Beyond farming:

Entrepreneurship, Enterprise and

Industry

Paper presented to the workshop on “Harnessing Opportunities to Improve

Agri-Food Systems” held on 24-25 July, 2014 at the NASC Complex, Pusa,

New Delhi

Nilabja Ghosh

Institute of Economic Growth

Delhi University Enclave, Delhi 110007

Indianilabjag@yahoo.com

nila@iegindia.org

Ph : 2766-7424

Acknowledgement

For primary data based study team work

involving AERCs of: Ludhiana (Punjab);

Jorhat (Assam); Sardar Patel University

(Rajasthan); Shimla (HP); Delhi (Uttarakhand,

Haryana); Bhagalpur (Bihar & Jharkhand);

Allahabad (UP); Vishakhapatnam (AP)

Rajeshwor and Roopal of FASAL support in

Consolidation and analysis

The transition of Agriculture:

Subsistence to Market

Farming may be viewed as enterprise and recognized for the risk taking by farmers of food and export items for sale. After all production!

Food production is not just crop cultivation

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Agro-processing as a link in the supply chain

End products-Food, chemical, pharma, beverage, craft, fuel etc.; Use of different parts and components- grain, husk, extracts, organs etc. Serial and sequential processing, Alternative processing, co-production or sundry varied with tradeoffs

Consumer Agriculture ManufacturingFarm

THE SPACE: FROM FARMER TO CONSUMER

contract

ENTERPRISE

INDUSTRY

Gains from value addition to

agricultural products

Appeal, taste, packaging, convenience, variety

Employment generation, also in ancillaries (infa, machines,packaging, labeling, research)

Higher farm incomes

Quality gain, improved farm technology

Reduction of product wastage food value loss leading tosaving of resources (water, land, others)

Gender empowerment- women joining workforce

Exports, informed purchase, health

Full use of agro-products and by-products

Agro-Processing

PADDY

Raw rice, Powder rice, Par

boiled, Broken rice, etc.

OTHER

PROCESSING

CONSUMER

SNACKS

Grain milling

Mil

lin

g s

erv

ice

s

PULSES (UNMILLED)

MILLED PULSES

OTHER

PROCESSING

CONSUMER

FOOD

PROCESSING

Milling

RAW WHEAT

ATTA, MAIDA,

FLOUR, etc.

OTHER

PROCESSING

CONSUMER

BREAD, CAKE, BISCUITS,

etc

Grain milling

Mil

lin

g s

erv

ice

s

GROUNDNUT

OILSOTHER PROCESSING

(oil cakes, etc)

CONSUMER

FOOD

PROCESSING

Oil Milling

REFINING

LIVE ANIMAL

STOCKS

Carried over

SLAUGHTER

Basic Processing

CONSUMER

Food Processing

Other (leather, industrial

products lard etc.)

RAW WHOLE MILK

Pasteurized Milk OTHER

PROCESSING

(milk fat, pharma,

etc.)

Basic Processing

Creamskimmed/

whole milk

flavored

milk, yogurt,

paneer,

khoa, ice

cream, baby

food

SMP,

WMP,

Casein

Butter,

butter oil,

ghee

Derived

products

(bakery, etc.)

Exports

CONSUMER

Entrepreneurship

Economic activity with risk-return tradeoff

Major instrument for employment generation and poverty

alleviation in RD policies

Flagship prgrm- Integrated Rural Development Programme

(IRDP) -poor achievement of product development and human

capital formation

National Agricultural Technology Project (NATP),

agricultural extension mechanism- addresses the dual

issues of the farm technology/drudgery reduction and

diversification

Addresses women entrepreneurship also

Flexible and more compatible with family workload

Three studies

Objectives

To study the opportunities for processing activities related toAgriculture

Three levels-Overview and main results

Entrepreneurship of farm women- using primary data

Small enterprises in the unregistered sector using NSSO data

Registered factories in organized sector using ASI data

Entrepreneurship of Farm Women

Coordinated study- based on Primary surveyconducted between 2004 and 2005 (MOA sponsored)

Enterprises that draw on inputs from surroundingagriculture and nature

Surveys in Nine states (by AERCs) in districts selectedon the basis of availability of enterprises- trained(NATP and other creditable sources) and non-trained.

Mostly NATP (extension) promoted, trainingimportant (KVK, KVIC SAU-Home Sc etc.) but allsurveyed are not trained

Activity types

Primary production (PP)

Food processing (FP)

New and eco-friendly products (NEC)

Crafts (CRF)

Women in agriculture

Agrarian development in India overlooked the

importance of gainful participation of women.

Tedious and exhaustive farm operation- little relation

with human development.

Mostly as family labour (no direct income,

recognition) or as farm labour (low paid, poor

bargaining power in labour market).

Bias and social norms against work participation,

regional and class dimension

‘Women in Agriculture’ series of pgms sponsored

by national and international agencies

Details of Samples in various Regions

State Districts ActivitiesPunjab Gurdaspur

Amritsar

Dairy (PP), Bee-keeping (PP), Papad-Badi (FP), Pickles (FP)

Assam Jorhat

Golaghat

Live-stock (PP), Bee-keeping (PP), Fruit and Vegetable processing (FP)

Rajasthan Udaipur

Chittorgarh

Vermi-composting (NEC), Improved animal feed (NEC), Fruit-

vegetable, preservation (FP), Nursery raising (PP), Papad making (FP).

Haryana Hissar Dairy (PP), Vermin-composting (NEC), Pickle making (FP)

Himachal Kangra,

Bilaspur

Dairy (PP), Bee-keeping (PP), Vermi- culture (NEC), Potato production

using Bio-pestiside (NEC), Diversified Farming (PP), Fisheries (PP).

Uttarakhand Udham Singh

Nagar

Beekeeping (PP), Dairy (PP), Poultry (PP), Papad making (FP),

Mushroom (PP), Quilt making (CRF)

Uttar Pradesh Sultanpur Agarbatti (CRF), Blanket making (CRF), Spice processing (FP), Dalia

making (FP), Milk processing (FP), Basket making (CRF)

Andhra

Pradesh

East Godavari,

Srikakulam,

Visakhapatnam

Coir products (CRF), Jute handicrafts (CRF), Leaf plates (CRF)

Bihar Banka,

Bhagalpur,

Munger

Preservation of Fruits vegetables (FP), Preparation of Jamjelly (FP),

Preparation of Potato chips, Badi and Papad (FP), Preparation of

pickles, and Murabba (FP)

Different Aspects of Agro Enterprises reported by Farm Women

Enterprise Product

Nature

Of product Raw Material

Male

cooperation Land

Dairy Milk Meat

Egg, Dung

Perishable Fodder

Feed straw

Moderate OL, CL -

Moderate use

Bee keeping Honey

Wax

Colony

Fragile

(Stored)

Sugar

Medicines

Sheets

Moderate CL-Low use

Fishery Fish Perishable Seeds, Dung,

Chemicals

Moderate CL-high use

Craft/utilities Basket,

quilt,plates

fragile Forest and farm

wastes, others

Moderate CL-high use

Food

products

Papad

Badi,

Pickles,

Jams,

Squash etc.

Fragile

Can be Preserved

Salt Spices Oil

Pulses Fruits

Vegetables

Preservatives

Moderate Low use but work space

needed

Agro/Live-stock

inputs

Animal feed,

Vermi-compost

Bio-pestiside

Perishable Vermin Dung Flour Moderate OL-High use

CL-High use

Crop

Diversi-

fication

Fruits &

Veg. Nur-

Sery

Perishable (veg) Seedlings, Fertilizers,

Farmyard manure

High OL-High use

Note: Land includes space within and without premises. OL-operated land; CL-common land. *additional inputs (new) provided by

promoting agency.

Results

Micro scale of Operation (Rs 40K avg) Low income- Rs 18000 for year (supplementary), per capita monthly earning avg only- Rs 300 (5 member), less than poverty line, income to paid resources ratio- 3.8, Labour return-Rs 200 per 8hours day.

PP most lucrative followed by FP.

Bee-keeping - high return/Cost ratio but small scale of operation, Vermin-compostinglow profitability demand low, Papad-Badi in Punjab highly profitable labour shortage,Dairy cooperatives better performing in Punjab and Haryana

Performance-Associated with the economic conditions of the states, but found Viable

Employment generation 132 days (comparable with NREGA) highest for crafts andthe least for the group NEC

Satisfaction- contribution to household income –Avg 16%, nearly 50% in UPsample, self-esteem, empowerment

Negotiation, participation and exposure, human capital formation, leadership skills

Freedom from drudgery

Beneficiaries -middle level background rather than the poorest –many possess comfortitems, transport, Salaried members in households, mostly from landed households

Features

Cost advantages from ecology

o Bee-keeping in pristine environment (no vehicular pollution) in

Himachal

oFishery topological advantage (reservoirs) in Himachal , FV (fertile

climate) BHR, Vermin from Common lands

Organization generally individual, proprietary and mostly home

based –few cases of common work space

Techniques-manual/ simple machines, household implements

for F&V processing. FP and CRF use electricity

Family labour, own finance, few cases of borrowing from

traders, SHG

Cheap sourcing from own farm, neighbours, commons (vermin,

dung), forests

Problems

Marketing greatest constraint reported

Not all product sold (esp NEC little demand)- used

for home/farm use

Sold mostly through traders, Direct sales in village

haats, Kissan melas (DWACRA), cooperatives in

HRY, PJB (branded), ASSM (weak), national

company (branded honey) in HP

Training not always useful as in FP

Male support crucial for marketing or input

purchase

New features

Group operation (distinct from partnership) in Rajasthan, Bihar andAndhra Pradesh –- cost economy

Common workshops-share rents, machines (purchased or provided bysupporting agencies or traders). Individual raw materials collectivebargaining.

Not reported in most regions including Punjab and Haryana.

• Branding

• Cooperative with brand in PJB HRY -Dairy

• Contract with company for national market-branded Honey in HP, CoirBoard

• Revival with new technology and training

Brinjal in HP using biopesticides and cross-bred cows with improved feedin HP

• Gender

Female labour intensive, FP women have traditional expertise, Womensupervision, easier access to credit, Male cooperation but help in outdoorwork and negotiation (familiar stereotype)

Potentials

Farming can be integrated with and supplemented byenterprises of basic level processing services Post harvest operations manual or with simple machines,

cleaning/sanitizing, threshing, feeding animals/fertilizing soilseparating, cutting- primary processing –preservation, makingbutter etc., craft work with by products and wastes.

Farming of new crops with new inputs/methods as specialenterprises- need advert, awareness, support

Certified training primarily hygienic practices, customerpreferences, nutrition of human and animals, efficientmethods- basic managerial practices

Specialized marketing support needed- State, corporateresponsibility, cooperatives

Small Enterprises (Only Food Processing

NIC 15)

Data-NSSO 62nd round (2005-06) and 67th round (2010-11)

secondary

Unregistered units in unorganized sector

Undertakings engaged in production meant for sale fully or

partly

Operated by hhds singly or jointly

Excluding those registered under Factories Act or run by

govt/ PSU

Include hhld and non hhd entrpr with and without hiring

labour

The decline of the small units

Unorganized sector dominance strong in numberof units (only 1%in Orgnzd) but poor (less than5%) in value of output, 79% employment; 19%value of material

Between 2000-01 to 2010-11, number of unitsdeclined by 25%, employment by 30%

Shift to urban location (small increase innumber, workers), huge fall in rural

Workers per unit 2.3 to 2.14- fall in both Ruraland Urban

Missing opportunity

Integrate/tie with agriculture, trading and larger industries,malls/retailers and export markets

Understand their difficulties of viability power supply, management deficiencies, capital, inconsistency with

global norms/customer preferences, dependence on State support,Land issues, Environment

Delineate core competencies Traders generally link with both farmers and business

Contentious relation with traders-

Ideally synergy with agriculture and large industries- need to improveprofessional relations

Traders play useful role, take risk, bring information esp price and marketopportunities

Generally same traders as for agro-products

Factory sector (using agro-inputs)

Manufacturing activity

Employing 10 or more workers with power and 20 or

more workers with or without power

ASI data- unit level identified by ASICC/NPCMS

codes of agro-inputs, all NIC

Output mostly food but others like pharma, tobacco, fuel,

dominant grain milling, starch feed etc.

Quantity data quality raised questions, deflated value

by WSP to derive quantity processed

Sun rise sector

Between 20001-10-11 number of units rose by 4.4Empt by 2.7% value of production and raw materialsby over 30%.

Increasing worker on contract (16%-24%)genderratio (16%)no change

Contracts with farmers, technology financemonitoing, quality standards and rejection farmers offload rejected in APMC markets

larger national companies (as Pepsi), also regionalprocessors (Potato, Tomato, Amla) cases of NGOintermediation

Depends on state policies

Challenges- price discovery, adjudication possiblelinkage with SSU

Organized and Unorganized sectors in Food

processing in India

Enterprises

(No)

Enterprises

(No)

Value added

(Lakh)

Value added

(Lakh)

Organized Unorganized Organized Unorganized

2000-01 21649 3011300 1644731 466752

2005-06 23734 2602807 2345568 1540575

2010-11 30253 2241195 5521147 2205400

Sources: National Sample Survey Office (various) and Annual Survey of

Industries (various)

100

150

200

250

300

350

400

2000

-01

2001

-02

2002

-03

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

Total Factories Production nominalEmployment Production Real

Growth (Index) of organised sector in Food processing in decade 2000s. Source: ASI data

Food processing sector in the Unorganized sector in 2000s. Source: NSSO data

Share of the Organised and Unorganised Sectors in total

Quantity processed in 2005-06

What is Agro-processing

Complexity of definition and specification of activities

Some activities are basic, essential for consumption Milling of paddy, wheat, slaughtering animals, pasteurizing milk,

crushing of Oilseeds, sugarcane• Done in Domestic kitchen, Commercial in informal sector or as services

Some output feed in as inputs in other enterprises

Multiple products from same input, Gnut as nut, to oil, othersnacks (chikkis), Oil to refined oils, to other food

Value added sophisticated technology for varied food- paddyto rice- idli mix, milk- cheese to pizza

Some activities cleaning and packaging (for marketing) like spices, rice

Agro-processing as manufacturing:

Wide variety

Agro processing: Alteration by heat, pressure, and/or freezing temperatures.

Processed products : Can be food, Beverages, non-food (chemicals, paints, varnishes, inks, bricks, porcelain, energy, furniture, broom, brushes, craft)

Byproducts and or constituents: Different uses – paddy-rice/rice products/husk/fuel-feed/craft/other purposes, wheat-atta/ flour/ suji/ bakery items/ noodles, husk for fuel, gluten, daliya, bran, Sugarcane-sugar/gur/ethanol, cogen, oilseeds-oil/feed/ manure, FV-presvtion/juice/puree/sauce/ jams/wine/medicines/compost, Milk-dairy products/other food products/whey/casein/fat, Animal-milk/meat/egg/ leather/other articles/medicinal inputs, fertilizer

Milling as service industry

Milling and processing may be integrated in

manufacturing activity or given as services by

commercial providers

Farm retention, PDS and other distribution

Government procurement of paddy/wheat from farmer-

custom milled as service (nor mfg) and distributed as

rice/atta

Procurement from millers (rice)allows more processing as

mnfg (market rate?)

Estimates

Extent of processing is a measure of linkage between

agriculture and industry

Complexities- few reliable estimates explaining

methodology

Literature quotes that estimates of food processing

vary among countries 70% Brazil, 30% Thailand,

78% Philippines, 30% China and 80% Malaysia,

(KPMG-MoFPI-FICCI, 2007) whereas in India it lies

low at about 1.3% (D’ Essence Consulting, 2009).

Data sources, methods, specification not elaborated

Need for estimates in India

Estimates cited (probably insights and insider information from industries) for FV as 2.2%, Milk as 35% and meat 21% (KPMG-MOFPI-FICCI, 2007)

APEDA quotes estimates at 1.7% for FV, 37% for dairy and 21% for meat.

Our estimates using ASI unit level data (% of net production corrected for SFW) : 1.79% for fruits; 2.52% for vegetables, 10.85% in milk, and 1.29% for milled rice, 2.16% for milled wheat and 15.4% for milled coarse cereals. (average of org sector, 2003-04 to 2010-11)

Largest value share of use of agro-inputs for grain mill, Oil, Sugar and dairy products, also fish feed, bakery, beverage, small share of chemical, bio electricity, furniture, crafts, paints etc.

Our estimates based on FAO data 2009-10 (% of net availability) are 0.2% for fruits, 49.5% for milk (whole) and 0.26% for milled cereals.

Estimates of milling services not counted

Concluding suggestions Immense scope of developing enterprise and integrating agriculture with

industry

Processing can start from farmer level Need for useful relevant training, standards, mostly sanitary

Marketing- tie ups, support

New forms of organization (collectives) more exposure

Halt the decline of smaller units: Core competency Advantage of cooperation with bigger industries- Prevent competition with LSU

Awareness of standards, technology and demands-policy support

Harness synergy with farm enterprises and larger industries

Processing service (milling etc) potential

Government procurements come in the way

Policy support to bring in investment in Larger industries (Fiscal and other macro policy ) Diffuse benefits through the supply chain (Farms, entrepreneurs, Traders, SSU, LSU,

Consumers)

Monitoring and statistics Improve statistical protocols-Attention to emerging and detailed consumption

behaviour, processing amenable for public use and evaluation, consistency among databases

Features

Cost advantages from ecology

o Bee-keeping in pristine environment (no vehicular pollution) ,Himachal-

oFishery topological advantage (reservoirs), FV in fertile areas, Vermin fromCommon lands

Organization generally individual, proprietary and mostly home based –few in common work space

Techniques-Mostly manual involving simple machines householdimplements for F&V processing (mixer, grinder and refrigerator). FP andCRF are two categories that are found to be users of electricity

Family labour, own finance, few cases of borrowing from traders, SHG

Cheap sourcing from own farm, neighbours, commons (vermin, dung),forests

Share (%) of Organized and unorganized sectors in

food processing activities (05-06)

Sector Enterprises Employment Value of outputs Materials

Organized 0.90 21.09 96.85 80.51

Unorganized 99.10 78.91 3.15 19.49

Total 100.00 100.00 100.00 100.00

Note and Sources: Based on ASI and NSSO data for 2005-06

India's organized food processing sector in 2000sYear Total Factories Value of

Production

Materials

Consumed

Income Employment

(In number) (Rs'000 Crore) (Rs'000 Crore) (Rs'000

Crore)

Lakh number

2000-01 21649 135.52 107.54 10.52 13.33

2001-02 22395 130.35 103.76 9.74 13.07

2002-03 22490 157.00 129.23 8.25 13.08

2004-05 23471 175.41 144.48 12.45 13.43

2005-06 23734 201.28 162.59 18.10 13.92

2006-07 23951 246.02 194.97 28.56 14.76

2007-08 24616 296.66 243.21 26.79 15.05

2008-09 25788 354.69 292.62 30.30 15.64

2009-10 25915 385.47 317.50 33.21 16.06

2010-11 30253 507.58 422.75 41.79 16.62

Average

growth% 4.42 30.51 32.57 33.02 2.74

Source: Annual Survey of Industries (various)