Chapter 7

The objective of this chapter is to analyze the nature, structure, aims and

extent of farm-industry linkages provided by sample rtgro-processing industrial units.

The study is based on survey data, case studies researcher's discussions with agro-

processing entrepreneurs and researcher's observations while visiting agro-

processing industrial units for survey.

This chapter is divided into four sections. Section 1 explains theoretical

framework for the study to be made in this chapter. Section 2 examines the extents

of farm-industry linkage provided by sample agro-processing industrial units. In

section 3, case studies of 2 milk processing units and afiuit and vegetable processing

unit and a natural rubber latex processing unit in the study area are undertaken to

analyze the nature, structure and aims of farm-industry Iinkages provided by them.

Of these four ago-processing industrial units, only one mil k-processing unit (PDDP)

belongs to sample units and others do not as they are large-scale industrial units.

Observations made in the case studies are suminarised in section 4.

SECTION 7.1 THEORETICAL FRAMEWORK FOR THE STUDY

The present study is conducted within the theoretical framework that there

is a close interdependence / inter-relation I linkage between agriculture / farm and

industry,' Bright SinghZ has documented in his work the contributions, which each

1 W.A. Lewis (1955, I970), R.Nurkse ( 1 9591, G. Rains and J.C.Fei (1961), B.F. Johnston and J.W. Mellor (19611, A . Muntjoy (1963), and B.W. Hodder ( 1976) have well documented the inter-relationship between agriculture and industry and provided heoretical expression to the concept of agriculture-industry inter-relationship.

2 D. Bright Singh, Econuniic.~ of Development wiih SpecialRefurenre to Indiir, Asia Publishing House, New Delhi, 197 1, P. 460.

sector makes to each other on account of their mutual existence and linkages between

them.

Theoretically, the agriculture and non-agriculture sectors can be linked

directly through production linkages or indirectly through investment and

expenditure 1inkages.Vhe production linkages can be upstream or downstream -

upstream, if industries supply technologies, inputs and credit for agricultural

production, and downstream, if increased agricultural production leads to increased

industrial investment in agro-processing or value added activities. Investment

linkages occur when part of the saving in one sector is invested in the other sector.

Expenditure linkages between the farm and non-farm sectors occur when increased

farm incomes lead to increased demand for industrial or manufacturing products.

Strong and dynamic linkage between farm and industry sectors make possible

commercialization of agriculture, which, in turn, enables it to achieve high and

sustained growth.4

The idea that econon~ic and social development is possible through farrn-

industry linkages is widely accepted today. Systematically formulated farm-industry

linkages have a far-reaching effect on agricultural productivity as well as on social

and economic devel~prnent.~ Economic history of western countries have shown

that without sacrificing agricultural development, these countries have transformed

themselves from agrarian society / economy to an industrial society I economy using

farm-industry linkages-"n India, models of integrated rural organizations such as

Nilokheri model of Industrial Township linked with surrounding villages, Co-

3 Hari Krishna Upadhyay, "Achieving a Dopble digit Growth: The Centrality of Farm-Industry Linkages", htt~://www.nepalnews.com.nv/contentslennlishweeklv/svotliaht/2005/ ianlian2 11 viewpoint.htm.

4 Ihid.

S V.R. Gaikwad, "Application of Science and Technology for Integrated Agricultural and Rural Development-A farm-Industry Linkage Approach", in U.K Srivastava and S.Vathsala, (eds) Agro-Prucessing: Stralegyjor Acceleration and E.rports, Oxford & IBH Publishing Co. Pvt. Ltd, 1989, P.20.

operative sugar factories and Milk processing Co-operatives of the AMlJL type

were based on the idea of farm industry linkage concepth7 In a developing economy

like India, farm-industry linkages can be systematically formulated through the

establishment of agro-processing industries. The establishment and relocation of

ago-processing industries i n or near production centers can promote the farm-

industry linkage, which is very important for the transition of subsistence economy

to an industrial econ~rny .~

The agro-processing industry provides the crucial farm-industry linkage

which helps accelerate agricultural development by creating backward and forward

linkages, adding value to farmer's produce, generating employment opportunities

and increasing farmer's net income and opening up possibilities for export^.^ By

increasing agricultural income, agro-processing industries make farmers to go for

innovation and new techniques of production to raise productivity. Added to this,

agro-industries, by enhancing agricultural income, enhance self-confidence among

the farmers that is needed in building up industrial and business leadership from

the village. Agro-industries generate new demand on the farm sector for more and

different agricultural output, which is more suitable for processing. It' Agro-

processing plant can open up new crop and live stock opportunities to thc farmer

and thus creates farm income and employment. ' I

The Tamil Nadu government in its "Policy Notes on Agriculture 2002-

2003" proposed to setup food parks to provide farm-industry linkage to augment

farmers' income and generate emp1oyment.l2 Thus development of t he

H Hari Krishna Upadhyay, op-cit.

9 U.K. Srivastava, "Agro-Processing Industres: Potential, Constraints, and Task Ahead", Indian Journal oj'Agricultum Economics, Vo1.44, No.3, July-September 1989, P. 242.

i I .lames E Austin, Agro-industrial Projec! Analysis, John Hopkins University Press, I,ondon, t9HI.

12 Government o f 'I'amil Nadu, Polic,y Nures on Agricul&uve 2002-2003, http://www.tn.gdv.in/ policynotes!archives/policy2002-03!a~ri2002-03-8.htm.

agro-processing industries contributes to rural-led employment oriented economic

de~eloprnent. '~

In order to solve the mismatch between agriculture production and its

subsequent management which is a major handicap of rural India, Gaikwad and

others have suggested setting up agro-processing industries based on farm-industry

linkages with collaboration between commodity based farmers' organizations and

processing industry.I4

The agro-processing industry which provides the crucial fam-industry

linkages can becomes/serves as an anchor I central activity of organizations for

integrated rural development. Around this anchor activity should be developed

backward linkages (credit, input, extension, support services and procurement etc)

and forward linkages (marketing of produce and finished products), infrastructure

(roads, electricity, irrigation etc), and social welfare facilities - housing, medical,

education, recreation, etc, and supplementary economic activities.I3 In this way

agro-processing industry becomes an organization for integrated rural development

or acts as an anchor for integrated rural development. This anchor activity integrated

with other welfare activities provide various monetary, welfare, and social benefits

to rural population, particularly producer farmer.

SECTION 7.2 FARM-INDUSTRY LlNKAGES PROVIDED BY SAMPLE

AGRO-PROCESSING INDUSTRIAL UNITS

Table 7.1 provides an idea of the sample agro-processing industrial units

providing farm-industry linkage or having established linkage with farmers or

farmer's organizations.

13 Bhupat M Desai and N.V. Namboodiri, "Development of Food processing Industries", Economic und PoliticaI Weekly, March 1992, P. A3 7.

14 V.R. Gaikwad, State of the Indian Farmer, A Millennium Stud,y, Volume 16: Post-Harvest Management, htt~://www.academicfoundation.corn/n detail/mill/volIb.as~.

1 5 V.R. Gaikwad, op.cit., 1989, P.14.

Table 7.1: Distribution of Units on the Basis of Providing Farm-Industry Linkages

Source: Survey Data Figures in parentheses are percentage shares.

It is observed in table 7.1 that only four units (3.42 percent) of agro-

processing industries as a whole have established linkage with farmers or are

providing farm-industry linkages. These four units (44.34 percent) belong to milk

processing industry. It was observed during the survey that none of the rice mills,

coconut oil mills, curry powder manufacturing, fruit and vegetable processing units,

hawai sheet manufacturing, crumb rubber making and tread rubber manufacturing

units in the sample size have not provided any form of farrn-industry linkages. It,

thus, emerges from the analysis that the linkage ofagro-processing industrial sector

with farm sector / farmers organizations is the weakest in the study area. It? therefore,

requires the Government of Kerala to take necessary steps to encourage agro-

processing industrial units to provide farm-industry linkage for the benefit of both

farmers in the rural areas and processing sector.

Nn, of' units providing

farm-industry linkage

0

Industry

Rice milss

Total no. of units

35

Coconut oil mills

Curry powder manufacturing

Milk processing

Fruit and vegetable processing

Hawai sheet nlanufacturing

Crumb rubber making

Tread rubber manufacturing

Total

15

15

9

I I

9

8

I5

117

0

0

4 (44.44)

0

0

0

0

4

( 3 -42)

It is also observed during the survey that three units of the fbur milk

prtxcssjng units providing tZm-industry linkage are organized as charitable societies

under the leadership of religious organizations, formed on non profit basis, with

the objective of generating employment and increasing income of poor farmers in

the rural areas. It was observed during the survey that agro-processing industrial

units organized as sole proprietorship, partnership form or private limited company

are not willing to provide any farm-industry linkages or to establish any link with

producers of agricultural raw material. This finding suggests that Government of

Kerala needs to take initiatives to set up processing units in the co-operative sector

linking farm and processing industry.

In the farm-industry linkages, f m sector's linkage with agro-processing

industrial units takes the form of farm sector supplying share capital, agricultural

raw material, labour, leadership and management. At the same time, agro-processing

industrial unit's backward linkage with farm sector takes the form of processing

units supplying credit, farm inputs, farming technology, employment in the

processing sector, extension services, construction of infrastructure for the benefit

of farmers such as road, irrigation, share profit with farmers, engage in the welfare

activities such as housing, medical, education, recreation etc. This backward Iinkage,

the processing industria1 sector can provide to farming sector, will ensure agricultural

and rural development.

Table 7.2 provides details of the form of backward linkages the four milk

processing industrial units provide to the farming sector.

Table 7.2: Distribution of Units by Type of Their Backward Linkages with the Farm

Source: Survey Data Figures in parentheses are percentage shares

Industry

Rice mills

Coconut oil mills

No. of units reported of providing backward linkages

0

0

Curry powder manufacturing 0 0 0 0 0 0

4 3 3 0 0 0 (75) (75)

Crumb rubber making 0 0 0 0 0 0

Arrange creditl supply credit

to farmers

0

0

Tread rubber manufacturing

Total

Supply farm inputs1 providing

production enhancement

services to farmers

0

0

0

4

Provide off farm activities to

farmers

0

0

0

3 175)

Share profit with farmers1

bonus t o farmers

0

0

0

3 (75)

Undertake contract farming

for farmers

0

0

0

0

0

0

0

0

Table 7.2 : Distribution of Units by Type of Their Backward Linkages with the Farm (Contd.)

- .

Source: Survey Data Figures in parentheses are percentage shares

Industry

Rice mills

Coconut oil mills

Curry powder manufacturing

Milk processing

Fruit and vegetable processing

Hawai sheet manufacturing

Crumb rubber making

Tread rubber manufacturing

Total

Arrange insurance cover for farmers/

cattle / crops from insurance

companies

0

0

0

3 (75)

0

0

0

0

3

(75)

Employment and wages.

0

0

0

4 (1 00)

0

0

0

0

4 (1 00)

Creation of infrastructure

such as electricity, road, irrigation etc.

0

0

0

0

0

0

0

0

0

Engage in social welfare activities

housing / medical/ education/

recreational

0

0

0

0

0

0

0

0

0

Conduct Study class/ workshop/ seminars!

video shows

0

0

0

4

( loo)

0

0

0

0

4 ( 100)

It is observed in tab1 e 7.2 that only four milk-processing units of the agro-

processing industrial units as a whole in the study area are found to be providing

backward linkage with farm sector. It is observed that 3 milk processing units have

arranged credit from banks to the farmers to purchase cows, supply cattle feed at

concession / reduced rates and other production enhancement services, arranging

insurance cover from insurance companies to the farmers and cattle. 4 units of the

milk processing industry are found to be providing employment to the milk producers

of the area where units are located.

The table, thus, reveals that sample agro-processing industrial units in the

study area hardly provide any farm-industry linkage or hardly create any form of

backward linkage with farm sector / raw material growers except four units in the

]nil k processing industry. This implies that agro-processing industrial units' linkage

with farm sector is the weakest in the study area. This is an indicative of the fact

that ago-processing sector in the study area does not respond to the needs of the

farm sector and processing of agricultural product take place only for the benefit of

agro-processors.

SECTION 7.3 INITIATIVES IN CREATING FARM-INDUSTRY

LINKAGES THROUGH AGRO-PROCESSING

INDUSTRIAL UNITS

In this section, an attempt is made to examine the nature, structure, and

aims of farm-industry linkages provided by agro-processing industrial units in the

study area in the light of the model presented in section 7.1. This is done by

undertaking case studies of Kerala Co-operative Milk Marketing Federation, whose

Ernakulam Regional Co-operative Milk Producers' Union owns a milk-processing

unit in Eranakulam, Peoples Dairy Development Project that owns a milk-processing

unit in Kalady, Nadukkara Agro Processing Co.Ltd in Muvattupuzha and Periyar

Latex Limited in Muvattupuzha, which are found to be providing farm-industry

linkages. An attempt is also made here to examine in what respect actual farrn-

industry linkages provided by them deviate from the model. The study in this section

is based on researcher's visit to the units, observations, discussions and interviews

with the entrepreneurs / management of the units.

7.3.1 In Milk Processing Sector

7.3.1 -1 Kerala Co-operative Milk Marketing Federation (KCMMF)

Kerala Co-operative Milk Marketing Federation (KCMMF) popularly

known as milrna, established in 1980, with the mission of farmer's prosperity through

consumer satisfaction, for the successful implementation of the operation flood,

which and its Regional Co-operative Milk Producers' Union operate milk processing

units, one of these in Ernakulam, is an attempt to link milk processing units with

milk producers in the rural areas of Kerala state. It is found to be providing farrn-

industry linkages. I t is a farmer oriented organization and is based on the motto of

co-operation and is an organization of the milk producers, by the milk producers

and for the milk producers. Therefore, its objectives are:

a. To channelise marketable surplus milk from the rural areas to urban deficit

areas, to maximize return to the producer and provide quality milk and milk

products to the consumer

b. To carry out activities fox promoting production, procurement, processing and

marketing of milk and milk products for the economic development of the

farming community

c . To build up a viable dairy industry

d. To provide constant market and stable price to the dairy farmers for their

produce. I('

These objectives can be achieved only if the organization creates an effective

farm- industry linkage or provide an effective backward linkage to farmer producer/

I t ? "Operation Flood", Kerala Co-operative Milk Marketing Federation. and "Who arc We", http:// www.mi~ma.com/intro.html.

farmer's organizations. For the purpose of processing milk, thc organization and its

Regional Co-operative Milk Producers' Union manage ten dairies, one of which is

in Ernakulam.

The organization's backward linkage with farmer producer is established

through its three-tier system based on the principle of co-operation of farmers. At

the bottom, at the village level, there are village co-operative societies called primary

milk co-operatives numbering 2100, which have the local raw milk producers i

farmers as its members of about 5.24 lakhs. These village co-operative societies

unite at the regionaI level to form Regional Cn-operative MiIk Producers' Unions

which run milk processing units / diaries in their regions. The unions are federated

at the state level to fonn state federation namely Kerala Co-operative Milk Marketing

Federation (KCMMF).17 Ernakulam RegionaI Co-operative MiIk Producers' Union

operates Ernakulam Dairy in Thripunithura..

The producers of raw milk / farmer's forward linkage with milma takes the,

form of fan~lers supplying raw milk to the nilma through primary co-operative

societies, supplying labour, providing leadership and management to ~nilma as

president of the primary ctl-operative societies, managing bodies of regional milk

producers unions, and the chairman and board of directors of Kerala Co-operative

Marketing Federation are elected from among producers of raw milk / farmers on

democratic lines.

The observed farm-industry linkages provided by milma are depicted in

the chart 7. I . The chart is prepared on the basis of information provided by

entrepreneur / ofticials of the units regarding inputs it supplies to the milk producers,

inputs obtained fiom website of Kerala Co-operative Milk Marketing Federation

(KCMMF), and leaflet supplied by KCMMF, discussions and interviews with dairy

manager, procurement manager and our officials at Ernakulam Diary in

Thripuni thura.

t 7 Ihid.

Chart 7.1 : Farm - Industry Linkage Provided by KCMMF

Backward Linkage Forward Linkage

1 . Provide assured market for raw milk to the farmers by , procuring raw milk.

2 . Provide veterinary services and animal husbandary services like artificial insemination.

3. Provide balanced cattlefeed at reduced and subsidised - rate.

Marketing 'b and

distribution

1. Provide orientation programme and training to farmers 1 to equip them with the basic and fundamentah of co- operatives, accounting, testing, laws etc.

5. Arrange subsidised insurance cover for cattle from insurance companies. (at subsidised premium rate)

6. To arrange financial assistance from banks to the farmers at the request of primary societies.

7 . Introduction of Embryo transfer technology to upgrade cattle wealth. +

8. Co-operative development activities for the farmer such as seminar, workshops, veterinary camps, video shows on human health, nutrition. management techniques of dairying, cattle rearing etc. to disciminate latest infomation

9. Employment and wages. + 10. Provide subsidy to milk produers for grass cultivation

(to cover the cost of fertilizer and laboru charge etc.)

- 1. Supply of output of raw milk - 2. Provide leadership and management. - 3. Supply labour

1 1 . Supply seedlings of high breed and nuturious grass to farmers.

12. Make contribution to Milk Producers Pension Fund. from which pension is given to milk producers.

b Farm-Industry Linkage Source: Field Investigation

I t is also observed during the visit to the unit that the processing unit makes

a contribution of 8 paise per Iitre of milk it procures from the primary milk co-

operative societies, to the milk producers' pension fund constituted by Government

of Kcrala at the initiative of Milma, From t-his fund, pension is give11 to milk

producers 1 farmers who supply milk to primary milk co-operativc societies

continuously far 10 years. This also constitute processing unit's backward linkage

with farmers / milk produces in an indirect way.

7.3.1.2 People's Dairy Development Project (P D D P)

It is a government approved milk procurement, processing and marketing

organization run under the patronage of Archdiocese of Ernakulam as part of i t s

rural development project, linking rural areas with urban areas and miIk producers

with consumers. It is estabIished on the principle of co-operation of the farmers, by

the farmers and for the farmers to help the rural poor who form the bulk of the

population. It was observed during the visit to the organization that i t provides

linkage with farmers / producers of raw milk.

At the bottom level of the organization, there are primary societies in which

the milk producers are the members. These primary societies unite to form a central

society which functions under a chairman nominated by the bishop of the

Archdiocese of Ernakulam. The central society undertakes the activities of

procurement, processing and marketing of milk.18

So far as producers of milk are concerned, they have a forward linkage

with procurement, processing and marketing organization. This forward linkage

takes the form of farmers supplying raw milk to central society, which runs a milk-

processing unit, through primary societies of the farmers, providing leadership and

management to the organization.

1 X I-'euplw Diary Development Prqjermt. Kulady, A Brief Sketch, P D D P Central Society, Kalady, P. 3 .

Organization's linkage' with farmers / milk producers are observed to be

taking the form of providing assured market for raw milk through its procurement,

providing veterinary services to the farmers, supplying cattle feed at ccmcession

rate, arranging hank loans from the banks to the milk producers, arranging subsidized

insurance cover for cattle from insurance companies, organizing cattle shows,

seminars, workshops etc to milk producers to motivate them, and supplying seeds

of nutritious grass to the f'armers for grass cultivation. It was observed during the

study that ail these input services were provided to milk producers through primary

societies constituted by milk producers.

During the survey the milk processing units reported that the henetit ofk

farm industry linkage provided by them is the assured availability of raw milk of

required quality, in sufficient quantity and in time for processing.

7.3.2. In Rubber Processing Sector

7.3.2.1 The Periyar Latex Limited

It was observed during the survey that Periyar Latex Limited, a company

jointly owned by Rubber Board and 49 Rubber Producers' Societies (RPS) of

Ernakulam and Idukki districts with majority participation by Rubber Board,

established in an effort to facilitate processing of small rubber growers product -

natural rubber latex,'" is observed to be providing farm-industry linkage. The share

capital of the company is contributed by Rubber Producers' Societies (48 percent)

and Rubber Board (52 percent). lU

The rubber plantation sector is dominated by small holders who account

for 85 percent of the production and 86 percent of area in the c o ~ n t r y . ~ ' There are

about 900000 small holders whose average holding size is around 0.5 hectares.22

19 "Periyar Latex Limited, A Profile", http:// www.periyarlatex.com.

20 [hid.

2 1 . The Rubber Board, Ruhber and Its Cultivalion, 2005, P.93.

22 Peri,var 1.ar.a Limited- Prqfife, http: // www.periyarlatex.com.

One of the probletns encountered by the small growers is the post harvest handling

of the crop and marketing. The Indian small rubber grower when compared to his

cuuntcrpart elsewhere in the major natural rubber producing countries is better off

in the sense that he gets a better farm gate pri~e.~"evertheIess the price realized is

not as per the various grades because of the preponderance of small holdings in the

county, the effective transfer of technology has become difficult, as a result ufwhich

the desired productivity levels also have not been reached. To overcv~ne this

difficulty, the Rubber Board promoted the formation of village level voluntary

associations of small rubber growers called Rubber Producers' Societies (RPS),

which are registered as charitable societies.

In order to further integrate and strengthen the activities of the RPS and to

link them with a processing industrial unit for the benefit of small rubber growers,

Rubber Board in association with RPS set up the Periyar Latex Limited in

Muvattupuzha in Ernakulam district, covering the area of operation to Ernakulam

and Idukki districts.

In this background, the objectives of the company are processing of srnall

rubber grower's product (latex), transfer of technology to farmers, work for

productivity enhancement, quality improven~ent and empowerment of small rubber

growers.24 The company attempts to achieve these objectives by creating linkage

with farmers / rubber growers (Rubber Producer' Societies).

Rubber growers' forward linkage with processing unit - Periyar Latex

Limited - take the form of farmers supplyng latex, share capital through Rubber

Producers' Societies, supplying labour and providing leadership to the company.

Regarding the contribution of farmers' contribution of share capital to company, it

was observed that 25 paise per kilogram of latex supplied by RPS is converted into

2 3 Ibid.

24 Leaflet on Periyar Latex Limited supplied by the company

their share capital to the company. Regarding supply of labour to the company, i t

was found that labourers in the processing unit were recruited from farming

community in company's area of operation (Emakulam and Idukki districts). With

regard to farmers providing leadership to the company, it was reported during the

survey that the company is managed by the board of directors, of which four members

are elected from among the presidents of Rubber Producers' Societies in the area.

(The president of a Rubber Producers' Society is elected from among the members

of the society who are rubber growers).

The inputs and services supplied by Rubber Board (which is a partial owner

of the company) in association with Periyar Latex Limited, to themembers of Rubber

Producer's Societies forms company's backward linkage with rubber growers /

farmers. Company's backward linkage with farmers takes the farm of transfer of

farming and initial processing technology to farmers, distribution of plantation

inputs, helping Rubber Producers' Societies to set up demonstration plots, providing

employment and wages, undertaking contract farming for farmers, organizing

training, seminars and group meetings for the empowerment of small farmers,

arranging bank loan for rubber planting, facilitating inter-agency linkages such as

participation with peoples' planning programmes and other state government

agencies for implementing programmes.

The observed farm-industry linkage provided by Periyar Latex Limited is

presented in chart 7.2. The chart is prepared on the basis of information provided

by the company officials regarding the inputs it supplies to the farmers, inputs from

the company's wcbsite, Rubber Board Publications, interviews and discussions

with company officials and RPS members.

Chart 7.2 : Farm - Industry Linkage Provided by Periyar Latex Limited, Muvattupuzha

Backward Linkage Forward Linkage =, I 1 I I

Association of

8.

Financial support for constructin of latex collectin centres.

Supply of plantation inputs such as fertilizers, fingicides, tapping aids, spraying materials at reduced rates. Provide an assured market for latex by its procurement.

Help RFS to raise nurseries and supply high yielding planting materials to growers.

Provide employment and wages.

Contract farming for farmers. Arrange seminars, group meetings to facilitate transfer of latest information, women development programmes for capacity building and leadership.

Arrange working capital loans from banks for maintenance of existing yielding plantations for meeting expenses of aH agricultural practices.

t - Marketing and distribution - supply of processed high quality latex to industrial units to manufacture rubber based products.

Supply raw material Iatex

Supply share capital 3 . Supply labour

4. Supply leadership + 1 1 , Farm-Industrq. Linkage t I Source: Field Investigation

7.3.3. In the Fruit and Vegetable Processing Sector

7.3.3.1 Nadukkara Agro-Processing Company Limited

A unit in the fruit and vegetable processing sector of the EmakuIam district,

which is observed to provide farm-industry linkage, is Nadukkara Agra-Processing

Company Limited at Muvattupuzha in Ernakulam district.

Nadukkara Agro-Processing Company, a modern fruit and vegetable

processing factory, is established as co~nponent of Kerala Horticulture Development

Programme, a project funded by European Union and Government of Kerala, for

commercial processing of pineapple, mango, and other fruits and ginger f'or value

addition and to ensure supplementary income to farmers through transfer of

t e c h n ~ l o g y . ~ ~ It is a processing industrial unit of the farmers, by the farmers and for

the farmers. Thus it is an agribusiness started by farmers for themselves. The

company has shown that fanners can create value addition to their products and

intervene successfully in the market to stabilize the prices of agriculture products.2b

It is a public limited company with target farmers (Registered farmers)

holding 70 percent shares of the company and the Government of Kerala with 30

percent shares of the company.27 The command area of the factory includes 19

panchayats and Muvattupuzha municipal areas of Ernakulam district.

The company has entered into an agreement with target farmers in the

command area whereby the hmers cultivate pineapple in at least half an acre of

land and supply fruit to the factory and the fanners get reasonable and the most

remunerative price and is assured of a minimum price of Rs.4 per kilogram for the

25 "The Best of the Nature, World has ever Tasted", http:// www.ficci.corn/a~roindialaicmember/ nadukkara agro.htm.

26 .'The Best of Nature World Has Ever Tasted", www.ficci.com/agroindia/cicmeniber/nadullara a~ro.htm. .

27 .'Nadukkara Agro Processing Company", http:ll www.talent kerala.net/previous/Z003/iun/26.h1

pineapple fruit.28 The company, in turn, process and market value added fruit

products for domestic as well as international markets.

?'he object] ves of the company are commercial processing of pineapple,

mango and other fruits and ginger for value addition for the benefit of farmers, and

to ensure supplementary income to the farmers through successful transfer of

technology, to stabilize price of pineapple, to provide employment to poor people

in its command area. In order to achieve these objectives, the company has

established linkage with target farmers growing fruit in the command area who

supply fruit to the company.

Target fanners' observed forward linkage with the processing company

take the form of registered farmers supplying fresh pineapple of the specified

standard (the fruit must weight at least 700 grams) to the processing company,

contribute to the share capital of the company, supply of Iabours and proving

leadership and management to the company. With regard to farmers' contribution

to the share capital of the company, it was reported that every member farmer is

required to buy 250 shares of the company with face value of Rs. 10 for each share.

Regarding farmers providing leadership and management to the company, it was

observed that seven out of ten board members of the board of directors uf the

company are representatives of the member farmers who are eIected from among

member farmers.

The company's observed backward linkage with farmers takes the fbnn of

company providing employment and sustenance and livelihood to large number of

families (providing wages and salaries), procurement of pineapple and ginger from

member farmers by fixing a minimum price, especially beneficial to the farmers

when there is a glut in the market.29 (This intervention by the company has helped

28 Ihid

29 hnnua l Report, 2003-2004, Nadukkara ~ ~ r o - ~ r h c e s s i n ~ Co. Ltd. P. 8.

in stabilizing the price of fresh pineapple thereby having a price stability effect in

the whole of pineapple provide advice to the farmers on modern crop

management / crop planning / farm techniques such as high density planting, fertilizer

management and manuring, chemical weed control and on post harvest management

etc. (it was seen that company's agriculture experts frequently visit the farms to

give proper guidance to farmers).

The f'arm-industry linkage observed to be provided by Nadukkara Agro

Processing Company is depicted in chart 7.3. The chart is prepared on thc basis of

information provided by the company officials regarding the inputs i t supplies to

the farmers, inputs from company's websi te, company's annual reports, discussions

with farmers and fanner representatives in the board of directors.

Chart 7.3: Farm - Industry Linkage Provided by Nadukkara Agro-Processing Company, Muvattupuzha

1 . Provide advice 011 crop planning / + farm techniques such as high density planting and management, fertilizer management/manuring, pest control, chemical weed control etc to optimise the level of inputs for maximising f rui t output and to desired top qulaity crop.

Pineapple and ginger Producers 2. Supply booklets on package practice t

for Kew cultivation at free of cost.

3. Provide assured market for pinappie + and ginger at reasonable price by its procurement from registered farmers.

I I 4. Provide employment and wages +

5. Offer price guarantee to farmers to t- ensure stability of supply.

Linkage Forward Linkage

1 * I

1. Supply of output of pinapple of top quality and ginger

t

2. Supplysharecapital 3. Supply labour

--+ 4. Provide leadership and management (70% of share holders are farmers and 7 out of 10 board members are

Marketing and I'L distribution

I Farm-Industry Linkage d representatives of fanners.)

Source: FieId Investigation

It was reported during the visit to the company that the benefit accruing to

the company from the farm industry linkage it has created is the assured availability

of finest fresh pineapple for producing fruit products of international standards.

SECTION 7.4 SUMMARY OF OBSERVATIONS FROM THE CASE

STUDIES

Thus the observations made in the case studies regarding the aims and

activities of farm-industry linkage system provided by four agro processing industrial

units are summarized in chart 7.4.

Chart 7.4: Aim and Activities of Agro-Processing Industries in Providing Farm - Industry Liakages

* Farm-Industry Linkage (Aim) I

Eackward Linkage T w

Forward Linkage 4

Marketing

--b and distribution

Aim Activities

from farmers. 3. Ensure assured Activities 4. Arrange financial assistance production and supply - to farmers from banks and 1. Post harvest

of raw materials in and market terms of quantity, crops ! cattIe from insurance activities quality and time. companies.

2. Transport 4. Transfer of most 5. Employment and wages + 3. Storage

advanced technology 6. Help farmers to organise 4. Processing to farmer with the themselves into co-

view to increase farm operative societies, groups 5. Packaging productivity. or charitable societies 6. Distribution

7. Conducting semianrs, 1. Supply of farm output of raw workshops, conferences etc. +

materials to facilitate exchange of information 2 Supply of labour ' 3. Supply of share capital - 4. Leadership and Managelnent

I . Increasing farm productivity and production.

2. Minimising primary producer's risk.

1. Supply of farm inputs 4-

2. SuppIy of advanced information on crop planning and farm + techniques.

3 . Procurement of farm output +

Chart 7.4: Aim and Activities of Agro-Processing Industries in Providing Farm - Industry Linkages (Contd.)

b Farm-Industry Linkage +-,

Aim I . Assured market for and Remunerative and

assured price to primary producers for their raw materials and sharing of benefits with the primary producers due lo value addition.

2 . Employment generation in the processing sector for rural poor.

3 . Increase in the net income o f the primary producers

4. Development of agriculture and processing industry.

5. Preparing poor people in rural areas for a co- operative action and for social life.

6. Farm-industry collabroation and direct inter action between primary producers and enterprises.

7. Standardisation of produce of the farmer

Source: Chart 7.1. 7.2, 7.3 and Field lnvestigation

It is ohserved in chart 7.4 that processing units create farm-industry linkages

with specific aims. It is seen that in the farm-industry linkage system, processing

units crcates backward linkages with farmers I farms with specific aims and

undertake specific activities (which takes the form of its backward linkages) to

achieve the aims. Processing units also are found to be having forward linkages of

various forms. It was also observed that in the farm-industry linkage system provided

by processing units, farmers / agriculture produce growers have forward linkage

with processing units.

It is seen that agro-processing units create farm-industry linkages in which

they establish backward linkage with farmers. Processing units have reported

following aims in creating farm industry backward linkages:

*:* To increase farm productivity and production

*:* To reduce primary producers' risk

*:* To ensure assured production and supply of raw materials in terms of quantity,

quality and time

*:* To transfer most advanced technology to the farmer with the view to increase

farm productivity.

In order to achieve these objectives, processing units are found to engage

in certain specific activities which take the form of processing units' backward

linkage with farmers I farms. The observed activities undertaken by processing

units in creating backward linkages are:

*:* Supply of farm inputs

*:* Supply of advanced information on crop planning, farm techniques, post

harvest management etc

4 4 Arranging financial assistance to farmers and insurance cover to farmers 1

crops / cattle from insurance companies

*:* Providing employment and wages

+:* Helping farmers to organize themselves into co-operative societies, groups or

charitable societies

*:* Conducting seminars, workshops, conferences etc to facilitate exchange of

information and empowerment of small farmers

Processing units' forward linkages include marketing and distribution of

processed products.

In the hrm-industry linkage system created by processing units, i t was

found that farmers have forward linkage with the processing units which take the

form of -

-3 Supply of farm output of agricultural raw material to processing units

*:* Supply of labour

*:* Supply of share capital and

8 Providing leadership and management to the processing units

The aims of farm-industry linkage system reported by processing units are

found to be-

+:* Assured market, remunerative and assured price to primary producers for their

raw materials and sharing of benefits with primary producers due to value

addition

*:* Employment generation in the processing sector for rural poor

Q Increase in the net income of primary producers

*:* Development of agriculture and processing industries

a:* Preparing poor people in the areas for a co-operative action and for social life

*:* Farm-industry collaboration and direct interaction between primary producers

and enterprises

*:* Standardization of the producc of the farmers

The case studies madc of four agro-processing industrial units have

revealed that they provide farm industry linkages. However, farm-industry linkages

observed to be provided by agro-processors such as Milma, PDDP, Nadukkara Agro-

Processing Company, and Periyar Latex Company Limited have been found to bc

limited to processing unit's supply of certain farm inputs and conduct of study

class to farmers. The case studies also have revealed that these agro-processors

have not shown any interest in routing governmental schemes thorough them for

implementation for the benefit of farmers in the rural area and are not involved in

the development of infrastructure and social welfare facilities for the rural poor. It,

thus, implies that these units do not act as an anchor activity for integrated rural

development in the study area.