Draft Report Bharath_final

8/2/2019 Draft Report Bharath_final

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Draft Report

Feasibility study on Fresh

Produce supply chain

KIIT School of Rural Management

P Krishna Bharath Varma


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TABLE OF CONTENTS

Contents1. INTRODUCTION: .................................................................................................................................... 3

2. OBJECTIVE OF STUDY: ........................................................................................................................... 4

3. METHODLOGY: ...................................................................................................................................... 4

4. Findings ................................................................................................................................................. 5

4.1. Village Details ................................................................................................................................ 5

4.2. Existing Marketing Structure: ....................................................................................................... 6

4.3. Crop Cycle and Productivity of Vegetables ........................................................................................ 8

4.4. Availability of Vegetables in Rangareddy District throughout the year ..................................... 10

5. Proposed Marketing Model................................................................................................................. 12

6. Cost Analysis ....................................................................................................................................... 15

Non Recurring Cost ................................................................................................................................. 15

Recurring cost (per month) for shop ...................................................................................................... 15

Recurring cost per month for supply chain............................................................................................. 16

7. Risk factors & mitigation ..................................................................................................................... 17

Marketing/Price Risks ...................................................................................................................... 17

8. Conclusion ........................................................................................................................................... 18
http://e/ksrm/serp%20mts2/pdf%20for%20report/final/Draft%20report%20Bharath_final.docx%23_Toc316282361http://e/ksrm/serp%20mts2/pdf%20for%20report/final/Draft%20report%20Bharath_final.docx%23_Toc316282361


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1. INTRODUCTION:India is fortunate to be endowed with a variety of agro-climatic zones and has a tradition of

growing a wide range of horticultural crops. Among the horticulture produce, vegetables have

the largest share of production (60.8 %). Vegetables not only contribute to the food basket of the

country but are also a highly remunerative crop, providing quick returns to the farmer per unit of

area. Production and productivity of crops and profitability of farmers can be enhanced by

encouraging 'off-season' production under protected cultivation in green houses, shade net

houses etc for generating income round the year. Moreover, vegetables form the most important

component of a balanced diet.

There has been great concern in the recent years regarding the efficiency of marketing of

vegetables in India. It is believed that poor linkages in the marketing channels and involvement

of more intermediaries are leading to high and fluctuating consumer prices, and only a small

proportion of consumer price reaches the farmer. There is also substantial wastage of agricultural

produce, lack of quality-standards and frequent mismatch between demand and supply spatially

and over time. With growing demand and the accompanying supply response, fruits and

vegetables have assumed great importance, and India now ranks second in the world in the

production of vegetables. Horticultural crops are mostly labor intensive in India and provide

substantial employment - not only in production but also transportation, processing andmarketing. The marketing of horticultural crops is also quite complex and risky due to their

perishable nature, seasonal production and bulkiness

In the light of these issues the paper examines the feasibility of fresh produce supply chain. The

paper particularly focuses on a model which would mainly involve linking of small and marginal

farmers directly to markets at the consumer end. It also aims at understanding present marketing

structure of vegetables and involving SHG women in the proposed marketing model. The paper

examines various aspects of market including its functions, marketing practices, as well as the

value chain from the farmer to agent to retailer to consumer.


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2. OBJECTIVE OF STUDY:The objective of the study is

1. To analyses the current production system of vegetables in the villages.2. To analyze the SHG capabilities to be linked with model.3. To understand the present existing markets structure of vegetable and their function.4. To analyze the infrastructure requirement and cost efficiency of the proposed model.

3. METHODLOGY: Sample design:

The sample design is based upon the representative of the whole population by taking

10% of the total SHG women farmers who have land area of minimum .5 acre of land.

Primary Data Collection:1. Focus Group Discussion:2. Structures questionnaire3. Direct observation

Secondary data collection:1. Internet2. SERP Resource persons.3. Agriculture Department

Direct Field Observation


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4. Findings4.1. Village Details

Peddashapur is one of the Villages in Shamshabad Mandal in Rangareddy District in Andhra

Pradesh, India. Peddashapur is located 6.4 km distance from its Mandal Main Town

Shamshabad. Peddashapur is 25.5 km far from its District Main City Rangareddy. It is 22 km far

from its State Main City Hyderabad.

This is one of the villages where SERP has taken CMSA intervention. There are 68 SHGs in

these villages out of which 40 SHG groups adopted NPM practice. There are more than 12

varieties of vegetables grow in this area. On an average, daily vegetables production in these

villages is more than 3 tons.

Agriculture sector

Village Total Agri

land(acres)

Land

underNPM

(acres)

Vegetable

Cultivation (acres)

Vegetable

Cultivation- NPM (acres)

Kharif Rabi Summer Kharif Rabi Summer

Pedhashapur

village and its

adjacent

villages

1500 950 80 40 50 30 18 30

Agro climatic /ecological zone

Agro ecological sub regionsouth Telangana plateau and eastern ghat, Hot dry semi arid.

Agro climatic Region Southern Plateau and hill region.

Agro climatic zone Southern Telangana Zone.

Though there are many SHG farmers registered under CMSA but not all farmers follow Non

pesticide management in these villages. Yet there are some farmers who managed to reduce theuse of pesticides. Famers in these villages mainly prefer to grow paddy in kharif season and

vegetables in Rabi and summer season. Even though they produce vegetables, the land allocated

particularly for vegetables throughout the year is less because of high fluctuations in rates of

vegetable and better profit realization in Paddy than vegetables.

All the farmers who grow vegetables go to Shamshabad market (mandi). But it has been

observed that only women go to market for selling their produce and as it is a strenuous job of


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sitting all day for selling their produce and (they leave at morning 6am to farm for harvesting

produce and again at 10a.m they go to market for selling their produce and return home by

evening) most of them prefer selling it to the middlemen. Daily a minimum of 3 tons is going in

to market from these villages. Despite of these efforts, by the end of the day when some of their

produce is not sold they dump it on the road as they cannot afford taking it back. The other

market where the farmers prefer to sell their produce if they have less produce is the Shamshabad

vegetable market; they also sometimes buy vegetables for the household needs from here.

Farmers have to pay a commission of Rs.10 per bag of produce for selling in the vegetable

market.

4.2. Existing Marketing Structure:

Traditional Vegetable market model followed in Pedhashapur village and its habitat villages is

very complex. It is predominantly followed in traditional retail marketing. The above figure

shows the logistical route of vegetable market and the players involved in the market. Players

involved in this model are commission agents, cart vendors, retailers, local vendors and

consumers. In fact there are at least 5 intermediaries in traditional supply chain who do not add

any value to the produce but they earn more profit margins than the farmers. Agents and retailers

are main traders for the vegetables produced by farmers in Pedhashapur village. Traders charge 7

to 10 percent commission for every sale. The commission rate depends upon the relationship

between farmer and the commission agent. If the farmer is a regular supplier then the

commission agent would charge less commission as compared to the amount charged from other

farmers. The farmers of these villages grow vegetables in a small land. Mostly these farmers


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prefer to sell their produce to agents to save time, so that they can come back and work in their

fields. Mandi agents generally dont reject the produce even if its quality is lower than specified.

Most of the agents in Shamshabad market deal with specific vegetables, depending upon the

demand or orders they receive from retailers or hoteliers. Normally, agents dont get involved in

transportation either inward or outward transportation. Farmers have to bear the transportation

expenses for supplying their produce to local mandis or local market. Most of the farmers

supply their produce through mini truck by spending 50rs per bag while some farmers would

carry their produce travelling in bus which costs around 30 per bag and 30rs per person.

Vegetable logistics in the existing model has 3 phases - producer to agents, agents to local

vendors or retailers or cart vendors and then to customers. In the first phase, farmers would

supply their produce to agents at their own expense. In the second phase retailers, hoteliers, local

vendors and cart vendors buy vegetables for which they bear transportation cost themselves. In

the final phase customer is the player. Domestic customer shop and retail stores are nearly

located near the consumers residence. Vegetables are delivered at the door steps by the cart

vendors. Grading is done at the farm level by farmers before supplying it to the agents. Then

retailers purchase it from agents and pack it thereby adding value to the produce. In this

traditional model of marketing, cost adds largely due to transportation cost. In every phase each

intermediary adds their profit percentage depending upon expenses incurred by them.


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Vegetable

Name

Duration

of crop

Start of

harvest

Duration

of Harvest

Season for

sowing

Production

per acre

Average

production

/per day

Cold storage

Duration

French Beans 70 days 40 days

onwards

from

germination

30 days July ,

January

33.5

tonne

7-9 quintal

per picking

3-6 weeks

Cabbage 120 days 50 to 80

Days after

plantation

30 -35

days

July,

august,

October.

50

quintal per

acre

16 quintal

per day

during

Harvest

Duration

3 Months

Bitter gourd 150 -180

days

After 100

days

50 -80

days

February

and July

75 quintal

per acre

1.5 quintal

per alternate

day picking

4 weeks

Carrot 120 days After 50

days

30-35

days

August to

Nov

60 quintal

per acre

3-4 quintals

per picking

4-6 weeks

Bottle gourd 100 days After 6065

days

30 days Nov-Dec/

Dec-Jan/

Jun-July

6 tonnes per

acre

3 quintal per

pick

3 weeks

Brinjal 180 days After 60

days

90 days Jun-Jul/

Oct-Nov/

Jan-Feb

20 tonne

per acre

Weekly one

pick

7 to 10 days

Okra 90 days After 60

days

30 days Jan-Feb/

May-Jun/

Oct-Dec

40 quintal

per acre

Alternate

day pick

7-10 days

Cluster bean 100 days After 65days

30 days Jun-Jul,Aug

20 quintalper acre

Alternatepicking

5-6 days

Tomato 90 days After 60

days

30 days Jan-Feb/

Jun-Jul/

Oct-Nov

160190

quintal

Alternate

day picking

4-7 days

Mirchi 150 -180 After 140 60 days April -may 5 to 6 tonne Weekly

once

2 weeks

4.3. Cro C cle and Productivit of Ve etables


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days days picking

Onion 160-180

days

After 150

days

One day Mar-Apr/

May-June/

Sep-Oct

3.8 tonne Once -nil-

Garlic 150 -180

days

After 150

days

Once Mar-Apr/

May-June/

Sep-Oct

2 tonne One day 6 months

Ginger 240 days After 230

days

Once 3.5 tonne One day -nil-

Ridge gourd 60 days After 45

days

Weekly

twice or

thrice

Feb-Mar/

Jun-Jul/

Oct-Nov

4 tonnes per

acre

Weekly

three picks

2 weeks

Colocasia 7 -8

months

After

7months

Once pick Feb 6.7tonne

per acre

Once No need


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4.4. Availability of Vegetables in Rangareddy District throughout the year

DESCRIPTION UOM Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec

VEGETABLES

TOMATO LOCAL KG y y y y y y y y y y y y

TOMATO HYBRID KG y y y y

POTATO KG y y y y

BOTTLE GOURD NO y y y y y y y y y y y y

RIDGE GOURD KG y y y y y y y y y y y

BITTER GOURD KG y y y y y y y y y

SNAKE GOURD KG y y y y y y y y y

OKRA (BHENDI) KG y y y y y y y y y y y y

CABBAGE-GREEN KG y y y y y y y y

CAULIFLOWER NO y y y y y y y y y y

CAPSICUM-GREEN KG y y y y y y y y y

CHILLY-GREEN KG y y y y y y y y y y y y

BRINJAL-ROUND

GREEN KG y y y y y y y y y y y y

BRINJAL

PURPLELONG KG y y y y y y y y y y y y

BRINJAL - PURPLE

ROUND KG y y y y y y y y y y y y

BRINJAL

VARAKATRI KG y y y y y

Bottle Brinjal KG y y y


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BEANS - CHIKADI KG y y y y y y y y y

BEANS - FRENCH

ROUND KG y y y y y y y y

BEANS CLUSTER(GOKARA) KG y y y y y y y y

BEANS COW PEA KG y y y y y y

CUCUMBER

(KHEERA) KG y y y y y y y y y y y y

CUCUMBER

SAMBER (DOSA) KG y y y y y y y y y

RADDISH WHITE NO y y y y y y y y y y y

ONION LEAF NO y y y y y y

MINT BUNCH

(PUDHEENA) NO y y y y y y y y y y y y

DRUMSTICK NO y y y y

COCCINIA(DONDA) KG y y y y y y y y y y y y

AMERICAN SWEET

CORN NO y y y y y y y y y y y y


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5.Proposed Marketing Model

Production Plan

Phase 1:

SHG Group

Village

Organization

Distribution

center and

cold storage

Collection

Center and

processing

center

SERP

(CMSA)

Master Farmer will take care

of proper implementation of

production plan.

SHG women at the Mandal

Level will receive

information from the Zilla

and according send the

required quantity and mix of

vegetables.

Demand and supply

forecasting. (They will use the

infrastructure present at the

zilla level and process

information)

Marketing Activist (Will

collect produce form

collection center and

transport to Secondary

processing center and

outlets

SHG GroupSHG Group

Retail Outlet

Zilla

Samakhya

Farmers Farmers Farmers

Urban

Samakhya

(Managing

Retail outlets

and promoting

Business

Production and grading at

village level.

Supply to retailers, vendors,

mandi, wholesalers etc.

Consumers


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Phase 1:

The model concentrates on SHG farmers who in the existing structure come together in an SHG

comprising of 10-15 women (both farmers and non-farmers). The farmers in such SHG`s form

the base of the model as producers of the vegetables. The farmers who are interested in the

model register themselves with the CMSA. Then CMSA resource person would provide the

farmers with the crop calendar detailing them regarding the rules and guidelines to be followed

in this model. The CMSA resource person would select a Master farmer from 3 SHG`s (each

SHG should have a minimum of 4 farmers registered with the model) .The Master farmers

would take care of the implementation of the model by visiting the fields of the registered

farmers and informing the staff about the crop progress.

All the registered farmers of a village will grade their produce at the farm level and bring both

grades A as well as grade B to the village organization building where the produce would be

collected by the CMSA resource person. The master farmer will also be responsible to tie up

with the vendors or shops in the local market where the grade B produce would be put for sale.

The grade B produce thus, shall move directly from the VO to the local selling points. A vehicle

(Tata Ace) would reach every village in the morning between 8 to 10 am and collect the Grade A

produce from the VO building of the village. The CMSA resource person would take note of the

quantity each farmer brings to the VO and also ensure that the selling price is realized by the

farmers. A Tata Ace (2.5 tons capacity) will thus be able to cover 2 to 3 villages and will carry

the produce to the Collection center.

Phase 2:

A collection center will be set up in the center of a Mandal where procurement from villages up

to 60 km radius around the collection center is collected so as to minimize the transportation cost

per kg of the vegetable. The collection center will employ 6 SHG women (landless) or grading

and sorting of the vegetables and also would employ a collection center manager for supplying

required quantities of vegetables to the store according to the forecast indent sent by the Zilla

Samakhya. The CMSA resource persons from every village would regularly update the


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production status and intake of produce from each village to the Collection center manager (CC

manager) and in turn the CC manager would inform him the requirements for the next day.

There is a Distribution center which collects the produce supplied from each CCs. In a

distribution center the required quantities for each vegetable for a single outlet would be weighed

and sent to that particular store. The main idea of having a distribution center is to bring different

varieties of vegetables grown in different areas or mandals at one central point and distribute all

the varieties of vegetables to different stores, thus ensuring the availability of a wide range of

vegetables to our customers. A Distribution center manager and an analyst will be working in the

distribution center. The analyst would take the demand forecasts from each outlet and prepare a

forecast indent and send it to the CC managers. Both the distribution center manager and the

analyst would be from the Zilla Samakhya and would be trained by CMSA about the operations.

Phase 3:

From the distribution center the specified quantity and variety of vegetables would reach the

retail outlet in a vehicle (Tata Ace) which would operate in between the distribution center to the

outlets. The vehicle driver would also procure certain vegetables from the mandi which are

seasonal and thus not available in our procuring areas. The outlet would be managed by the

members of the Urban Samakhya which are being managed by MEPMA (Mission for eradicationof poverty in Municipal areas).The urban Samakhyas consist of slum level federations which are

situated in the urban municipal areas. At present there are 656 slum level federations spread

across the twin cities.

The left over produce from the distribution center will be sold in another market in which we

target the wholesalers (who buy produce from the mandis and sell it to vendors) ,slums, push cart

vendors, etc. Direct delivery of vegetables to door step by online orders or orders through phone

can also be implemented in this model.

As vegetables (except leafy vegetables) can be stored without spoilage for 2 days and because

we have 3 markets to sell our produce we do not suggest for a cold storage (at least in the initial

stages). If the forecast indent and production planning is well managed and coordinated there

will be no use of a cold storage.


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6. Cost AnalysisNon Recurring Cost

Transportation(Tata ace-3) 1050000

Collection (2)

plastic crates(2000) 440000fork lifter(3) 60,000

electronic weighing machines(6)(including shop) 90000

Grading tables(2) 30000

washing table 300000

overhead tank

Pipelines

bore well

washing sheet

computer(5) 100000

printer(4) 40000

shop accessories 100000

Total 2210000

Less Subsidy 884000

total cost 1326000

per shop(fixed cost) 265200

Recurring cost (per month) for shop

urban Samakhya 5000

Helper(1)(urban Samakhya) 3000electricity(shop) 3000

shop rent 20000

Miscellaneous 1000

Total 32000

per day 1066.667

per day(total recurring cost) 1801.6

If we procure at Rs.10 per kg 6000

Costs 1801.6

total cost 7801.6

Profit 780.16

total price 8581.76

per kg price 14.30293

yearly profit 284758.4


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Recurring cost per month for supply chain

electricity(collection center) 1000

electricity(distribution center) 2000

Distribution center manager 4000

security guard(1) 2000

zilla level (1)(distribution center) 4000

10 women @two Collection 15000

supervisor at collection center 3000

ace driver(2) 10000

Diesel 30240

CMSA resource person(2) 4000

distribution center Rent 20,000

auto(for local work) 15,000

Total 110240per shop 22048

per day per shop 734.9333

Break even 1 year

Return on Investment (%) 107.375

Cost for infrastructure Rs.2210000 and getting a subsidy of 40% from horticulturedepartment and total cost after subsidy will be Rs.1326000. If the materials are procured at Rs.10 per kg for 600kgs than the yearly profits would

come to Rs.284758

Recurring cost for 5shops including collection and distribution center comes toRs.110240. So cost per shop would be Rs.22048 and on daily basis it would be around

Rs. 734.

Breakeven will be achieved with in through sales of 500Kg of vegetables per day pershop.

Return on Investment 107.375


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7. Risk factors & mitigationProduction risk:

Production risks relate to the possibility that your yield or output levels will be lower than

anticipated. Major sources of production risks arise from inclement weather conditions (such asdrought or excessive rainfall at harvest), but may also result from damage due to insect pests and

disease.

Tools and Strategies

Adopt appropriate technology such as drip irrigation or resistant varieties. Follow recommended production practices. Diversify enterprises by growing different crops and varieties.

Marketing/Price Risks

Marketing risks relate to the possibility that you will lose the market for your products or that the

price received will be less than expected. Common sources of marketing risk include lower

prices due to increased supply or decreased consumer demand; loss of market access due to the

relocation or closing of a processor or other buyer; and, lack of marketing power due to the smallsize of farm sellers relative to others in the market.

Tools and Strategies

Develop a marketing plan with realistic sales forecasts and target prices. Increase direct marketing efforts to capture a higher price. Market through multiple channels or outlets to reduce reliance on a single market. Enter into sales or price contracts with buyers. Spread harvest and sales over the season by scheduling planting and considering storage

options.

Financial Risks

Financial risks relate to the possibility of having insufficient cash to meet expected obligations, lower

than expected profits, and loss of net worth. Sources of financial risk commonly result from the

production and marketing risks described earlier. In addition financial risks may also be caused by

increases in key input costs, increases in interest rates, excessive borrowing, lack of adequate cash orcredit reserves.

Tools and Strategies:

Control key farm expenses. Conduct a trend analysis to assess whats happening with farm income and net worth over time.


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Management flaws:

One of the main risks in this model is the possible management flaws. A business can sustain

only if it is managed as a business. As our model is more service oriented and is being managed

by SHG women alone so, loop holes in the business can be expected. All the activities and

participants in the model right from the base to the top should be monitored properly. Thefarmers who have registered with us should be sustained and the chain should grow or else the

whole model can collapse.

Tools and Strategies:

Proper monitoring system should be established with a designated staff in CMSA lookingafter the whole project.

Accounts should be checked and verified fortnightly and suggestions should be given tothe staff to increase the sales.

Training and support to the staff from CMSA is inevitable.8. Conclusion

Based on the analysis of data and field observations it can be concluded that the Marketing

model proposed above will be successful if farmers are provided with agri support by CMSA to

enhance production and reduce post harvest losses at farm level. To ensure efficient supply chain

the representatives of SHG who are taking part in management of supply chain need to be

imparted with proper training so that loss can be minimized and self sustainable supply chain

network can be established. If self sustainable supply chain network can be established it will

ensure three things. Firstly the end user price of the vegetables which the consumers pay will

reduce, secondly the farm gate price and profit of the farmers will increase and finally it will helpin employment generation by incorporating SHG women in the supply chain network.

Draft Report Bharath_final

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