ANALYSIS OF AGRI-SUPPLY CHAIN OF INDIA WITH EMPHASIS ON VEGETABLES AND FRUITS

PROJECT REPORT

submitted by

KAMLESH JAIN
Batch2012-14

in partial fulfillment for the award of the degree of

MASTER OF MANAGEMENT STUDIES

under the guidance of

PROF. SUHAS PRABHU

THAKUR INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH KANDIVILI (EAST), MUMBAI

Certificate

This is to certify that this project report " ANALYSIS OF AGRI-SUPPLY CHAIN OF
INDIA WITH EMPHASIS ON VEGETABLES AND FRUITS "is a bonafide work of Mr.

Kamlesh Jain in part completion of the Masters in Management Studies and has been done under my guidance. The project is in the nature of original work that has not so far been submitted for any degree of this university. References of work and sources of information have been given at the end of the project.

Signature of the candidate

Kamlesh Jain

Forwarded through the research guide

Signature of the guide

Prof. Suhas Prabhu HOD (Operations)

Acknowledgement

At the completion of my project, I would like to thank all those who helped me knowingly and unknowingly. I would like to express my deep sense of gratitude towards Director Dr. Subhash Kulkarni of Thakur Institute of Management Studies And Research for giving me an opportunity to do my Final Project.

I would like to thank my guide, Prof. Suhas Prabhu for helping me out at each and every point of time. I am very grateful to him for guiding me throughout the project, who advised me at all the right times. I also thank him for his valuable time and continued assistance for the successful completion of the project. Would like to express my special gratitude and thanks to Traders and Commission Agents for their gracious support, without which the project would not have been materialized and completed successfully.

And last but not least I would like to thank all the faculty, staff of the institute for their direct or indirect help in making my project an unforgettable and great learning experience.

Kamlesh Jain

Executive Summary

India can become the food supplier of the world. It has the cultivable land, all the seasons for production of all varieties of fruits and vegetables, an agribusiness system that works although it needs to be vastly improved. The single most important problem facing the Indian agricultural industry is the highly inefficient supply chain. Because of lack of cold chain infrastructure and also a food processing industry about 20 per cent of all foods produced in India (Rs. 500 b) are wasted. By building an efficient and effective supply chain using state of the art techniques it is possible to serve the population with value added food while simultaneously ensuring remunerative prices to the farmers. The surplus of cereals, fruits, vegetables, milk, fish, meat and poultry can be processed as value added food products and marketed aggressively both locally and internationally. Investments in cold chain infrastructure, applied research in postharvest technologies, installation of food processing plants in various sectors and development of food retailing sector are mandatory for achieving gains in this sector. Strategic growth plans for achieving both national and international competitiveness of the food industry are essential. Finding of report: 1. Though Government is thinking of coming up with mega-park but is slow and with poor planning. 2. Large number intermediarys involvement without any significant value addition. 3. Lack of institutional and governmental support for farmers, especially for farmers growing country vegetables. 4. Lack of organized market links for farmers to sell their produce at appropriate price. 5. Limited use of cold storage that to only for expensive commodities and not for long term storage of vegetables.

Table of Contents
SR. NO.
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CONTENTS Acknowledgement Executive Summary Introduction Industry Overview Problem Statement Objective and Scope Significance of Problem Research Method Related Literature Findings (Primary and Secondary) Recommendations & Conclusion Appendices Bibliography and References

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1 2 3 4

5 6 7 8 9 10 11

Chapter 1

Introduction

Introduction

Agri-Supply chain in India is a complex network, majorly dominated by unorganized traders, intermediaries. The involvement of unorganized players has led to a very inefficient chain, resulting into drastic price variation, huge amount of wastage (around 40% of produce gets wasted.) and exploitation of farmers in the hands of intermediaries. Also, most farmers being less educated, lack proper planning and market inputs to properly plan their cultivation. Often the decision on, what to grow and when to harvest are all based on adhoc decisions rather than well planned approach. The end consumers are often hit by huge variations in prices and quality and availability, that food security is one of the biggest problems facing our nation today. Though several modern retailers have been operational for over a decade, owing to a combination of factors such as high operational costs, localized presence in metros, and low margins have forced even many large chains to shut operations. When one mentions 'agri crisis' most people associate it with farmer suicides, monsoon failures, poor yield GM food etc. Contrary to popular opinion, the real crisis in Indian agriculture is not only because of poor farming practices, but more because of lack of organized marketing, supply chain & distribution. An efficient supply chain is crucial for success of any modern industry. Though the Green revolution's focus was to increase the yield, as any economist would say, increasing supply without proper knowledge of 'demand', would never yield expected results. Thus, India is caught in situation where we are world leaders in 'production' but still having to 'import' even essential commodities. Our cost of production is very low, but our cost of local distribution is much higher than world average making international products cheaper than home grown items.

Chapter 2

Industry Overview

Industry Overview
Indian Agricultural Industry

In India, 52% of total land is cultivable as against 11% in the world. All 15 major climates of the world, snow bound Himalayas to hot humid southern peninsula; Thar Desert to heavy rain areas all exist in India. There are 20 agro-climatic regions and nearly 46 out of 60 soil types in the country. Sunshine hours and day length are ideally suited for round the year cultivation of crops. India is the centre for biodiversity in plants, animals, insects, micro - organism and accounts for 17% animal, 12% plants and 10% fish genetic resources of the globe. In the live stock sector, India has 16% of cattle, 57% of buffalo, 17% of goats and 5 % of sheep population of the world. Agriculture contributes 24.2% to GDP, 15.2% of total exports and provides employment to 58.4% of country's work force. As mentioned in the FICCI report of October 2004 India is the
Second highest fruit and vegetable producer in the world (134.5 million tones) with

cold storage facilities available only for 10% of the produce.

Second highest producer of milk with a cold storage capacity of 70,000 tonne. Fifth largest producer of eggs. Investments in cold chain required to store 20% of surplus

of meat and poultry products during 10th plan requires Rs 500 Crore (US$ 100M)
Sixth largest producer of fish with harvesting volumes of 5.2 million tones. Investment

required is estimated to be Rs 350 Crore (US$ 70M) In spite of the vast natural resources and abundant agricultural produce India ranks below 10th in the export of food products. Conservative estimates put processing levels in the fruits and vegetables sector at 2%, meat and poultry at 2%, milk by way of modern dairies at 14%, fish at 4%, bulk meat deboning is to the tune of 21%. Currently, the food processing sector, though in the nascent stage, constitutes 14% of manufacturing GDP amounting to products value ofs.2, 80,000 Crores. It employs 130 lakh persons and is supposed to increase at an annual rate of 7%.

The Indian Food Processing Industry

The Food processing industry has an important role to play in linking the farmers to the final consumers in the domestic as well as the international markets. Food

processing combined with marketing has the potential of solving the basic problems of agricultural surpluses, wastages, rural jobs, and better remuneration to the growers. In the next ten years, food production is expected to double. These produces, if processed and marketed smartly, can make India a leading food supplier of the world. India with a population of 1.08 billion (growing at about 1.7 % per annum) provides a large and growing market for food products. Food products are the single largest component of private consumption expenditure, accounting for as much as 49% of the total spending. Furthermore, the upward mobility of income classes and increasing need for convenience and hygiene is driving demand for (a) perishables and non food staples and (b) processed foods. Also, eating out is a booming practice in urban India and processed foods are accepted as alternative to the home cooked food because of the convenience it offers. Also, with the globalization of trade and availability of high speed logistics, food retailers in developed countries are sourcing an year-round supply of fruits and vegetables from developing countries. Thus, both for local consumption as well for export there is a year round opportunity for fruits and vegetables, meat and poultry products and ready to eat processed foods. The processed food industry should introduce innovative new products of high quality at low cost in small package sizes in ready to eat format to cash on this booming opportunity. HLL, ITC, MTR and others have introduced some innovative heat and eat dishes with reasonably good packaging. But here is lots of manual handling and hence food hygiene and quality are suspect. Multinational companies have entered the food value chain in India, Cargill and Conagra in agri-inputs, Tropicana in food processing and Metro in wholesaling. Local companies like Dabur, MTR, ITC, Godrej, and Amul are aggressive across the value chain. Multiple restaurant chains such as McDonalds, Pizza Hut, Dominos, Coffee day, Qwiky's and Saravana Bhavan, and Sagar Chains are growing rapidly. However, the pace is slow in the food sector compared to the other sectors such as IT and Pharma.

Chapter 3

Problem Statement

Problem Statement

Over 95% of India's Fruits and Vegetable produce is handled by the unorganized sector (traders and intermediaries). The goods typically change at least five hands before reaching end customer, escalating prices by a huge margin. Multiple stages of unorganized players, the produce travels before reaching the end customer exposes it to lot of damage and leads to huge wastage. At first glance it looks like if we remove the traders and intermediaries and directly sell the farm produce to end consumer will solve our problems. Any regulated market - say stock market, insurance segment, real estate etc all have their share of brokers and middlemen who are necessary to 'enable' the buyers & sellers to meet up and trade. In other industries the broker's role is seen as a value addition, hence not that despised. Hence the concept of middlemen as a system is necessary for market making mechanism to work efficiently - just that we need to ensure that they are being transparent and add value to the chain.

Chapter 4

Objective and Scope

Objective of Study

The steps of a Logistics Study are Investigate, Evaluate, Design, Model

To analyze the current agri-supply chain network in India to identify issues and loop holes and propose feasible solution.

Scope

India being a vast landscape, we have restricted our studies majorly to the state of Maharashtra and in particular the region around Vasi.

Chapter 5

Significance of Problem

Significance of Problem

India can become the food supplier of the world. It has the cultivable land, all the seasons for production of all varieties of fruits and vegetables, an agribusiness system that works although it needs to be vastly improved. The single most important problem facing the Indian agricultural industry is the highly inefficient supply chain. Because of lack of cold chain infrastructure and also a food processing industry about 20 per cent of all foods produced in India (Rs. 500 b) are wasted. By building an efficient and effective supply chain using state of the art techniques it is possible to serve the population with value added food while simultaneously ensuring remunerative prices to the farmers. The surplus of cereals, fruits, vegetables, milk, fish, meat and poultry can be processed as value added food products and marketed aggressively both locally and internationally. Investments in cold chain infrastructure, applied research in postharvest technologies, installation of food processing plants in various sectors and development of food retailing sector are mandatory for achieving gains in this sector. Strategic growth plans for achieving both national and international competitiveness of the food industry are essential.

Chapter 6

Research Method

Research Method
For this report, both primary data collected through questionnaire and observation and secondary data available on the topic were research. For primary data collection, a sample set of 5 Trader and Commission Agent were interviewed by Observation and casual interaction with traders and intermediaries were made for analysing the current agri-supply chain of fruits and vegetables. Secondary data available in form of research reports, government reports and various articles in magazine were analysed to understand the current solution proposed for the agri-supply chain issues.

Chapter 7

Related Literature

Review of Related Literature

Agri-supply chain has attracted a lot of attention and kindled the interest of both academic and practitioner communities. Compared to the developed markets, very few studies on Agri-supply chain are done in India. Some of the literature reviewed which were of direct relevance of this report are as follows:

Indian Fresh Fruits and Vegetables Supply chain: Indias Agriculture Sector Account for only a minuscule percentage of GDP and growth, however most of Indias population continues to depend on it. Despite rapid growth of the services and industries sector as globalization leads to assimilation of foreign technology and practices; agriculture continues to live in medieval times. Indias Food Supply Chain leads to