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Aurangabad-Amravati Integrated Value Chain

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Aurangabad-Amravati Integrated Value Chain OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT AURANGABAD‐AMRAVATI INTEGRATED VALUE CHAIN Aurangabad‐Amravati region, Maharashtra Focuss 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%).
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