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Documentation of Success Stories of Food Processing Units in Karnataka

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Documentation of Success Stories of Food Processing Units in Karnataka DOCUMENTATION OF SUCCESS STORIES OF FOOD PROCESSING UNITS IN KARNATAKA Revised report I Maruthi Venkata reddy B.G Agriculture Development and Rural Training Centre (ADRTC), Institute for Social and Economic Change (ISEC), Bengaluru 560072 i ACKNOWLEDGEMENTS I am extremely grateful to the Agricultural Ministry Government of India, New Delhi, for financing this study. I am very thankful to the Acting Director of ISEC Prof. K.S James for encouraging me to work on this project and to former Director of ISEC, Prof. R.S Deshpande, who has always inspired me to work harder. My special thanks to Prof. Parmod Kumar, Head ADRT Centre, who helped me at various stages of this project. Further I thank to all my colleagues in the ADRTC for their unstinted help. I am greatly indebted to Dr. M. Devendra Babu, for reading the earlier draft of this report and for giving valuable suggestions. I thank Mr. Venkatareddy BG, Research Assistant for conducting fieldwork, graciously extended his co-operation in inputting the tables in the report. I profusely thank him. Finally I thank Entrepreneurs, District Industrial Centers for the information that they gave us. The secretarial assistance by Mr.N Boopathi, and Mr. Muthuraja is thankfully acknowledged. Dr I Maruthi Associate Professor, Agriculture Development and Rural Training Centre (ADRTC), Institute for Social and Economic Change (ISEC), Bengaluru. ii CONTENTS Page No Acknowledgement (ii) Contents (iii-vi) Executive summary (vii-xix) Chapter 1 Introduction 1-13 1.1 Background 1 1.2 Structure and composition of the food processing industries in India 4 1.3 Review of Literature 6 1.4 Objectives of the Study 11 1.5 Methodology and Data Sources 12 1.6 Overview 12 Chapter 2 Food Processing Industry in India and Karnataka 14-29 2.1 Introduction 15 2.2 Classification Of Food Processing Industry 15 2.3 Need for Food Processing Industry 17 2.4 Different Stages of Processing Food 19 2.5 Contribution of Food Processing Industry to GDP 21 2.6 Persons Employed in the Registered Food Processing units 22 2.7 Exports of Food Processing Related Items 22 2.8 Exports of Major Processed Food & Related Commodities from food 23 processing sector 2.9 Investment In Food Processing Sector 23 2.10 Food Processing Industry in Karnataka 24 2.11 Production of Major crops in Karnataka 28 2.11.1 Agriculture 28 2.11.2 Commercial crops 28 2.11.3 Horticulture 29 2.11.4 Dairy and Livestock 29 Chapter 3 Socio - Economic Characteristics of Entrepreneur s and Food Industries 30-37 3.1 Background of the Food Processing Industries 30 3.2 Ownership of Industries 31 3.3 Age Profile of the Entrepreneurs 32 3.4 Educational Background of Entrepreneurs 33 3.5 Caste background of Entrepreneurs 34 iii 3.6 Land Assets of Agro-Processing Entrepreneurs 35 3.7 Employment in Agro-Processing Industries 36 Chapter 4 Documentation of Success Stories of Food Processing units in Karnataka 38-47 4.1 Reasons/Factors for Success of Food Processing units 38 4.1.1 Quality Management 38 4.1.2 Good Customer Service 38 4.1.3 Reasonable Prices 39 4.1.4 Replacement for Damaged Products 39 4.3 Percent change in average annual income of food processing industries in 40 Karnataka 4.4 Case Studies 41 Case 1: Mahesh Cashew Industries 42 Case 2: Jain Agro Food Products 45 Case 3: Siddabasava Dhal Industries 46 Chapter 5 Problems, Prospectus and Challenges of Food-Processing units 48-56 5.1 Problems of Food-Processing Industry in India 48 5.1.1 Problems Relating to Raw Materials 48 5.1.2 Problems Relating to Marketing 48 5.1.3 Problems Relating to Processing 49 5.1.4 Financial and Fiscal Problems 49 5.1.5 Other Problems 50 5.2 Problems faced by Manufacturing Enterprises 50 5.2.1 Problems Relating to Raw Materials 50 5.2.2 Marketing Problems of Sample Food Processing units 52 5.3 Other Problems 54 5.4 Prospectus of Food Processing Units in Karnataka 56 Chapter 6 SWOT analysis of Food- Processing Industry in Karnataka 57-64 6.1 SWOT analysis of Fruit Vegetable Manufacturing Industry 58 6.2 SWOT analysis of Manufacture of Grain Mill Products Industry 60 SWOT analysis of Dairy Industry 61 6.4 SWOT analysis of Marine Industry 64 6.5 SWOT Analysis of Consumer /Packed Goods Industry 64 Chapter 7 Conclusions and Policy Recommendations 67-80 7.1 Introduction 67 7.2 Main findings 67 iv 7.2.1. Background of Food Processing units 68 7.2.2 Ownership of Industries 68 7.2.3. Age Profile of the Entrepreneurs 68 7.2.4 Educational Background of the Entrepreneurs 68 7.2.5 Caste Background of the Entrepreneurs 69 7.2.6 Land Assets of Agro-Processing Entrepreneurs 69 7.2.7 Employment in Agro-Processing Units 69 7.3 Reasons for Success of Food Processing units 70 7.4 Problems faced by Manufacturing Enterprises 71 7.4. Problems relating to Raw Materials 71 7.5 Marketing Problems of Sample Food Units 73 7.6 Other Problems 74 7.7 SWOT analysis of food processing industries in Karnataka 75 7.8 Conclusions 76 7.9 Policy Recommendations 77 References 78 v LIST OF TABLES Table 1.1 Structure and composition of the food processing industries in India 2011-12 05 Table 2.1 Classification of Organized Food Processing Industries in India 15 Table: .2.2 Percentage of Losses Estimated for Major Produces 19 Table: 2.3 Processing details of different Sectors of Food Processing Industry 20 Table 2.4 Contribution to GDP of Food Processing Industry at 2004-05 prices (Rs crore) 21 Table 2.5 Exports of Major Processed Food & Related Commodities from Food 23 processing sector Table: 2.6 Foreign Direct Investment in Food processing sector in the India. 24 Table 2.7 size of food processing industries, capital investment, employees, value of 27 output & net Value added by manufacture 2012-13(value in lakh) in Karnataka Table 2.8 Production of Agri-crops (in lakh MT) 28 Table 2.9 Production of these Commercial crops (in lakh MT) 28 Table 2.10 Production of Major Fruits in Karnataka. 29 Table 2.11 production statistics for major livestock products 29 Table 3.1 Distribution of Units by Year of Establishment 31 Table 3.2 Ownership Status of the Sample of Food Processing Industries 32 Table 3.3 Age Characteristics of the entrepreneurs 33 Table 3.4 Educational level of Sample Entrepreneurs 34 Table 3.5 Distribution of Entrepreneurs by their Caste 35 Table 3.6 Distribution of Entrepreneurs by Land Holding 36 Table 3.7 Distribution of Units by Size of Employment 37 Table4.1 Reasons/Factors for success of food processing industries 39 Table 4.2 Average annual turnover of food processing industries (Rs crores) 40 Table 4.3 Percent change in average annual income of food processing industries in 41 Karnataka Table 5.1: Constraints faced by the Food Processing Units in Procuring Raw Materials 51 Table 5.3 Distribution of Units on the Basis of Other Problems Table 6.1 SWOT Analysis of Fruit and Vegetables Industries 60 Table 6.2 SWOT Analysis of Manufacture of Grain Mill Products Industry 62 Table 6.3 SWOT Analysis of Dairy Industry 63 Table 6.4 SWOT Analysis of Marine Industry 65 Table 6.5 SWOT Analysis of Consumer /Packed Goods Industry 66 vi EXECUTIVE SUMMARY The food-processing industry in India plays a vital role in the national economic development and has potential to meet the local needs and export requirements. It helps in processing agricultural products such as field crops, pulses, horticultural crops, livestock and fisheries and converting them to edible and other usable forms. Thus, transformation of agriculture through creating forward and backward linkages with industry has been emerging as an important option to overcome the increasing challenges of creating employment opportunities for increasing labour force and sustaining the livelihood of households in rural areas. Most important point in the food-processing is that a sizeable portion of raw material processed in them being rural based it has a very high employment potential with significantly lower investment. Further the food- industry generates new demand on the farm sector for more and different agricultural outputs, which are more suitable for processing. On the other hand, development of these industries would relax wage goods constraints to economic growth by enhancing the supply of their products. In this context there is a need for improving the capacity of the food-units to harness backward linkages with agriculture and allied activities in order to efficiently convert part of the output to value added products acceptable to the domestic and international markets. This would generate employment opportunities for different types of skills through food processing, packaging, grading and distribution. Keeping the above aspects in consideration the study was carried out in the state of Karnataka. Objectives of the study Keeping the above aspects in consideration this study is carried out with the following objectives. 1. To bring in socioeconomic aspects of food processing units , 2. To document success stories of food processing units, 3. To emphasize on the problems, prospects, challenges and concerns in the food processing industries. vii Methodology and Data Source The study has been based on both primary and secondary sources of information data. The primary data is collected among a sample of different product groups of registered industries of Karnataka state. It means that a detailed list of industries/ units has been prepared and number of these units/industries has been decided on the basis of total number of industries in the selected clusters.
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