Logistics: Mango The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, etc. At the peak of operations, around 10 vehicles are expected to arrive at the spoke on daily basis. The total number of outgoing vehicles would be 5, out of this 2 would be refrigerated and 3 would be normal trucks.

25.2.2 Sweet lime Ambient Pack House An ambient pack house is proposed to be set up for handling of 80 TPD of sweet lime. In the ambient pack house, following infrastructure will be provided: . Covered Pack shed (open to ambient) with landing area. . Requisite weighing equipment and transaction recording arrangement. . Sorting and grading areas (with tables). . Packaging store and Packing tables. . Waste disposal systems. . Vehicle parking area.

Ambient Pack House Process flow: The process flow of sweet lime handled in the pack house is depicted below:

Facilities Description

Quality Check  Quality assessment of sweet lime on the basis of size, ripening stage etc.

Sorting and  Manual sorting and grading is suggested, which is cost effective. Grading  Sorting and grading tables are proposed in the pack shed.

Packing  Packaging tables to be provided in the pack sheds.  Manual packing of sweet lime in crates. The packaging material may change depending upon the requirements of the destination market. Dispatch  The same area would be offloaded on a daily basis.  The packaged produce would be staged on the raised platform.  Produce is expected to be transported in trucks of 15 MT capacities.

166 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Aggregation Mechanism: Sweet Lime The spoke will develop an aggregation mechanism for assured supply of produces to the pack house. As 80% of the sweet lime is sold at farm itself, hence the pack house owner will try to establish direct relationship with farmers. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment areas. Since farmers are unwilling to take marketing risk because of price fluctuation and fewer selling scope for them, setting up of pack house in the region will provide assured market to the sweet lime growers. The pack house owner may also invest in setting up of basic infrastructure such as shed at the aggregation points. The produces will be collected through pick up vans/trucks from various points of aggregation.

Logistics: Sweet Lime At the peak of operations, the daily inbound logistics to the spoke would be 16 and outbound logistics would be 6. Sweet lime will come to the spoke in various modes of transport such vans, tempos, trucks etc. and the onward dispatch to destination markets will be through trucks of 15 MT capacities.

25.2.3 Dry Warehouse A dry warehouse of 2000 MT capacity is proposed, which will be used for storage of pulses. The warehouses would plan for sufficient parking and eased traffic flow layout along with waste disposal areas.

25.2.4 Other facilities Apart from the pack shed, other facilities proposed in the spoke are: . Business Centre . Parking Area . Canteen . Weigh Bridge . Water Supply Facilities . DG Rooms . Solid Waste Management Area . Other Amenities

167 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

26 FINANCIAL ANALYSIS

26.1 AURANGABAD‐AMRAVATI IVC

26.1.1 Project Details The facilities/infrastructure proposed in the spokes for the IVC and its handling capacities as well as area (in sq meters) are summarized below:

Facilities Paithan Warud Anjangaon Akola Sangrampur Jalna 2000 MT 2000 MT 2000 MT 5000 MT 2000 MT ‐ Dry Warehouse (920) (920) (920) (2300) (920) 100 100 Orange Packhouse ‐ MT/Day MT/Day ‐ ‐ ‐ (1700) (1700) 40 MT/Day 40 MT/Day Banana Packhouse ‐ ‐ ‐ ‐ (1350) (1350) 10 MT/Day 10 MT/Day Ripening Chamber ‐ ‐ ‐ ‐ (527) (527) Mango Packhouse‐Cold 15 MT/Day ‐ ‐ ‐ ‐ ‐ Chain (700) Mango Packhouse‐ 35 MT/Day ‐ ‐ ‐ ‐ ‐ Ambient (603) 80 80 Sweet lime Ambient MT/Day ‐ ‐ ‐ MT/Day Packhouse (500) (500) 35 MT/Day Grain pack shed (750) To support the operations of above facilities, the spokes will also have adequate basic infrastructure and other support infrastructure like power and water supply systems, ETP, solid waste disposal facility, administration block/business centre, canteen, parking space, etc. A list of these basic and support infrastructure facilities (spoke wise) is given below: Basic and Other Unit Support Infrastructure Paithan Warud Anjangaon Akola Sangrampur Jalna Administrative Sq. m building/business centre 300 300 300 300 300 300 Parking Sq. m 810 810 1620 810 810 810 Canteen Sq. m 50 50 100 50 100 50 Power Supply KVA 200 130 260 150 210 50 Water Supply LPD 5550 3550 63050 3550 57950 4450 Total 1160 1160 2020 1160 1210 1160

26.1.2 Project Cost The cost estimates of plant and machinery are based on the information obtained from equipment suppliers including quotations given by them for similar facilities. The civil work and basic infrastructure costs have been worked out by architects/engineers based on layout plans and as per the industry standards. Finally, the costs of land and land development have been assessed mainly based on interactions with industry/stakeholders in the identified locations. The component wise costs of the project are given below: Item Sr. No. Description Amount (Mn Rs) Amount (Mn $) A 1 Land 0.00 0.00

168 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 2 Land Development 16.00 0.34 3 Buildings 122.61 2.60 4 Plant Machinery & Equipments 96.25 2.04 5 Utilities & other fixed assets 8.15 0.17 Sub Total (A) 243.01 5.16 B Contingencies 20.78 0.44 C Pre‐operative expenses 12.15 0.26 D Margin Money for Working capital 1.14 0.02 Total Project Cost (A+B+C+D) 277.08 5.88

Land Keeping in view the maximum built up area of about 60% and open area of about 40%, the total land requirement for the project is estimated to be about 6.4 Ha. The breakup of land requirement for the spokes is given below.

Location Area (Ha) Paithan 1.0 Warud 1.0 Anjangaon 1.7 Akola 1.1 Sangrampur 1.1 Jalna 0.5 Total IVC 6.4 The land cost has not been considered as part of project cost because according to the implementation framework suggested the land will be given by the state government..

Land Development Cost of land development includes boundary wall, road, water drainage, parking etc. The cost of development is taken as Rs 2.5 mn/Ha.

Buildings The estimated costs of construction for various buildings in the projects are given below: Amount in Rs millions Facility Paithan Warud Anjangaon Akola Sangrampur Jalna IVC Orange Packhouse ‐ 10.20 10.20 ‐ ‐ ‐ 20.40 Warehouse 5.98 5.98 5.98 14.95 5.98 ‐ 38.87 Banana Packhouse ‐ ‐ 8.10 ‐ 8.10 ‐ 16.20 Ripening Chamber ‐ ‐ 2.76 ‐ 2.76 ‐ 5.52 Mango Packhouse‐Cold Chain 5.60 ‐ ‐ ‐ ‐ ‐ 5.60 Mango Packhouse‐Ambient 3.60 ‐ ‐ ‐ ‐ ‐ 3.60 Packhouse‐Ambient 3.00 ‐ ‐ ‐ 3.00 6.00 Packshed‐ Ambient 4.50 4.50 Business Centre 2.70 2.70 2.70 2.70 2.70 2.70 16.20 Miscs 0.80 0.80 1.68 0.80 1.00 0.64 5.72 Total Buildings 21.68 19.68 31.42 22.95 20.54 6.34 122.61 The building construction rate for mango packhouse (cold chain) has been estimated to be Rs. 8000/sq. m. Rate for ambient packhouse for orange and sweet lime and ambient packshed for grains has been estimated to be Rs. 6000/sq. m. The construction rate for banana packhouse and dry warehouse have been assumed at Rs. 6000/sq. m and Rs. 6500/sq. m respectively. The lumpsum cost of pre-fabricated banana ripening chamber of 40 MT capacity (which is equivalent to 10 MT/day ripening capacity) having an area of 280 sq.m has been taken as Rs. 2.76 million. The rates are in tune to the industry standards and have been verified against quotations received from different industry players.

169 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT In case of non technical infrastructure, the construction rate has been estimated between Rs. 8000 to Rs. 9000 per sq. m for facilities such as administrative building/business centre, canteen etc.

Equipments The break-up of the estimated costs of major machineries is provided below: Table: Machinery Cost Amount in Rs millions Plant Machinery and Equipments Paithan Warud Anjangaon Akola Sangrampur Jalna IVC Ripening equipments ‐ ‐ 4.20 ‐ 4.20 ‐ 8.40 Banana Packhouse equipments ‐ ‐ 3.00 ‐ 3.00 ‐ 6.00 Refrigeration equipments 2.50 ‐ ‐ ‐ ‐ ‐ 2.50 Mango Grading line 8.00 ‐ ‐ ‐ ‐ ‐ 8.00 Grains‐Cleaning, grading line ‐ ‐ ‐ 1.50 ‐ ‐ 1.50 Weigh Bridge‐40 MT 2.50 2.50 2.50 2.50 2.50 2.50 15.00 DG sets 0.90 0.50 1.20 0.50 1.00 0.20 4.30 Crates 1.88 3.75 5.63 ‐ 1.88 ‐ 13.13 Pallets 1.13 ‐ 3.38 ‐ 1.13 ‐ 5.63 Refer trucks‐7 mt 6.00 ‐ ‐ ‐ ‐ ‐ 6.00 Normal Pickup vehicles 0.90 1.50 2.40 1.50 1.20 1.50 9.00 Normal trucks‐15 MT 2.40 2.40 4.80 2.40 2.40 2.40 16.80 Total Plant Machinery & Equipments 26.20 10.65 27.10 8.40 17.30 6.60 96.25 The cost wise major components of the project are normal pickup vehicles and trucks (Rs. 25.80 mn), weigh bridges (Rs. 15 mn) and crates and pallets (Rs. 18.46 mn). The rates for plant, machinery and equipments are comparable to the industry standards and have been verified with the quotations from different suppliers.

Miscellaneous Fixed Assets / Utilities The breakup of the estimated cost of the miscellaneous fixed assets and utilities is provided below: Amounts in Rs millions Misc Fixed Assets Paithan Warud Anjangaon Akola Sangrampur Jalna IVC Power supply system 1.20 0.50 1.50 0.50 1.20 0.20 5.10 Water supply system 0.50 0.15 0.50 0.15 0.50 0.10 1.90 IT system 0.20 0.10 0.20 0.10 0.20 0.05 0.85 Furniture 0.05 0.05 0.05 0.05 0.05 0.05 0.30 Total Misc Fixed Assets 1.95 0.80 2.25 0.80 1.95 0.40 8.15 The power load for the total project has been estimated to be 1000 KVA. DG sets have been taken for each spoke and the capacities vary from 50 KVA to 250 KVA depending on the requirement. The project would require 0.14 million LPD of water for the operations. The

170 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT cost of water supply has been distributed among the locations in proportion to their water requirements.

26.1.3 Preliminary & Pre‐operative Expenses The provision towards preliminary & pre-operative expenses includes expenditure towards preliminary expenses like salaries & administrative expenses, travel expenses, market development expenses, interest during construction period etc. It is also assumed that the project will be commissioned over a period of one year. The interest during construction period is capitalized in the project cost. Pre-operative expenses other than interest during construction period are assumed to be 5% of cost of fixed assets.

Working Capital Requirement As the project is meant to create facilities and offer them to various users on rental basis, the WC requirement is assumed to be operating costs like management, maintenance, insurance, power and water. As most of these expenses and the rent receipts are monthly in nature, so to cover these expenses the requirement of working capital is calculated by considering the fund requirement for 30 days.

Contingencies The contingencies related to project implementation are calculated as below: Physical Price Contingencies Contingencies Contingencies Contingencies Contingencies (Rs Mn) (Mn $) Land 0.0% 0.0% 0.00 0.000 Land Development 5.0% 8.3% 1.39 0.030 Buildings 5.0% 8.3% 10.69 0.227 Plant Machinery & Equipments 0.0% 8.3% 7.99 0.170 Utilities & Other Assets 5.0% 8.3% 0.71 0.015 Total 20.78 0.441 The price contingencies are based on the whole sale price index for FY 2009.

26.1.4 Means of Finance The cost of the project is proposed to be financed through a mix of equity and project grant from State government including ADB funds. As mentioned in the implementation framework the promoter’s equity has been taken at 30% of the project cost and the remaining funds required will be contributed by state government as project grant. The table below shows the funding pattern for the project: Particulars Amount Amount Share Rs Million Million $ Asian Development Bank 135.77 2.88 49.0% State Government 58.19 1.23 21.0% Equity‐Private Investor 83.12 1.76 30.0% Total 277.08 5.88 100.0%

171 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 26.1.5 Key Operating Assumptions The key operating assumptions underlying the project’s business plan are described below.

Operating Cost Assumptions: 300 working days per annum are assumed for operations. Power & Fuel Costs The total connected load of the facilities for all locations is estimated at 1000 KVA. The power tariff has been assumed at the prevailing rate of Rs 1.30 per unit for agro based industry in Maharashtra. Average daily requirement of power would be about 3600 KWH. The details of power load assumptions for the facility are given below: Facilities Assumption Orange/ Sweetlime Packhouse 1 KVA/ 60 sqm Warehouse 1 KVA/ 92 sqm Banana Packhouse 1 KVA/ 45 sqm Ripening Chamber 50 KVA/ 40 MT Mango Packhouse‐Cold Chain 50 KVA/ 15 MT Mango Packhouse‐Ambient 1 KVA/ 40 sqm Packsheds‐Grains (including grading line) 75 KVA/ 35 MT Business Centre & Misc facilities 1 KVA/ 30 sqm The table below shows the location wise power requirement: Locations Power Load (KVA) Warud 130 Anjangaon 260 Akola 150 Sangrampur 210 Jalna 50 Paithan 200 Total 1000 Taking into account the current power supply scenario in the state it has been assumed that the facilities would run on DG sets for about 2 hrs/day. The average fuel cost for DG set is assumed to be Rs. 35/Lt. Water Cost Daily requirement of water is estimated to be 140 KL/day for all the locations combined. The charges are assumed to be Rs 40/KL. Employee Cost The employee cost has been estimated by considering the man power requirement for managing the facility. The project will be managed by the developer/SPV, who will maintain and operate the facilities in the project. This includes management and 24 hour maintenance of the plant and machineries, management of the canteen, business centre, security, etc. So, a team of technical engineers, support staffs and security personals will be required. The details of manpower and their average costs are given in the following table:

Grade/ Employee Number Salary/ month (Rs) Managers 6 20000 Technical Manager 7 20000 Operators 12 10000 Maintenance 12 6000 Account 6 8000 Security 18 4000 Support Staff 18 3000 Total Employee Cost (Per Month) 79

172 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT *Increment in salary is assumed at 5% p.a for 1st five years of operations. Cost of Maintenance The cost of maintenance has been assumed as 1.0% of value of plant & machinery and miscellaneous fixed assets. The maintenance cost will increase by 2.5% every year due to aging of assets. Cost of Insurance The cost of insurance has been assumed as 1.0% of value of plant & machinery and miscellaneous fixed assets. Admin & Marketing Overheads The developer will be responsible for only the management and maintenance of the facilities without any own operations. However, initial tie ups are needed for better capacity utilization of the facilities. Most of the promotional/marketing expenses will be incurred up front with only small recurring expenses afterwards. Hence during operations, marketing and business development expenses will not be significant for the project. The major overheads for the project will be traveling costs, statutory (like audit etc.) costs and communication expenses etc. So, the admin & selling overhead costs have been assumed @ 2.0% of revenue in line with the industry norms for such facilities.

Financial Assumptions Taxes Income Tax rate is assumed to be 33.99% flat (Prevailing Corporate Tax Rate). Income tax is calculated on PBT after adjusting for the difference between the depreciations calculated according to Companies Act, 1956 and Income Tax Act, 1961. Depreciation Rates Depreciation has been calculated by straight-line method, as per the Companies Act, 1956, for book purpose, whereas for tax purpose (As per Rule-5 of Income Tax Act, 1961), written down value method is employed. The rates of depreciation are in tune to the rates that are used in cold storage and warehousing industry. The depreciation rates used for different assets are given below:

Depreciation Rates Book Depr Tax Depr Plant & Machinery 10.34% 15.00% Miscellaneous Fixed Assets 10.34% 15.00% Buildings 3.34% 5.00% The plant & machinery includes refrigeration and cooling systems used for operation of facility, sorting-grading equipments, crates, pallets etc. The noncore equipments like water supply system, transformers etc are included in miscellaneous fixed assets. Buildings include, building for ripening facility, ambient and cold pack-houses, dry warehouse storages, business center, canteen etc.

Revenue Assumptions Rental assumptions Based on the discussion with market players (service providers, food processors, users, traders and wholesalers) the rental charged for various facilities is tabulated below:

Facilities Charges/ Unit Unit of Charge Ambient Packhouses‐Orange/Sweetlime 60 Rs/sqm/month

173 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Banana Packhouse 1000 Rs/sqm/month Banana Ripening Facility 1400 Rs/MT Mango Packhouse‐Cold Chain:‐ Sorting/Grading/Packaging charges 1000 Rs/MT Cold Store & Pre‐cooling charges 600 Rs/MT Mango Packhouse‐Ambient 60 Rs/sqm/month Warehouse 100 Rs/sqm/month Business Centre 100 Rs/sqm/month Crates 7 Rs/cycle/crate Weighbridge 2 Rs/MT Logistics 10 Rs/Km Grain Packshed Sorting, grading, cleaning, Packing charges 500 Rs/MT The rentals charged for these facilities are comparable to the prevailing market rates.

Capacity Utilization The estimated capacity utilizations are shown in the table below. Year Capacity utilization Year I 40% Year II 60% Year III and onwards 80% The capacity utilizations have been assumed conservatively, starting at 40% in the first year.

26.1.6 Financial Performance The estimated financial projections for the project are tabulated below: Income Statement: (Rs Million)

Year 1 2 3 8 12 16 20 Capacity Utilization 40% 60% 80% 80% 80% 80% 80% Revenue Rental‐Orange/lime Pack houses 0.24 0.37 0.49 0.49 0.49 0.49 0.49 Rental‐Banana Pack houses 7.20 10.80 14.40 14.40 14.40 14.40 14.40 Rental‐Ripening chambers 3.12 4.68 6.24 6.24 6.24 6.24 6.24 Rental‐Mango pack house‐cold chain 0.45 0.68 0.90 0.90 0.90 0.90 0.90 Rental‐Mango pack house‐Ambient 0.02 0.03 0.04 0.04 0.04 0.04 0.04 Rental‐Warehouses 1.72 2.42 3.11 3.44 3.44 3.44 3.44 Rental‐Crates 7.35 11.03 14.70 14.70 14.70 14.70 14.70 Rental‐ Logistics 16.92 24.75 32.58 33.84 33.84 33.84 33.84 Rental‐cleaning grading line ‐ Grains 1.35 1.69 2.03 2.70 2.70 2.70 2.70 Rental‐ Business centre 1.20 1.77 2.33 2.40 2.40 2.40 2.40 Rental‐Pre‐cooler 0.27 0.41 0.54 0.54 0.54 0.54 0.54 Rental Pack shed 0.04 0.05 0.07 0.07 0.07 0.07 0.07 Weighbridge 0.07 0.11 0.15 0.15 0.15 0.15 0.15 Revenue 39.96 58.77 77.58 79.91 79.91 79.91 79.91

Expenses Power & Fuel 1.24 1.86 2.49 2.49 2.49 2.49 2.49 Employee Cost 7.51 7.89 8.28 9.59 9.59 9.59 9.59 Water cost 0.66 0.99 1.33 1.33 1.33 1.33 1.33 Maintenance cost 2.43 2.49 2.55 2.89 3.19 3.52 3.88 Insurance 2.19 1.86 1.58 0.70 0.37 0.19 0.10 Admin & Selling Overheads 0.80 1.18 1.55 1.60 1.60 1.60 1.60 Total Expenses 14.84 16.27 17.78 18.59 18.55 18.71 18.98

174 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

EBITDA 25.12 42.49 59.79 61.33 61.36 61.21 60.93 Interest Long Term Debt (LTD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Interest Working Capital borrowing 0.46 0.63 0.80 0.83 0.83 0.83 0.83 Depreciation 16.90 16.90 16.90 16.90 4.65 4.65 4.65 PBT 7.76 24.96 42.09 43.60 55.88 55.73 55.45 Tax 0.00 0.00 10.56 16.35 18.38 19.37 19.83 Net Profit (PAT) 7.76 24.96 31.53 27.24 37.51 36.35 35.62

Cash flow to government 7.99 11.75 15.52 15.98 15.98 15.98 15.98 Net profit to private developer ‐0.23 13.21 16.02 11.26 21.52 20.37 19.64 In the above table, it is seen that in the first year of operations with 40% capacity utilization, the revenue from the project is Rs. 39.96 millions which increases to Rs. 77.58 millions at capacity utilization of 80% from sixth year onwards. The net income from the project during 1st year of operation is expected to be Rs. 7.76 millions (at 40% capacity utilization).

Major Financial Performance Indicators:

Year 1 2 3 4 5 6 7 EBITDA Margin 62.87% 72.31% 77.08% 77.08% 77.02% 76.58% 76.67% PAT margin 19.42% 42.47% 40.65% 38.98% 37.59% 36.01% 34.98% Debt‐Equity Ratio 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Debt to EBITDA ratio 0.14 0.11 0.10 0.10 0.10 0.10 0.10 Interest Coverage Ratio 54.33 67.11 74.32 74.33 74.22 73.53 73.68 DSCR 54.33 67.11 74.32 74.33 74.22 73.53 73.68 Average DSCR 71.43 Project IRR 16.55% The above table shows the operational and financial efficiencies of the project. The project is able to achieve an operating margin (EBITDA Margin) of about 62% from the first year of operations itself. From fourth year onwards, the project is able to convert about 35% of its revenue into net profit. The project IRR is coming around 16.55%, which seems attractive from investor point of view.

175 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

27 ECONOMIC ANALYSIS: IVC AMRAVATI‐AURANGABAD

The need for economic analysis of any project is to assess various intangible costs and benefits which are normally not captured in the financial analysis. Any decision on desirability or otherwise of a project would therefore require to take into consideration such costs and benefits and then arrive at a net impact of the project on the economy as a whole. This is more relevant for projects which have a bearing on large segments of the society such as farmers. The IVCs have been proposed mainly to plug the gaps and deficiencies along the agricultural value chains and the aim is to enlarge the size of the value chains in terms of greater revenue and ensuring a larger share to farmers. The major benefits therefore expected would be in terms of better price realization, wastage reduction and employment generation. The major costs considered are opportunity cost of factors of production viz. land, capital and labour. The above costs and benefits have not been captured in the financial analysis as major assumptions there include all facilities being developed by private developers for leasing out to actual users. Thus, financial analysis has taken revenue in form of rentals only which do not truly reflect above gains. Also, as land for all facilities is to be provided by state governments on BOT model, financial analysis does not include cost of land even as these land parcels may have large opportunity cost to the economy as a whole.

27.1 METHODOLOGY AND ASSUMPTIONS The economic analysis is aimed at calculating EIRR which has been done by identifying the benefits arising due to the proposed practices and infrastructure/facilities and are evaluated by comparing ‘With Project’ and ‘Without Project’ scenarios. The major benefits considered for calculation of EIRR are those which are easily quantifiable and are as follows:

Better Price realization due to quality improvement of the agricultural produces A major impact expected is significant improvement in produces through modern methods of handling, packaging, storage and transportation which would lead to better price realization.

Wastage Reduction The interventions in technological infrastructure such as packaging, storage, temperature controlled transportation and better post harvest management practices will help in increasing the shelf life of the perishable commodities. The improved shelf life will lead to low wastage level even during transportation and marketing to distant places in the country.

176 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Employment Generation Considering the high unemployment rate in India and the seasonal availability of work for agricultural labour the project will provide good opportunity to work throughout the year for the people of surrounding areas.

Large increase in revenue and tax realization The project envisages large investments in agribusiness infrastructure which are likely to generate sufficient revenues and lead to incremental tax realization by the government. Similarly, the major quantifiable costs considered for calculation of EIRR are given below. While opportunity cost of land has been treated as a capital cost for the purpose, opportunity cost of capital (project grant) and labour has been treated as recurring cost.

Opportunity cost of land The land for the IVCs is to be provided by state governments on BOT model. Thus, the cost of land has been taken as the rates prevalent for industrial land in the surrounding areas. The opportunity cost of land is broadly in line with Maharashtra Industrial Development Corporation (MIDC) land rates in the region. . Opportunity cost of capital/ project grant The project provides for large amount of capital grant to private developers, which may range from 90% of project cost in Bihar to 70% of the project cost in Maharashtra. For the purpose of EIRR calculation, the opportunity cost of project grant amount has been considered which was not captured by the financial analysis. Opportunity cost of capital contributed as project grant is assumed at 10% per annum. The assumption is based on the fact that the money invested as grant can be invested elsewhere and a minimum return of 10% per annum has been assumed conservatively. . Opportunity cost of labour The project assumes large employment generation for agricultural labourers and limited employment opportunities for management professionals. For the calculation of EIRR, the opportunity cost of agricultural labourers has been taken assuming that they had options to work on other projects such as National Rural Employment Guarantee Scheme (NREGS). The detailed calculation for above mentioned benefits and costs has been done at IVC level and is given below:

27.2 QUANTIFICATION OF BENEFITS

Quality improvement leads to premium Price of the commodities The incremental price realization is calculated based on the price range available in the market for different grades (firmness, color, size etc.) of the produce. The table below compares the ‘Without Project’ and ‘With Project’ cases to estimate the incremental benefits due to improved quality of the produce.

Withou t Project With Project

177 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Estimated Additional Price Total Realization (%) Incremental Price Quantity Incremental Benefit Weighte (Rs/MT) (MT) Benefit (Mn (Rs/MT) Price Min Max d Rs) Crops (Rs/MT) Average Fruits 23000 10% 20% 12.0% 25760 2760 32400 89.42 Banana 16000 10% 15% 11.0% 17760 1760 30000 52.80 Mango 40000 15% 20% 16.0% 46400 6400 3750 24.00 Grains/ pulses 40000 10% 15% 11.0% 44400 4400 43500 191.40 Total 109650 357.62 The incremental benefit due to quality improvement is estimated to be Rs 357.62 million per annum at 100% capacity utilization.

Wastage Reduction The range of wastage reduction depends on the grade of produce and the distance of final market from source of production. The table below shows the assumptions made and calculations of the benefit due to reduction in wastage.

Without Project With Project Wastage Reduction Range (%) Selling Total Quantity Price Incremental Saved (MT) Crops Quantity saved Min Max Average (Rs/MT) Benefit (Mn Rs) Fruits 0 10% 15% 11.0% 25760 3564 91.81 Banana 0 15% 20% 16.0% 17760 4800 85.25 Mango 0 10% 15% 11.0% 46400 413 19.14 Grains 0 5% 8% 5.6% 44400 2436 108.16 Onion 0 10% 15% 11.0% 0 0 0.00 Total 11212.5 304.36 The project help in saving of estimated quantity of agricultural produce of about 11000 MT valued at Rs 304.36 million.

Employment Generation The spoke wise number of workers and for how many days in year the labour will be employed has been estimated based on the capacity of the facilities and the seasonality of crops handled. The wage rate for the labour is taken at prevailing market rate of Rs 120 per day. Being a green field project, the entire labour for the project is incremental in nature and the monetary value of income to the labour is given as below:

Without Project With Project Annual Annual Annual Incremental No. of Days/ amount No. of Days/ amount Benefit (Rs Mn) Location workers Annum (Rs Mn) workers Annum (Rs Mn) Warud 0 0 0.00 94 180 2.03 2.03 Anjangaon 0 0 0.00 280 300 10.08 10.08 Akola 0 0 0.00 40 180 0.86 0.86 Sangrampur 0 0 0.00 196 300 7.06 7.06 Jalna 0 0 0.00 84 180 1.81 1.81 Paithan 0 0 0.00 135 200 3.24 3.24

178 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Total 0 0.00 829 25.08 25.08

Large increase in revenue and tax realization The income tax calculated for the project is also incremental in nature when compared to the without project scenario hence, considered as an economic benefit. The likely increase in revenue collection has been captured in the projected cost benefit statement for EIRR.

27.3 QUANTIFICATION OF COSTS

Economic Cost of Project

Amount Amount Items Sr. No Particulars (Mn Rs) (Mn $) A 1 Land 25.90 0.55 2 Land & Site Development 16.00 0.34 3 Buildings 122.61 2.60 4 Plant Machinery & Equipments 96.25 2.04 5 Utilities & other Assets 8.15 0.17 Sub Total (A) 268.91 5.71 B Project Implementation Cost @10% of ADB Funds 13.58 0.29 C Pre‐op expenses 12.15 0.26 D Contingencies 20.78 0.44 E Capacity Building 32.21 0.68 Total Project Cost (A+B+C+D+E) 347.63 7.38 All the capital expenses such as land &site development, buildings, plant machinery & equipments, utilities & other assets are incremental in nature and thus considered as various components of economic cost of the project. The opportunity cost of land is assumed to be paid upfront and is therefore treated as capital cost. The project implementation cost (technical assistance etc.) is assumed as 10% of funds contributed by ADB. The pre-op expenses and contingencies related to project implementation are also taken as economic cost of the project. Further, the cost related to environmental impact has also been treated as one time expenditure in terms of equipments and facilities provided under the project. The environmental assessment for the project has not indicated any long term impact which would have significant cost implications. Finally, the social cost also would be mainly towards capacity building efforts and does not envisage any other cost like resettlement etc. Based on the above assumptions the estimated economic cost of the project is Rs 347.63 million or 7.38 million $. The exchange rate of 47.114998 Rs per Dollar is considered for calculation of cost of project in Dollar value.

Recurring Costs . Opportunity cost of labour

Location No. of workers Day/Annum Annual amount (Rs Mn) Warud 94 100 1.18

179 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Anjangaon 280 100 3.50 Akola 40 100 0.50 Sangrampur 196 100 2.45 Jalna 84 100 1.05 Paithan 135 100 1.69 Total 829 10.36 As mentioned earlier the estimates are based on NREGS. According to the scheme the government will provide minimum 100 days of employment to rural families with daily wage of Rs 125 per worker. . Opportunity cost of capital Opportunity cost of capital contributed as project grant is assumed at 10% per annum. The assumption is based on the fact that the money invested as grant can be invested elsewhere and a minimum return of 10% per annum has been assumed conservatively. . Opportunity cost of other factors Opportunity cost of other factors such as power, water, fuel etc. is not incremental in nature as these factors are available already and will be used from existing sources.

27.4 COST‐BENEFIT STATEMENT

Year 0 1 2 3 4 8 12 16 20 Imp Capacity Utilization Period 40% 60% 80% 80% 80% 80% 80% 80% A. Economic Benefits Quality Improvement 143.05 214.57 286.10 286.10 286.10 286.10 286.10 286.10 Wastage Loss 121.74 182.61 243.48 243.48 243.48 243.48 243.48 243.48 Incremental Labour 10.03 15.05 20.07 20.07 20.07 20.07 20.07 20.07 Incremental Income Tax 0.00 0.00 10.56 12.29 16.35 18.38 19.38 19.83 Total Economic Benefits 274.83 412.24 560.21 561.94 566.00 568.03 569.03 569.48 B. Economic Costs Opportunity cost of labour 4.15 6.22 8.29 8.29 8.29 8.29 8.29 8.29 Opportunity cost of Capital 19.40 19.40 19.40 19.40 19.40 19.40 19.40 19.40 Total Economic Cost 23.54 25.61 27.69 27.69 27.69 27.69 27.69 27.69 Net Economic Benefits (A‐B) 251.28 386.63 532.53 534.25 538.32 540.34 541.34 541.80 The table above shows the annual cost and benefits arising from the project.

27.5 CALCULATION OF ECONOMIC IRR (EIRR) Economic IRR (EIRR)

Imp Year Period 1 2 3 4 8 12 16 20 Economic Investment 347.63 251.2 386.6 532.5 534.2 538.3 540.3 541.3 541.8 Net Economic Benefits 0.00 8 3 3 5 2 4 4 0 Net Economic Cash ‐347.63 251.2 386.6 532.5 534.2 538.3 540.3 541.3 541.8

180 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Flow 8 3 3 5 2 4 4 0 Economic IRR (EIRR) 102% The economic IRR for the project is estimated to be 102% which appears to be high. This high level of IRR is due to the high investment in productive assets and most of the facilities proposed will directly be used for value addition.

27.6 ECONOMIC APPRAISAL RESULTS

27.6.1 Major Economic Indicators: The major economic indicators considered to assess the economic viability of the project are given in the table below:

NPV (Rs Million) 2,989.46 NPV (Million $) 63.45 Benefit‐Cost Ratio 19.89 NPVI 8.60

NPV: The positive NPV for the project indicates the viability of the project. The NPV is calculated considering the economic life/ concession period of project as 20 years. The discounting rate for calculation of NPV is the Weighted Average Cost of Capital (WACC). The WACC is calculated by assuming the capital cost of 16% for the private investor and 10% for project grant. The calculation of WACC is shown in the below table:

Details Share Cost of Capital Project Grant 70.00% 10% Equity‐Private Investor 30.00% 16% WACC 11.80%

Benefit‐Cost Ratio (BCR): The average BCR over the project life is estimated to be 19.89. The ratio indicates that for every one $ of expense it will generate about twenty times of expense over the life of project. Hence, the project is highly economic viable.

Net Present Value per $ of Investment (NPVI): The NPVI of more than zero is always considered as a good indicator of the economic viability of the project. The estimated NPVI for Aurangabad-Amravati IVC is 8.60 which is quite high.

181 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

MAHARASHTRA: INTEGRATED VALUE CHAINS

Nashik Integrated Value Chain

and

Aurangabad‐Amravati Integrated Value Chain

. Conceptual plans of facilities . Stakeholder consultation . Market Assessment . Impact Assessment . Capacity building support . Policy and regulatory aspects . Implementation framework . Project Implementation Structure

182 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

28 CONCEPTUAL PLANS FOR FACILITIES

In Maharashtra the sites for the proposed facilities have not been identified. The planning for the proposed facilities has been carried out conceptually for different locations of the IVCs based on the sizes and numbers of the proposed facilities as per the requirements envisaged as well as essential support infrastructure such as business centre, canteen and parking etc. A Greenfield development approach has been considered and the Master Plans have been evolved accordingly. Conceptual Master Plans for 4 representative locations viz. Nashik Road, Anjangaon, Paithan and Vivra (two from each IVC) have been prepared. Nashik Road has been identified as the Hub location for Nashik IVC and the facilities include cold chain infrastructure such as grape pack house and cold store and ambient facilities such as dry warehouse, onion store. Banana ripening facility is also envisaged in the hub. Hence, the location gives a representation of most of the envisaged facilities/infrastructure in the IVC. The Master Plan of the Vivra has also been prepared which is also in the same IVC. Vivra spoke is expected to focus mainly on banana crop and hence the facilities are mostly focused towards handling of banana such as packhouse and ripening facility. This represents a spoke which mostly focuses on one fruit crop. Paithan which is in Aurangabad-Amravati IVC is another spoke which is expected to cater to multi crops such as mango and sweet lime. Both cold and ambient facilities are envisaged for the spoke and hence may be taken as a representative spoke. Master Plan of Anjangaon has also been prepared. Anjangaon would handle products such as orange and banana having facilities catering to both the products. The four locations, which have been selected for the Master Plan preparation, hence cover a wide range of crops and corresponding facilities which are fairly representative for both the IVCs. Adequate provision of basic infrastructure such as access roads, water supply facilities for domestic industrial and fire fighting, effluents carriage and treatment, solid waste management, internal electrical distribution and communication lines has been kept in mind at the proposed facilities. Concepts of proper green areas for aesthetics and a pleasant ambience have been used besides adequate and efficient vehicular traffic access and parking to create a modern facility in an eco-friendly manner. . Broad planning concepts for the master planning and the design of the main components, are as follows:

28.1 PLANNING CONCEPT . The concept of the proposed Facilities is derived based on the requirements of the functions with self contained facilities. The proposed facilities shall be environment friendly facility comprising of physical and common infrastructure components interwoven with green spaces. . The concept is guided by the applicable development guidelines of the Site Planning, Spatial Planning norms and principals and prudent practices. The design philosophy revolves around prioritizing various aspects viz., circulation, land suitability, environmental sustainability.

183 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT . The master plan is based on modern planning concepts of providing good and efficient internal movement, efficient layout of services with supporting infrastructure and facilities in an aesthetic environment. . Considering the Greenfield approach has been considered to provide fresh, modern, eco-friendly places of conducting business replete with all necessary infrastructure facilities that provide a sanitized and pleasant ambience.

28.1.1 Master Plan The guiding principle of the master plans is to incorporate the principles of an eco-industrial facility by maximizing green space and open spaces, and provision of green belts. The design envisages functional and accessible work places by incorporating prudent and scientific planning principles and includes the following: 1. Provision of Basic Infrastructure to the proposed facility adequate for the proposed usage with anticipated vehicular traffic and other service requirements 2. Location of process and non-process activities 3. Location of process activities with requirement of mechanical services 4. Providing efficient access to the main road from all buildings 5. A central common facility center interwoven with green spaces 6. Provision of services area with ease of connecting with main service lines.

28.1.2 Buildings

1. Shed building are planned with dimensions optimized for economic structure. 2. Building are placed at the longer axis to provide long loading / unloading dock 3. All building are provided with proper parking and circulation area for heavy vehicles 4. Building which require mechanical services cold storage are clustered together 5. The structural design shall cater to the usage for the proposed life with wind and earthquake resistance

28.1.3 Services

1. Adequate space has been provided to cater to the proposed usage of the facilities such as water supply, sewerage/effluent carriage and treatment, power and telecom distribution 2. Water supply and Electrical Room are provided near the main road to provide easy access to operation and maintenance also provides provision connect with main external infrastructure 3. Sewerage, Storm water drainage are planned considering the outlet towards the entrance to facilitate easy connection with external storm water drainage system.

28.1.4 Road & Parking

1. The proposed internal roads are of sufficient width and adequate parking as per requirements along with pedestrian paved path 2. The proper signage system is adopted to make sure the smooth traffic movement

184 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT inside the market complex 3. The main access to the facility center is taken from at least 15mt wide road. 4. The proposed access to the facility shall connect with the existing access roads with a well-defined access to the development 5. No road shall be less than 6 meters in width of paved top 6. The secondary roads within the markets, where the movement of HMV is not required and the transportation can be done by LMV only, the proposed road widths are 4.5 M. 7. The pedestrian walkway 2.0 m wide is also provided from Main entrance to different blocks of markets. 8. Adequate parking spaces are provided for weigh-bridge, covered Platform, shops, Godown etc. 9. A centralized parking is proposed along with driver’s rest room, toilets and canteen 10. Every Building is proposed with an apron of paved area where the vehicle can park away from main road and loading/unloading can be done 11. Signage systems are proposed to clearly indicate Vehicular and pedestrian movement along with buildings, parking space and other utilities

28.1.5 aGreen Are

1. The green areas planned as centralized open space to provide access from all around which provide visual relief. 2. The extent of open space shall not be less than 10 percent of the total area of the facility 3. Conceptual Master Plans along with sectional drawings for 2 market complexes, one in each zone, have been provided based on the facilities proposed as per the specific requirements.

28.2 LINK INFRASTRUCTURE The proposals for the various locations have been framed considering the requirements of the specific location. The basic support infrastructure like roads, power, telecom, water supply, sewerage system, storm water drainage, solid waste management has been provisioned considering the planning norms and the specific business requirements. But the proposed market complexes with modern infrastructure facilities cannot function in isolation. Efforts have been made and possibility has been explored to propose self contained facilities where possible such as solid waste management and water supply and waste water disposal. With regards to the large quantum of agricultural waste expected to be generated composting centers have been proposed which may function even without the corresponding external solid waste collection and disposal arrangements. Irrespective of the standalone facilities planned the internal infrastructure has to be matched with adequate infrastructure outside the proposed complexes and linked by suitable means for smooth functioning as planned.

28.2.1 Approach and Accessibility

185 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 1. Approach and accessibility play a vital role in proper functioning of the proposed complexes. 2. There are expected a significant number of HMV and LMV traffic coming and going out to the markets along with pedestrian movement. 3. The approach roads to the market complexes are required be of sufficient width along with proper signage. 4. The main approach road should be of minimum 9m Width with proper turning radius to the Complex along with some buffer space between main road and Entrance Gate so that if required one or two HMV could wait for some time. 5. The external approach roads has been considered to be wide enough. A ‘slip road’ has to be proposed so that entry/exit to and from the markets do not lead to congestion of general traffic, as would be the case in the present condition. 6. Proper Signages are proposed and recommended regarding the Entry/Exits of Markets along with the approach lane to follow.

28.2.2 Linkages for Power, Water, Storm Water etc. A detailed study of the available infrastructure outside the proposed marketing complexes has not been undertaken in the scope of work of the present study. However, generally there is a need to augment the external infrastructure in all fields such as roads, water and waste water, storm water drainage, power and telecom etc. The basic infrastructure facilities are generally lacking even in bigger cities. For smaller locations it becomes all the more important that suitable basic infrastructure be provided which can integrate in itself the internal provisions at the proposed locations. For e.g. the storm water drain outside of the proposed location shall be adequate to take in the expected storm water flow from the market without causing water logging or flooding.

28.2.3 Design Considerations The proposals have been drafted considering the prudent engineering practices in provision of the various infrastructure as well building facilities. The proposals for 4 locations in Maharashtra have been formed in detail considering the requirements and provisioning of the required facilities. The master plans have been drawn and the cost estimates have been prepared accordingly. The cost estimates of the remaining facilities in Maharashtra have been prepared according to the requirements and prevalent costing norms as done for similar proposals. The major technical considerations are as follows:

Electricals Electrical services are one of the most important services of any complex. Various Electrical facilities for the building have been envisaged considering the usage of area, patterns of electrical load and relevant Indian Standards / Codes. Power supply for the complex shall be catered at 11 KV from the State Electricity Board and stepped down to 415 V using distribution transformers for further distribution. This report gives the brief design criterion proposed to be adopted on the various facilities of the

186 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Electrical System. The design shall be based on Indian Standards, IE rules, NBC and NEC, CPWD Specifications and all the statutory requirements shall be complied with.

Power Supply And Sub‐Station :

D.G. SETS: 1. Considering the chronic power shortage in the country it is essential to have alternative power source to meet electrical requirements under power failure / break down conditions. DG Sets of adequate capacity shall be provided to meet all the requirements of the building in non-availability of power grid 2. Considering 80% loading on DG Sets, 90% load of Cold storage various sizes of DG Sets with AMF facilities are proposed as an emergency power supply for the complex. 3. The Transformers and DG Sets shall be connected in parallel so that operational flexibility shall be available in case of break down in Transformer or DG Sets.

L.T. Panels: The LT Panels shall be provided with sufficient number of ACBs/ MCCBs, through which required number of feeders shall be catered for various purposes. The panel shall be in compartmentalized design and it shall be totally enclosed floor standing and cubical type, accessible from front preferably with cable entry from top/as per site condition. The bus bar of the panel shall be made of High Electrolytic Conductivity Aluminum strips. The transformer and the panel shall be connected through adequate sized 415 V, 3 phase, 4 wire cables. Power Correction System: 1. As per the condition of supply of Electricity Board, consumers are advised to improve and maintain the power factor of their installation 0.9 or above because of various advantages. Improvement in the power factor would affect savings in the energy bill. Also the life of individual apparatus can be increased considerably by high power factor. For the improvement of power factor, suitable size of capacitor panel banks shall be provided. The Capacitor Banks shall be a part of LT Panel. 2. Automatic power factor correction relay of reputed make shall be provided to sense the power factor of the system and switch on the capacitors depending on the system requirements. The power factor shall be maintained around 0.95 to 0.98 through this system. Lighting: 1. Lighting shall be designed according to the required illumination levels as per Indian Standard / NBC Code. Generally, energy efficient CFL light fixtures matching with the internal layout have been proposed for the each building. Special emphasis shall be given on low energy consumption light fittings especially in the Corridors and in Walk-ways where suitable make light fitting with compact fluorescent 26/18/14W lamps are proposed to be provided. Light fixtures shall be used with electronic ballast for energy savings. 2. Similarly, energy efficient CFL Lamps fitting shall be provided for External Lighting. All the light fittings shall be provided with energy saving devices. The final selection

187 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT of the light fittings shall be made in consultation with Architect / Client/ Consultant. 3. The number of light points and socket shall be based on the accepted norms usually followed for this type of Building. The Illumination levels or Lux levels of different areas have been based on the NBC Code and are as follows: S.No. Description Lux Level 1. Common Areas 250 – 350 lux 2. Office Areas 350 – 400 lux 3. Pump Rooms / Sub Station 200 lux 4. Parking Areas 70 – 100 lux 5. Lobbies / Corridors 200 lux 6. Staircase Landings 200 lux 7. Cold Storage 350 – 400 lux 8. Covered platform in Mandi Area 200 lux Cabling: All MV Power Cables provided for power distribution shall be armoured PVC sheathed and XLPE insulated Aluminium Conductor, 1.1 KV grade, conforming to IS:1554. Appropriate Screened Copper cables / wires shall be used for all special purposed and Communication Systems. Earthing System: Considering the hazardous nature of electrical energy, safety measures in using this energy is of paramount importance. Earthing System is one of such safety systems. It is proposed to provide effective Earthing System conforming to IS : 3043 – 1987. All non current carrying metal parts forming the Electrical System shall be connected to the Earthing System as per the requirements of Indian Electricity Rules and local Statutory requirements. The Earthing System shall be so designed that the resistance of the Earthing Network shall be less than 1.0 ohm at any point of the system. The Earthing System is proposed as follows: Sub - Station Equipments: a. Transformer Neutral Earthing Copper (600x 600 x 3.15mm) Plate Earthing b. Transformer Body Earthing G.I. (600 x 600 x 6mm) Plate Earthing c. H.T. Switch-Gear Earthing Copper (600 x 600 x 3.15mm) Plate Earthing d. D. G. Set Neutral Earthing Copper (600 x 600 x 3.15mm) Plate Earthing e, D.G. Set Body Earthing G.I. (600 x 600 x 6mm) Plate Earthing Panel Earthing: a. L.T. Panels Earthing G.I. Plate Earthing b. Distribution Boards Earthing PVC Insulated Copper wire with sub mains. c. Equipment Earthing G.I. Plate Earthing d. Lighting / Power Point Circuits 1.5/2/4.0/6.0 Sq mm PVC insulated Single Core Green Wire e. Laboratory Equipment/UPS/ Copper Plate Earthing

188 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT f Server/EPABX Earthing

28.2.4 Sanitary Installation, Water Supply and Fire Fighting Systems The objective of the design is to achieve the most efficient and high quality system to meet the required standards. It is therefore essential to spell out and understand the basic objectives of design of all the services. This would assist in the detailed engineering and preparation of final working drawings for execution. The sanitary engineering services covered in this project for which detailed engineering handled are :

Plumbing

 Sanitary fixtures, chromium plated fixtures and accessories.  Soil, waste and vent pipe systems.  Cold water supply.  Rainwater pipes and disposal ,Rain water harvesting.  External sewerage disposal including connection up to existing manhole.  Municipal water connection, storage tanks and overhead tanks.  Construction of tubewell, pumps and accessories.  Garden irrigation system.  Sewage treatment plant

Fire Protection System

1. External Fire hydrant system. 2. Under ground and overhead fire reserves. 3. Fire pumps and ancillaries. In the planning of all the above services following objectives have been kept in view. 1. Effective and efficient disposal of all wastes from the building quickly. 2. Prevention of back flow of waste waters from external sewer or other sources and minimizing the possibility of encroachment of rats, insects from main sewers or manholes by adequate trapping of all fixtures. 3. Easy access to all services for proper maintenance with adequate number of cleanouts, door bends and access points. 4. Protection of pipe lines from corrosion and accidental damage. 5. Prevention of pollution of surrounding environment. 6. Supply of water in adequate quantity and pressures in all areas on 24 hour basis. 7. Selection of materials and equipment of best indigenous makes requiring minimum maintenance and repairs. 8. Piping system to be so designed as to prevent, as far as possible and practical, any obstruction to normal movement of men and materials and be generally aesthetically pleasing.

189 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 9. Statutory requirements of all the services 10. All sanitary services shall be designed as per Indian Standard code of practice relevant to the service and the services are modified to suit local conditions, architectural and structural considerations of this particular project.

Soil, Waste And Vent Pipe Systems The system shall be designed on “TWO PIPE SYSTEM” as recommended in code of practice for soil and waste pipes above ground (IS: 5329 -1969).

External Sewerage Sewerage from the building will be collected by means of underground sewerage system and connected to the Sewage Treatment plant. Manholes would be provided at all junctions and turning points and generally not exceeding 30 mt. in distance. Material a. All soil, waste and vent pipes shall be CI spun Iron pipes with drip seal/lead joints. b. The waste pipes used for wash basins and sinks shall be GI /uPVC of designated class. c. Pipes used for external sewerage system shall be CILA pipe due to uneven and rocky soil.

Disposal All the rain water from the building roof and area around the building shall be connected separately taken up to open surface drain with grating and gully grating chambers and covered peripheral drains. These drains shall be further connected to rain water re-charge pits and the overflow shall be connected to the municipal storm water disposal system/Nallah. Material 1. Pipes used for rain water inside the building shall be uPVC 6kg/cm2 pipes with drip seal joints. 2. Pipes used for storm water drainage shall be RCC.

Water Supply System

a. Owing to shortage of Municipal water supply, it would be necessary to augment the same by providing tubewells within the site. b. Untreated tubewell water shall be utilized for garden supply. c. The estimated total population, requirement of water supply and the proposed storage capacity for the project is given in separate Annexures.

Potable Water (Non‐Flushing):

a. The water supply from City Water Supply (Municipal Main), Borewells & Truck fill point shall be brought to underground fire storage tank and overflow from fire storage tank shall be taken to raw water storage tank in order to

190 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT replenish the fire storage water. b. The water from Raw Water Storage Tank shall be pumped through dual media pressure sand filter, activated carbon filter Softener Cum brine tank & taken into underground Treated water storage tank (Soft).

Flushing Water System (Recycled from STP): Recycled water from Flushing cum Irrigation Water Storage Tank located at Sewage Treatment Plant (STP) shall be pumped through battery of two pumps (One working & one Standby) to over head Flushing Water Storage Tank.

Distribution System Water from the tubewell and Municipal supply are connected to a fire reserve. The overflow is collected in to raw water tank. Water from this raw water will then be passed through filter and polishing softener as required and stored in domestic treated water tank. The entire site is divided into two wings for easy running and maintenance.

Irrigation System The premises comprises of irrigable area such as planter, lawns etc, hydrant system is proposed as per Landscape/ plantation design. Source of Water: The irrigation water shall be made available from treated effluent of sewage treatment plant (STP).

Sewerage: Drainage system for soil & waste is based on the most efficient, functional design, minimum maintenance after installation and available side topography to minimize the excavation work in laying the pipes; two pipe system (soil and waste) is proposed to carry soil and waste separately from the building under gravity. Waste pipes are connected to manhole through gully trap and soil pipes are to be directly connected to the manhole. The main drainage is carried through a battery of manholes and finally discharged into Sewage Treatment Plant (STP).

Sewage Treatment Plant: Sewage Treatment Plant of capacity shall be provided in the final requirement of 80% domestic water. The Waste Water Treatment System will be treated using an extended aeration activated sludge type system consisting of following system:- Component – I [Pre Treatment]:  Screen Chambers  Collection cum Equalization Tank  Solids handling sewage transfer pumps.  Bypass pump from equalization tank to municipal sewe  Component – II [Secondary / Biological Treatment] :  Aeration Tank

191 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT  Clarifier Tank (Secondary settling tank)  Chlorine Contact Tank\  Chlorine Dosing System  Aerobic Sludge Digester cum Thickener Tank  Sludge Disposal Pump  Sludge Recirculation Pump  Component – III [Tertiary Treatment] :  Filter Feed/Backwash Pumps  Pressure Sand Filter  Activated Carbon Filter  Softener cum brine tank  Soft Water Storage Tank  Soft Water Transfer Pumps  Irrigation cum Flushing Tank  Irrigation Water Transfer pump  Flushing Water Transfer Pump.

Storm Water Drainage System : Storm water drainage systems will be designed based on a rainfall intensity of 70 mm per hour. Rainwater harvesting pit of size 3m dia x 3.5m effective depth shall be provided. Storm water drainage system will be provided for the building roof drainage and the site drainage. The Storm water will be collected by gravity through catch basin, storm water manhole and RCC pipe and finally discharge to the Rainwater Harvesting Pit. Overflow of rainwater harvesting pit shall be discharged to city storm water drain/storm water sump.

28.2.5 Fire Protection Measures

1 Type Of Risk 1.1. Since the project is mainly used as Mandi, the type of risk can be categorized as under NBC / TAC. 2. Proposals 2.1 It is proposed to have a total protection system best suited for this Project and also as per the directives of NBC/ TAC Fire Service. These shall include the following. a. External Fire Hydrant system b. Automatic pumping set for the systems. c. 2,00,000 ltrs underground fire reserve in one compartment accessible for hydrant systems. d. Fire fighting hand appliances of various categories to be located throughout the Campus. 3. Fire Reserve

192 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 3.1 It is proposed to have an underground storage tank of 2,00,000 ltrs, in one compartment exclusively for firefighting purposes. The tank is located in such a way that it is readily accessible to fire appliances. Necessary manholes shall be provided in this tank to enable the fire brigade to draw water from the tank in case of necessity. A three way fire service inlet shall be provided for the underground storage tank. 4. Source Of Water Supply a. For underground tank: From Municipal mains with additional supply from tubewells at site. 5. External Hydrant System 5.1 It is proposed to have External hydrant system throughout the Campus. Yard fire hydrant shall be provided on the main fire line The minimum outlet pressure at the top most hydrant would be 6.5 kg/sqcm. 5.2 The system would be permanently connected to the fire pump outlets by a common header of 200 mm dia. 5.3 External hydrants connected to the fire line have been proposed in the proposed complex.

28.3 COST ESTIMATES FOR IVCS IN MAHARASHTRA

28.3.1 NASIK IVC:

Land Development: Cost of land development includes boundary wall, internal roads, drainage system, parking facilities etc. The cost of development is taken as Rs 2.5 mn/Ha. It is based on the prevailing market norms and rates.

Buildings: The cost of proposed buildings of all spokes in Nasik IVC is given below: In Rupees Mn. Nasik Pimpal Maleg Sanga Srira China Vivr Kajg Dan IVC Facility Road gaon aon mner mpur val a aon ora IVC (Mn $) Warehouse 29.90 ‐ 5.98 ‐ ‐ ‐ ‐ ‐ ‐ 35.88 0.76 Cold Store‐ 5000 MT 21.60 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 21.60 0.46 Grape Packhouse‐ Cold Chain 19.20 19.20 19.20 ‐ ‐ ‐ ‐ ‐ ‐ 57.60 1.22 Banana Packhouse ‐ ‐ ‐ ‐ ‐ 8.10 8.10 8.10 8.10 32.40 0.69 Ripening Chamber 2.76 ‐ ‐ ‐ ‐ 2.76 2.76 2.76 2.76 13.80 0.29 Packshed‐ Ambient 3.00 3.00 ‐ 3.00 3.00 ‐ ‐ ‐ ‐ 12.00 0.25 Onion Store 14.04 3.51 ‐ 3.51 3.51 ‐ ‐ ‐ ‐ 24.57 0.52 Knowledge centre 3.60 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 3.60 0.08 Business 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70 24.30 0.52

193 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT centre Guest house 2.70 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 2.70 0.06

Misc. 4.40 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 20.40 0.43 Total Buildings 103.90 30.41 29.88 11.21 11.21 15.56 15.56 15.56 15.56 248.85 5.28 The above costs have been calculated based on the conceptual master plan and drawings prepared by industrial infrastructure and cold chain experts. The total construction areas required for various facilities in each spoke of the IVC and rates of construction are given below:

Nasik Pimpal Maleg Sanga Srira Chin Viv Kajg Dan Rate/ Facility Road gaon aon mner mpur aval ra aon ora Unit in Sq. m. Rs Warehouse 4,600 ‐ 920 ‐ ‐ ‐ ‐ ‐ ‐ 6,500 Cold Store‐5000 MT 2,700 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 8,000 Grape Packhouse‐ Cold Chain 2,400 2,400 2,400 ‐ ‐ ‐ ‐ ‐ ‐ 8,000

Banana 1,3 1,35 Packhouse ‐ ‐ ‐ ‐ ‐ 1,350 50 1,350 0 6,000 Ripening Chamber 540 ‐ ‐ ‐ ‐ 540 540 540 540 LS Packshed‐ Ambient 500 500 ‐ 500 500 ‐ ‐ ‐ ‐ 6,000 Onion Store 2,160 540 ‐ 540 540 ‐ ‐ ‐ ‐ 6,500 Guest House 300 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 9,000 Knowledge centre 400 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 9,000

Business Centre 300 300 300 300 300 300 300 300 300 9,000

Misc 550 250 250 250 250 250 250 250 250 8,000

Total Buildings 2,44 2,4 2,44 2,44 14,450 3,990 3,870 1,590 1,590 0 40 0 0

Miscellaneous Fixed Assets / Utilities The requirements of power and water have been estimated based on industry norms. The estimates have been prepared based on market rates and similar projects costing norms. The breakup of the estimated cost of the miscellaneous fixed assets and utilities at each spoke is provided below: Amounts in Rs millions Nasik Pimpal Male Sanga Sriram China Kajga Dan IVC IVC Facility Road gaon gaon mner pur val Vivra on ora Mn. Rs Mn. $ Power supply system 25.00 2.00 2.00 0.50 0.50 1.20 1.20 1.20 1.20 34.80 0.74 Water supply system 2.00 0.50 0.50 0.20 0.20 0.50 0.50 0.50 0.50 5.40 0.11 IT system 0.30 0.20 0.20 0.05 0.05 0.20 0.20 0.20 0.20 1.60 0.03 Furniture 0.10 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.50 0.01 Total Misc Fixed Assets 27.40 2.75 2.75 0.80 0.80 1.95 1.95 1.95 1.95 42.30 0.90

194 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 28.3.2 Amravati‐Aurangabad IVC The engineering cost estimates of Amravati-Aurangabad IVC, based on the specifications given earlier, are given below:

Land Development: Cost of land development includes boundary wall, internal roads, drainage system, parking facilities etc. The cost of development is taken as Rs 2.5 mn/Ha. It is based on the prevailing market norms and rates.

Buildings: The cost of proposed buildings of all spokes in Amravati-Aurangabadad IVC is given as below: In Rupees Mn. Facility Paithan Warud Anjangaon Akola Sangrampur Jalna IVC IVC(Mn $) Orange Packhouse ‐ 10.20 10.20 ‐ ‐ ‐ 20.40 0.43 Warehouse 5.98 5.98 5.98 14.95 5.98 ‐ 38.87 0.83 Banana Packhouse ‐ ‐ 8.10 ‐ 8.10 ‐ 16.20 0.34 Ripening Chamber ‐ ‐ 2.76 ‐ 2.76 ‐ 5.52 0.12 Mango Packhouse‐ Cold Chain 5.60 ‐ ‐ ‐ ‐ ‐ 5.60 0.12 Mango Packhouse‐ Ambient 3.60 ‐ ‐ ‐ ‐ ‐ 3.60 0.08 Packsheds‐ Ambient 3.00 ‐ ‐ 4.50 ‐ 3.00 10.50 0.22 Business Centre 2.70 2.70 2.70 2.70 2.70 2.70 16.20 0.34 Miscs 0.80 0.80 1.68 0.80 1.00 0.64 5.72 0.12 Total Buildings 21.68 19.68 31.42 22.95 20.54 6.34 122.61 2.60 The above costs have been calculated based on the conceptual master plan and drawings prepared by industrial infrastructure and cold chain experts. The total construction areas required for various facilities in each spoke of the IVC and rates of construction are given below: Facility Paithan Warud Anjangaon Akola Sangrampur Jalna Rate/ Sqm in Sq. m. Rs Orange Packhouse ‐ 1,700 1,700 ‐ ‐ ‐ 6,000 Warehouse 920 920 920 2,300 920 ‐ 6,500 Banana Packhouse ‐ ‐ 1,350 ‐ 1,350 ‐ 6,000 Ripening Chamber ‐ ‐ 540 ‐ 540 ‐ LS Mango Packhouse‐ Cold Chain 700 ‐ ‐ ‐ ‐ ‐ 8,000 Mango Packhouse‐ Ambient 600 ‐ ‐ ‐ ‐ ‐ 6,000 Packsheds‐Ambient 500 ‐ ‐ 750 ‐ 500 6,000 Business Centre 300 300 300 300 300 300 9,000 Miscs 100 100 210 100 125 80 8,000 Total Buildings 3,120 3,020 5,020 3,450 3,235 880

195 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Miscellaneous Fixed Assets / Utilities The requirements of power and water have been estimated based on industry norms. The estimates have been prepared based on market rates and similar projects costing norms. The breakup of the estimated cost of the miscellaneous fixed assets and utilities at each spoke is provided below: Amounts in Rs million

Paithan Warud Anjangaon Akola Sangrampur Jalna IVC Misc Fixed Assets Power supply system 1.20 0.50 1.50 0.50 1.20 0.20 5.10 Water supply system 0.50 0.15 0.50 0.15 0.50 0.10 1.90 IT system 0.20 0.10 0.20 0.10 0.20 0.05 0.85 Furniture 0.05 0.05 0.05 0.05 0.05 0.05 0.30 Total Misc Fixed Assets 1.95 0.80 2.25 0.80 1.95 0.40 8.15

196 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

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29 STAKEHOLDER CONSULTATIONS

During the course of the preparation of the Detailed Project Reports, various stakeholder consultations were carried out in both the states of Maharashtra and Bihar. Consultations with various stakeholders were conducted mainly during the phases II (during detailed field surveys and analysis and consultations were held mainly with farmers, traders, cold store/warehouse/packhouse owners and other intermediaries in the value chains) and III (which mainly consisted of stakeholders’ consultations with food processors, organized retailers, exporters, and others) of the study. During the field surveys, in-depth interviews and Focus Group Discussions (FGDs) with farmers, traders/wholesalers, cold store/warehouse/packhouse owners etc were held in most of the important locations of the value chains. The stakeholders were asked about the details of the value/supply chains of the identified crops in the regions, trade practices, constraints faced by them as crucial members of the chains, gaps and market dynamics. Through such meetings and discussions, validation of data was also done at all major locations along with identifications of major clusters in the regions. In case of the consultations with food processing and agri-business industries, exporters, organized retail chains, potential investors, government representatives, etc, interviews, group meetings and brain storming sessions were held in Delhi, Mumbai, Patna and some other major cities in the states of Maharashtra and Bihar.

29.1 IVCS IN MAHARASHTRA In case of Maharashtra, the focus of the project will be development of agricultural infrastructure with higher involvement of private sector. The IVCs in Maharashtra will be green-field projects with development of brand new infrastructure which would boost the agriculture sector growth in the state. The role of private players/investors will be very important and higher association of the private players is envisaged. Accordingly, due importance has been given to the private sector during the stakeholder consultations. The summary of the stakeholder consultations (per major stakeholder groups) in Maharashtra are given below:

29.1.1 Farmers Several interviews and FGDs were conducted in the course of the field surveys in all the selected districts of Maharashtra. Issues related to farming and trading practices, availability of primary processing facilities and post harvest infrastructure, marketing and other aspects of the value chains were discussed in details. Here also, both orchard owners/cultivators and farm owners/cultivators have been covered during the consultations to get an understanding of the value chain dynamics of fruits, vegetables and grains in the indentified regions. The Post Harvest Contractors (PHCs) were also consulted at different stages of the study with the objective of understanding their role in the value chain along with their modes of operations. Their relationship with the farmers and traders were also studied.

221 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The main concerned raised by the farmers and PHCs during those meetings and discussions are as follows: . Lack of irrigation and dependence on rains for cultivation . In case of perishables, high wastages/distress sale due to lack of post harvest infrastructure . Non-availability of quality tissue cultures leads to lower quality plant/produce . Lack of access to formal credit leads to dependency on traders/wholesalers/cold store owners which reduces the profit margin of the farmers in many cases due to high interest rates (many times which are hidden as lower than market rates offered to farmers, etc.) . Asymmetry in market intelligence about price and demand of produce in the markets which does not allow the farmers/PHCs to gain on temporal/locational arbitrage.

29.1.2 Traders/Wholesalers/Local processors/Cold Chain Owners Several in-depth interviews and meetings with traders/local processors/cold chain and packhouse owners were in the course of the study. Various aspects of the project were discussed with them and their views and opinion were received. The discussions provided a good understanding of the market perspective of the identified focus crops and existing trade practices. The current status of food processing sector, cold infrastructure and warehouses in the identified districts was also discussed. The main feedbacks received are as follows: . Many of the traders/wholesalers/processors are willing to invest in post harvest infrastructure such as sorting, grading and storage, ripening facilities, pack houses, etc provided there are good subsidies/government support . Non-availability of labour is a constraint faced by local processors in many parts of the identified districts . Limited knowledge about modern cold technologies available . Limited access to finance . Lack of awareness about different government schemes, subsidies, etc.

29.1.3 Industry Players Interviews and meetings with large food processors, organized retail chains, exporters, banks and agri-business houses were conducted for explaining the project and getting their feedback. Several pertaining issues were discussed such as issues related to utilization of existing facilities, experiences of conducting business in the sector, challenges faced and expectations from the project. The discussions helped in getting a detailed understanding of the potential investors and financers of the project. Also, detailed consultations were held with the potential private investors about their roles in the development in the project. The ownership, viability, operation and & management issues were discussed with them for considering in the project design and implementation framework. Some of the major issues which came up during the discussions are as follows:

222 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT . Requirement of a single window approval system for the entire state for procurement and storage . Allowing dovetailing of different appropriate schemes (both central and state schemes) in a project . Lack of awareness about available government assistance and incentives . Long gestation periods of projects in agri-sector . Upper cap on subsidies acts as a disincentive to the promoters for making large investments . Capacity building at the grass root level is required to reduce losses and for production of higher quality produces which would adhere by the specifications given by the procuring companies . Requirement of portable packhouses at the farm/collection centre level which would facilitate quick evacuation of the produces. The locations of the spokes should also be close to the farms. Some Major Stakeholder Consultations in Maharashtra:

29.2 STAKEHOLDERS’ MEETING AT MUMBAI A stakeholder consultation was conducted at Mumbai Cricket Club and Recreation Centre, BKC on 5th December, 2009. The participants of the meet included the following: . Representatives of the Department of Marketing and Cooperation, Government of Maharashtra . Representatives of Maharashtra State Agricultural Marketing Board . Food Processors Agri-business Companies . Organized Retail Chains . Infrastructure Developers and Supply Chain Companies . IL&FS Clusters representatives The discussion focused on policy related and other issues faced by the stakeholders and potential investors. Feedbacks from the stakeholders about the proposed interventions were also received during the meeting.

29.2.1 Suggestions from Stakeholders on Policy Issues: 1. Single unified license should be issued to corporate to operate in agri trade 2. Private markets should be allowed to set up collection centres 3. Private markets should be given parity with APMCs in terms of notified area etc. 4. Power cost for agro/food processing should be charged at agricultural rates and not at industrial rates, as it comprises of a huge portion of operational cost 5. Limits on storage quantity of agri produce should be waived 6. Single window approval for the entire state should be given for procurement and storage, which at present has to be taken at every Taluka level 7. Waiver of market fee on direct procurement from farmers

223 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 8. Subsidies should not be essentially credit linked 9. Information products should also be subsidized so that more information could be made available to farmers 10. An investor should be allowed to dovetailing of the schemes in one project and should be made eligible to get both central as well as state assistance 11. Upper cap on subsidies discourages investors for making large investments and hence should be removed 12. Information on available government assistance and incentives should be widely publicized 13. Investments in agri sector has relatively long gestation period and hence tax subsidies/holidays etc. are required

29.2.2 Suggestions on Proposed Interventions: 1. Credit should be made more easily accessible to the farmers so that they do not have to take credit from the traders, who in turn try to control the price of produce. 2. More on-farm facilities and farmer’s own retail centres should be promoted 3. Portable pack houses should be set up at farm level and produce packed at farm should come to spokes for storage or dispatch to consumption markets 4. Location of spokes should be at a minimum possible distance from the production areas to reduce losses 5. More investment should go into procurement infrastructure, which should be small scale and more in numbers 6. Education and awareness on pre-harvest activities is equally important particularly in crops like banana, as it determines the quality of the produce 7. Farmers should be trained in better pre-harvest and post harvest practices to cultivate good quality produce 8. More emphasis should be given on capacity building at grass root level 9. Developing long term relationship between farmer and the corporate is very important 10. An assessment of losses should be done at different levels in value chain and identification of areas of maximum loss as potential area for development 11. Spokes should be set up in partnership between farmers groups and corporate 12. Corporate should work on profit sharing model with farmers 13. Stakeholders, particularly farmers should be made aware and sensitized about the benefits of proposed interventions

29.3 STAKEHOLDER’S MEETING AT RAHEJA CENTRE POINT, MUMBAI A stakeholder consultation was conducted at Raheja Centre Point, Mumbai on 19th January, 2010. The participants of the meet included the following: . Organized Retail Chains

224 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT . Food Processors . Financial Institution . Representatives of Asian Development Bank (ADB) . IL&FS Clusters representatives The project was discussed and feedback of the stakeholders about the project and the sector in general were received; key issues are mentioned below: 1. Some unorganized retail chains have reduced their packhouses because of less demand of value added agri products (although demand for such products is increasing). 2. Large organized retailers are not willing invest in infrastructure at farm level/collection centres or even at spoke level. Instead they would prefer to have those facilities operated for them by private operators initially. They may make investments and take up operations in these kinds of facilities in future. 3. Large food processors are of the opinion that more incentives from the government is required for the sector. They also had a similar view as organized retailers about investment and operations of farm level/spoke level infrastructure. 4. The financial institutions stated that programs such AIDP give them a higher comfort level for lending to the projects. 5. Bigger players who own most of the facilities in the IVCs are preferable to FIs for lending instead of many small players owning individual facilities. 6. First Loss Default Guarantee (FLDG) offered to the banks would increase their comfort level for lending in the discussed projects

29.4 LIST OF POTENTIAL INVESTORS In AIDP model the potential investors may be the organized retail chain companies, 3PL companies and large food processors.. The lists of potential investors for Maharashtra are given below: The potential investors who have been contacted/ consulted during the AIDP study are given below:  Mr. Dnyandeo G Mahajan, President, Maha Banana  Mr. T T Pathrikar Secretary Mango Growers Association, Aurangabad  Mr. V Kiran Kumar, CEO HALCON, Nashik  Dr. J S Yadav, COO Premium Farm Fresh Produce Ltd.  Mr. Santosh Dadheech, Sr. Vice President NBHC Ltd.  Mr. Ajay Kumar Prusty, Director Frutech Agro Industries Pvt. Ltd.  Mr. Madhukar B Chobe, Director

225 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Akruti City Ltd.  Mr. Vinit Kumar, Chairman and Mr. Shyam Mahale Temptation Foods Ltd.  Mr. Arvind Jhamb, CEO Ruchi Infrastructure Ltd.  Mr. Rajnikant Rai, Executive Vice President (Operations) ITC Ltd. (Agri Business Division)  Mr. Deepak Mundra, Vice President Finance Jain Irrigation Systems Ltd.  Managing Director, Godrej Agrovet  Mr. Ashok Motiani, Managing Director Freshtrop Fruits Ltd.  Mr. Rajeev Bhanawat, Asst. Vice President Aditya Birla Retail Limited  Mr. Prem Saboo, CFO Reuter's Market Light  Mr. Pravin, Utsav Banana  Mr. A. Srinivasa Ramanujam, AVP - Operations  Adani Agrifresh Ltd.  Chairman, Pomegranate growers association (Nashik division)  MALTA Grape Growers Association

Other Contacts Apart from the above list, the organizations with whom IL&FS Clusters have been in touch for other projects such as Modern Terminal Market, Mega Food Park, etc and who may also considered as potential investors for the AIDP projects in both the states are:  Mr. A. Srinivasa Ramanujam, AVP - Operations Adani Agrifresh Ltd.  Mr. B.B. Pattanaik, Chairman & Managing Director Central Warehousing Corporation  Mr. M C Goyal, Chief Executive Officer Deepak Fertilisers & Petrochemicals Corp. Ltd.  Mr. Kishore Biyani, Chairman Future Group  Mr. Mayank Jalan, Managing Director Keventer Agro Ltd.  Sri Arvind Jhamb, CEO Ruchi Infrastructure Ltd  Mr. Vinit Kumar, Chairman Temptation Foods Ltd.  Mr. Arun Uppal, Head – New Businesses Hariyali Kisaan Bazaar  Mr. Mike Cockrell, Chief Merchandising Officer Bharti Wal-Mart Pvt. Ltd.

226 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT  Mr. Thomas Varghese, CEO Aditya Birla Centre  Mr. R. Sreeram, Vice President-Manufacturing Dabur India Ltd.  Mr. Shrijeet Mishra, Hindustan Unilever Ltd. Hindustan Unilever House  Mr. S Sivakumar, Chief Executive-Agri Businesses ITC Limited  Mr. Sumantra Banerjee, President Spencer’s Retail Ltd  Mr. Anil K Choudhary, Managing Director & CEO National Bulk Handling Corporation  Mr. Sanjeev Asthana, President & CE, Agri Business & Food Supply Chain Reliance Industries Limited  Dr. J. S. Yadav Premium Farm Fresh Produce Ltd.  Sri S K Jain LMJ International Limited  Mr. Vimal Mody, General Manager Usha Breco Realty Pvt. Ltd.

 Sri Sushil Kumar Agarwal, Director Haldiram’s Mega Food Parks Private Limited  Sri Raja Mehta Indiabulls Real Estate Limited  Mr. Vipin Jain, Vice President (Finance) Negolice India Ltd

 Mr. Makarand Khanolkar, Vice President Unity Infra Projects Limited  Mr. Avinash Rangnekar, Ace Agro Industries Private Limited  Mr. Malamma B Bidari, Chairman & Managing Director FOREMMS Industries Limited  Director Bengal Salarpuria Eden Infrastructure Development Company (P) Limited  Pantaloon Retail (India) Limited

 Ruchi Soya Industries Limited

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30 ASSESSMENT OF MARKET DEMAND

India is the world 4th largest economy on purchasing power parity basis. India is also the second fastest growing major economy in the world, with a GDP growth rate of 6.7 percent in 2008-09. India’s economic growth has accelerated significantly over the past two decades. Real average household disposable income has almost doubled since 1985. With rising income levels, household consumption has increased manifold with the emergence of a re- defined middle class. The country is on the brink of becoming an economic powerhouse and it is gaining huge attention from global players as an excellent investment destination. Indians with an ability to spend over US$ 30, 000 per annum on PPP basis account for around 3 percent of the country’s total population. With a population base of 1.07 billion, this segment amounts to 20 million people. High economic growth has led to increased disposable income for the booming Indian middle class, which is estimated to reach a size of 582 million from its current size of 50 million by 20151. Accordingly, the disposable incomes are set to rise at an average rate of 8.5 percent by 2015.2 Maharashtra is the largest economy in the country with a high per capita income of US $ 6213. It is also among the most industrialized states, which is coupled with availability of skilled manpower, enabling infrastructure and a strong institutional framework. Maharashtra is the second most populous state in the country with a population of 96.9 million4. It is also the second most urbanized state in the country, with 42 per cent of the people living in urban areas. Bihar, on the other hand, has a per capita income of US $ 1395, which is much below the national average of US $512. The total population of Bihar is 82.88 million. Unregistered units dominate the industrial sector of the state and the major industries are Tea and dairy.

30.1 ASSESSMENT OF FOOD MARKET IN INDIA The size of the Global Food Industry is estimated at around US $3.6 trillion and India accounts for less than 1.5 percent of the international food trade. India currently produces about 50 million MT of fruits, which is about 9 percent of the world’s total production of fruits and 90 million MT of vegetables, which accounts for 11 percent of the world’s total vegetable production. Despite its large size, only 6 percent of the processed foods are traded across India’s borders as compared to 16 percent of major bulk commodities. Hence there is huge scope for export of value added food products in the international market.

1 NACER Research 2 Ernst & Young Research, 2008 3 Data: 2004‐05 4 2001 census 5 IBEF

228 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The Indian food market in 2007 has been estimated at around US$ 200 billion6 and is slated to reach US$ 310 billion7 in 2015. Food products are the single largest component of household consumption expenditure. Food and beverages (including tobacco) accounts for one third of the household expenditure. A survey done by NCAER reveals that food and beverages accounts for 35 percent and 32 percent of household expenditure in mega cities and boomtowns. It is estimated that by 2025, food and beverages segment will still be the biggest category in terms of consumer spends, though its share would drop from existing 35-40% to 25%. Food and Grocery contributes to around 41 percent of private consumption expenditure and about 74 percent of total retail revenue. Broad category-wise expenditure for each category of cities is shown in the table below. It is evident from above that more than one third of the monthly household expenditure is on Food and beverages segment. There is also an increasing shift from price consideration to quality, branded and hygienic products. The number of working women, as a percentage of the total female population, has risen from 15 percent in Source: NCAER Research, 2008 1991 to close to 25 percent in 2005. This has resulted in growing disposable income, which in turn, leads to increasing spend on convenience food, value added food products and grocery items.

30.2 GROWTH DRIVERS OF VALUE ADDED FOOD PRODUCTS India possesses the advantage of having a large young population. It is estimated that around 35 percent of India’s population is under 14 years of age and more than 50 percent of the population is estimated to constitute the working age group. The large population of working age group forms a wide consumer base. Rapidly changing demographic profiles and increased disposable income are changing the face of Indian consumers. The swelling middle class is redefining the consuming pattern with a shift towards branded and value added food products. With the country’s income pyramid changing rapidly, a definite shift is observed from saving to spending attitude. Discretionary spending has seen 16 percent rise for the urban upper and middle classes and the number of high income households has grown by 20 percent year-on-

6 Food Processing: Market and opportunities by KPMG 7 McKinsey & Company

229 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT year since 1995-96.8 The self employed segment of the population has also grown significantly. Growth drivers for emerging markets of value added food products are summarized below: Food and grocery dominates total retail spend: While rural consumers spend around 53%9 of their total consumption expenditure on food, urban India spends 40% of their retail spend on food items thus offering huge opportunity for value added food products. Higher disposable income: High economic growth has led to increased disposable income for the Indian middle class, which is switching over to healthy and value added food products. It is estimated that disposable income is set to rise at an average rate of 8.5 % by 201510. Also, the middle class is estimated to reach a size of 582 million from its current size of 50 million by 201511. Shift in demographic profile: The median age of Indian population is 24 years and approximately 65% of Indian population is below 35 years of age. The large population of working age group forms a wider consumer base for food products. Emergence of organized food retail: It is estimated that the total food and grocery retail space will grow at a CAGR of 6% over 2006-2011, with the organized share likely to increase from less than 1% currently to 6-6.5%12. This will translate into more business opportunity for value added food products.

30.3 ASSESSMENT OF FOOD RETAIL INDUSTRY Traditionally, the Indian retail sector has been dominated by large number of small and medium sized retailers, who account for more than 95 percent of the total retail business. In categories like food & grocery, fresh fruits and vegetables, their share is as high as 98 percent. Over twelve million small and medium retail outlets exist in India, the highest across the world. More than eighty percent of them are run as family owned businesses and the exemplary mom-and-pop retail outlets constitute a major part of country’s retail store formats. Modern retailing in India is evolving rapidly, with consumer spending growing by unprecedented rates and with increasing number of domestic and global companies investing in this sector.

8 Ernst & Young Research, 2008 9 NSS 62nd round 10 E&Y Research, 2008 11 NCAER Research 12 Retail Edelweiss report, 2008

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43.8 2010-11 460.6

16.5 2006-07 Org. Retail 337.3 Total Retail

12.9 2005-06 311.7

0 50 100 150 200 250 300 350 400 450 500

Source: Data Monitor, 2007, Sales in US $ Billion, Exchange Rate: US $ 1: INR 41 The size of Indian retail Industry was estimated at US$ 385 billion13 in 2007–08. In 2006-07, the retail market size was US$ 337.3 billion. In 2007, organized retail stood at US$ 16.5 billion, implying a share of 4% of the total retail revenue. Organized retail revenues are expected to increase from US$ 12.9 billion in 2005-06 to more than US$ 43.8 billion by 2010-11. Today, top eight cities (four metros, Pune, Ahmedabad, Bangalore and Hyderabad) together account for almost 80 percent of the total organized retail. Food retail, dominated by around 5 million retail outlets in India, is currently estimated at US$ 160 billion. Within this, organized food retail grew from US$ 391 million in 2002 to US$ 1624 million in 2007 with a CAGR of about 33 percent. India tops the AT Kearney's annual Global Retail Development Index (GRDI) for the third consecutive year, maintaining its position as the most attractive market for retail investment. Furthermore, a report by Price Waterhouse Coopers foresees India and China to continue as the top sourcing hubs in retail and consumer sector in the coming years. Driven by the huge potential in the sector a number of large corporations, both domestic and global, have forayed in to the market recently. It includes Reliance, AV Birla, RPG, Bharti- Walmart, Future Group, Big Apple, Godrej, Heritage and Wadhan Group (Spinach) to name a few. A few more global players like TESCO, Carrefour and Landmark are also expected to enter in the market. The growth in organized retail sector has been Source: KPMG spearheaded by the food & beverages segment and they are also likely to see a higher growth rate in future. The figure below depicts the responses of retailers about the fastest growing retail segments in India. This clearly shows that food and grocery is by far the

13 IBEF

231 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT fastest growing segment in the Indian retail sector. India has one of the largest numbers of retail outlets in the world. Of the 12 million retail outlets, nearly 5 million sell food and related products. Nearly two third of the food retail outlets in India are located in rural areas, which is also being reflected in the graph below:

Figure: Category wise Distribution of Retail Outlets

Source: NSSO 5th round, KPMG and Cygnus Research

The retail sector in India is primarily characterized by different SKUs rather than different retail formats in operation. It is envisaged that modern retail will adapt and absorb some of the traditional retail formats in subsequent years. Also, with the rural retail constituting the largest share of total retail revenues, the existing players are now looking at rural markets to tap the opportunity. A few players like ITC Limited, Godrej and DSCL have already started the venture under the brand name of Choupal Sagaar, Aadhaar and Hariyali Kisaan Bazaar respectively.

30.4 MAJOR PLAYERS IN ORGANIZED FOOD AND GROCERY SEGMENT Major players in organized food and grocery segment are Pantaloon Retail, Reliance Retail, RPG, Aditya Birla Retail etc. None of the organized retailers have presence in Bihar. However, Maharashtra is one of the leading states in terms of growth of retail space. Besides Mumbai, organized retailers are also present in tier I and tier II cities of Maharashtra. The table below shows the food and grocery sales (2008) as well as no of stores of major players in organized retail segment:

Sl No. Name of retailer Food and grocery sales ($ million) No of stores 1. Pantaloon Retail 1593 456 2. Reliance Retail 432 688 3. RPG 427 420 4. Aditya Birla Retail 251 645 5. Dairy Farm 100 67 Source: IGD, excludes cash and carry formats

A brief profile of the major retailers is given below:  Pantaloon Retail (India) Limited: Pantaloon has established strong presence across multiple consumption categories in a bid to capture maximum consumer wallet share. It has widened its format offerings from a single format to over 15 formats, which captures almost 75% of the consumption basket. Food Bazar, Big Bazar and KB’s Fairprice are the various banners under which Pantaloon Retail operates in the food and grocery segment. Out of these three, Food Bazar mainly caters to fruit and vegetable, staples, dairy

232 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT products etc. Pantaloon often combines its Food Bazaar (food supermarket) and Big Bazaar (Grocery and other items) formats to create a hypermarket format.

Name of retailer Area in sqm No of stores Food Bazar 102,752 152 Big Bazar 380,695 149 KB’s Fairprice 17,980 155 Source: IGD  Reliance Retail: Reliance Retail is part of Reliance Industries Limited, which is one of the India’s largest conglomerates. It ventured into organized retailing in November 2006. Reliance Fresh (Supermarket) and Reliance Mart (Hypermarket) are the two banners under which reliance operates in retailing business. The company invested heavily to build a nationwide network of procurement centers, cold storages and distribution hubs to improve supply chain efficiency of perishables. In 2008, 678 stores of Reliance Fresh and 10 stores of Reliance Mart were operating in the country.  RPG: Spencer’s (Supermarket) and Spencer’s Hyper (Hypermarket) are the two formats of RPG group involved into food and grocery retailing. Around 60% items in a RPG store comprises of fresh and dry groceries. Around 370 stores of Spencer’s and 50 stores of Spencer’s Hyper are functional in the country.  Aditya Birla retail: It is part of Aditya Birla group. The company forayed into retailing business in 2006 via the acquisition of Trinethra Super Retail. more. for you and more. MEGASTORES are the two banners. more. for you is a superstore format and the other one is hypermarket format. Both of them together account for presence of around 645 stores in the country. Out of this, 639 stores are in superstore format. The company focuses on private labels with presence of around 350 labels in food and non-food category.

30.5 ASSESSMENT OF MAJOR CONSUMPTION MARKETS As mentioned earlier, the major consumption markets for fruits and vegetables grown in Bihar are Patna, neighbouring states of Jharkhand, Orissa and West Bengal. For certain fruit crops such as Litchi and Mango, the state has established linkages with major metros like New Delhi, Mumbai, Hyderabad, Bangalore, Lucknow and Nagpur. In case of Maharashtra, Mumbai itself is a huge consumption market for fresh fruits and vegetables. The table below shows the crop wise major consumption markets of fruits and vegetables grown in Maharashtra:

Sl No Fruits/Vegetables Major consumption markets 1. Pomegranate Delhi, Kolkata, Jaipur 2. Grapes Delhi, Kolkata, Hyderabad 3. Banana Delhi, Chandigarh, Amritsar, Lucknow 4. Tomato Delhi, Kolkata, Surat, Ahmedabad 5. Sweet lime Delhi, Jaipur 6 Kesar mango Delhi Orange Delhi, Kolkata, Bangalore Lemon Delhi

233 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT As evident from table above, Delhi, Kolkata and Mumbai are the major consumption markets for fresh fruit and vegetables grown in Maharashtra; however, in case of Bihar, Delhi, Kolkata and Patna are the major consumption markets. Azadpur APMC, which is located in Delhi, is one of the largest fresh produce wholesale markets in South East Asia Region. It is also an important distribution hub for various markets of North India such as Chandigarh, Jaipur and Jalandhar etc. It witnesses huge arrivals from various parts of country on a daily basis. Azadpur Mandi is spread over in an area of around 40 hectares, which includes both fruit and vegetable market yards. A detailed analysis of the above mentioned cities (Delhi, Kolkata, Mumbai and Patna) have been undertaken to assess the consumer demand. Various parameters such as demography, income and expenditure pattern, penetration of organized retail, economic indices of respective cities have been taken into account to understand the market demand of food products.

30.5.1 Delhi With a population base of 19.73 million and median age of 22.8 years, Delhi has a young population with a high propensity to consume. Around 15% of the female population is working, which means a higher number of double income families, which have higher income and propensity to spend.

Demography ‐ Delhi Population 19.73 million Median age 22.8 years Per cent of working women 14.7 % Per capita income of Delhi has been estimated to be Rs 43,155. Around 54% of the households generate income from monthly salaries and the average HH income is Rs 183,000, which is higher than any other metros except Mumbai. Distribution of Income in Delhi Per Capita Income Rs 43155 Per cent of salaried household (HH) 53.8 % Average HH income from salary in Rs ‘000 per annum 183 Per cent of business and professional HH 32.3 % Average HH income from business in Rs ‘000 per annum 299 Source: How India Earns, Spends and Saves, The Max New York Life‐ NCAER India Financial Protection Survey, 2007 (Estimated data for 2004‐05) As there is no detailed data on the market size (especially of the food and beverages segment) of different cities, hence market size has been estimated using data from different sources. In terms of growth of organized retail, Delhi has an estimated retail space of 6.5 million sq ft which shows that retail boom has come up in big way in Delhi among all the Indian cities. The average monthly per capita expenditure (MPCE) in Delhi is Rs 1803.8614. Out of this, Rs 673.73 is spent on food items i.e. around 37% of the consumer spending is on food products and around 6% is spent on perishables. Estimation of Market size of food products in Delhi Estimated retail space in million Sq ft15 6.5 million sq ft

14 NSS report (2006‐07)

234 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Unit retail space (Sq Ft/HH) 4 Annual expenditure on food in Rs billion Rs 159.5 billion Monthly per capita expenditure on food in Rs Rs 673.73 The table below shows the distribution of MPCE on broad category of food items. Per cent distribution of MPCE on Food items in Urban Delhi Cereals 7% Milk & milk products 10% Vegetables 5% Fresh fruits 1% Other food items 14% Total 37% Source: NSS report (2006‐07) For the purpose of estimating the market size of food in Delhi, estimation of the total annual expenditure on food items was done using data on per capita expenditures on food items. It was found that NCR16’s annual expenditure on food is about Rs. 159.5 billion. As 6 % of monthly per capita consumption expenditure (MPCE) is spent on fruits and vegetables, the estimated annual expenditure on fruits and vegetables in Delhi comes out to Rs 9.6 billion. This clearly shows that Delhi is a large consumer market of food products.

30.5.2 Mumbai The total population of Mumbai is 19.23 million and the median age of population is 25.7 years, which clearly shows that city has a relatively young population that falls in the working age group. Demography ‐ Mumbai Population 19.23 million Median age 25.7 years Per cent of working women 10.9 % Per capita income of Mumbai is Rs 40,768 and the monthly per capita consumption expenditure of urban Maharashtra is Rs 1673.48. Out of this, Rs 587.95 is spent on food items, which constitutes 35% of MPCE.

Distribution of Income in Mumbai Per Capita Income Rs 40,768 Per cent of salaried household (HH) 57.8% Average HH income from salary in Rs ‘000 per annum 205 Per cent of business and professional HH 31.7% Average HH income from business in Rs ‘000 / annum 204 Source: How India Earns, Spends and Saves, The Max New York Life‐ NCAER India Financial Protection Survey, 2007 (Estimated data for 2004‐05) Mumbai is leading the retail revolution in the country with an estimated retail space of 6.6 million sq ft. All the major food and grocery retailers of the country such as Pantaloon, Reliance and AV Birla are present in the city. The annual expenditure on food is around Rs 135.6 billion.

15 Images retail 2005 16 NCR means Delhi, Noida, Gaziabad, Gurgaon and Faridabad

235 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Estimation of Market size of food products in Mumbai Estimated retail space in million Sq ft 6.6 million sq ft Unit retail space (Sq Ft/HH) 1.4 Annual expenditure on food in Rs billion Rs 135.6 billion Monthly per capita expenditure on food in urban Maharashtra Rs 587.95 Source: DES, Govt of Maharashtra Out of 35% of MPCE spent on food products, cereals and milk products constitute 13% of the total consumer spending. Fresh fruits and vegetables constitute around 6% of MPCE, which is almost similar to Delhi. Per cent distribution of MPCE on Food items in Urban Maharashtra Cereals 7% Milk & milk products 6% Vegetables 4% Fresh fruits 2% Other items 16.% Total 35% The estimated annual expenditure on fresh fruits and vegetables in Mumbai comes to around Rs 8.1 billion. In comparison to Delhi, Mumbai is a smaller market for perishables.

30.5.3 Kolkata Kolkata is a major market of eastern India and a large market for fruits and vegetables of Bihar. The total population of the city is 13.1 million. Around 10.6% of the female population is working and hence contribute in household income. Demography ‐ Kolkata Population 13.1million Per cent of working women 10.6 % Per capita income of urban west Bengal has been estimated to be Rs 27,868 and the monthly per capita consumption expenditure of urban West Bengal is Rs 1371.26. Out of this, Rs 551.40 is spent on food items, which constitutes 40% of MPCE. Distribution of Income in Kolkata Per Capita Income Rs 27,868 Per cent of salaried household (HH) 37.7 % Average HH income from salary in Rs ‘000 per annum 135 Per cent of business and professional HH 41.6 % Average HH income from business in Rs ‘000 / annum 146 As per images retail report, Kolkata has an estimated retail space of 0.7 million sq ft. It is much less in comparison to Delhi and Mumbai. Estimation of Market size of food products in Kolkata Estimated retail space in million Sq ft 0.7 million sq ft Unit retail space (Sq Ft/HH) 0.4 Annual expenditure on food in Rs billion Rs 86.6 billion Monthly per capita expenditure on food in Rs Rs 551.40 Fresh fruits and vegetables constitute around 7% of MPCE. Per cent distribution of MPCE on Food items in Urban West Bengal Cereals 10% Milk & milk products 4% Vegetables 6% Fresh fruits 1% Other items 19% Total 40%

236 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The annual expenditure on food in Kolkata is around Rs 86.6 billion. Hence the annual expenditure on fresh fruits and vegetables in Kolkata comes to around Rs 6 billion. Though the market size is relatively less in comparison to Mumbai and Delhi markets, still if offers huge scope for fruits and vegetables grown in Bihar and Maharashtra.

30.5.4 Patna Patna is the largest town and capital of Bihar. Total population of the district is 47.18 Lakh as per 2001 census with an urban population of approximately 30 lakhs. Patna, being the capital of the state and the largest town, offers a big market for fresh vegetable and fruits. Per capita income of Patna is Rs 6958, which is highest in the state. As per NSS report 2006-07, monthly per capita expenditure of urban areas in Bihar is Rs 864.96, which is lowest in the country. Out of this, Rs 435.56 is spent on food items, which constitutes 50% of the total consumer spending. The share of vegetables and fruits in total consumer expenditure of urban consumers of Bihar is around 7.8%. On the basis of above facts and figures, the estimated annual market size for fresh fruits and vegetables in Patna (urban) is estimated to be 2.5 Lakh MT.

It can be assumed based on the overall assessment here that the market size of fruits and vegetables, as also milk, milk products and cereals, in the metro cities, is a growing one and has scope for greater absobtion from organised supply centres. Other large metros and tier two metro cities are also markets ripe for tapping, given the needed organisation at the supply side.

237 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

31 IMPACT ASSESSMENT

The proposed components in the program are designed to achieve accelerated investment in agriculture and to support related infrastructure, all along the Integrated Value Chains. The proposed interventions include: • Aggregation facilities • Sorting, grading, packaging • Storage (ambient and controlled temperature) • Value addition and market intelligence • Distribution facilities including logistics • Value chains for end-to-end linkages These have been envisaged to come together to have a range of impacts all along the value chain. The major direct benefits expected would be in terms of better price realization, with the benefit being transferred to the farmer as well, reduction in waste and employment generation (direct and indirect). Direct impacts accruing from the interventions are discussed in this section and are illustrated through selected examples. Envisaged price and margin related impacts are quantified for the illustrative examples, and would differ, based on produce, location and ultimate market. Overall project impacts are also discussed. Detailed social and environmental impact assessment studies are included in the annexure to this section and cover management strategies where such a need has been assessed.

31.1 INTEGRATED VALUE CHAIN: ENVISAGED IMPACTS Illustrative value chains have been included here to compare pre and post intervention scenarios and key impacts are discussed. Some impacts may be more universal over the different product value chains where some are more pronounced in particular chains. The key emerging impacts resulting from the proposed interventions are expected to include but not be limited to the following: . Shortening of the existing value chain through the reduced number of intermediaries thereby reducing the margins earlier appropriated at those levels . Systems, effeciencies and infrastructure (at spoke and hub, and transport related) to effectively reduce wastages up to more than 50% (in several cases) and ensure greater value realisation. This would also contribute to an overall reduction in moisture loss, thus minimising quality(and value) loss. . Farmers could eventually get up to 20% higher farm gate-prices resulting from the above cumulative impacts: shortening the value chain, fewer players, pre-harvest contractors replaced by spokes, improved infrastructure, reduced wastages and improved awareness and enhanced capacities/skills . Further along the value chain, reduced losses add to the margins at wholesale and retail levels and ensure better quality . Higher price realisation all along the value chain due to improved handling packaging and storing.

238 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 31.1.1 Illustrative Example: Pomegranate Value Chain Value chains for pomegranate both as it exists today and the proposed value chain, after the interventions have been shown below to highlight the impacts envisaged.

Pre‐intervention :

Consumer price

Retailer’s margin

Rs 80 Losse s Rs 11.5 Wholesaler’s margin

Transport Rs 8

Losses Rs 6

Rs 0.3 Marketing cess

Rs 3 Contractor’s margin Rs 60 (Wholesaler’s Price)

Com mission charges Rs 0.6

Transportation, loading, U/L, losses Rs 6 Grading, Packing RsLosses 5

Farmgate price Rs 2.3 Rs 50 (C ontractor’s Price)

Rs 1.5

Rs 35

Post intervention After the suggested interventions, pomegranate value chain will have reduced level of intermediaries. If we compare the existing and proposed value chains, there is a possibility of reducing wastages up to more than 50%. Since pomegranate has a hard outer rind, most of the Consumer’s Price

Losses Rs 75 Retailer’s Margin Rs 5 Hub level / Wholesaler’s Margin Rs 12 Transportation, Unloading expense at destination Rs 6 Spoke’s profit

Rs 2.5 Grading, Packing, Loading at Spoke

Rs 6.5 Farm gate price

Rs 1.5

Rs 42 Rs. 50 ex‐spoke price losses are on account of moisture loss during transit. Better packaging and faster evacuation will ensure reduction in moisture loss to a large extent. The new value chain of pomegranate after the proposed interventions will be as shown in the figure.

239 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT The new value chain can offer the farmers a 20% higher farm gate price for their produce on account of savings on mandi tax and commission agent’s fee and still can keep the ex-spoke price at Rs. 50, which is the trader’s price in the existing value chain. Reduced losses would indirectly add to the margins at wholesale and retail levels. If we keep the wholesaler and retailer price at same levels as the existing one, 5-10 % discounts can be offered to the consumer from the current price apart from delivering a better quality produce.

31.1.2 Illustrative Example: Grape Value Chain In the case of fresh grape too, the extant value chain is given below to help compare with the changed scenario after the interventions.

Pre‐intervention :

Consumer’s Price

Losses at Retail Level Rs 50.00 Retailer’s Margin Rs 2.00 Wholesaler’s Margin Rs 8.00 Market Fee @ 1.05% Rs 4.63 Trader’s Margin Rs 0.36 Commission @ 10% Rs 2.94 Transportation, Unloading at APMC Rs40 (Wholesaler’s Price) Rs 3.50 Grading, Packing, Loading C Rs 1.25 Farm gate price Rs 35 (Trader’s Price Rs 2.30

Rs 25

Post intervention As shown in the figure above vis a vis the existing value chain figure, the new value chain Consumer’s Price

Losses at Retail Level Rs 50.00 Retailer’s Margin Rs 1.00 Hub level / Wholesaler’s Margin Rs 8.00 Transportation, Unloading expense at destination Rs 4.63 Spoke’s profit Rs 1.25 Grading, Packing, Loading at Spoke Rs 3 Farm gate price

Rs 2

Rs 30 Rs. 35 ex‐spoke price

240 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT can offer the farmers a 20% higher farm gate price for their produce. This increased price to the farmer will be mainly on account of savings on mandi tax, commission agent’s fee and slightly reduced (10-15% lesser) grading packing charges due to greater efficiency. Pre- harvest contractors in the proposed value chain will be replaced by the spokes. These spokes would also have greater margins than the contractor due to the proposed backward linkages and capacity building of farmers for better farm practices and post harvest handling practices resulting in reduced losses. With these interventions, spokes would still be able to competitive and supply the produce at ex-spoke price of Rs. 35, which is the trader’s price in the existing chain. Spokes will supply either to the distribution hub or to the wholesalers in distant markets or directly to the organized retail chains. If the produce from spoke follows the distribution hub / wholesaler and retail route, consumer can get a better quality produce at same price. However, if the organized retail chains directly procure from the spokes, they will have an additional margin of Rs. 4.63 per kg of grape (wholesalers margin), which can be passed on fully or partly to the consumer to remain competitive. Since the new value chain is based on reduced levels of handling and faster evacuation mechanism, it is assumed that the losses at each level would be reduced to more than 50% and would add up to the margins at distributor level. The consumer would still get the produce within the same price with better quality. There will be no impact on export value chain or value chain for processing varieties of grape as these chains are already the shortest possible and have no intermediaries between the grape growers and exporters or wineries.

31.1.3 Illustrative Example: Banana Value Chain

The pre- Retailer’s margin Secondary intervention value transportation and Pre‐intervention ripening cost chain for banana in Wholesale Margin at Rs. 2.50 Nashik region is Azadpur Mandi Commission @4‐6% at Rs. 1.00 shown in the Azadpur Mandi Rs .. 1.50 Rs. 18.00 diagram. Wastages (Retailer’s Pr ice) * Rs.0.30 Labour and transportation Rs 2.50 Rs. 14.00 Commission of PH C @ 2% (Wholesaler’s Price) Rs 2.50 Farmer’s Price Rs 0.20

Rs 6.45

The diagram depicts the future value chain of banana after the implementation of the suggested interventions. The future value chain would include hub and spoke facilities as suggested in the earlier chapters. The proposed interventions would create higher value at all levels, reduce wastages and enhance of produce along the value chain. In this value chain the produce, after harvest, will be transported to the spoke where it will be sorted, de-handed, washed, treated with fungicide, graded and packed. The spoke will replace the Pre-harvest Contractor in the value chain. The spoke will supply either to the distribution hub or to the wholesalers in distant markets or directly to the organized retail chains. The interventions at the spoke would fetch a

241 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Post‐intervention

higher consumer price (about 35% higher) due to better quality and improved packaging. Also, proper handling and better packaging/transportation will reduce wastages by more than 50% and would be able to fetch better price in retail markets. The higher value realization would then is expected to be distributed among the different players in the value chain. The farmer will get a better price (more than 15% of the present price) and an assured market as the forward linkages of the spoke will ensure a steady demand.

31.1.4 Illustrative Example: Sweet lime Value Chain

Retailer’s Margin

Transportation

Wholesaler’s Margin Rs 3.603.60 Rs 0.20 Pre‐intervention Transportation losses @2% Rs 2.10 Packing charges Rs 0.32 Sorting and grading Rs. 23.00 (Retailer’s Price) Rs 0.50 PHC’s Margin Rs 0.08 Rs. 19.00 We ight loss@ 5% (Wholesaler’s Price)

Commission charges Rs 3.50 @ 10% in Delhi Rs 0.80 Unloading Rs 0.80

Rs 1.60 Transportation to Delhi Rs. 16.00 Rs 0.10 (PHC’s Price) Harvesting, loading

Farmer’s Price Rs 2.00

Rs 0.80

Rs 8.00 Compared with the existing value chain, the future value chain shows higher value realization at all levels, reduced wastages and better quality of produce along the value chain. In this value chain the produce, after harvest, will be transported to the spoke where it will be sorted, graded and packed. From there, the produce will either go to the organized retail chains or will be sent to wholesalers in distant markets. Pre-harvest contractors in the proposed value

242 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

Post intervention

chain will be replaced by the spokes. These spokes would also have greater margins than the contractor due to the proposed backward linkages and capacity building of farmers for better farm practices and post harvest handling practices resulting in reduced losses. The proper handling and better packaging/transportation will reduce wastages by more than 50% and would be able to fetch better price in retail markets. Thus, the higher value realization will increase the margins of each stakeholder of the value chain by at least 10% to 20%.

31.1.5 Illustrative Example: Mango Value Chain

Consumer Price

Pre‐intervention Retailer’s margin Losses Rs 40

Wholesaler’s margin Rs 6

Wholesaler’s expense Rs 4 Rs 3.5 Contractor’s margin Rs 3.5 Commission Wastage Rs 0.9 Rs 30 (Wholesaler’s Price) Harvesting, grading and packaging Rs 1.4

Farm gate price Rs 1.6 Rs 23 (Contractor’s Price) Rs 1.8

Rs 17 The diagram depicts the future value chain of Mango after the implementation of the suggested interventions. After the suggested interventions, mango value chain will a have reduced number of intermediaries. The future value chain has possibility of reducing wastages to more than 50%. Reduced losses would indirectly add to the margins at wholesale and retail levels. The new value chain can offer the farmers 20% higher farm gate price for their produce. In this value chain the produce, after harvest, will be transported to the spoke where it will be sorted,

243 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT graded and packed. The spoke will replace the present contractors in the value chain. From the spoke the produce will either go to the wholesalers or to the Hub for further distribution.

Consumer price

Post Intervention Retailer’s Margin Rs 45.00 Wholesaler’s margin

Transport Rs 5.00

Wastage Rs 3.00

Rs 0.8 Spoke Margin

Washing, sorting, grading, packing Rs 1.20 Hub’s Margin

Loading and transport to spoke Rs 5.00

Rs 5.00 Harvesting Rs 2.50

Farm gate price Rs 1.30 Organized retailer’s margin Rs 0.4 Transport to organized Retail at distant markets Rs 18.0 Rs 5.00

Rs 2.00

Some volume would also be sent directly to the organized retailers at distant markets. These spokes would also have greater margins than the contractor due to the proposed backward linkages and capacity building of farmers for better farm practices and post harvest handling practices resulting in reduced losses. Thus, the higher value realization will increase the margins of each stakeholder of the value chain by at least 10% to 30%.

31.2 KEY OVERALL IMPACTS In addition to the specific impacts discussed through the illustrative examples, the following are also envisaged, as spin-offs of the project and its direct benefits:

Farm level improvements It is envisaged that there is likely to be an increase in productivity as a result of adoption of better technology, facilitated by better monetary margins and, increased awareness of farmers through capacity building, as also through an improved understanding of the market demand. This will be aided by improvement in farm level infrastructure and improved farmer skill levels. The capacity building initiative will, under the project train 19,500 farmers on aspects relating to this project simultaneously putting into place systems to carry on the training process beyond the project period and forming linkages with relevant resource persons and groups.

244 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Market driven farming Over the years, farming is likely to become even more market-driven as stakeholders along the value chain get better integrated and farmers are more in tune with market demands. This will also lead to more diversification which is responsive to market demand. In turn, this will contribute to better price realisations for the farmer as well as players along the value chain.

Market level improvements: Improvements at market level are also envisaged along with improved systems and effeciencies. Even as farmers will have better negotiating powers to through the proposed system of spokes and collection centres, this will also induce more competition and have a spin-off effect on other markets in the wider region. This system would have helped in the creation of another channel for marketing agri-produce leading to a healthy competition and improvements in the sector.

Price discovery Connected to the aspect of market level improvements and greater responsiveness of farmers, it is the price discovery mechanism that will be the catalyst in bringing about greater transparency in information flow and transactions with improved systems, keeping the farmers better informed. This is an essential impact that will have a much larger spin off in terms of decision making, responsiveness and eventually overall effeciencies.

Institution building: This project is envisaged to contribute directly to institution building, starting with farmers groups and ultimately leading to producer companies which in turn lead to better market access and need-based improvements in the sector, greater stakeholder participation in the sector and development processes overall. Institution building has other ramifications as well which will lead to contractual or more formal agreements between players, in turn helping to form a stronger supply chain. Special women-farmer groups are also proposed for group formation and capacity building. With adequate support and response from stakeholders, this has the opportunity to be mainstreamed and come to represent them as an interest group. In the longer term, greater professionalization of the sector through its institutions will also lead to risk reduction on both sides- farmers and market end.

Contribution to exports Improved quality produce from the region over time will contribute to export- based on improvements in quantity and quality, again bringing greater value realisation.

Sector improvement The cumulative effect of the impacts discussed here is likely to catalyse investment in the agri-infrastructure sector over the longer term and make it more financially sustainable.

245 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Overall Economic Development Overall economic development better human development indicators are envisaged for the project area in the long run. As a result of the project, and as discussed in the section on economic analysis of the project, incremental economic benefits including savings from wastage reduction and employment generation have been estimated.

For the Nashik Integrated Value Chain, the estimated incremental benefit due to quality improvement is pegged at Rs 469.65 million per annum at 100% capacity utilization. The interventions in the IVC would help in reduction in wastage of about Rs 589.73 million per annum with annual saving of about 26500 MT of fruits, vegetables, grains, pulses etc. at 100% capacity utilization. Over 1500 persons are estimated to get direct full-time employment and the estimated income from this incremental employment will be about Rs 41.74 million.

In the Aurangabad- Amravati Integrated Value Chain, around 850 persons are envisaged to get full time employment at the prevailing wage rate, which, for labour is taken at the market rate of Rs 120 per day. The incremental benefit due to quality improvement is estimated to be Rs 357.62 million per annum at 100% capacity utilization of facilities.

31.3 OTHER IMPACT ASSESSMENTS The following impact assessment reports are annexed:

Environmental assessment and review framework

Social and poverty assessment and mitigation . Poverty and Social Assessment . Public consultation and participation framework . Resettlement framework with entitlement matrix

246 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

32 CAPACITY BUILDING

Capacity building inputs are envisaged to be an integral part of the implementation strategy for the Agri-business Infrastructure Development Investment Program in Maharashtra. As mentioned in the approach, an assessment of the need for building capacity and raising awareness levels regarding the issues involved were woven into the analysis stage at the grassroots and implementation levels. As a result, the details regarding these aspects emerge from this assessment and have been developed to the appropriate scale, keeping in mind their viability and appropriateness to the local context.

32.1 CAPACITY BUILDING: NEEDS ASSESSMENT

32.2 FARM/PRODUCTION CLUSTER LEVEL The need for building existing capacities at farm level, was brought out in the early stages of the value chain analysis of focus crops in the identified regions: Nashik region and Aurangabad-Amravati region. The weaknesses in the system included lack of proper aggregation, absence of efficient and scientific systems of farming. Small/medium holding sizes, traditional farming practises and lack of field level organisation were among the reasons identified for the weaknesses. In addition, several issues pertaining to lack of awareness at the level of the farm and production cluster, lack of farmer-organisation, no interventions to build soft/technical skills, limited or no exposure to new and efficient techniques and systems and other good practices etc.. The social assessment has flagged the problems faced by women farmers in particular. Given the interventions envisaged under AIDP, these gaps are required to be addressed for the successful implementation of the projects. The focus of this level of capacity building will address the following aspects: . Farmer organisation: This is the first step towards facilitating extension services at farm level; this may be undertaken by strengthening existing channels and putting into place alternate services. Capacity building of farmers will be the necessary first step for these and further interventions. Formation of farmer groups as Self Help Groups (including micro-finance activities) with special women’s groups is proposed. These groups will be further linked to various institutions and systems for further development and support activities. Group Leaders will be provided special trainings to become Trainers themselves, to ensure continuity and scaling up the activities, over the years. Farmer Groups may, over the years, become federated along the value chain to form producer companies. . Awareness building: Once the organisation is in place at the farmer level, awareness building activities will be undertaken to address all involved groups: farmers, functionaries from concerned government departments (state agri department, MSAMB) and institutions, traders, elected representatives (at PRI/ULB level). This

247 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT will include subjects like understanding the Integrated Value Chain approach, good farm-level practises, the Agri-infrastructure Development Project, institutional linkages and available schemes, aspects pertaining to environment, economics, and social issues including gender sensitisation. Exposure visits to good examples by selected groups and further dissemination of learnings will also be undertaken. . Resource strengthening: Identification of relevant resources for each production cluster and linking them is also included These proposed interventions are detailed in the following sub-section. Further to the ones proposed, other interventions may also be included as the project progresses: . Input and farm-machinery modernisation . Scientific management of resources (inputs) . Farm mechanisation as a process to link to the value chain to ensure improved productivity and value realisation. This will lead to increased farm-level incomes and also help farmers become more responsive to market needs

32.2.1 Capacity Building at Production cluster/farm‐level It is envisaged that this initiative, in its 4-5 years of running, will cover about 19,500 farmers (including focusing on women farmers as well), through the formation and support of Self Help Groups to spread awareness, build capacity and disseminate information. The number of farmers to be covered is based on an estimation that takes into account the following: . Average land holding size in the project districts . Reported productivity per unit of land (also, based on focus crops) . Designed capacity for the Integrated value chains and the associated hub and spokes Taking these into account, it was assessed that during the project implementation period (4-5 yrs) , about 19,500 farmers would be targeted to be covered for capacity building inputs. Based on this assessment, workable/viable sizes of SHGs and farmer groups have been estimated. It is also envisaged that in time and with experience, some of these groups would become more professional and may transform into producer companies or cooperatives. The train-the-trainer approach has also been included with the trainer being selected from within the farmer groups to ensure greater outreach, local inclusion and the training exercise being embedded in the area for continuity beyond the project implementation period. The outline is described below, along with envisaged costs. Training Input Focus Group Costs Rs '000 1 Formation of Farmer Farmers, organised into 14 spokes and 1 Hub: 15 x 10 5200 Groups farmer groups (SHGs) groups x 130 persons per grp = 19500 farmers Spl Women SHGs 150 groups in 6 months across both value chains 2 Farmer Group Training Group Leaders: 2 2leaders x 150 groups= 300 3000 leaders/group persons20 persons per session= 15 tr sessions Rs2000/day x 5 dys x 300 persons One more refresher training of 2 1500

248 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT days 3 Training of Trainers Key persons from 10 persons for 2 wks at NIRD/IRMA 1000 NGOs/Govt) 4 Awareness Program for 5o officers chosen from Use of multimedia awareness in 1000 dissemination of project areas only across first 6 months information regarding the state (from PRIs, the project and good ULBs, dist offices, state practises (across 3 yrs) agri dept, ‐ About Project MSAMB,)Representatives [Coordinate with dissemination of objectives from Farmer information from exposure visits‐ ‐Value chain approach associations, NGOs, see next point] - Agri‐bus supply chains cooperatives ‐Env issues Traders awareness - Social/gender sensitisation - Inst linkages, govt schemes, MFIs 5 Exposure visits by Selected farmers and 30 farmers +10 officers 6 locations 10000 identified stakeholder officers from applicable overseas over 3 yrs groups cluster 6 Resource strengthening Across clusters, as As required through trading of applicable experts/practitioners TOTAL (in Rs mn) 21.7

32.3 CAPACITY BUILDING AT HUB‐SPOKE LEVEL Even as the proposed capacity building initiative seeks to address farm level capacity building, it also includes another essential facet: technical training at the level of the proposed facilities. Indeed, without the appropriate capacity building inputs the program will not be able to realise its objectives.

32.3.1 Capacity Building at hub and spoke‐level Thorough training support, of a more technical nature, is envisaged at the facility level to handle the produce passing through and adhere to the strict quality standards demanded by the process, according to each produce type. The facility level training will start with preparation of training modules specific to each product type. The training will cater to different target groups, focussing more on skills development and exposure to working with new technologies, including material handling systems. It is envisaged that workers at the facilities will not only be trained once but will require to be trained periodically to keep up quality standards, update technologies, remain current and efficient. This applies more specifically to all players along the cold chain as it has highly specialised needs and standards, to maintain and deliver quality. Variations by product type will b addressed through the specialised and different training modules proposed.

The following table captures the details of the training support by product category, over a 3- 4yr period. It is assumed that the facilities will become functional in the second year.

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All Focus CropsNo of Days For one std spoke (daily) No of facilitiesNo Frequency of training (3 yr period) Costs (per person per Days of training of days day*) Grape 150 skilled and unskilled, 4 supervisors, 1 3 One full training followed by annual 8370000 manager per facility refresher/on demand 3 155 1395 3 27 Pomegranate 150 skilled and unskilled, 4 supervisors, 1 1 One full training followed by annual 2790000 manager per facility refresher/on demand 3 155 465 3 9 Banana 164 workers, 4 supervisors, 1 manager per 6 One full training followed by annual 42588000 facility refresher 7 169 7098 3 126 Onion 3 persons, 1 supervisor, 1 manager Aggregation pt 4 One full training 640000 per spoke, 8 spokes

2 5 320 1 16 Kesar mango 30 workers, 4 supervisors, 1 manager per 1 One full training followed by annual 1050000 facility refresher/on demand 5 35 175 3 15 Multi product (processing) Only in the case of processing facilities being as req Equipment specific training set up Training days 386000 193 Module prep 3000000 TOTAL (in Rs mn) 58.824

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32.4 CAPACITY BUILDING COVERAGE Through the formed farmer groups and facilities set up, the following aspects are envisaged to be covered, in terms of issues over the project period, across the entire integrated value chain.

Capacity Building Input Focus Group 1 Product aggregation and pre‐sorting Farmer, unskilled worker 2 Product loading –unloading, transfer to facility Farmer, unskilled worker, (at farm and aggregation level) 3 Receipt, sorting, grading (QA/QC) Facility level‐ Unskilled labour, skilled labour, supervisor, manager 4 Packaging Facility level‐ skilled labour‐‐(packaging team), supervisor, manager 5 Cold Chain Operations: operations, resource Facility level‐ skilled labour‐‐(packaging team), optimisation‐energy management, decision‐making on supervisor, manager product flow, demand‐side link, 6 Compliances‐ HACCP,EHS, other regulatory Facility and logistics teams‐ all levels, as compliances applicable 7 Logistics (transport, ventilation) Transport team Supply chain management‐ tracking, optimisation Managers/owners 8 Warehouse‐ compliances and std operation, stacking Supervisor, manager stowage and ventilation systems, material management 9 Traceability issues along value chain‐eg. EuroGAP, All along value chain

32.5 IMPLEMENTATION ARRANGEMENTS The proposed capacity building initiative may be undertaken at the State level in Maharashtra to cover both Integrated Value Chains: Nashik and Aurangabad-Amravati, by the PMU. The PMU may have a separate cell internally to focus on Capacity Building. This cell may: . outsource this aspect, based on competitive selection of a qualified entity, with relevant experience and expertise-- this may be an institute or NGO . identify and appoint internally, through the relevant government department, a cell to undertake the tasks.

32.6 SUMMARY FINANCIALS FOR MAHARASHTRA MAHARASHTRA Training Coverage Cost (Rs mn) Soft Skills and awareness Farmers, officers, NGOs, Cooperatives and 21.70 training Farmer organisations Product Specific (at spoke Employees, supervisors and managers at Spokes 58.82 and hub level) and Hubs (at Aggregation pt level for Onion) Training Module Lump sum Rs3mn for module prep. Training Preparation and Trainer days 193@Rs 2000 per day fee TOTAL (In Rs mn) 80.52

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33 POLICY AND REGULATORY ASPECTS

33.1 ISSUES RELATING TO POLICY‐ AGRI‐BUSINESS INFRASTRUCTURE Investments in agri-business marketing infrastructure in the country continue to be public sector driven, and have resulted in a large network of markets created across the country. New developments have not kept pace with the rate of growth in production of agricultural commodities, especially perishables like horticulture and floricultural commodities. As a result, most of these markets do not have adequate infrastructure provision, capacities and capabilities to handle perishables. The lack of appropriate post-harvest management facilities including storage and effective evacuation mechanism- well developed and organized distribution The Task Force on Cold Chain systems; this has negated the advantages gained in development in India notes that “high wastages occur due to a multi‐layered production resulting in high wastage of fresh produce marketing channel, lack of infrastructure, in India. Wastage is estimated to be around 35-40 per absence of suitable cold stores and cent of the production equivalent to Rs 350-400 billion associated logistics as well as the lack of in value terms. an organized distribution system. These are further aggravated by the poor road The lack of private investment in agribusiness connectivity and lack of proper storage, infrastructure and post harvest handling infrastructure handling and transportation between are due to several reasons, but significant among these production areas and consumption is existing policies and regulatory frameworks for centres located far‐off from each other”. agricultural marketing. This is long standing legacy is set to change slowly as in recent years, the government has noted these drawbacks and taken steps to bring about positive changes. These are discussed later in this section.

33.1.1 Regulatory Issues In addition to the overarching policy, specific regulatory issues affecting the development of agri-business and post harvest infrastructure in the country are outlined below:

Low Level of Government Financial Assistance for Development of Agribusiness Infrastructure Multiple schemes exist under various departments and ministries which support the development of agribusiness infrastructure in the country (Details in Annexure). The Ministry of Agriculture provides for financial assistance in the form of back-ended credit linked subsidy for establishment if packhouses, cold storages, Controlled Atmosphere Storage, refrigerated vans, mobile processing units, wholesale markets, rural markets, functional infrastructure for collection and grading etc., through the schemes of the NHM, NHB, DMI and APEDA for export related infrastructure. However, the levels of assistance and calculation of project cost needs thorough revamping. The Working Group of the Planning Commission (agricultural marketing infrastructure for the XI Plan) has observed “that though the various schemes differ in-terms of scale of subsidy, mode of administration, and channel of fund flow, most of the schemes are back

252 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT ended subsidy schemes and are credit linked with 25 percent grant”. The Working Group further mentions that agriculture being a disadvantaged area for private investment, (as has been observed in practice), for promoting infrastructure in this sector, the scale of grant/incentives has to be much more attractive. Business in agriculture is risky due to small holdings, resource-poor farmers, technological backwardness, weather dependence, and the dispersed nature of raw-material sourcing. To provide adequate protection for meeting these risk factors, the incentives for investment have to be much more attractive in this sector. The present level of subsidy of 25 percent covers primarily the interest cost and hardly subsidizes the capital cost of the project, even though the incentive is called “capital subsidy”. If an enterprise has set up a project of Rs 1 million, he is eligible for Rs 0.25 million back-ended subsidy which exactly equals the interest cost. There is virtually no capital subsidy.”

Multiplicity of taxes Indirect Taxes Multiple taxes affect all aspects of marketing – starting from the levy of VAT (which even today varies among states) on even basic agriculture produce or elements of minimal value addition like rudimentary milling etc, Central Sales Tax, entry tax, octroi, purchase tax, excise tax etc. if further value addition including processing is undertaken. It is also ironic that in most of the states, while there is exemption or no VAT levied on liquor, large number of food items continue to be taxed at varying categories of rates of 1%, 4% and 12.5% (mainly on processed and packaged food products). With the recent rulings of the many high courts that entry tax levied by states are not constitutional, it still continues to be in effect in many states thereby reducing the competitiveness of the industry. Direct Taxes Unlike other infrastructure sectors, investments in agribusiness/post harvest infrastructure are not considered as “Infrastructure” and hence no incentives are provided under the Income Tax Act.

Essential Commodities Act, Stock Order etc. The Essential Commodities Act (ECA) 1955 was put in place after India’s Independence to control production, supply and distribution of essential agricultural commodities and to ensure availability of food products. In the current context of liberalizations, controlling the movement of products by licensing of dealers, limits on stocks and control on movements only hamper the growth of the agricultural sector and curtails promotion of food processing industries.

Fragmentation and Licensing The vast Indian market is broken up into smaller local /regional markets resulting in high costs involved in transporting agricultural commodities and processed food from one part of the country to another. Secondly, even within the states, a trader /operator has to take multiple licenses for operating in more than one APMC regulated markets, which is a deterrent and in many cases acts like a trade/entry barrier.

253 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT Convergence of Operations and Schemes: A World Bank study has found that multiple government agencies are involved in the agricultural marketing system. Functions and schemes overlap significantly. To quote the study “at least 39 central government agencies promote agricultural marketing development, either broadly or with respect to specific commodities. Most of these agencies offer investment grants to the private sector, but weak coordination o f these efforts prevents greater synergies in development impact and in some instances leads to duplication. For example, three government ministries offer grants to invest in cold storage facilities; each grant scheme has different terms and conditions. Clearly, these schemes should be rationalized. Greater coordination should be fostered among the agencies that implement them to promote greater consistency, minimize duplication, more effectively track the level of support, and document the impact of these investments.

Administered Prices The country has administered prices for the major food grains including cereals, oilseeds, cotton and sugarcane. These at times severely limit the private investors. Apart from these, the National Horticulture Mission has provision for buy back intervention for the state governments which can put the private players at a disadvantage.

33.1.2 Credit While Agriculture has been classified by the Government as priority sector for lending, investments in agribusiness remain a grey area. Given the intensive capital nature of some of the investments particularly in cold chain infrastructure, availability of credit, particularly for greenfield projects or for first generation investors become a stumbling block many a times. Secondly availability of venture capital funds in the country for agriculture and agribusiness investments is almost non-existent.

33.1.3 Technology Induction While some efforts have been made by the APMC markets to induct mechanised equipments for sorting, grading etc, the technology in use needs a revisit. Similar is the case with storages – both ambient and controlled environment. A Study by Directorate of Marketing & Inspection (DMI), GoI mentions that only two percent of the cold storages had PUF insulation and about 18 percent of the cold storages offered deep freeze facilities. Very few cold stores (about 9 percent) had some mechanized handling systems. About 54 per cent of cold storages offered manual grading facilities. Negligible cold storages had advanced facilities like humidity control or controlled atmosphere. Only a few cold store units in the consumption centres with capacities in the range of 2,000 to 4,000 MT have installed modified and controlled atmosphere systems The structure of the presently applicable schemes to such infrastructure have promoted traditional technologies and not the modern technologies that are better suited to the needs and cover connected functions and operations.

254 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 33.1.4 Capacity Building At the current levels of operations itself, there is shortage of skilled manpower at various levels right from the farm to processing. A survey by FICCI on estimating the skill shortage in Indian Industry, estimates that shortage of refrigeration mechanics, electricians and fitters exists to the tune of 65%. In addition, shortage of agricultural scientists exists to the tune of 60% and shortage of food safety professionals exists to the tune of 70%17. There are no specialized institutes for R&D and for imparting specialized skills in bakery and confectionery. Besides CFTRI, there are very few institutions, which provide qualified manpower for food processing sector. Similar is the case at the farm level. There is pressing need to undertake precision farming and train farmers in harvest and post harvest management of crops, especially perishable. The extension delivery mechanism is traditional and fully driven by the government. Considering the large number of small and marginal farmers in the production chain, attention paid to human resource development including development of grass root level institutions with a view to mainstreaming these farmers has received less attention. The public extension delivery system was never market oriented allowing private sector to play any significant role. Govt policies/schemes do not provide adequate assistance to support this essential aspect to operationalise new technology use through private initiatives. Private investors are also reluctant to invest in capacity building on their own.

33.2 RECENT POLICY INITIATIVES TAKEN BY THE GOVERNMENT Policymakers in India have taken cognizance of the changing requirement of agricultural business infrastructure as well as the importance of well-functioning markets to agricultural growth, food security, and broad-based rural development. In this regard, the Prime Minister of India, Dr. Manmohan Singh, noted during the Agriculture Summit 2005 in New Delhi that “an important commitment of the government is to integrate the domestic market to all goods and services. The time has come for us to consider the entire country as a common or single market for agricultural products. We have to systematically remove all controls and restrictions.”18 Recognising the need, there have been several policy changes that have taken place in the country, even though much needs to be still done. The Government has developed a model APMC Act 2003 and is vigorously promoting it. The modifications allow the direct marketing, establishment of private markets, single license for operating in the entire state, contract farming etc. even though there are still limitations that will need to be overcome. However, it is understood that these are the first steps and will evolve with time and experience gained from implementation. Some additional initiatives that have been taken up are:

17 Source: FICCI Industry Survey 18 India: Taking Agriculture to the Market – World Bank 255 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT . Removal of restrictions on investments in bulk handling and storage by domestic and foreign investors (up to 100%). . Repeal of the Cold Storage Order, 1980 (promulgated under Section 3 of the Essential Commodity Act 1995) with a view to remove administrative control in licensing, rent control and requisitioning cold store space. However, the Government of West Bengal has not yet amended it and the Government of Uttar Pradesh has partially amended the same. . In 2002, GoI lifted licensing requirements, stocking limits and movement restrictions for wheat, paddy/ rice, coarse grains, edible oilseeds, edible oils and removed restrictions on access to credit under the selective credit control policy. . Enactment of plant variety protection legislation protecting intellectual property rights with respect to crop research and development . Removal of ban on future trading of 54 commodities in 2003. . Liberalised norms for Foreign Direct Investment (FDI) through automatic route by including agriculture and allied activities like horticulture, and setting up infrastructure such as cold storage and warehousing facilities

33.2.1 lState Leve APMC Agriculture marketing, till recently was governed by the Agriculture Produce Marketing Committee (Act), 1963 enacted by different states. There are 2,170 Agricultural Produce Marketing Committees (APMCs) at present in the country with about 7,500 markets being regulated under the respective State APMC Acts. This was enacted to facilitate the establishment of an efficient system of buying and selling of agricultural commodities as well as regulate trade practices detrimental to farmers’ interest. The basic objective of setting up of network of physical markets was to ensure farmers obtaining fair and reasonable price for their produce by creating environment in markets for fair play of supply and demand forces, regulate market practices and attain transparency in transactions. Under this Act, a state was divided in various marketing zones and declared as a market area wherein the markets are managed by the Market Committees constituted by the State Governments. Under the Act, once a particular area is declared a market area and falls under the jurisdiction of a Market Committee, no person or agency is allowed freely to carry on wholesale marketing activities. However, due to the State monopoly, no private markets and large scale supply chains could come up in the past and these regulated markets typically suffered from inadequate infrastructure and trade practices inimical to farmers’ interest. The monopoly of Government regulated wholesale markets has prevented development of a competitive marketing system in the country, providing no help to farmers in direct marketing, organizing retailing, a smooth raw material supply to agro-processing industries and adoption of innovative marketing system and technologies.

33.3 INITIATIVES TAKEN TO PROMOTE AGRIBUSINESS INVESTMENT IN MAHARASHTRA The following are some initiatives taken up by Maharashtra in the agri-business area:

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33.3.1 Amendment to APMC Act The Maharashtra Govt has amended the Maharashtra Agricultural Produce Marketing (Regulation) Act 1963 in 2005. While regulation of markets including licensing continues to remain an integral function of the state under the amended Act, it has several enabling provisions such as: . Allowing direct marketing - direct marketing licence holder shall pay the market fee as per section 31 to the Maharashtra State Agricultural Marketing Board. License fee for direct marketing in the state as a whole is Rs 50,000 per year and for operating in division is Rs 15,000 per year. Direct marketing license holder cannot operate a private market or farm-consumer market . Establishment of private market - Private market cannot be operated in marketing area of Bombay APMC. In other places the private market has to be located at a minimum of 10 km from main market and 5 km from sub market yard. The new Private market has to be spread over a minimum of 10 acres in district areas with a minimum investment of Rs 5 crore and 5 acres with a minimum investment of Rs 2 crore in other places. License fee to operate a private market is Rs 50,000 in district area and Rs 25,000 in other places; Bank Guarantee of Rs 2 million and Rs 0.5 million have to be provided respectively for these locations. . Farmer market – can be established but over a minimum of 1 acre of land with minimum investment Rs 1 million. The annual license fee for operating such markets is Rs 10,000 and the operator has to provide a Bank Guarantee of Rs 100,000. However, there is restriction in the sale of produce by individual farmers in these markets with a maximum of 10 kg per day in case of fruits and vegetables and 50 kg per day for food grains. . Single License for operating in the state – The amendment allows for single license to operate in more markets than one. However, in actual practice, there are still lot of hurdles and permission to be taken to operate in each of the markets. . The amendment exempts the payment of market fee in case produce is procured directly from farmers in case of exports or used for processing. . The direct marketer or private market developer/operate has in addition to the license fee pay market supervision fee to the State Government.

33.3.2 Grapes Processing Industry Policy, 2001 . Declaration as a Preferential Area: The state has declared the winery industry as preferential area to avail easy loans from financial institutions like NABARD. . Declaration as a Small Scale Industry: . Concessions in Excise Duty: For those wine industries whose production has been started before 19th September, 2001, the excise duty will be charged at the rate of 50 per cent of the production 257 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT expenditure incurred by such units instead of present 100 per cent rate. For those wine industries whose production has been started or would be started on or after 19th September, 2001, the excise duty will be charged at the rate of 25 per cent of the production expenditure incurred by such units. Such concessions will be admissible for period of 5 years. . Concessions in Sales Tax The state is working towards getting wine manufactured in the country to get a concessional rate of Sales Tax. . Exemption from Excise Duty The state has provided 100% exemption from payment of excise duty to wines manufactured in the state . Wine Sales License Fee: Exemption for 10 years on wine sale license fee (Rs 5,000 per year)

33.3.3 Package Scheme of Incentives, 2007 Covers cold storage and agro industries . New projects to be eligible for Industrial Promotion Subsidy (IPS). Payment of IPS every year will be equal to 25% of any Relevant Taxes paid by the eligible unit to the State or to any of its departments or agencies as under

Taluka / Area Ceiling as % of Fixed Capital Investment Number of years Classification Micro & Small Medium Micro & Small Medium Manufacturing Manufacturing Manufacturing Manufacturing Enterprises Enterprises / LSI Enterprises Enterprises / LSI A ‐ ‐ ‐ ‐ B 20 ‐ 6 ‐ C 30 20 7 5 D 40 25 8 6 D+ 50 30 9 7 No Industry 60 35 10 8 District . Units under expansion will get 75% of benefits eligible for new units as above . Zero VAT Units also eligible for getting employment based incentive as proposed for low HDI districts in the form of 75% reimbursement of expenditure on account of contribution towards Employees State Insurance (ESI) and Employees Provident Fund (EPF) Scheme for a period of 5 years However the quantum of incentives for these units will be limited to 20%, 30%, 40%, 50%, 60% of FCI in “B”, “C”, “D”, “D+”, No Industry District respectively. . Exemption from Electricity Duty - Eligible new units in C, D, and D+ areas and No- Industry District(s) will be exempted from payment of Electricity Duty for a period of 15 years . Waiver of Stamp Duty- New as well as units undertaking Expansion/ Diversification will be exempted from payment of Stamp duty up to 31st March 2011 in “C, D, D+ Talukas and No Industry Districts. However, in A and B areas, stamp duty exemption would be available as given below: o BT and IT units in public Parks : 100%

258 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT o BT and IT units in private Parks : 75% o Mega Projects : 50% . Refund of Octroi / Entry Tax in lieu of Octroi - An eligible unit, after it goes into commercial production, will be entitled to refund of Octroi duty / Entry Tax (in lieu of Octroi), account based cess or other levy charged instead of or in lieu of Octroi payable and paid to the local authority on import of all items required by the eligible unit. This incentive will be admissible in the form of a grant restricted to 100% of the admissible fixed capital investment of the eligible unit for a period 5 / 7 / 9/ 12 years respectively in the B / C / D / D+ areas. In respect of No Industry District areas, however, the period will be 15 years. . Strengthening the Micro, Small and Medium Manufacturing Enterprises to promote quality competitiveness, research and development and technology upgradation: o 5% subsidy on capital equipment for technology up gradation subject to maximum of Rs.2.5 million o 50% subsidy on the expenses incurred for quality certification limited to Rs.100,000. o 25% subsidy on cleaner production measures limited to Rs.500,000. o 50% subsidy on the expenses incurred for patent registration limited to Rs. 5 Lakh . Special Incentives for Units coming up in the low Human Development Index Districts:- New units setting up facilities in notified districts (Annexure-II) and employing at least 75% local persons as defined in the Employment of Local Persons Policy will be offered 75% reimbursement of expenditure on account of contribution towards Employees State Insurance (ESI) and Employees Provident Fund (EPF) Scheme for a period of 5 years. However these benefits will be limited to 25% of FCI.

33.3.4 Others . Subsidy for constructing onion storage @ 25% of the project cost estimated at Rs 6,000 per MT conforming to the specifications laid by the MSAMB . Subsidy for erecting grain handling unit - subsidy of 10 %of the cost of the machine or Rs 200,000 whichever in less to the beneficiary APMC . Subsidy @ 25 % of the total project cost with maximum limit of Rs 250,000 per project for constructing cold storage with a capacity of 100MT. . Subsidy for putting up stall at fruit festivals to cooperative societies/APMC/SHGs @ Rs 1000/- for stalls in grade 1 cities and Rs 700/- per stall in other cities and towns.

259 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 33.4 EXISTING SCHEMES PERTAINING TO AGRI‐BUSINESS INFRASTRUCTURE

33.4.1 Impact of Schemes on Development of Agribusiness Infrastructure Nearly all the currently operational schemes do not promote convergence. Firstly, this has resulted in investors or infrastructure developers not being able to take advantage of dovetailing/convergence of scheme funds and provisions. Second, the quantum of assistance and the level of assistance (in terms of percentage and project cost) do not reflect the current prices and need. For example, the project cost of cold stores taken by all the schemes of the Ministry of Agriculture are based on the cost of the projects around 1999 or 2001 and for the creation of RCC infrastructure with glass wool insulation and the like, not in accordance with more recent developments like PUF panels thereby restricting the induction/adoption of advancements in technology. Third, the administered prices or the provision for market intervention within the state’s ambit of functioning further restricts actual players and promotes intermediation. Fourth, the schemes actually support the fragmentation of the value chain as they support one or the other individual components and not the complete chain. Fifth, most of the Schemes do not promote creation of backward linkages in terms of development of grassroots institution framework by private investors as also don not support the investor undertaking market driven farming. The level of assistance (in terms of % of project cost) has been captured well by the Working Group of the Planning Commission (agricultural marketing infrastructure for the XI Plan). However, nearly two thirds of the eleventh plan period has already passed and no developments have taken place (Except 1-2 schemes of the Ministry of Food Processing Industries)

33.5 POLICY INITIATIVES CRITICAL TO SUCCESSFUL IMPLEMENTATION OF AIDP

33.5.1 Applying the Integrated Value Chain approach The limited and inadequate facilities of existing markets are major constraints to efficient operations in terms of agri-business infrastructure and services. However, fragmented and component wise development (as observed from past experiences) are not going to be effective. Efforts over the longer term, however, have to be framed within a holistic agricultural market development strategy integrating all components and elements. The current initiative promotes the Integrated Value Chain approach for Agri-business infrastructure and services. This approach is envisaged to address the discussed infirmities and create awareness along the chain on the value erosion due to different actions taken at different points of supply chain. It is also expected that the support to be provided under the proposed project, will address the presently low level of assistance available and attract larger investments. This will allow improving the operations and facilities and address the criticality of ensuring that more resources are used to improve agribusiness infrastructure development and link farm to the market effectively.

260 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 33.5.2 Suggested Policy Interventions In the context of Integrated value chains and the existing issues in this area, the following set of suggestions are presented for consideration and coordinated action towards the operational climate for the project:  Single uniform license to enable procurement in any district or market without hindrance or , single unified license for buying, procuring, selling of inputs, storage, and processing of all agriculture commodities for the State as whole be introduced.  Abolition of mandi market fees charged by APMCs on private market developers and investors  Relaxation of restriction on storage  Including agri infrastructure legible for viability gap funding  Investment in agri infrastructure to be considered for tax exemptions – Investment in agri business infrastructure to be accorded 100% depreciation in first year similar to that for cold storages to be carried forward for at least three years of operations

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34 IMPLEMENTATION FRAME WORK

34.1 PROPOSED MODELS UNDER PUBLIC‐PRIVATE PARTNERSHIP

34.1.1 Approach to Public–Private Partnership (PPP) in India

“The approach to PPPs must remain firmly grounded in principles which ensure that PPPs are formulated and executed in public interest with a view to achieving additional capacity and delivery of public services at reasonable cost. These partnerships must ensure the supplementing of scarce public resources for investment in infrastructure sectors, while improving efficiencies and reducing costs. As noted in the Approach to the Eleventh Plan, PPPs must aim at bringing private resources into public projects, not public resources into private projects.” ‐11th Five Year Plan (2007‐12), Volume I, Planning Commission, Government of India After the unprecedented success of the 10th Five Year Plan, which achieved average annual growth rate of 7.7 per cent, the growth target for 11th Five Year Plan has been further enhanced to 9 per cent with acceleration projected to reach 10 per cent by the end of the Plan. To achieve these growth targets, it is believed that India needs to step up its infrastructure investments from the present level of around 5 per cent to about 8 per cent of GDP which may amount to almost USD 400 billion of investments. While acknowledging the dominant role of the public sector in building infrastructure, the 11th Plan also appreciates limitations of the public sector in mobilizing the total requisite resources. The share of the private sector in infrastructure investment is, therefore, projected to rise substantially from about 20% estimated in the Tenth Plan to around 30% in the Eleventh Plan. It has, therefore, suggested attracting private investment through “appropriate forms” of public private partnerships to meet the overall investment requirements.

34.1.2 Experience of PPP in India PPP approach in India, as elsewhere in the world, has been guided by the belief that it not only brings much needed financial resources from private sector but also ensures greater efficiency in provision of public services. The database of PPP in India, prepared by Department of Economic Affairs, Ministry of Finance, reveals that as on November 15, 2009, there have been Ene rgy Others 5% 2% around 450 PPP projects in focus sectors where a T ourism contract has been awarded and projects are under 6% Por ts implementation/near implementation. The total project 10% cost is estimated to be about Rs. 225,000 Crore or USD

48 billion. Roads Urban Dev 61% The road sector clearly dominates PPP experience in 16% India and accounts for about 60 per cent of total number of PPP projects so far. Other significant sectors, in terms Number of PPP Projects in India – of numbers, are urban development (16 per cent), ports Sector‐ wise distribution (10 per cent), tourism (6 per cent) and energy (5 per cent).

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In terms of value, though, while road remains leading Energy Others 2% sector, accounting for 45 per cent of total value of projects, 8% Airports port and airport sectors are next accounting for 30 per cent 9% and 9 per cent of total value of PPP projects in the country Roads so far. 45% Further, Karnataka, Andhra Pradesh and Rajasthan are Ports leading states and National Highway Authority of India is 29% the leading central agency involved in PPP projects in the Urban Dev country. Finally, in terms of main types of PPP contracts, 7% almost all contracts have been of the BOT/BOOT type Value of PPP Projects in India – (either toll or annuity payment models) or close variants. Sector‐ wise distribution A study of World Bank regarding experience of developing countries reveals that Telecom (54 per cent) and Electricity (23 per cent) together account for more than 75 per cent of investment commitments to infrastructure projects with private participation. Also, cumulative investment in PPP Water treatment Water utilities Seaports Com bined water plants 2% projects near/under 4% and electricity Roads 1% utilities Railways 8% Electricity implementation in India at around 2% 23% 0% Airports 3% USD 48 billion accounts for Natural gas merely 5 % of investment 3% commitments in such projects in Telecoms developing countries during 2000- 54% 2008. Of course, it may not be entirely fair to compare investment “commitments” to projects near/under implementation where contract has already been awarded. More so, as PPP projects have truly gained momentum in India only during last 4-5 years. Total investment commitments to infrastructure projects with private participation in developing countries, by subsector, 2000–2008 : USD 843.3 billion (2008 USD) This is also corroborated by another set of data which has put India at 2nd position behind Brazil amongst top 10 countries by investment commitments in infrastructure with private sector participation. In fact, India accounted for as much as USD 110.2 billion (13.1 per cent) of such investment commitments, marginally behind Brazil which attracted USD 111.9 billion.

34.1.3 PPP in Agribusiness Infrastructure: AIDP has envisaged PPP model for implementation of proposed integrated value chains. The key rationale for introduction of PPP model in infrastructure projects has been a combination of private sector efficiency and public budget constraint. It is being argued similarly here that scale of investment needs for agribusiness infrastructure are too huge to be adequately met by public sector alone. Moreover, it is agreed that most of the projects in agribusiness suffer from large inefficiencies and a PPP structure may therefore bring in much needed efficiency in both construction and operation ofproposed agribusiness infrastructure. However, the proposed financial structure for AIDP would be one of the first such efforts in the country to create Agribusiness infrastructure under PPP model. As can be seen from sector-wise distribution of PPP projects in the country, Agribusiness has not yet been covered as a sector under PPP projects under/near implementation. To be sure, this would be true of PPP experience worldwide too as this model has been preferred mostly for creation of public

263 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT utilities and basic infrastructure, specially for projects which involve large scale upfront investments even as natural ownership of assets may lie with the Government.

34.1.4 pViability Ga Funding Scheme (VGF) It was earlier envisaged to provide funding to proposed projects for integrated value chains under Viability Gap Funding Scheme. The financial assistance available under VGF of Ministry of Finance, Government of India is normally in the form of a capital grant at the stage of project construction. The financial assistance is equivalent to the lowest bid for capital subsidy, but subject to a maximum of 20 per cent of the total project cost. In addition, the sponsoring Ministry/ State Government/ statutory entity may propose to provide assistance up to a further 20 per cent of the total project cost. To be eligible for consideration under VGF, a project needs to be a PPP project and should meet the following criteria: 1. The PPP project has to be implemented, i.e. developed, financed, constructed, maintained and operated for the project term by a private sector company to be selected by the Government or a statutory entity through a transparent and open competitive bidding process. 2. The criterion for bidding shall be the amount of viability gap funding required by the private sector company for implementing the project where all other parameters are comparable. 3. The PPP project should be from one of the following sectors: Roads and bridges, railways, seaports, airports, inland waterways, power, urban transport, water supply, sewerage, solid waste management and other physical infrastructure in urban areas, infrastructure projects in Special Economic Zones, international convention centers and other tourism infrastructure projects. However, it has been provided that the Empowered Committee may, with approval of the Finance Minister, add or delete sectors/sub-sectors from the aforesaid list. 4. The project should provide a service against payment of a pre-determined tariff or user charge. 5. The concerned sponsoring entity has to certify with reasons the following: The tariff /user charge cannot be increased to eliminate or reduce the viability gap of the PPP project. The project term cannot be increased for reducing the viability gap. The capital costs are reasonable and are based on standards and specifications normally applicable to such projects where the capital cost cannot be further restricted for reducing the viability gap. 6. Finally, the Scheme will apply only if the contract/concession is awarded in favour of a private sector company in which 51 percent or more of the subscribed and paid up equity is owned and controlled by a private entity.

264 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 34.2 CHALLENGES OF VGF MODEL FOR AGRIBUSINESS INFRASTRUCTURE UNDER AIDP

34.2.1 Under VGF, ownership of project assets has to remain with the Government To satisfy this core condition of VGF, land would need to be arranged by the concerned state governments. In case of AIDP, this would require a relatively large parcel of land (say, around 25-30 acres) to be provided for building Hubs and smaller parcels of land (say, around 5-10 acres) to be provided for setting up various Spokes of each Integrated Value Chain. Also, such land need to be at locations suitable for setting up such facilities in terms of basic infrastructure and market connectivity. The detailed field surveys done in Maharashtra for proposed value chains have brought out difficulties in this regard. There are no such land parcels available with the Government of Maharashtra which can be offered for proposed value chains. The State Government representatives have also expressed their inability to provide land for setting up these value chains and have clearly advised their preference for a model which allows private entrepreneurs to bring in their own land for the projects. However, such an arrangement may not then quality the projects for positioning under VGF.

34.2.2 Private sector is given a contract/concession for the project term to recover its investments It may be appreciated here that typically PPP projects like roads, ports, airports etc. provide certain captive market to interested developers and therefore may not require large efforts at market development. In fact, many PPP facilities evolve as monopolies which ensure certain traffic (market) to private sector bidder selected for building and operating these facilities. In case of roads and bridges under PPP, most of these projects have little competition and get assured traffic. In case of modernisation of airports under PPP in India, no new or existing airport is permitted by Government of India to be developed as, or improved or upgraded into, an International/Domestic Airport within an aerial distance of 150 kilometers of the Airport before the twenty-fifth anniversary of the airport opening date. Thus, the project operators in all these cases are assured a captive market and “market risk” to a large extent is taken care of under PPP model. The only market risk in such cases is accuracy of traffic projections. This may though not be applicable to proposed integrated value chains under AIDP. The facilities created under these projects, though need based, would require to compete with similar existing and future facilities both in the public and private sector. Considering the effort/investment required in building forward and backward linkages for proposed projects, the condition of transferring ownership of the projects back to the government/sponsoring entitymay discourage promoters/private enterprises from bidding for these projects under VGF.

265 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 34.2.3 User charges need to be determined before implementation of the project This would be another challenge for integrated value chain projects. User charges need to be determined in advance for projecting “viability gap” for these projects, which may be a difficult exercise in agribusiness projects. This is due to greater market uncertainties in this sector. While user-charges at the level of Hubs (large storage, trading and value added facilities) may be possible to be determined, this may not be practical at the level of Spokes (Agri-business centres) considering the range and scale of services. Moreover, any private enterprise operating in dynamic market conditions needs to have flexibility in pricing its services. The absence of such flexibility may come in the way of success of these projects. Thus, the above requirements of VGF viz. state ownership of land, transfer of assets, pre- determination of tariff may come in the way of smooth implementation of the integrated value chain projects. These requirements would be mostly alien to agribusiness entrepreneurs in the country and may not therefore attract sufficient interest from private investors. Moreover, as mentioned above, even in case of investor interest, it would be extremely difficult to ensure compliance of the IVC projects with eligibility conditions of VGF.

34.2.4 Need for a flexible PPP structure for AIDP The above challenges, however, may be met by providing the required flexibility in project structure. It needs to be appreciated that the PPP offers a range of options and is much more than a BOT model. The PPP options range from concessions and joint ventures to service contracts and O&M contracts. In fact, service contracts and O&M contracts are considered to be first steps in involving private sector as these may be implemented quickly. In a sector like Agribusiness, where PPP models have not been tried earlier, flexibility in choosing an appropriate model may be essential to success of the program.

34.2.5 TBOT vs BO –Annuity models BOT model has got two main approaches to handle traffic/market risk. Under the toll-based Build-Operate-Transfer (BOT) projects, traffic/market risk is borne by the private operators. Under this model, capital subsidy may be provided to selected bidder for meeting the projected “viability gap” during construction phase. An important variant of this approach is “shadow tolling”, wherein private partners do not collect tolls from the road users but are exposed totraffic risks, as they are paid on the basis of the volume of actual traffic. This model has been found attractive due to provision of subsidy during construction phase. In fact, as mentioned earlier, VGF which is the main scheme providing government support to PPP projects has provision for providing capital subsidy normally during construction phase. On the other hand, the private bidder remains exposed to traffic/market risk under this model which may make it unattractive for projects which are seen to have large market risks. Under BOT- Annuity Model though, the sponsoring entity (government or its agency) absorbs the traffic risk and the private operator is paid for making the specified level of road service available regardless of the extent of traffic, these are also known as “availability- based” projects. This model has thus been found acceptable for NHAI projects for highways which assures private operators regular “annuity” payments over project period. Of course, in this case, private operators may need to arrange for large capital funds for completing the project which has its own cost implications.

266 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 34.2.6 SPV Model Large sized and complex PPP projects are often developed through an SPV route, wherein a project SPV is incorporated and it takes the responsibilities of acquiring land and other statutory and environmental clearances. The SPV – along with the project – is then bid out through a transparent process. There are other variants possible of this model which may though vary from traditional PPP approach. For example, it may be envisaged to invite private operators for participation in the equity structure of the SPV along with the government agency. The equity being offered to private operator may be either majority share (51 % or more) or minority share (49 % or less), depending on the nature of the project and decision of the concerned government agency in this regard. The selected private operator shall also be given responsibility of O&M of the project under this model.

34.3 PREFERRED OPERATIONAL MODEL FOR AIDP It may be noted here that the draft Detailed Project Report had given three operational models as options for project implementation. It would be useful to mention suggested options once again. Option 1 assumed entire value chain to be funded under existing guidelines of Viability Gap Funding Scheme which therefore assumed a BOT model with maximum 40 % of project cost as grant support, as mentioned above. Option 2 suggested unbundling of value chain components in such a manner that some components (in particular “Hubs” ) may be eligible for funding by VGF even as rest of the components would be required to be funded by other grant support schemes like NHM, RKVY etc. Finally, Option 3 provided for a separate scheme to be launched by state governments (particularly by Government of Maharashtra) which would provide for maximum 40 % of the project cost as grant support to private entrepreneurs setting up value chain projects. The provision of alternative options revolved around a major concern: Whether State ownership of assets and thus provision of land by the government should be a pre-requisite for PPP approach as suggested by BOT Model It also emanated from the uncertainty surrounding the willingness and ability for state governments to provide suitable land for the value chain projects. All the above models were discussed in detail and it was finally decided to recommend an operational model which would adhere to the essentials of PPP approach in terms of public ownership of proposed agribusiness infrastructure so as to ensure benefits to all stakeholders in a transparent manner. The model selected for implementation of AIDP is based on a series of discussions with representatives of Asian Development Bank, Department of Economic Affairs, Government of India and State Governments of Bihar and Maharashtra. The recommended model requires the concerned state governments to provide land for Hub and Spokes so that project meets the requirement of ownership by a government or statutory entity. Thus, a large land parcel close to a large market centre which is owned by government needs to be identified for creating the Hub (Distribution Centre). Further, smaller land

267 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT parcels, close to producing areas, which are owned by government, may need to be identified for setting up various spokes (Agri Business Centres etc.) for the Hub. Based on availability of land, proposals would be invited from investors for creating infrastructure along the value chain at these project sites on Build--Operate-Transfer model. The recommended concession period under this model is 20 years. While the essential operational structure of the model remain same for both Bihar and Maharashtra, it has been recommended that project grant support available may be different in case of these two states. Thus, minimum equity contribution required from a private operator, as percentage of project cost,may be 30 % in case of Maharashtra compared to 10 % in case of Bihar. This has been recommended based largely on two counts. First, as argued earlier, too, Maharashtra and Bihar are atdifferent stages of development process at present and therefore it is believed that in Maharashtra, potential bidders may be willing to put in larger equity contributions considering larger market size. Second, while projects in Bihar would require renovation of erstwhile market yards and rather limited value chain infrastructure, those in Maharashtra would be entirely value add infrastructure providing greater revenue options for a private operator. However, as the private operators would be selected through a bidding process, actual project grant required maydepend on the response of the potential bidders. The salient points of the selected operational model are as follows: 1. A state promoted mother Special Purpose Vehicle (SPV) would be the main implementing agency for the project which would facilitate core infrastructure convergence and provisioning for the IVC. The mother SPV will be 100% owned by the state government and will channel the funds for the IVC investments to the private sector developer and for the link infrastructure to the government departments as needed. 2. This government-led mother SPV would act as the concessioning authority and will invite bids from private developers to design, construct, operate and maintain (O&M) the IVCs and will contract them on Build-Operate-Transfer [BOT] basis at value chain level. 3. AIDP will be designed as a State level scheme. ADB funds can be used for the development of link infrastructure deemed necessary for the success of the IVC project, for meeting the need for public funding as capital expenditure through the private sector for the IVC project and also for the grant component to be disbursed as viability gap funding (which is not to be treated as subsidy in view of the fact that it is a grant to the project to build infrastructure that will be transferred back to the government after the concession period is over, as per the BOT model). 4. The IVC will include mandatory infrastructure, i.e. the basic (such as internal roads, power and water supply system, waste management etc.) and Agribusiness (such as trading platforms and shops, CA chambers, warehouses etc. ) infrastructure within the project sites as suggested in Detailed Project Reports (DPRs). On top of the mandatory infrastructure, the private developer can also invest in more commercial/add on infrastructure using its own funds as applicable on a case by case, subject to approval by the state government. The link infrastructure, also part of the program, would include linking public services such as bulk water, power and connecting external roads from the existing supply points to the market yards, as needed. 268 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 5. The works for link infrastructure would though not be a precondition for the IVC investments to start but they could be run in parallel. 6. The private developer will invest at least 10% of the total project cost of the mandatory components of the IVC in Bihar which would be 30% in case of Maharashtra. 7. The grant for the IVC mandatory infrastructure will be released to the private developer into installments based on the achievement of predefined milestones. The grant will be the bidding parameter, while the technical parameters will be the eligibility parameters. 8. The concession period could be increased up to 20 years to make it more attractive to the private developer. 9. The service charges for the market yards infrastructure will be capped and indexed to inflation to be determined by a committee .appointed by the state governments and subject to regular revision. 10. For the infrastructure, standards incorporating both the quality and the quantity of outcomes will be fixed. Also for the O&M, service level standards will be fixed and private developer will have to meet them throughout the concession period. There would be provision for the oversight and periodic certification by an independent engineer throughout the concession period. 11. The revenue collection will be done by the private operator and shall be shared with the mother SPV as per contract conditions given in the Model Concession Agreement. (See Annex). A diagram of the model is shown below:

• Overall management of IVC components • Provide funds for the IVC components Gov- • Aggregate the unbundled IVC components • Bid out to private developers for design, construct, O&M grants/GOB budget led • Manage capacity development activities SPV GOB / •Provide funds for the link infrastructure to Gov Depts GOI / grants/GOB budget ADB Link Infrastructure Pvt. SPV design, construct and design, finance, O&M construct, and O&M On site and Commercial/ VGF, Marketing other OtherVGF facilities facilities schemes (warehouse, cold chain, (business centers, waste management, etc) cantines, etc) User charges User charges (capped) (market based)

Leverage of private sector funds Services to users 12. Finally, in the case of Maharashtra, it is recommended to allow additional flexibility in view of foreseen difficulties in providing land for projects by the state government. As the state government may not be in a position to provide land for the entire IVC and the private sector is willing to bring its own land for some components, such

269 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT components of IVC may be owned and operated by private sector with the support of existing schemes and government funding. 13. Further, a Project Management Unit (PMU) or a state level SPV could be authorized to purchase the land for the IVC's hubs/spokes for other IVCs if government land is not available. Once the land is owned by the government, the above mentioned model can be applied in Maharashtra as well.

34.3.1 Proposed Project Grant, O&M Framework and Recovery of Charges 1. The private developer and operator, selected through a bidding process, would be responsible for detailed design, engineering, building and O &M of the project assets including the common infrastructure and facilities. 2. The mother SPV (the Concessioning Authority) would, as consideration for design, building and managing the project assets and facilities, pay to the private developer and operator (the Concessionaire) project grant as specified in the bid documents submitted by the successful bidder. Such Project Grant amount shall be paid by the Concessioning Authority based on milestones on progress of the Project as per following schedule: a. 20 % of the Project Grant after completion of 25 % of Project Construction as per the project requirements and so certified by the Independent Engineer b. 20 % of the Project Grant after completion of 50 % of Project Construction as per the project requirements and so certified by the Independent Engineer c. 20 % of the Project Grant after completion of 75 % of Project Construction as per the project requirements and so certified by the Independent Engineer d. 20 % of the Project Grant after issue of Completion Certificate by the Independent Engineer as per the project agreement e. Balance 20 % of the Project Grant after satisfactory operation of Project Services and Facilities for one year as to be decided by the Concessioning Authority 3. Further, the private developer and operator, after commencement of operations, may be required to pay the Concessioning Authority Royalty per Month equivalent to 30 per cent of the Gross Revenue chargeable by the Concessionaire . 4. Private developer and operator may recover the O & M charges from the traders and other entrepreneurs by way of following monthly charges: a. Charge I - Monthly Fixed Lease Charges apportioned to all traders on the basis of allocable area (shops) to each of them b. Charge II - Monthly Variable Utility Charges will be based on monthly consumption of utilities such as power, water, effluent treatment and other O & M cost apportioned on the basis of allocable area to each of the traders c. Charge III - User Fee would be charged for use of warehouses, sorting/grading lines, CA chambers and other value added facilities which may be aligned with existing market rates

270 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 5. Private developer may enter into a Lease Agreement with the traders. The Lease Agreement shall provide rights to the traders for carrying out trading operations and also using common facilities in the Market yards. The Lease Agreement shall also contractually bind the traders to pay all such charges as may be levied by SPV for the allotment, development and maintenance of infrastructure assets and provide recourse by way of right to replace traders who have defaulted in respect of payments to the private operator SPV or follow practices which inhibit project operations.

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35 PROJECT IMPLEMENTATION STRUCTURE

In the case of Maharashtra, implementation arrangements will be slightly different from Bihar as the State Government is keen to implement the project through existing State Agricultural Marketing Board. This is being done to create necessary synergy between existing marketing yards (under APMC) and proposed value chain infrastructure under AIDP. However, the essential structure in terms of Empowered Committee may be required in this case, as with Bihar. The Empowered Committee may be headed by Principal Secretary (Agricultural Marketing) in Maharashtra and may have representatives of state government departments like planning, finance, co-operatives and agriculture. The roles and responsibilities of Empowered Committee may be the same as suggested for Bihar. Further, it would be required to constitute a Project Management Unit (PMU) inside the Marketing Board which would be responsible for overall implementation of the project. It is recommended that PMU should have an organisational structure which enables it to make decisions quickly. As the Government of Maharashtra is not keen on incorporating a mother SPV for this purpose, PMU may be required to be given requisite financial autonomy. PMU may be headed by a dedicated Chief Executive Officer and may include experts from both inside and outside the Board. The experts may be drawn from diversified areas like agriculture-extension, agriculture marketing, agribusiness Infrastructure development, legal documentation and financial management. The external experts may be hired on long term contracts (at least 3 yrs) from market on need-based contracts through a transparent process. It may further be required by PMU to appoint a Project Consultant or Project Management Agency to assist it in project implementation. The role of PMA may be similar to that envisaged in Bihar as project would require bid process management as well as effective monitoring of the project during both construction and operation. Further, PMA may also be given responsibility of assisting PMU on “soft” issues i.e. strengthening of existing farmers’ co-operatives, imparting training and providing requisite institutional linkages along the value chains. The diagram presents the recommended implementation structure for AIDP in Maharashtra

Empowered Committee on Agricultural Marketing Headed by Principal Secy (Agr Marketing)

Prog Implementation through PMU

Prog Management Project Management Inside Board PMA Unit (PMU)

Bid Process Capacity Bldg Interventions Prvt Developer/Operator Management ‐Consortium/federations Design, Build & Operate Link Infrastructure Monitoring ‐Training Core & Agribusiness Infrastructure (Access roads, power and ‐Technology Inputs (Renovation/refurbishment of and water linkages, Evaluation ‐Exposure visits ‐Market linkages shops, Value added Infrastructure) waste disposal etc)

272 OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT 35.1 ROLE AND RESPONSIBILITIES OF PROJECT IMPLEMENTING AGENCY (MOTHER SPV/PMU) In Maharashtra, the PMU is required to be sufficiently empowered to undertake implementation of AIDP. Responsibilities of Implementing Agency will include:  Implementation of AIDP as approved by DEA/ADB in consultation with the State Government  Mobilising requisite state government contribution (30 %) and receiving Project Funds from ADB as required for the programme  Reporting progress regularly to the State Level Committee/Board  Make and ensure approval of all follow-up plans required as part of the programme roll out and implement them  Co-ordinate with other departments of state government for getting requisite clearances (power and water connections, access roads etc.) and ensuring link infrastructure development including social infrastructure The suggested organisational structure of the Implementing Agency is shown in the following diagram. MD/CEO PMA Program manager (assisted by 2 support staff) need based Domain Experts

Agri Extension Agri Agribusiness Legal & Financial Services Marketing Infrastructure Management

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Summary Financials The overall project financials are summarised in the table below, for the both Integrated Value Chains, in Maharashtra:

Budget Heads Costs (in Rs mn)

1 Project costs (Integrated Value Chains) 715.35+277.08

2 Implementation and project management @10% ADB funds 35.05+13.58

3 Capacity Building costs 48.31+32.21

Grand Total 1121.58

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