Value chain mapping of paddy in Thrissur district
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Date
2019
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Department of Rural Marketing Management, College of Co-operation Banking & Management, Vellanikkara
Abstract
Value chain is a set of linked activities that work to add value to a product, which
consist of actors and actions that improve a product while linking producer to processors and
markets. A value chain work best when their actors cooperate to produce high quality
products and generate more income for all participants along the chain. A value chain
encompasses the flow of products, knowledge and information, finance, payments, services
and value additions at different levels. A value chain approach in agricultural development
helps in identifying weak points in the chain and actions to add more value.
The study on value chain mapping of paddy in Thrissur district has been undertaken with
the objective of mapping value chain of paddy, identifying the factors influencing choice of
value chain of paddy, analysing price spread efficiency and factors influencing it, identifying
interventions necessary to improve value chain of paddy.
The area of study was confined to Thrissur district. The sample respondents consist of
thirty farmers, one miller, one agent, five wholesaler and three retailers. Thirty farmers were
selected from two blocks of Thrissur district namely Pazhyannur and Puzhakal (with more
production in paddy) through snow ball sampling. The data were collected using pre- tested
structured interview schedule. The collected data were analysed with the help of value chain
mapping tool (global approach), modified market efficiency (Acharya’s approach),
percentage analysis, index method and chi square test.
The mapping of paddy value chain revealed that the core process involved in the chain is
input supply, production, procurement, processing, marketing and consumption with actors
like Krishi Bhavan, open market traders, technology and information, labour and financing
institutions in input supply, farmers in production process, SUPPLYCO, agents and millers in
procurement and processing, PDS, wholesalers and retailers in marketing and consumers in
consumption stage. The farmers are mainly depending on Krishi Bhavan for farm inputs
especially for seed or fertiliser at subsidised price. The padasekara samithies are the main
information disseminating agency for farmers. They provide information on input
availability, registration time for selling to SUPPLYCO, information on classes/ training
conducted by Krishi Bhavan/ Panchyath in the group, time of insuring crop, etc. Provisions of
seeds and fertilisers are the major support to farmers from Krishi Bhavan as the cost of seeds and fertilisers are high in open market. They also provide high yielding varieties of seeds
which are resistant to common diseases. The dependency on banks is mainly for financial
support and maintenance of accounts since all transactions are operated through bank account
only. Farmer’s contact with Krishi Bhavan, private traders, financing institutions,
SUPPLYCO, millers, agents and other institutions like KAU, Paddy research station and
insurance companies. The paddy produced in the field is procured by agents, millers or
SUPPLYCO and converted to boiled rice, raw rice and broken rice which is then distributed
to local markets, others districts in Kerala and to abroad.
SUPPLYCO is the major purchaser of paddy, 60 percent of farmers in virippu and 64.70
percent of farmers in mundakan, and 100 percent of farmers in punja season are selling paddy
through SUPPLYCO. The rest is marketed through channels including agents and millers.
The identified marketing channels are
1. Farmers agents millers wholesalers retailers consumer
2. Farmer miller wholesaler retailer consumer
3. Farmer consumer
4. Farmer SUPPLYCO PDS Consumer
In channel 1 and 2 the average price received for paddy is Rs.16.18 and Rs.19.00 per
kilograms respectively. It leads to Rs. 2.73 and Rs. 3.70 loss to a farmer per kilograms. In
channel 3 in which a farmer directly sell to consumers is at a good margin of Rs. 5.51 per
kilogram. In first two channels actors other than farmers are profit makers. The formal
channel of marketing of paddy in Kerala is through SUPPLYCO. The SUPPLYCO procure
paddy from farm gate at minimum support price, which is Rs. 21.50 during the study period.
In this case a farmer can get a higher margin of Rs. 9.54 for each kilogram of paddy.
To identify the factors influencing the choice of value chain of paddy the variables like
income of actors, availability of inputs, holding capacity, time required for realisation of
payment and product acceptability norms were taken to account. The chi-square test between
the choice of value chain and the selected variables showed that promptness of payment has a
significant relationship in choice of value chain. Eventhough SUPPLYCO is the highest paid
channel actor for farmers, delay in procurement by the SUPPLYCO and delay in payments
influence the farmer to choose informal channels for marketing. It takes nearly 3 to 6 months to get payment from SUPPLYCO. So for easy realisation of cash the farmers are depending
on informal channels for marketing.
The paddy farmers always sell their produce after keeping for self-consumption, seed,
keeping for wage and rent purpose. So the assessment of distress sale cannot be done based
on quantity of paddy marketed compared to other agricultural produces like vegetable which
are highly perishable. So price spread efficiency was calculated for studying channel
efficiency. The increase in number of intermediaries in a value chain decreases the market
efficiency through increasing cost and margin of intermediary. The percentage of producer
share in consumer rupee is better for lesser intermediary chain. Among four channels of
marketing, channel 1 is least efficient with market efficiency 0.71 followed by channel 2
were market efficiency is 0.83, where number of intermediaries are more. Channel 3 is most
efficient channel in informal channels of marketing with market efficiency 1. The producer
share in consumer rupee was found to be higher for channel 3 (100) followed by channel 2
(83.77) and channel 1 (71.34). Even though producer share in consumer rupee was higher in
channel 2 total marketing margin was negative, it was due to higher labour cost incurred by
farmer in virripu season for harvesting. If the farmer is able to reduce harvesting cost they
can make profit from channel 2. The only channel which give maximum return to farmer is
the formal channel of marketing through SUPPLYCO. Since the PDS is not meant for margin
the marketing efficiency was not considered for the channel.
The problems faced by actors were analysed to find out interventions required in the
value chain. The major problem faced by farmer are labour shortage, attack by pest and
diseases and lack of fair price in marketing of produce. The agents and millers face the
problem of non-availability of demanded variety in the market and higher storage expenses.
The government intervention during festival season through Onam and Vishu markets
negatively affect the business of wholesalers and retailers very much by reducing demand for
their produce.
The study pointed out the major area of interventions necessary to improve the value
chain of paddy. The development and dissemination of good quality seeds and fertilisers are
to be continued by the institutions involved in it. The timely distribution is also an important
factor for better production result, since the farm output is decreasing day by day. The
training programs in this aspects can be imparted through Krishi Bhavans in association with
Panchayathraj organisations. Timely availability of harvesting machines are also important since on maturity, the crop won’t stand on the plant as days passes. Lack of storage facility
and timely procurement problem in formal channels can be reduced by setting up of rural
godowns in main production centers and pooling the produce in such centers. Setting up of
labour bank and spreading it to all major production centers are to be taken up by the
cooperative societies.
Inadequate support price and high loading unloading charges affect farmers in the
marketing stage. Exploitation of farmers by intermediaries is found in Pazhayannur area.
These improper marketing channels need to be eliminated by the proper intervention of the
Padasekarasamithies and the government.
Paddy sector of Kerala can be improved only by making farmers comfortable
ie, by improving procurement and payment. SUPPLYCO should change its procurement
policy by speeding up procurement and payment system. So that the hesitated farmers will
come back to cultivation and the dependency on other states can be reduced.
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