IMPACT OF BACKWARD INTEGRATION OF AGRIBUSINESS FIRMS IN CHILLI FARMING IN PRAKASAM DISTRICT OF ANDHRA PRADESH STATE
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Date
2019
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ACHARYA N G RANGA AGRICULTURAL UNIVERSITY, GUNTUR
Abstract
Market liberalization and growth of international trade have created export opportunities in agricultural sector for many developing countries. The traditional way for food production is replaced by practicing more similar to manufacturing processes, with greater co-ordination of farmers, processors, retailers and other stakeholders in value chain of agriculture. The agro-food sector can be conceptualized as a system of vertically intercorrelated stages. Vertical coordination is harmonizing of vertical inter dependence of the production and distribution of activities. Backward integration is a strategy under vertical integration where a firm gains control over ownership or increased control over its suppliers. Wide variation in yield levels leading to fluctuation in chilli prices and farmers are facing problems like high transportation cost, viral diseases, quality deterioration by contamination of pesticides, industrial chemicals and aflatoxins. It is vitally important to support the chilli farmers to produce high quality, sustainable food safe spices to compete in the international market. The major players like ITC, Synthite etc., are providing customised solutions to diverse challenges of chilli farmers through backward integration.
The research study entitled “Impact of Backward Integration of Agribusiness Firms in Chilli Farming in Prakasam District of Andhra Pradesh State” was taken up with the following objectives.
1. to study the impact of backward integration on input use pattern, productivity and profitability in integrated and non-integrated chilli farmers 2. to estimate the resource use efficiency of integrated and non-integrated chilli farming 3. to analyse the impact of backward integration on adoption of technologies in chilli farming 4. to analyse the constraints in practising backward integration.
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Multistage sampling technique was adopted for selection of sample at different levels in the present study. In Andhra Pradesh, Prakasam district that ranks 2nd in area was selected, as chilli farmers integrated with agribusiness firms, ITC and Synthite are present in the district only. The criteria for selection of mandals and villages were the presence of highest number of integrated farmers. Four mandals and from each mandal two villages were selected. From each village, eight integrated farmers and eight non-integrated farmers were selected, making a total sample of 128. The data pertains to the year 2017-18. Primary and secondary data collected and analysed through Decomposition analysis, CobbDouglas production function, Technology adoption index, Poisson model with endogenous treatment and Garrett’s ranking technique were followed.
The decomposition analysis showed that the per hectare returns of integrated farming was 13.28 per cent higher than that of non-integrated farming. The integrated technology component was contributing 3.7 per cent to the total increase in output. Input use to the outcome differences between the two groups was 9.58 per cent.
Under integrated chilli farming, human labour (0.60), fertilizers (-0.15), plant protection chemicals (-0.16) and irrigation (0.15) showed a significant effect on output. Under non-integrated chilli farming, seed (0.04), human labour (-0.19), manures (0.07), plant protection chemicals (-0.26) and irrigation (0.24) showed significant effect on output.
In the total sample of chilli farmers, 46.87 per cent of the integrated chilli farmers were adopting seven technologies and 73.43 per cent the non-integrated farmers were adopting less than four technologies. The marginal effect indicates that a farmer with own land, awareness on backward integration, less market distance and more farm size had a probability of adopting backward integration greater than others. Extension service and backward integration were positive and significant at 10 and 5 per cent levels respectively on adoption of technologies.
Difficulty in meeting quality parameters was the first major problem faced by the sample integrated farmers. The major problem faced by firms was farmers negligence in maintaining quality. Frequent chilli price fluctuation in the market was the second major problem faced by the firm. The major problem faced by the non-integrated farmers was low production of produce.
Backward integration technology increases output and quality of the produce so it should be expand by an assured alternative agency (Government or co-operative) for increase in quantity and value of export of chilli. Creating awareness on optimum use of inputs by Agricultural department. The problem of rejection rate and maintenance of quality of produce may overcome by provide technical support and create awareness through extension service among farmers from sowing to harvest in an integrated manner. Increase in extension service would create knowledge about technologies in chilli farming to farmers because most of the non-integrated farmers are adopting less technologies than integrated farmers.
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D5905
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