maharashtra adb dpr
TRANSCRIPT
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Prepared by
F I N A L R E P O R T
Operationalising the Agribusiness
Infrastructure Development
Investment Program-
Phase II
-Maharashtra-
November 2010
Client :
A s i a n D e v e l o p m e n t B a n k
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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 41
5 Focus crop: Onion 43
5.1 Value chain analysis 44
5.1.1 Trade channel of Onion 44
5.1.2
Price
build
up
along
the
value
chain
of
Onion
46
5.2 Infrastructure Assessment 47
5.2.1 Marketing Infrastructure 47
5.3 Gaps in the value chain 48
5.4 Potential for Intervention 48
6 Focus crop: Tomato 49
6.1 Value chain analysis 50
6.1.1 Trade channel of tomato 50
6.1.2 Price build up along the value chain of Tomato 55
6.2 Infrastructure Assessment 57
6.2.1 Post harvest infrastructure 57
6.2.2 Marketing Infrastructure 57
6.2.3 Institutional Infrastructure 58
6.3 Gaps in the value chain 58 6.4 Potential for intervention 59
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DPR: Nashik Integrated Value Chain Project 60
7 Spoke: Deola 61
7.1 Focus Crops and Estimated Throughput 61
7.2 Proposed Facilities 61
7.2.1
Pack House
62
7.2.2 Warehouse 64
7.2.3 Other Facilities 64
8 Hub: Pimpalgaon Baswant 65
8.1 Focus Crops and Estimated Throughput 65
8.2 Proposed Facilities 66
8.2.1 Pack House 66
8.2.2 Pack Shed ‐ Ambient 67
8.2.3 Banana Ripening Facility 68
8.2.4 Ambient Onion Stores 69
8.2.5 Dry Warehouse 69
8.2.6 Cold Store 69
8.2.7
Other Facilities
69
9 Spoke : Sinnar 71
9.1 Focus Crops and Estimated Throughput 71
9.1.1 Pack House 71
9.1.2 Pack Shed ‐Ambient 73
9.1.3 Ambient Onion Stores 74
9.1.4 Other Facilities 74
10 Spoke: Chandwad 76
10.1 Focus Crops and Estimated Throughput 76
10.2 Proposed Facilities 76
10.2.1 Pack House 77
10.2.2 Onion Storage 78
10.2.3
Other Facilities
79
11 Spoke: Sangamner 80
11.1 Focus Crops and Estimated Throughput 80
11.2 Proposed Facilities 81
11.2.1 Pack House 81
11.2.2 Ambient Pack Shed 83
11.2.3 Onion Store 84
11.2.4 Other Facilities 84
12 Spokes (Banana): Anturli, Padalasa, Kajgaon, Galangi 85
12.1 Focus Crops and Estimated Throughput by Cluster: 85
12.1.1 Cluster I 85
12.1.2 Cluster II 85
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 89
13 Financial Analysis 90
13.1 IVCs in Maharashtra 90
13.2 Nashik IVC 90
13.2.1 Project Details 90
13.2.2 Project Cost 91
13.2.3 Preliminary & Pre‐operative Expenses 94
13.2.4 Means of Finance 95
13.2.5
Key
Operating
Assumptions
95
13.2.6 Financial Performance 98
14 Economic Analysis: IVC Nashik 100
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14.1 Methodology and Assumptions 100
14.2 Quantification of Benefits 101
14.3 Quantification of Costs 103
14.4 Cost‐Benefit Statement 104
14.5 Calculation of Economic IRR (EIRR) and NPV 104
14.6 Economic Appraisal Results 105
14.6.1
Major Economic
Indicators:
105
Aurangabad‐Amravati Integrated Value Chain 106
15 Focus Crop: Sweet Lime 108
15.1 Value Chain Analysis 108
15.2 Infrastructure Assessment 113
15.2.1 Post Harvest Infrastructure 113
15.3 Gaps in the Value Chain 114
15.4 Potential Interventions 114
16 Focus Crop: Kesar Mango 115
16.1.1 Value chain analysis 115
16.1.2 Price build up along the value chain of mango 118 16.2 Infrastructure Analysis 120
16.2.1 Marketing Infrastructure 120
16.3 Gaps in the value chain 121
16.4 Potential for Intervention 121
17 Focus Crop: Orange 122
17.1 Value Chain Analysis 122
17.1.1 Value Chain Actors and Functions 123
17.1.2 Grades in Orange 126
17.2 Post Harvest Infrastructure and Institutional Arrangements 128
17.3 Gaps in the value chain 129
17.4 Potential for Intervention 129
18
Focus Crop:
Lemon
131
18.1 Value Chain Analysis 131
18.1.1 Price build up along the value chain of Lemon 133
18.2 Infrastructure Assessment 135
18.2.1 Post Harvest/Marketing Infrastructure 135
18.3 Gaps in the value chain 135
18.4 Potential for Intervention 135
19 Focus Crop: Banana 137
19.1 Value Chain Analysis 137
19.1.1 Value Chain Actors and Functions 138
19.2 Infrastructure Assessment 141
19.2.1 Post Harvest Infrastructure 141
19.3
Gaps in
the
Value
Chain
142
19.4 Potential Interventions 142
DPR: Aurangabad‐ Amravati Integrated Value Chain Project 143
20 Spoke: Warud 144
20.1 Focus Crops and Estimated Throughput 144
20.2 Proposed Facilities 144
20.2.1 Ambient Orange Pack house 145
20.2.2 Dry Warehouse 146
20.2.3 Add on/Commercial Facilities 146
21 Spoke: Anjangaon 147
21.1
Focus Crops
and
Estimated
Throughput
147
21.2 Proposed Facilities 148
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21.2.1 Banana Pack House 148
21.2.2 Ambient Orange Pack house 150
21.2.3 Banana Ripening Facility 151
21.2.4 Dry Warehouse 151
21.2.5 Other facilities 151
22 Spoke: Akola 152
22.1
Focus Crops
and
Estimated
Throughput
152
22.2 Proposed Facilities 152
22.2.1 Dry Warehouse 153
22.2.2 Ambient Packing Shed 153
22.2.3 Business Centre 154
23 Spoke: Sangrampur 155
23.1 Focus Crops and Estimated Throughput 155
23.2 Proposed Facilities 155
23.2.1 Pack House 156
23.2.2 Banana Ripening Facility 158
23.2.3 Dry Warehouse 158
23.2.4 Other Facilities 158
24
Spoke: Jalna
159
24.1 Focus Crop and Estimated Throughput 159
24.2 Proposed Facilities 159
24.2.1 Ambient Pack House 160
24.2.2 Other facilities 161
25 Spoke: Paithan (Pachod) 162
25.1 Focus Crops and Estimated Throughput 162
25.2 Proposed Facilities 163
25.2.1 Pack House 163
25.2.2 Sweet lime Ambient Pack House 165
25.2.3 Dry Warehouse 166
25.2.4 Other facilities 166
26
Financial Analysis
167
26.1 Aurangabad‐Amravati IVC 167
26.1.1 Project Details 167
26.1.2 Project Cost 167
26.1.3 Preliminary & Pre‐operative Expenses 170
26.1.4 Means of Finance 170
26.1.5 Key Operating Assumptions 171
26.1.6 Financial Performance 173
27 Economic Analysis: IVC Amravati‐Aurangabad 175
27.1 Methodology and Assumptions 175
27.2 Quantification of Benefits 176
27.3 Quantification of Costs 178
27.4
Cost‐
Benefit
Statement
179
27.5 Calculation of Economic IRR (EIRR) 179
27.6 Economic Appraisal Results 180
27.6.1 Major Economic Indicators: 180
Maharashtra: Integrated Value Chains 181
28 Conceptual Plans for Facilities 182
28.1 Conceptual Plans for facilities at selected locations of the IVCs 182
28.1.1 Planning Concept 182
28.1.2 Master Plan 182
28.1.3 Buildings 183
28.1.4
Services
183
28.1.5 Road & Parking 183
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28.1.6 Green Area 183
29 Stakeholder Consultations 199
29.1 IVCs in Maharashtra 199
29.1.1 Farmers 199
29.1.2 Traders/Wholesalers/Local processors/Cold Chain Owners 200
29.1.3 Industry Players 200
29.2
Stakeholders’ Meeting
at
Mumbai
201
29.2.1 Suggestions from Stakeholders on Policy Issues: 201
29.2.2 Suggestions on Proposed Interventions: 202
29.3 Stakeholder’s Meeting at Raheja Centre Point, Mumbai 202
29.4 List of Potential Investors 203
30 Assessment of Market Demand 205
30.1 Assessment of Food market in India 205
30.2 Growth drivers of value added food products 206
30.3 Assessment of Food retail Industry 207
30.4 Major players in organized food and grocery segment 209
30.5 Assessment of major consumption markets 210
30.5.1 Delhi 211
30.5.2
Mumbai
212
30.5.3 Kolkata 213
30.5.4 Patna 214
31 Impact Assessment 215
31.1 Environmental Aspects 215
31.2 Social and Poverty Assessment and Mitigation 215
32 Capacity Building 216
32.1 Capacity Building: Needs Assessment 216
32.2 Farm/Production Cluster level 216
32.2.1 Capacity Building at Production cluster/farm‐level 217
32.3 Capacity Building at Hub‐Spoke Level 218
32.3.1 Capacity Building at hub and spoke‐level 218
32.4
Capacity Building
Coverage
220
32.5 Implementation arrangements 220
32.6 Summary Financials for Maharashtra 220
33 Policy and Regulatory Aspects 221
33.1 Issues relating to policy‐ Agri‐business infrastructure 221
33.1.1 Regulatory Issues 221
33.1.2 Credit 223
33.1.3 Technology Induction 223
33.1.4 Capacity Building 224
33.2 Recent Policy Initiatives taken by the Government 224
33.2.1 State Level APMC 225
33.3 Initiatives taken to promote Agribusiness Investment in Maharashtra 225
33.3.1
Amendment
to
APMC
Act
226
33.3.2 Grapes Processing Industry Policy, 2001 226
33.3.3 Package Scheme of Incentives, 2007 227
33.3.4 Others 228
33.4 Existing Schemes Pertaining to Agri‐business infrastructure 229
33.4.1 Impact of Schemes on Development of Agribusiness Infrastructure 229
33.5 Policy Initiatives Critical to Successful Implementation of AIDP 229
33.5.1 Applying the Integrated Value Chain approach 229
33.5.2 Suggested Policy Interventions 230
34 Implementation Frame work 231
34.1 Proposed Models under Public‐Private Partnership 231
34.1.1 Approach to Public–Private Partnership (PPP) in India 231
34.1.2
Experience
of
PPP
in
India
231
34.1.3 PPP in Agribusiness Infrastructure : 232
34.1.4 Viability Gap Funding Scheme (VGF) 233
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34.2 Challenges of VGF model for Agribusiness Infrastructure under AIDP 234
34.2.1 Under VGF, ownership of project assets has to remain with the Government 234
34.2.2 Private sector is given a contract/concession for project term to recover its investments 234
34.2.3 User charges need to be determined before implementation of the project 235
34.2.4 Need for a flexible PPP structure for AIDP 235
34.2.5 BOT vs BOT –Annuity models 236
34.2.6
SPV Model
236
34.3 Preferred Operation Model for AIDP 236
34.4 Proposed Project Grant, O&M Framework and Recovery of Charges 239
34.5 Project Management Framework 240
Annexure
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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 theAgribusiness 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
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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:
A market system perspective A focus on end markets
Understanding the role of value chain governance
Recognition of the importance of relationships
Facilitating changes in behaviour
Transforming relationships
Targeting leverage points
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:
facilitate upgrading to become competitive, and
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
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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 I NTEGRATED VALUE
C HAIN REGIONS
One of the most industrialized
states in the country, Maharashtrahas 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
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
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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 focuscrops 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
initiatives proposed-
Mega Food Park,
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 M ETHODOLOGY
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
Aurangabad‐
Amravati
RegionNashikRegion
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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:
A study of various existing data e.g. relating to production, processing, marketing,
infrastructural facilities, along with a mapping of the same.
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:
A detailed structured questionnaire survey was canvassed for mapping the entire
value chain. This included assessment of marketable surpluses, mapping of the
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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.
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.
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.
The prepared action plan was validated through focus group discussion and bring out
environmental and social acceptability, financial feasibility, legal and other issues.
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 thetemperatures 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.
Crop harvest times;
Processes required for different crops – picking, washing, grading, packaging,
storage;
Existing types and numbers of facilities for undertaking these operations;
Transport-types used, to and from these facilities;
Road networks connecting the clusters and markets, and also the facilities;
Main sources of consumption for the different crop types – un-organized retail,
organized retail (supermarkets), export;
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Typical number of stages in the existing supply chains – commission agents,
aggregators, traders, markets, etc.
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 developmentof 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.
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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 recommendationfor 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.
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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
Map of region
Introduction- Separate sections detailing focus crops Pomegranate, Grape, Tomato, Onion,
Banana
Spoke description, proposed system
Proposed Locations for Hub and Spoke model, system
Proposed Integrated Value Chain Project
Aurangabad ‐ Amravati Integrated Value Chain
Map of region
Introduction- Separate sections detailing focus crops Sweet lime, Kesar mango, Orange,
Lemon, Banana
Spoke description, proposed system
Proposed Locations for Hub and Spoke model, system
Proposed Integrated Value Chain Project
Conceptual plans of facilities, engineering drawings etc.
Stakeholder consultations
Market assessment
Impact assessment
Capacity building
Policy and regulatory aspects
Implementation framework
Project implementation structure
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NASHIK INTEGRATED VALUE CHAIN
Nashik region, Maharashtra
Focus Crops
Pomegranate
Grape
Tomato
Onion
Banana
DPR: Nashik Integrated Value
Chain Project
Description of Hub and Spokes
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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.
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:
Pomegranate
Grape
Tomato
Onion
Banana
NashikRegion
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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 inMaharashtra 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 pinkisharil 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.
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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 V ALUE 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
are mentioned below:
Pre‐harvest contract:
This is the most commonly used sales system of
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
orchard to a contractor, irrespective of the size and
grade, because of lower price realization for lower
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
bigger APMC markets like Mumbai, Delhi etc,
where the traded is facilitated by a commission
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
Pre Harvest
Pre‐harvest
contractor Village
aggregator
Commission agent
Wholesaler
Semi‐wholesaler
Retailer
Consumer
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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:
* 20 bags of fertilizers per Ha @ Rs 600 per
bag of 50 kg of NPK
**7.5 trolleys of Rs 3000 each
***1 kg per plant @ Rs. 9/kg
****Rs. 100 per day (1 person per acre
throughout the year)
The capital cost incurred for establishment of an orchard in 7 Ha is mentioned below:
Besides the initial establishment
cost, farmers incur a cost of Rs
100,000 – Rs 200,000 in
maintenance of 1 ha of orchard. It
mainly comprises of costs
incurred in application of
fertilizers, pesticide application,
irrigation, pruning etc.
The operational cost per Ha is shown below:
Fertilizer-3 kg per plant (3
applications @ 1 kg per
application)
Pesticides - 14 litres per plant @
Rs. 2 per litre
Staking - 4 bamboo sticks per
plant @ Rs. 5 per bamboo stick
(life of bamboo sticks - 4 years)
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
Activity in a Ha for 750 plants Cost in Rs
Pit digging @ Rs 10/pit 7500
Fertilisers* 12000
Organic manure** 22500
Pesticides 12500
Growth hormones for root setting 3750
Neem cake***
6750
Farm labour**** 90000
Irrigation 500
Planting material @ Rs 15/plant 11250
Total 166750
Capital cost incurred in orchard of 7 Ha Rs in lakhs
Land leveling 2.5
Water storage tank 6
Drip irrigation system 4.5
Borewell with electricity connection 2
labour quarter 2
packing shed 2.5
room for drip irrigation filter systems 0.5
Total 20
Operational cost per Ha for 750 plants Cost in Rs
Fertilizer 27000
liquid fertilizer 8000
Pesticides 21000
micro‐nutrients 6250
Irrigation 500
labour for various operations 90000
Staking 3750
Total 156500
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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 dependingupon the destination markets. 3 fold CFB
boxes are used for local market while 5 fold
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.
Activity
Charges
in
Rs
per
person
Sorting/Grading 120
Packaging 150
Other activities on farm 80
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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
sent to many places all over the country
like Kanpur, Bareilly, Jhansi, Patna,
Ludhiana, Amravati, Nagpur etc.
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.
Activity Cost in Rs /box
Grading Sorting and Packaging labour Rs. 3
Packaging Material (10 kg per box) Rs. 10
Paper cutting for cushioning (250 gm
to 500 gm per box) Rs. 8‐10
Loading into trucks Rs. 0.75
Grading, Packing
Rs 35
Rs
Losses
Rs 11.5
Rs 5
Transportation, loading, U/L, losses
Commission charges
Rs 8
Rs 0. 3
Wholesaler’s margin
Retailer’s margin
Consumer price
Farmgate price
Rs 6
Rs 80
Contractor’s margin Rs 3
Rs 0. 6
Rs 2. 3
Rs 1.5
Marketing cess
Losses
Transport
Losses
Rs 50 (C ontractor’s Price)
Rs 60 (Wholesaler’s Price)
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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 of8% 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
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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 agentconstitutes 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 I NFRASTRUCTURE 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 G APS 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
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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 relativelyshort shelf life of the produce and hence less price realization.
2.4 POTENTIAL FOR I NTERVENTION
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 and Sangamner 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.
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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, Puneare 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.
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3.1 V ALUE C HAIN 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 uponthe 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
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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
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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 andload 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 fromfarmer to the trader. Traders are resourceful and are more capable to bear this risk by storing
the produce during peak 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.
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.
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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 everystep has been mapped, as shown below.
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.
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 Rs3.5/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
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.
Rs 35 (Trader’s Price
Rs40 (Wholesaler’s Price)
Rs 25
Rs 1.25
Rs 2.30
Farm gate price
Grading, Packing, Loading
Transportation, Unloading at APMC
Rs 3.50
Commission @ 10% Rs 2.94
Trader’s Margin
Rs 50.00
Rs 4.63
Retailer’s Margin
Consumer’s Price
Rs 8.00
Wholesaler’s Margin
Rs 0.36
Market Fee @ 1.05%
Rs 2.00
Losses at Retail Level
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@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 W INERIES
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
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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
of cash.
Value chain of grapes used
for processing is much short
and simple. Values build up
at each stage and activity of
the value chain for wine
grape (per kg) is as shown.
3.3 E XPORT OF GRAPES
Farmers incur a cost of around Rs 0.25 million in cultivating export quality grapes in a
hectar