Maharashtra ADB DPR

8/18/2019 Maharashtra ADB DPR

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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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OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM‐ PHASE II FINAL REPORT

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


4.1.1 Existing Post Harvest Infrastructure and Institutional Mechanism 38

4.2 Gaps in the value chain and potential interventions 41

5 Focus crop: Onion 43


5.1.1 Trade channel of Onion 44

5.1.2

Price

build

up

along

the

value

chain

of

Onion

46





6 Focus crop: Tomato 49


6.1.1 Trade channel of tomato 50

6.1.2 Price build up along the value chain of Tomato 55


6.2.1 Post harvest 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



8.2.1 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


9.1.1 Pack House 71

9.1.2 Pack Shed ‐Ambient 73

9.1.3 Ambient Onion Stores 74


10 Spoke: Chandwad 76



10.2.1 Pack House 77

10.2.2 Onion Storage 78

10.2.3

Other Facilities

79

11 Spoke: Sangamner 80




11.2.2 Ambient Pack Shed 83

11.2.3 Onion Store 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





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



15.2.1 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




17 Focus Crop: Orange 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



18

Focus Crop:

Lemon

131


18.1.1 Price build up along the value chain of Lemon 133


18.2.1 Post Harvest/Marketing Infrastructure 135



19 Focus Crop: Banana 137


19.1.1 Value Chain Actors and Functions 138


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



20.2.1 Ambient Orange Pack house 145


20.2.3 Add on/Commercial Facilities 146

21 Spoke: Anjangaon 147

21.1

Focus Crops

and

Estimated

Throughput

147


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21.2.1 Banana Pack House 148

21.2.2 Ambient Orange Pack house 150



21.2.5 Other facilities 151

22 Spoke: Akola 152

22.1

Focus Crops

and

Estimated

Throughput

152



22.2.2 Ambient Packing Shed 153

22.2.3 Business Centre 154

23 Spoke: Sangrampur 155







24

Spoke: Jalna

159

24.1 Focus Crop and Estimated Throughput 159


24.2.1 Ambient Pack House 160


25 Spoke: Paithan (Pachod) 162




25.2.2 Sweet lime Ambient Pack House 165



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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OPERATIONALISING THE AGRIBUSINESS I NFRASTRUCTURE DEVELOPMENT I NVESTMENT PROGRAM- PHASE II FINAL R EPORT

1

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

Documents

Maharashtra ADB DPR