PROSPECTS AND CHALLENGES OF SECONDARY AGRICULTURE BASED LIVELIHOOD SYSTEMS
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Date
2014
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DIVISION OF AGRICULTURAL EXTENSION INDIAN AGRICULTURAL RESEARCH INSTITUTE NEW DELHI
Abstract
Indian agriculture is broadly a story of success. India is first in the world in the
production of milk and pulses and second in rice, wheat, sugarcane, groundnut,
vegetables, fruits and cotton production. Despite the fact that India is doing remarkably
well in terms of output, extent of value addition to raw food material is only 7 per cent.
Only 2.2 per cent of total fruits and vegetables are processed in India while, more than 35
per cent of fruits and vegetables are wasted due to lack of storage and processing
facilities. Looking at the present agricultural production and post production scenarios in
India, the most appropriate action for minimizing post harvest losses, enhancing income
of farmers, generating employment and export growth would be encouraging processing
and value addition, which is nothing but secondary agriculture. In view of these prospects
and challenges, a research investigation was designed on secondary agriculture with
specific objectives of ascertaining factors facilitating and inhibiting development of
secondary agriculture, assessing the outcomes of secondary agriculture based livelihoods,
analyzing the supply chains of processing enterprises and studying the institutional
support for promoting secondary agriculture. The study was conducted in Tamil Nadu
and Uttar Pradesh and NCR, Delhi states based on production potential of the crops,
Banana and Potato, respectively. For each crop, 5 value addition units were selected, thus
a total of 10 processing enterprises were studied. It was observed that, among individual
variables, education, social participation, achievement motivation, self-confidence,
manageability, innovativeness, risk taking, hope of success, persistence and persuability
were positively and significantly correlated with entrepreneurial orientation of
respondents. Market driven factors such as increasing demand for the processed products,
assured and remunerative price for the processed products coupled with easy availability
of raw material and work force were the major facilitators of secondary agriculture, while
inadequate infrastructure, high upfront capital investment, poor marketing linkages, lack
of electricity supply, maintenance of quality standards etc., pose challenges for its growth.
Processing activity not only increased the value of raw material by several times but also
brought about desirable socio-economic benefits such as increased employment
opportunities and improvement in income and lifestyle. Cottage and micro enterprises had
very less payback period of less than 6 months whereas payback period for small,
medium and large enterprises was 2 to 3 years. Agro-processing industries generated
more returns per unit investment than cultivation of respective crops. Raw material cost
shared significant portion of consumer’s rupee (9-34% for banana enterprises; 14-60% for
potato enterprises) followed by processing charges (8 to 57%) and processor’s margin (24
to 59%). Processor’s margin, marketing cost, marketing margin, price spread and
producer’s share in consumer’s rupee varied with length of marketing channel. Large
number of middle-men in the supply chain caused multiplicity of costs, thereby reducing
efficiency. Supply chain efficiency was inversely related to length of marketing channel
and marketing costs. The supply chains of fiber extraction unit of banana processing
(Marketing Efficiency=70.94) and Dehra enterprises of potato processing (Marketing
Efficiency=13.51) were found to be efficient due to direct marketing of the produce by
the processors. Total marketing costs ranged from 2 to 8 per cent for banana enterprises
and 7 to 16 per cent for potato enterprises. Highest proportion of marketing costs was
incurred by processors (2-11%) followed by super-stockists (2-4%) or wholesalers (2-
3%). Total margins ranged from 24 to 59 per cent for banana enterprises and 28 to 49 per
cent for potato enterprises. Highest percentage of profits were realized by processors (26-
59%) followed by retailers (8-17%). Packaging charges (4-11%), transportation costs (2-
11%) and sales tax (2-6%) contributed significantly towards increase in consumer’s price.
Price spread was lesser and producer’s share in consumer’s rupee was higher for shorter
marketing channels with less number of intermediaries and vice-versa for lengthier
marketing channels. Institutional support for information and training on processing
technologies was adequate, whereas support for credit, marketing and quality testing was
very limited. The suggestions for promoting secondary agriculture included establishment
of Agri-incubation centers, encouragement of cooperative and contract farming,
developing and disseminating cost effective processing technologies, integration of
technologies for different products to operate the enterprise for a substantial period in a
year, synergy between departments and convergence of institutional support,
development of integrated cold chain infrastructure, in addition to awareness generation
among farmers on secondary agriculture.
Description
t-9546
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