Agribusiness South Asia Final 27-04-07

MAKE TRADE FAIR campaign aims to secure a fair deal for 650
million poor people depending on agriculture so that they

have the Power to Decide the pace and scale of opening up of
their agriculture markets to ensure food security, livelihood
security and rural development Agribusiness in South Asia
A Fact Sheet
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www.maketradefair.com
Agribusiness in South Asia
A Fact Sheet
Sukhpal Singh
Centre for Management in Agriculture, Indian Institute of Management, Ahmedabad
Copyright © 2007
Make Trade Fair Campaign research papers and case studies are intended to
disseminate the preliminary findings of the ongoing research on issues of Trade
and Agriculture in South Asia for the purpose of exchanging ideas, catalysing
debate and mobilising individuals and organisations in South Asia to ensure that
trade makes a real difference in the fight against poverty. The views, analysis and
conclusions are of author/s only and may not necessarily reflect the views or
position of Oxfam. Readers are encouraged to quote or cite this paper with due
acknowledgement to the author/s or Make Trade Fair Campaign.
Edited and coordinated by

Kumar Gautam
Researcher, Make Trade Fair Campaign
Copyedited by
Meera Juneja
Copyeditor, New Delhi, India
Design and Printing by

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Abbreviations
AAFL Adani Agri Fresh Limited
AP Andhra Pradesh
APMCs Agricultural Produce Marketing Committees
BDA Bio Fuel Development Authority
BILT Ballarpur Industries Limited
BRAC Bangladesh Rural Advancement Committee
CF Contract Farming
CFC Ceylon Fisheries Corporation
EEZ Exclusive Economic Zone
GDP Gross Domestic Product
GNP Gross National Product
GSAMB Gujarat State Agricultural Marketing Board
GTZ German Technical Cooperation
HBC Hard Boiled Candies
HPCL Hindustan Petroleum Corporation Limited
HYV High Yielding Variety
ICT Information and Communication Technology
IDPL International Dairy Products Limited
IFFCO Indian Farmers Fertiliser Cooperative Limited
IOC Indian Oil Corporation
IQF Individual Quick Frozen
ITC Indian Tobacco Company
KMILL Kiriya Milk Industries of Lanka (Pvt) Ltd
KRBL Khushi Ram Behari Lal
LPG Liquified Petroleum Gas
M&M Mahindra & Mahindra
MFPI Ministry of Food Processing Industries
Agribusiness in South Asia iii

A Fact Sheet
MNCs Multi National Corporations
MoU Memorandum of Understanding
MSP Minimum Support Price
MT Million Tonnes
NABARD National Bank for Agriculture and Rural Development
NAPL National Agri Products Limited
NAS Nestle Agricultural Services
NGOs Non-Governmental Organisations
NLL Nestle Lanka
ONGC Oil and Natural Gas Corporation
PAFC Punjab Agro Foodgrains Corporation
PCRA Petroleum Conservation Research Association
RIL Reliance Industries Limited
SFADP Small Farmers and Agro-forestry Development Programme
SKU Stock Keeping Units
SNF Solids Not Fat
TCS Tata Consultancy Services
TN Tamil Nadu
TNCs Trans National Corporations
UP Uttar Pradesh
WB World Bank
WTO World Trade Organisation
iv Agribusiness in South Asia

A Fact Sheet
Contents
Abbreviations iii
Foreword viii
Executive Summary ix
1. Introduction 1
2. Agribusiness in India 3
2.1 Indian Food Processing Sector 3
2.1.1 Wheat based industry 6
2.1.2 Confectionery industry 6
2.1.3 Fruit and vegetable processing industry 7
2.1.4 Dairy sector 7
2.1.5 Meat and meat products industry 10
2.1.6 Fisheries sector 11
2.1.7 Paper industry 14
2.1.8 Bio diesel 14
3. Food Retailing in India 17

3.1 Retail Formats of Major Food Chains in India 18
3.1.1 Food processors and exporters as retailers 20
4. Global Supermarket Chains in India 21
4.1 Procurement Practices of Supermarkets 22
4.2 Agri Export Chains and Primary Producers and Labour 24
5. Agri Retail Chains in India 25
6. Contract Farming in India 25

6.1 Status and Experience of CF in India 28
6.2 Impact of CF on Rural Women and Child Workers in India 33
6.2.1 Child labour and gender 34
6.2.2 Case studies 35
6.2.3 Contract cottonseed production in Andhra Pradesh 35
6.2.4 Contract tomato and potato production in Punjab 37
6.2.5 Labour in tomato fields 38
6.2.6 Labour in potato fields 38

7. Agribusiness in Sri Lanka 40
7.1 Tea and Rubber Sectors 40
7.2 Fish and Fisheries Products Sector 40
7.3 Livestock and Dairy Sector 40
7.4 Horticultural Supply Chains 42
8. Agribusiness in Bangladesh 43
8.1 Livestock Sector 43
8.2 Forestry Sector 43
8.3 Fisheries Sector 44
8.4 Major and Emerging Players in Agribusiness 46
8.4.1 The PRAN Group 46
8.4.2 BRAC (Bangladesh Rural Advancement Committee) 46
8.4.3 Proshika 46
8.5 Value Chains 47
9. Organic Produce Chains in South Asia 48
10. Conclusions 48
References 49
List of Tables
Table 1: Comparative Contribution of Agriculture to GDP in South Asia
(at Current Prices in %) 1980-2003 1
Table 2: Farm Sector Structure in South Asia 2
Table 3: Magnitude of Indian Food Processing Sector (Organised sector) 4
Table 4: Market Size, Growth Rates and Key Players in Food industry 4
Table 5: Market Size of Various Segment of Wheat-based Foods 6
Table 6: Sectoral Volumes and Key Players in the Indian Processed Fruit and Vegetable Industry 7
Table 7: Distribution of Dairy Animals by Size Group of Land Holdings, 1992 8
Table 8: Status of Dairy Industry in India 8
Table 9: Main Products, Size, and Major Players in Indian Dairy Industry 9
Table 10: Principal Dairy Products Manufacturers in India 9
Table 11: Major Manufacturers of Processed Meat Products in India 11
Table 12: India’s Seafood Processing Industry Infrastructure 13
Table 13: Category-wise Paper Mills in India 14
Table 14: State-wise Jatropha/Karanja Plantation in India (Area in ha.) 17
Table 15: Profile of Major Food retailers in India 19
Table 16: Total Number of Ghers and Area under Shrimp Farming in Southwest
Coastal Region (Bangladesh) 44
vi Agribusiness in South Asia

A Fact Sheet
Table 17: Number of Working Hours/Day (Bangladesh) 45
Table 18: Hazardous Conditions for Workers in the Shrimp Farms (Bangladesh) 45
Table 19: Harassment of Female Workers in Shrimp Farms (Bangladesh) 45
Table 20: Grower’s Price in Traditional and Modern Marketing Chain, 2003 47
List of Figures
Figure 1: Segments of the Fisheries Industry in India 12
Figure 2: Supply Chain for Fish 12
Figure 3: ITC Aqua-Choupal Model 13
Figure 4: Major Paper Producers in India 2002 15
Figure 5: Supply Chain Mechanism Adopted by the Retail Chains 22
Figure 6: Milk/Dairy Channels in Sri Lanka (% of Production) 41
Figure 7: Broiler Supply Chain in Sri Lanka 42
List of Appendix Tables and Figures

Table A 1: Major Agencies, Crops/Commodities, Locations and Types of Contract
Farming in India 61
Table A 2: Indian Organic Products, Players and Markets (Domestic and Export) 66
Fig. A 1: Bi-partite Contract Farming Model 67
Fig. A 2: Tri-partite Contract Farming Model 67
Fig. A 3: State-led Contract Farming System in Punjab (original model) 68
Fig. A 4: State-led Contract Farming System in Punjab (revised model) 68
Fig. A 5: The Quad-partite Contract Farming Model 68
Fig. A 6: The Six-partite (networking) Contract Farming Model 69
Fig. A 7: Tri-partite (Intermediary) Model of Contract Farming 69
Agribusiness in South Asia vii

A Fact Sheet
Foreword
As structural transformation of the economy takes place, the relative importance of primary farm production
declines and that of processing and distribution increases. This shift is largely from agriculture to agribusiness
as seen in most of the developed countries and more recently in developing Asian countries. The policy stance
of many of these developing countries also seems to have tilted over the last one decade or so in favour of
agribusiness from a more specific focus on agriculture. Such developments have significant implications
for agricultural development in these countries where a large section of the population still depends on
agriculture for their livelihood.
Agribusiness is the single largest sector of economy in many developing countries and is growing fast.
Agriculture currently accounts for only about 26 percent of the GDP in India, but if we take an agribusiness
perspective of the economy, more than 50 percent of India’s GDP comes from the agribusiness sector. A
large majority of Sri Lanka’s population (75%) still lives in rural areas and depends on agriculture or
related agribusiness activities directly or indirectly for their livelihoods. Sri Lanka’s agribusiness sector is
rather diversified and has a long history of serving international markets with products like rubber, tea and
spices. Bangladesh being predominantly agrarian, its agricultural sector accounts for 31.6 percent of the
GDP and provides employment to 63.2 percent of its population. The major export agribusiness sectors
of Bangladesh are potato, shrimp and seeds.
While analysing the impact of agribusiness on the development process of a country, understanding
the complexity of agribusiness becomes crucial. The increasing expansion and control of big business
in agriculture and food systems have given rise to increasing concern, even alarm, regarding the adverse
impact on livelihoods of farmers, labour markets in general and women workers in particular, sustainable
production of food, quality of food, health and nutrition, environment and welfare of other forms of life.
It is therefore important that agri-business activities should be carefully analysed and monitored for their
impact on sustainable rural livelihoods.
This paper reviews and analyses the nature, profile and functioning of agribusiness sector in South Asia. It
has also risen some very pertinent issues regarding this sector which are important in order to understand
the policy design and action. I hope all the stakeholders would find the facts presented in this paper
useful.
Palash Kanti Das

Regional Trade Policy Advisor, Oxfam GB
& South Asia Lead, Make Trade Fair Campaign
viii Agribusiness in South Asia

A Fact Sheet
Executive Summary
Poverty reduction in the south Asian region is farming is dominated by small holdings, which
inevitably linked to agricultural development. But, means there are resource constraints to link up
the context in which this agricultural development with global markets or global players.
has to be achieved has changed in the last decade or
so in the region due to the opening up of domestic Globalisation and liberalisation are likely to have
markets, liberalisation of domestic policies under the greatest impact on the rural poor through their
Structural Adjustment Programme (SAP) and the influence on the agricultural sector, terms of trade,
inclusion of agricultural trade under the WTO. availability and cost of inputs, and new investments
Now, due to the declining terms of trade for primary in the agribusiness sector. Technological progress
products, which have a low level of knowledge in farming can help the rural poor by raising farm
intensity, the focus has shifted to value added agro productivity, lowering food prices, increasing
products for export and domestic markets. Though employment, and reducing farming risk. But the
there are many advantages in becoming part of the role and influence of multinational corporations
export-oriented value chains like knowledge transfer, (MNCs) in food production and trade will,
better incomes, and understanding of market, there as an institutional mechanism, determine the
are also negative aspects like vulnerability of export exact impact of globalisation on the rural poor,
markets, high cost of attending to these markets who are mostly from the labour class. Contract
and price fluctuations. This paper examines the farming promotes participation of domestic firms
profile of agribusiness sector and the impact of and MNCs in farming, and is seen as the ‘new
agribusiness corporations, supermarket chains, and investment’ aspect of globalisation.
such agencies on primary producers in South Asia
from the perspective of rural poverty reduction. Supermarkets in south Asia presently account
for a very small share of the fresh produce retail
Agribusiness has strong linkages with the industrial, sales. However, sales are growing rapidly and an
agricultural and service sectors and has impacts attractive fruit and vegetable sector is perceived
on each of these. It is the single largest sector of as an important way of attracting customers.
economy in south Asian countries and is growing Supermarkets presently use a wide variety of fresh
fast. Agriculture currently accounts for only about fruit and vegetable procurement practices which
a quarter or less of the GDP in these countries and are likely to see consolidation. At present, the
has been on a decline for some time, though the following channels can be seen:
people dependent on agriculture continue to be a  direct, uncontracted purchases from farmers at
high proportion of the total population. But, if we individual supermarkets;
take an agribusiness perspective of the economy,  purchases from wholesalers, who either work
then even now, more than 50 percent of the GDP of directly with farmers or through wholesale
these countries comes from the agribusiness sector markets;
which includes all the agricultural input sectors, the  purchases through independent procurement
farm production sector, agro processing, including companies (dedicated suppliers) who often work
food, and manufacturing sector and the food/fibre with farmers approved by the supermarkets
distribution and marketing sector. South Asian chains (preferred suppliers);
Agribusiness in South Asia ix

A Fact Sheet
 purchases through government-sponsored provision for agencies and measures to promote
distribution centres; quality, standards, and alternative markets, and
 purchases through informal farmer groups, public-private partnerships to facilitate more
farmer associations or cooperatives; and better linkage between firms and farmers.
 purchases through large individual farmers, The model contract agreement is quite fair in
who often sub-contract part of the supply to terms of sharing of costs and risks between the
smaller farmers; sponsor and the grower. But, it leaves out many
 leasing of space within the store on a commission aspects of farmer interest protection like delayed
basis to traders, farmers and cooperatives. payments and deliveries, contract cancellation
 multiple channels, and damages if the producer made firm specific heavy
 integrated chains investments, inducement / force / intimidation
to enter a contract, disclosure of material risks,
But, small producers have been, by and large, competitive performance based payments, and
excluded from various commodity chains, sharing of production risks. Also, there are state
including organic produce chains, which operate level variations in the amended Acts and the spirit
with contract farming schemes at the producer has been diluted.
level, with the exception of some crops like
gherkins which require family labour and constant There are many malpractices and negative
supervision, and therefore, only small acreage is implications of contract farming in the region
allowed under contract. In Bangladesh, there is despite the fact that it does lead to higher income
a positive development where NGOs are taking and employment for rural producers and labour
active role in these chains and facilitating the due to new crops and technologies besides assured
small producer involvement in value chains by markets and prices. These ill-effects include
organising contract farming which is missing in ‘agribusiness normalisation’ and depletion of
India and Sri Lanka. In India, the legal reform natural resources like land and water. Further,
process is already under way with the Union contract farm production is primarily carried out
Government enacting the Model Act (Agricultural by female labour, and increasingly by young girls
Produce Marketing (Development and Regulation under adverse wage and work conditions. The paper
Act) 2003 and many states adopting the amended concludes by arguing for a holistic understanding of
Act which deals with the setting up of private the functioning and dynamics of the organisation
markets, selling of produce by growers outside the of vertical co-ordination in various sectors and
APMCs (regulated markets), setting up of direct examines the institutional and organisational
markets, specialised commodity specific markets, dimensions of such chains and networks from the
regulation and promotion of contract farming, primary producer perspective.
x Agribusiness in South Asia

A Fact Sheet
1. Introduction
Agricultural development still holds the key to and employment to that at home (da Silva, 2005).
economic development in many developing Though there are many advantages in being part of
countries, especially in South Asia where a large export-oriented value chains like knowledge transfer,
proportion of the population relies on agriculture better incomes and market understanding, there
directly or indirectly for their livelihoods. Poverty are also negative aspects like vulnerability of export
reduction and social progress in the region is markets, high cost of attending to these markets and
inevitably linked to this as well. But the context price fluctuations (Andreas et al, 2006). Further, the
in which this agricultural development has to be food miles i.e. the distance food travels has increased
achieved has changed in the last decade or so in this significantly e.g. in the USA, food typically travelled
region due to the opening up of domestic markets, 1500-2500 miles from the farm to plate which was
liberalisation of domestic policies under Structural 25 percent higher than that in 1980 and in the
Adjustment programme and the inclusion of UK, the average food miles is 3000 kms. (da Silva,
agricultural trade under the WTO. Now, due to the 2005). This is possible due to developments in
declining terms of trade for primary products, which food technology, transport technology, Information
have a low level of knowledge intensity, the focus and Communication Technology (ICT), and
has shifted to value added agro products for export biotechnology. In the developed world, processed
and domestic markets. The share of value added foods accounts for 60 percent of consumption on an
processed products in relation to commodity trade average (Rehber, 2000).
increased from 24.7 percent in 1970 to 58.2 percent
by the end of the 1990s globally across developing Agribusiness has strong linkages with the industrial,
and developed countries (da Silva, 2005). But, a agricultural and service sectors and has impacts on
large part of this value added agro trade is intra- each of these. It is the single largest sector of economy
industry, spread across countries and even within in many developing countries and is growing fast
the same corporate entities like MNCs or TNCs. (Andreas et al, 2006). Agriculture currently accounts
In fact, the food industry ‘transnationality’ index, for only about 26 percent of the GDP in India as
which rose from 59 percent in 1990 to 79 percent also for many other countries like Sri Lanka and
in 1999, is the highest among all industries. This Bangladesh and has been on a decline for some time
index measures the degree to which a company is (table 1). But if we take an agribusiness perspective
internationalised by comparing foreign assets, sales of the economy, then even now, more than 50
TABLE 1
Comparative Contribution of Agriculture to GDP in South Asia (at Current Prices in %) 1980-2003
Country Agriculture Industry Services

1980 1990 2001 2003 1980 1990 2001 1980 1990 2001
India 38.1 31.1 24.7 22.2 25.9 29.3 26.4 36 39.7 48.8
Bangladesh 31.7 30.4 22.7 21.8 20.9 21.7 26.4 47.4 47.9 50.9
Sri Lanka* 17.3* 27.3* 55.3*
Source: Bayes and Ahmed (2003).
* http://www.fao.org/countryprofiles/selectiso.asp?lang=en, accessed on 1st August, 2006.
* for 2006; http://en.wikipedia.org/wiki/Economy_of_Sri_Lanka
Agribusiness in South Asia 1

A Fact Sheet
percent of India’s GDP comes from the agribusiness input supply to the retail represents an increasingly
sector, which includes the following: all agricultural interlinked economic, technological and multi-
input sectors, the farm production sector, agro regional production system. This makes the
processing, including food, and manufacturing distinction between agriculture and agro-industry
sector and the food/fibre distribution and marketing increasingly blurred and the two sectors become
sector. Though sectors like agro processing and interwoven (Andreas et al., 2006). South Asian
retailing or distribution are considered as part of the farming is dominated by small holdings (table 2),
industrial and service sectors, respectively, they are which means there are resource constraints to link
directly dependent on what happens on or around up with global markets or global players.
the farms. Therefore, they are legitimately part of the
agribusiness sector as agribusiness includes any land Globalisation and liberalisation are likely to have
based or allied food or fibre production and activities the greatest impact on the rural poor through their
deriving from them as long as the raw material base influence on the agricultural sector, terms of trade,
is biological in nature. Most of the rural non-farm availability and cost of inputs, and new investments
sector, which is targeted for employment generation in the agribusiness sector. Technological progress
today is nothing but agribusiness and depends in farming can help the rural poor by raising farm
directly on what happens in the farm sector. It productivity, lowering food prices, increasing
accounts for 32 percent of household income in Asia employment, and reducing farming risk. But the
(Andreas, et al, 2006). As structural transformation role and influence of multinational corporations
of the economy takes place, the relative importance (MNCs) in food production and trade will, as
of primary farm production declines and that of an institutional mechanism, determine the exact
processing and distribution increases. This shift is impact of globalisation on the rural poor, who are
largely from agriculture to agribusiness as seen in mostly from the labour class. Contract farming
most of the developed countries and more recently (hereafter CF) promotes participation of domestic
in developing Asian countries. Countries like Taiwan firms and MNCs in farming, and is seen as the ‘new
have shown that the agribusiness sector can serve investment’ aspect of globalisation (Ramamurthy,
to boost other sectors of the economy. However, 2000; Killick, 2001). This paper examines the
the complexity of the agribusiness sector needs to profile and impact of agribusiness corporations,
be kept in mind while analysing its impact on the supermarket chains and such agencies on primary
development process of a country. Every step or producers in South Asia from the perspective of
link in an agribusiness chain from farm gate or even rural poverty reduction.
TABLE 2
Farm Sector Structure in South Asia
Country Average Size of % of marginal % of farm area % of small % of farm area

holding (ha.) holders under marginal holders under small
(< one ha.) holdings (1-2 ha.) holdings
India (1995-96) 1.3 62 17 19 19
Sri Lanka 0.8 71 30 29 72
(2002, only two
categories i.e.
<0.8 and > 0.8
but all <2 ha.)
Bangladesh 0.5 87 43 9 26
(1996)
Pakistan (2000) 3.0 36 6 22 10
Nepal (2002) 0.8 75 39 18 30
Source: Joshi et al, 2007.
2 Agribusiness in South Asia

A Fact Sheet
2. Agribusiness in India
India is world’s third largest producer of agricultural of exports soaring to $30 billion by 2015 from $8
commodities after China and USA. India produces billion in 2003. Only 2 percent of Indian fruits and
16 percent of the world’s milk, 41 percent of vegetables are processed, compared with 80 percent
mangoes, 30 percent of cauliflowers, 28 percent of in the United States.
tea, 23 percent of bananas, 24 percent of cashew
nuts, 36 percent of green peas and 10 percent of 2.1 Indian Food Processing Sector
onions. This strong base in agriculture provides The agro processing sector has grown appreciably
a large and varied raw material base for food during the last two decades. There are 35,000
processing. Further, India has the largest livestock modern rice mills besides 91,000 rice hullers,
population (cattle / buffalo: 283 mn; sheep / 4500 shellers and 8300 hullers- cum-shellers
goat: 183 mn), reflecting the huge potential for which together can process two thirds of India’s
India in the dairy and meat segments. This base paddy production. There are 20, 000 pulse mills
in agriculture can not only feed India’s large and processing more than 75 percent of the pulses
growing consumption base, but also become a key produced in the country (The ET Knowledge
supplier of food to the world. Although, India’s Series – Rural Economy, 2002-2003; Sekhon et.al.,
current share of world agri and food exports is 2003; Chengappa, 2004). Vasad town in Gujarat
about 1.6 percent, there is potential for a multi- has 35 pulse processing mills which process close
fold increase (Rai, 2006). But, the land holdings in to 10 lakh qlt. of tuar (arhar) dal annually. Most
India are very small. of these units are owned by Patels and source raw
materials from within India as well countries like
Though agriculture accounts for only 26 percent Burma, Malawi, Tanzania, and re-export it to
of the GDP, the commodity sector as a percentage North American, European, and Asian countries
of GDP accounts for 58 percent. At present, besides Australia.
commodities of the order of Rs. 1100 billion are
being traded. The major agricultural commodities In the horticulture sector, there are 5198 units
traded are cotton, sugar, wheat, soybean, and processing fruits and vegetables (Chengappa, 2005).
potato. The case of potato is interesting as there is The fruit and vegetable processing industry grew
neither any production subsidy nor MSP (Business 2.5 times in its installed capacity between 1990
Today, 10 July 2006, pp. 114-117, and 123). At and 1996. This was also accompanied by higher
present, future trading is permitted in more than capacity utilisation (48 percent) which was only 34
100 commodities and there are 3 national and percent in 1990. The exports grew more than five
21 regional exchanges recognised for commodity times during this period (Viswanathan and Satyasai,
futures trading. 1997). However, this processing accounted for
only 1.2 percent of the total production of fruits
India possesses 11 percent of the world’s arable land, and vegetables in the organised sector in India with
which is approximately 161 million hectares, and is the overall figure being 1.7 percent. It is higher at
the second-largest grower of fruits and vegetables, 37 percent in milk, 21 percent in meat, and about
after China. Yet in 2004, it accounted for merely 6 percent and 11 percent in poultry and marine
1 percent of the world’s $100 billion in exports of fisheries respectively in 2005 (http://www.fas.usda.
fruits and vegetables. The Dutch lender Rabobank gov/gainfiles/200504/146119288.doc).
projected that India would double its share of global
food and agricultural exports to 3 percent in the There are also more than 400 fish processing units
next decade from 1.5 percent now, with the value in India (Scheuplein, 1999). In fact, in the Indian

A Fact Sheet
food market, the processed food segment constitutes processing are meat and meat products, vegetable
only 10 percent while the semi-processed another oils, and cereal products. Besides, there are 3619
15 percent. The food processing sector is dominated ginning and pressing units with 47,194 gins
by unorganised sector units which account for and 810 presses. The value addition in the agro
42 percent of all units with the small scale sector processing industry is estimated to be Rs. 25,00-
taking another 33 percent and the organised sector 3,000 billion with one third of it being in value
only 25 percent of all food industry units (CII and added food products alone (Chengappa, 2004).
McKinsey & Co. Inc., 1997). The organised sector Table 3 below gives contribution of this sector to
comprises of 18000 units producing Rs.9000 the Indian economy. Table 4 shows the key players
crore worth of foods. The major sectors in food in major segments of the food processing industry.
TABLE 3 The Employment growth in the agro processing

Magnitude of Indian Food Processing Sector
(Organised sector) industries during the early 1990s as against the
1980s was higher in the case of only fruit and
Size of the industry Rs. 2,50,000 crore
vegetable processing, meat, fish, edible oils and
No. of units 6607
cashew, while net value added growth rates were
Investment Rs. 20097 crore
higher than those in the later half of 1980s (Gandhi
FDI as o 31-2-04 Rs. 3500 crore
et.al., 2001). During the post 1994-95 period,
Contribution in GDP 5%
employment growth rates have been higher in
Direct employment 2.77 lakh
the case of fruit and vegetables, tea, starch, wines,
Exports 2004 Rs. 14,500 crore
textiles, and paper. The industry, especially the small
Growth 15% annual
scale and rural based, suffers from low productivity,
Contribution in total exports 10%
and lack of capital and market orientation (Mathur,
Source: http ://www.idfresearch.org/pdf/Tradelib.pdf
TABLE 4
Market Size, Growth Rates and Key Players in Food industry
Industry Size* (in crore) Key players Net sales** (Rs crore)
Edible oil 12000 (5%) Adani Wilmar 2500
Ruchi Soya 4500
Marico 900
Agro Tech Foods (Con Agra) 900
Cargill
Godrej Foods
NDDB
Marico
Markfed, Punjab
Bunge
Tea 8000 (5%) Hindustan Lever 1400
Tata Tea 1000
Mcleod Russel 500
Bakery products 8000 (1%) Parle 2000
Britannia 170
ITC 300
Kellogs
Poultry 7500 Venky’s (India) 400
Godrej Agrovet 150
Vista
Branded sugar 7000 (5%) Triveni Engg. 1200
Balrampur Chini 1100
EID parry 900
Bajaj Hindustan 850
TABLE 4 (Contd...)

A Fact Sheet
TABLE 4 (Contd...)
Soft drinks/mineral water 7000 (5%) Pepsi 3000

Coca Cola 3000
Dairy products 5000 (5%) Amul 3800
Nestle India 1600
GlaxoSmith CHL 1000
Hatsun Agro 500
NDDB
Mother Dairy
Dynamix
Health drinks 1100 (8%) Nestle India 600
Dabur 150
Rasna
Heinz
Glaxo Smithkline
Amul
Culinary/Ready to eat 2500 (20%) MTR 500
NestleIndia Hindustan Lever 500
ITC 400
McCain Foods 400
Branded rice 2000 (8%) Satnam Overseas (38%) 950
LT Overseas (26%) KRBL 700
Lakshmi Energy 550
REI Agro # 550
Amira Foods (new entrant)
Coffee 1000 (5%) Hindustan Lever 400
Tata Coffee 200
CCL Products 120
Branded Atta (65% of all 500 (8%) ITC 200
wheat converted into atta Pillsbury
and the branded segment is HLL
0.9 million tonnes)
Notes: Figures in percentage (%) terms indicate growth rates

*size estimates for branded/organised segments
** the above includes unlisted companies, figures for which are indicative and are based on industry sources.
# Net Sales figures for both branded and unbranded.
Source: Bhattacharya, A. 2006: Food for Thought, Economic Times, portfolio, 10-16 July 2006, P 2. Also The Hindu Business Line, 18 July 2006.
1994; Chadha and Sahu, 2003). The major in India with the remaining being produced by
problems of the agro processing industry are non- private (153) and public sector mills. Similarly,
availability of quality raw materials in adequate more than 87,000 dairy cooperatives federated into
quantity at reasonable cost and at the right time, 187 district level cooperatives and 27 state level
besides financial and demand constraints (Gandhi federations working with 87 lakh milk producers
et.al., 2001). There have been many mergers and have been important players in the milk business.
acquisitions, and restructuring in the Indian food There are 173 cooperative spinning mills accounting
industry during the 1990s which have led to large for 22 percent of yarn and fabric production, and
consolidated players dominating many segments of 431 ginning and pressing cooperatives accounting
the market (Banaji, 1996-97). for 12 percent of all units and 21 percent and
18 percent, respectively of all gins and presses.
The cooperatives have been successful in the Besides, there are 13,000 fisheries cooperatives in
processing of sugar, paddy, milk and cotton. Now, India (The ET Knowledge Series – Rural Economy
there are 273 sugar cooperatives which produce 2002-2003). The main reason for the success of
nearly 55 percent of the total sugar production this segment of the processing sector has been

A Fact Sheet
the focus on value addition, and therefore, high medium scale and 1,800 small scale manufacturers
returns to producing members, functional vertical together accounting for 45 percent of production.
integration, high participation of members, and The unorganised sector is estimated to have as
professional management and leadership (Dwivedi, many as 75,000 bread bakers located in residential
1996). During 2003-04, however there was a areas in towns and cities. From being a low priced
closure of 144 sugar mills of which most of them commodity, bread has gradually developed into a
were in Maharashtra (49), U.P. (19) and Bihar (18). branded product largely because of the product
This figure increased to 176 in 2004-05, with 89 positioning platforms created by two large players
in Maharashtra, 19 in Bihar, and 17 in UP. During in the industry. Milk bread accounts for 85 percent
2005–06 also, 132 sugar mills were closed with 48 of the bread market with 10 percent going to
in Maharashtra, 19 in Bihar, and 16 in U.P. (The brown bread and 5 percent for fruit and other
Indian Express, July 21, 2006). special bread (http://mofpi.nic.in/visdoc/volume2.
pdf, accessed on 7 August, 2006). The size of the
2.1.1 Wheat based industry biscuit industry is estimated to be around 1.95
Within the wheat-based processing industry, million tonnes, (valued at Rs. 68.6 bn) of which
bakery constitutes the largest segment of grain the organised sector (branded/packed) is about 57
based processed foods (table 5). The industry is percent by volume, and 64 percent by value. The
characterised by the presence of a large number of organised biscuit sector comprises two large scale
unorganised players, exceeding 50,000. There are units, about 50 medium scale and about 2,500 SSI
only about 15 players, who market branded, packed units. The unorganised sector is estimated to have
bakery products. As far as bread is concerned, the approximately 30,000 small and tiny bakeries across
total bread production in the country is estimated the country. Namkeen accounts for 94 percent and
to be 3.75 million tonnes annually. As per industry 92 percent of the organised and unorganised sector
estimates, in the last 5 years, the bread industry grain based snacks market respectively with the
in India has been growing at about 6 percent. rest going to extruded snacks (http://mofpi.nic.in/
The organised segment has grown faster at about visdoc/volume2.pdf, accessed on 7 August, 2006).
8 percent. In 1977, the Government of India Ready-to-eat foods is another emerging segment in
reserved the bread industry for the SSI. The two India now.
large units that were already in existence namely,
the Brittannia Industries Limited and the Modern 2.1.2 Confectionery industry
Food Industries Limited were however allowed to The size of the confectionery and chocolate
continue on the basis of their existing installed market in India is estimated at Rs. 26.0 billion.
capacity. Besides these two players, there are 25 Sugar confectionary accounts for 61 percent of
this market, with the balance being in chocolates,
mints and gums. The organised market for sugar
TABLE 5
confectionery and gums is estimated at 1,39,000
Market Size of Various Segment of Wheat-
Based Foods tonnes valued at Rs. 12 billion. The market can
be divided into 7 major categories, namely hard
Segment Value Volume
(Rs billion) (Million tonnes)
boiled candies (HBC), toffees, eclairs, chewing
Bread 38.9 3.75 gum, bubble gum, mints and lozenges. Hard
Biscuits 68.6 1.95 boiled candies and toffees together constitute
Grain based snacks 29.0 0.29 the largest segment accounting for a 69 percent
Branded atta 13.5 0.90 share. Gums are the second largest with an 18
Pasta products 8.4 0.14 percent share. The confectionery market has been
Total 158.4 7.03 growing at 6 percent annually over the last five
Source: http://mofpi.nic.in/visdoc/volume2.pdf, accessed on 7 August,2006 years. Gum based confectionery has grown faster

A Fact Sheet
at over 10 percent. The confectionery market is processed, the sector has many existing large scale
highly fragmented with several local players. The players and many new ones entering the sector
unorganised segment is estimated to constitute two with large investments both in value added fresh
thirds of the total market and has a strong presence and processed products (table 6).
in the HBC/Toffee segment. Sugar confectionery
is a major segment (61 percent) with almost equal India produces 2.5 to 3 million MT of spices
shares (12-14%) being held by other segments annually worth around US$ 3 billion. India
i.e. chocolate bars, choco counts and mints and exports around 0.25 million MT of spices
gums. Dabur’s Hajmola, P&G’s Vicks and Warner annually, accounting for a 37 percent share in
Lambert’s Halls, Chicklets, Clorets are also sold volume and 23 percent share in value in the world
as confectionery with 1-2 percent of the market spice trade. India meets around 70 percent of
share each (http://mofpi.nic.in/visdoc/volume2. the world demand for spice oils and oleroresins.
pdf, accessed on 7 August, 2006). The market for India accounts for 25-30 percent of world’s
chocolate has grown at 12 percent annually over pepper production, 35 percent of ginger and
the last decade. Growth has been more rapid in the about 90 percent of turmeric production. Major
period 1997-02, in line with increased disposable exports destination are the EU, Sri Lanka, Japan,
incomes. Moulded chocolates are more preferred, and Middle East countries. (Indian Agribusiness
with a market share of 50 percent by volume, Survey, 2005; and http://www.indiaonestop.com/
followed by counts (33%), and sugar and panned markets/spices/ spices.htm, Accessed on 7 August,
chocolates accounting for the remainder. Within 2006). Major spices in terms of area are chilli,
these two segments, Cadbury is the biggest player cumin seed, mustard seed, coriander seed,
(66-70% market share) followed by Nestle (18- pepper, cardamom, turmeric and fenugreek
22%) (http://mofpi.nic.in/visdoc/volume2.pdf, (http://hortibizindia.org/database_files/2003/
accessed on 7 August, 2006). db_page21.pdf, accessed on 7 August, 2006).
2.1.3 Fruit and vegetable processing industry 2.1.4 Dairy (milk products) sector
(including spices) The Indian dairy production system is dominated
Though only about 2 percent of these crops are by small producers. There are around 100 million
TABLE 6
Sectoral Volumes and Key Players in the Indian Processed Fruit and Vegetable Industry
Category Industry size (Rs. in million) Key players in organised segment

Organised Unorganised
Jam 900 500 HLL, Mapro, Marico, Mala’s
Pickles 1,500 10,000 Priya Foods, Praveen, Desai Brothers, Cavin Care,
GD Foods
Sauce/Ketchup 1,000 4000 HLL, Nestle, GD Foods, Heinz, Cremica (Mrs.
Bector’s)
Pulp/Concentrate 4000 - Foods and Inns, BEC, Clean foods, Jain irrigation,
Usha International
Juices/Fruit based drinks 5000 - Pepsi, Dabur, Parle, Godrej, Mother Dairy
Squashes 1,300 2,500 HLL, Haldiram, Mapro
Ready to eat vegetables 1,000 - Tasty Bite, ITC, MTR, ADFC
Potato chips 2,500 3,000 Pepsi
Cooking pastes 300 - Dabur, HLL
Total 37,500
Source: http://mofpi.nic.in/visdoc/volume2.pdf Accessed on 31 July 2006, p 5.

A Fact Sheet
milch animals reared by 70 million farmers (table 7). on manufacturing of milk powders, dairy whiteners,
The share of landless, small and marginal farmers is infant foods, ghee and to some extent the traditional
68 percent in milch animals and 62 percent in milk Indian dairy products. Only a few of them market
output. There are 100,000 village dairy cooperatives liquid milk. In 1999-2000, there were 653 plants in
with a farmer membership of the order of 11 the organised sector with an employment of 80,000
million. These primary cooperatives are federated persons (Chand, n.d.) (table 9 and table 10).
into 170 district cooperative milk unions and further
into state cooperative dairy federations. The dairy About 37 percent of India’s milk production of
cooperative network collects about 17 million litres 86 million tonnes is processed, 15 percent in the
milk per day and pays an aggregate amount of about organised sector and 22 percent in the unorganised
Rs.700 billion to the milk producers in a year (table sector. A major share of the milk processed in the
8). The cooperative and public sector focuses on organised sector (mostly by dairy cooperatives) is in
meeting the liquid milk demand in cities and towns. the form of packaged liquid milk. Other processed
On the other hand, the private sector concentrates items include ethnic sweets, milk powder, ghee
TABLE 7
Distribution of Dairy Animals by Size Group of Land Holdings, 1992
Type of % of Arable land Distribution of milch animals Average dairy holding

house house (No./100 household)
hold holds
% share Av. size Cows Buffaloes Total Cows Buffaloes Total
(ha) (%) (%) (%)
Landless 21.8 0 0 2.8 2.9 2.8 4.9 3.9 8.8
Marginal 48.3 15.5 0.3 48.8 36.6 43.5 38.5 22.3 60.8
(<1.0 ha)
Small
(1-2 ha) 14.2 18.6 1.4 22 21.2 21.7 59 44 103
Medium 9.7 24.2 2.7 15.8 20.1 17.7 62 61 123
(2-4 ha)
Large 6 41.7 7.5 10.6 19.2 14.3 67.4 94.3 161.7
(>4 ha)
All 100 100 1.1 100 100 100 38.1 29.5 67.6
Source: Chand, R (n.d.): ‘Dairy industry in India: Situation and outlook’, A presentation, NCAP, New Delhi
TABLE 8
Status of Dairy Industry in India
1990-92 1998-2000
Income Value of milk (Rs. billion at 1980-81 prices) 158 214
Share in value of agricultural output (%) 15.1 16.7
Share in value of livestock output (%) 69.2 69.3
Employment*Man days engaged in livestock rearing (million person days) 9.8 8.5
Share in agricultural employment (%) 4.7 4.4
DCSs in 2000 84,289
Producer members (millions) in 2000 10.6 (21% women)
Milk procurement (million lts/day) in 2000 15.8
*Usual status activity. Figures relate to 1983, 1993-94 and 1999-2000.

Source: Chand (n.d.)

A Fact Sheet
TABLE 9
Main Products, Size, and Major Players in Indian Dairy Industry
Products Industry size (billion rupees) Key players in the organized sector
Organised Unorganised
Packaged milk 98.0 0 Mother Dairy, Amul, various state cooperatives, Paras Dairy,
Heritage, Chitale, Metro, and private dairies in various states
esp. Gujarat, Karnataka, Punjab and Haryana
Ethnic sweets 62.5 455 Mother Dairy, Amul, various state cooperatives, Haldiram,
Bikanerwala,
Yogurt 6.3 160 Mother Dairy, Amul, Nestle
Cheese 2.0 21 Amul, Vijaya, Britannia, Dynamaix Dairy
Ice cream 8.0 0 HLL, Mother Dairy, Vadilal, Amul
Butter 5.2 60 Amul, Mother Dairy, Vijaya, Brittania, Verka, Creamline
Ghee 35.0 210 Amul, Vijaya, various state cooperatives, Paras
Milk powder 38.0 0 Amul, Nestle, Verka, Vijaya, Nandini,
Total 255 906
Grand Total 1,161
Source: http://www.fas.usda.gov/gainfiles/200504/146119288.doc accessed on 20 July, 2006.
TABLE 10
Principal Dairy Products Manufacturers in India
Company Brands Major products

Nestle India Limited Milkmaid, Cerelac, Lactogen Sweetened and condensed milk and milk
powder
Milkfood Limited Milkfood Ghee, ice cream,
SmithKline Beecham Limited Horlicks Malted milkfood, ghee, butter, powdered milk,
milk fluid and milk based baby foods.
Indodan Industries Limited Indana Condensed milk, smp, wmp, dairy whitener,
and chilled and processed milk
Gujarat Co-operative Milk Marketing Amul Butter, cheese and other milk products
Federation Limited
H.J. Heinz Limited Farex, Complan, Lactose, Infant and malted milkfoods
Bonniemix, Vitamilk
Cadbury Bournvita Malted food
Source: http://mofpi.nic.in/industryspecificinformation/milk/milk_players/milk_players.htm accessed on 20 July, 2006.
(melted, clarified butter), butter, cheese, and ice 12,000 crore and is growing at the rate of 10 percent
cream. In the unorganised sector, a major share annually (Sodhi, 2005). On the other hand, in
is processed into milk-based sweets, and a smaller the marketing of western dairy products, it is only
share for making yogurt, butter, and ghee. the organised cooperative and private sector that
marks its presence. The orientation of the large
The Indian dairy industry can be divided into two private dairy sector has been, historically, towards
types of enterprises: liquid milk and milk products. milk product marketing. The private domestic and
In the procurement and marketing of liquid milk, multinational enterprises are attracted to dairy
there is a strong presence of cooperative and product manufacturing because of the ease of profit
traditional private channels though the organised making through brand marketing by reaching
sector private enterprises also exist. The packaged high income consumers, SNF (Solids Not Fat)
liquid milk market alone is of the order of Rs. surplus and the lesser hassles in marketing (Shah

A Fact Sheet
et.al., 1995). The price realisation per litre of milk 2.1.5 Meat and meat products (including
is higher in the case of western milk products. poultry)
There are a few organisations which are into both The total meat production in the country is 4
liquid milk as well as milk products. These two million tonnes which includes beef, buffalo meat,
categories differ in terms of their ownership, size mutton, goat meat, pork and poultry meat. But,
of business and profitability. Whereas the liquid beef and buffalo meat account for 60 percent of
milk business is dominated by cooperative or the total meat market with goat, pork and poultry
private Indian firms, the milk product business is accounting for about 10 percent each (http://www.
largely in the hands of multi national corporations southasianmedia.net/Magazine/journal/9-wto_
(MNCs). The presence of private dairies in liquid poultry_industry_India.htm, accessed on 20 July,
milk is confined only to certain cities and regions 2006). However, only about 1 percent of the total
(Promar International, 2001). meat is converted into value added products like
sausages, ham, bacon, luncheon meat, kababs, meat
Nestle, a Swiss multinational company, one of balls, etc. as the slaughter rate was only 6 percent in
the largest and oldest firms, has been operating cattle, 11 percent in buffalo, and 30-40 percent in
a milk plant at Moga since 1961 when it started small ruminants in 1994 with almost 100 percent
with 180 producers from four villages and in pigs and chicken. (http://mofpi.nic.in/industrys
520 kg. of milk procurement. In 1962, the firm pecificinformation/meat/meat_rawmaterials/meat_
expanded its operations to 66 villages covering rawmaterials.htm, accessed on 20 July, 2006). The
4660 milk producers and collected 2.0 million kg. total meat export during 1999-2000 was Rs. 845.00
of milk. Initially, the firm adopted a ‘cooperative crores consisting mostly of mutton and buffalo meat
approach’ to source milk supplies, but this was out of which 70 percent was contributed by export
gradually abandoned in favour of CF with an aim of buffalo meat. The country has 3600 slaughter
to increase milk production and procurement by houses, 9 modern abattoirs and 171 meat processing
providing inputs and services to the producers. The units licensed under Meat Products Order. Major
company procures 236 million kg. of milk from players in meat sector with their product range and
85,000 farmers in 1002 villages in the districts of brands are given in table 11.
Moga, Ludhiana, Sangrur, Muktsar, Faridkot and
Ferozepur (Chand, 2001; 2005) through the Nestle Compared with the rest of the livestock sector, the
Agricultural Services (NAS), which works closely poultry industry in India is more scientific, better
with the dairy farmers of these villages by providing organised and continuously progressing towards
extension advice, inputs and other services needed modernisation. Breeding and feeding management
to obtain the assured supply of quality raw milk. has improved through education, training,
Average milk procurement has increased from competition, expansion and survival instincts.
4.6 kg./farmer/day in 1962 to 10.7 kg./farmer/ India is the world’s fifth largest egg producer, with
day in 2002. NAS also provides health cover to a total production of 40 billion eggs per year. India
dairy animals, and supplies medicines, balanced has 150 million layers and 650 million broilers.
feed and fodder seed. For genetic upgradation of There are 750 hatcheries and 3430 million birds.
dairy cattle, the company supplies pedigree bulls The annual per capita consumption of eggs is
and has also set up 37 artificial insemination 40 gms, and that of broiler meat is 1000 gms.
centres. All material inputs are supplied on a cost Although these figures are low in comparison with
recovery basis but costs are low as a result of bulk those for developed countries, the industry has
purchase by the company (WB, 2003). It has a great potential to expand because 30 percent of the
retail network of 700,000 outlets in India covering country’s population (about 300 million people)
3300 towns serviced by over 4000 distributors is developing economically and the demand for
(Birthal et al., 2005). poultry products is therefore likely to grow.

A Fact Sheet
TABLE 11
Major Manufacturers of Processed Meat Products in India
Company Products Brand/s

Frigo Refico Allana Limited, Kulaba, Mumbai Frozen buffalo meat Allana
Frigo Refico Allana Limited, Kulaba, Mumbai Canned meat Allana
Hind Industries Limited, New Delhi Frozen buffalo meat Sibaco, Eatco
Hind Industries Limited, New Delhi Chilled/Frozen sheep and goat meat Sibaco, Eatco
Alkabeer Exports Limited, Mumbai Frozen buffalo meat Alkabeer
Alkabeer Exports Limited, Mumbai Chilled/Frozen sheep and goat meat Alkabeer
P.M.L. Industries, Chandigarh Frozen buffalo meat PML
U.P. Pashudhan Udyog Nigam Ltd. Uttar Pradesh Pork and other meat products CDF
U.P. Pashudhan Udyog Nigam Ltd. Uttar Pradesh Canned meat manufactures CDF
A.P. Meat & Poultry Corporation, Hyderabad Pork and other meat products APSMPC
Pigpo, Jorbagh Market, New Delhi Pork and other meat products Pigpo
MAFCO, Mumbai Pork and other meat products MAFCO
Ranchi Bacon Factory, Ranchi Pork and other meat products
Rajasthan Meat and Wool Marketing Federation, Alwar Canned meat manufactures
Venkateshwara Hatcheries, Pune, started as a franchise Poultry products Venky’s Food
of Babcook in 1971 and now its broiler breed VENCOBB
has 60% market share in India. It is into contracting
since 1990s (Birthal et al, 2005).
DeeJay, Bangalore Poultry products
Source: http://mofpi.nic.in/industryspecificinformation/meat/meat_players/meat_players.htm accessed on 20 July, 2006.
Currently, it is growing at the rate of 10 percent that in exports is 0.07 percent only (http://www.
in broilers and 6-7 percent in layers and is going southasianmedia.net/Magazine/journal/9-wto_
through a phase of integration in broilers which is poultry_industry_India.htm, accessed on 21 July,
likely to change the face of the industry. Although 2006).
the phenomenon is new, it is expected that there
will be very rapid changes towards integration as 2.1.6 Fisheries sector
more farmers find it increasingly difficult to run With an annual fish production of 6 million metric
farms with marginal profits or negative margins. tonnes, India occupies the fourth position in fish
The poultry industry is very modern, with pure- production and second in aquaculture production
line breeding, the latest vaccines and medicines, globally. The annual domestic per capita fish
environmentally-controlled poultry houses, up- availability is 9 kilograms and seafood export earnings
to-date processing units, the latest management of India is consistently over Rs. 6,000 crores a year.
practices, chicken processing, exports of hatching Fish contributes 1.4 percent of the GDP and 4.5
eggs and excellent feed quality (http://www.fao. percent of the agricultural GDP (Sarada, 2006). The
org/DOCREP/ARTICLE/AGRIPPA/X9500E01. fisheries in India are classified as marine, inland and
HTM, accessed on 3 August, 2006). Poultry aquaculture. India has a coastline of 8118 sq. kms.
processing is still in its infancy. There are only with an Exclusive Economic Zone (EEZ) of 2.02 mn.
seven modern integrated poultry processing plants. sq. kms. and 0.5 mn. sq. kms. of continental shelf.
However, there are a good number of small poultry In the inland sector the resources comprise of 2.38
processing units engaged in production of poultry mn. hectares of ponds and tanks, 2.03 mn. hectares
meat products. There are five egg processing units of reservoirs, 0.19 mn. kms. of rivers and canals and
engaged in exporting egg products. But, India’s 1.4 mn. hectares of brackish water area, the potential
share in poultry production is 2.19 percent and of which can be tapped through capture and culture

A Fact Sheet
fisheries. Inland fisheries provide 54 percent of the see figure 1). The Indian marine fisheries sector
total national fish catch. Of the total fish production, is characteristically open access, with free and
62 percent is on account of capture production and common property rights. The multi species fisheries
38 percent is on account of aquaculture. Marine comprise of over 200 commercially important
fish in India primarily include shrimp, finfish, tuna, finfish and shell fish species. Mackerel, penaeid
cuttlefish, squids, octopus, red snappers, ribbon fish, prawn, clupeiods, sciaenids, and perches are the
mackerel, lobsters and cat fish. Of the total, 60 percent dominant species in Indian marine waters.
is obtained from marine sources, while coastal fishing
constituting the bulk. Deep sea resources account for Fisheries supply chain
only 12 percent of the output. The supply chain in the fisheries is depicted below
(figure 2). Pre-dominantly, producers sell their
The marine fisheries segment can be segregated catch directly to consumers via wet markets. The
into Deep sea fishing and Coastal fishing (also alternate channels for distribution are:
Figure 1
Segments of the Fisheries Industry in India
Fisheries
Marine Inland Aquaculture
Deep Sea Coastal Brackish water Fresh Water
Pelagic River Shrimp
Demersal Ponds Carps
Crustaceans Reservoirs Catfish
Cephalopods
Source: http://mofpi.nic.in/visdoc/volume2.pdf, (accessed on 4 August, 2006).
Figure 2
Supply Chain for Fish
Hatchery Agent
Feed Fisherman Mandi Processor Exporter Consumer
Medicine
Source: http://mofpi.nic.in/visdoc/volume2.pdf, (accessed on 4 August, 2006).

A Fact Sheet
 Via commission agents, who in turn sells to the TABLE 12
processor India’s Seafood Processing Industry
Infrastructure
 Mandi /market yard.
Type of infrastructure Number Capacity
Fish processing (MT)
*Fishing Vessels 180000 NA
Most processing facilities are concentrated in
(Traditional)
clusters with Kerala accounting for 30 percent and
*Fishing Vessels 47000 NA
AP, Gujarat and TN about 12-14 percent each. (Mechanised)
Maharashtra and West Bengal follow with about 10 Freezing plants 397 8497
percent each (http://mofpi.nic.in/visdoc/volume2. IQF Plants 102 746
pdf, accessed on 4 August, 2006). The capacity Canning Plants 13 50
utilisation in these clusters is less than 30 percent. Ice plants 157 2969
About 85 percent of the existing processors are Fish Meal Plants 12 229
classified as small scale. In 2001 80.5 percent of the Pre-processing Plants 579 3408
total fish were sold as fresh, 4.5 percent were sold Conveyances 498 NA
Cold storages 482 106890
as frozen and 5.8 percent were cured. Processing of
Other storages 216 11458
produce into canned and frozen forms is carried out
(Dry Fish etc.)
almost entirely for the export market. In all, there *Fishing Harbours 29 NA
were about 393 freezing units, 13 canning units, (Minor/Major)
160 ice-making units, 12 fish meal units and also *Fishing landing centres 114 NA
about 476 cold storage units in 1999 (table 12). Source: Indian Agribusiness Survey, 2005, p. 99.
Shrimp aquaculture
Shrimp aquaculture is part of both marine and at the rate of 11.5 percent over the period of
inland fisheries. On a resource classification basis, 1990-91 to 2002-03. Brackish water shrimps
the aquaculture sector covers fresh water culture, account for 79 percent of production, the balance
brackish water and marine culture. Two types being scampi culture.
of shrimps are cultivated in India, Tiger shrimp
(Penaeus Monodon) and Chinese White or Pacific Aqua E-choupals
White shrimp (Penaeus Vannamei). Cultured ITC Aqua Choupal Model (figure 3) was launched
shrimps/fresh water prawns contribute nearly 60 in 2003 in Coastal Andhra Pradesh. Its turnover was
percent of the marine exports by volume. However INR 500 crore in 2004-05. With a participation by
in value terms their contribution is higher at 82 more than 10,000 farmers in more than 100 villages
percent. The area under shrimp production has in Andhra Pradesh. Seven districts in Andhra,
increased at a CAGR of 6.7 percent and production Srikakulam, East and West Godavari, Krishna,
Figure 3
ITC Aqua-Choupal Model
ITC Labs Aqua Choupal ITC processing ITC packaging
42 Pratinidhi Input
10,000 farmers Fish farmers Input

A Fact Sheet
Guntur, Prakasam and Nellore are covered. It has China, Thailand and Vietnam. These are further
vertical co-ordination at the farm level wherein a processed in the destination country, either for local
very important role is played by the Pratinidhi. The consumption or for exports. Value added products
Pratinidhi builds ITCs brand among the farmers, account for 1.5 percent of the total exports. There
encourages the farmers to use ITCs choupal labs, are about 16,000 registered exporters in the country.
monitors quality at the farm level and provides Of these only 773 exporters are directly trading in
extension services. The Pratinidhi gets 1 percent the international market. Nearly 70 percent have a
share in the final value. The choupal has a free turn over ranging between Rs 0.1 -50 million, and
internet facility for farmers which provides all the are classified as small or marginal exporters. Ruchi,
necessary information, amounting to extension Vishal, Adai, Aditya are leading merchant exporters
services. The farmer can exercise his choice in the while HLL, Liberty and Falcon Marine are leading
sale of produce. Payment is INR 5 less than the producer exporters (http://mofpi.nic.in/visdoc/
market price. Prompt payment is done unlike other volume2.pdf, accessed on 4 August, 2006).
players and also provides discounted inputs at the
farm gate (http://www.idfresearch.org/sps/docs/ 2.1.7 Paper industry
agarppt4.pdf, accessed on 4 August, 2006). Indian paper industry has annual production
capacity of 5 million tonnes. It generates annual
Exports of fish turnover of approximately 120 billion. It directly
Marine exports were estimated at Rs. 68.8 bn and indirectly employs nearly 1.3 million people
in 2002-03. The export of marine products has (http://www.bilt.com/corpbrochure/1-9corpbroch.
undergone a shift from dried fish products in the pdf, accessed on August 9, 2006). There are, at
1960s, to canned products in the 1980s which was present, 515 units engaged in the manufacture
further evolved into frozen products in the 1990s. of paper and paperboards and newsprint in India
Shrimps account for 67 percent of the exports by (table 13). The country is almost self-sufficient
volume followed by fin fish and cuttle fish. Culture in manufacture of most varieties of paper and
shrimps accounts for over 80 percent of the shrimps paperboards. Import, however, is confined only
exports. Processed fish products for export include: to certain specialty papers. To meet part of its
conventional block frozen products, individual raw material needs, the industry has to rely on
quick frozen products (IQF), minced fish products imported wood pulp and waste paper. Production
like fish sausage, cakes, cutlets, pastes, surimi, of paper and paperboard during the year 2002-
texturised products and dry fish, etc. (MFPI). 03 (upto December, 2002) was 24.52 lakh tonnes
Of the total shrimp exports, 80 percent are in (also see figure 4). At present about 60.8 percent
the traditional block frozen form, primarily to of the total production is based on non-wood raw
material and 39.2 percent on wood (http://www.
TABLE 13 economywatch.com/business-and-economy/
Category-wise Paper Mills in India paper-industry.html, accessed on August 9, 2006).
Category Capacity Number of Capacity
Wood as raw material accounts for 40 percent of
range* units (TPA)* the paper production and about 30 percent each
Small Up to 10,000 299 12,90,382 being shared by agro waste and waste paper (http://
<2000 69 75,522 www.waterandagroindustry.org/pulp_paper.htm,
2000–5000 107 296,980 accessed on August 9, 2006).
5000–10000 123 917,880
Medium 10000–20000 116 1669,460 2.1.8 Bio diesel
Large >20000 70 3893,048 India is looking at bio fuels as a viable alternative
*Tonnes per annum. to petroleum diesel and exploring the main
http://www.waterandagroindustry.org/pulp_paper.htm; accessed on 9 August,
2006. commodity sources for bio diesel which can be

A Fact Sheet
Figure 4
Major Paper Producers in India 2002 Project Number
The biggest producers focus on printing and writing papers, newsprint and cartonboards Project Name
Ballarpur
Hindustan Paper*
ITC
Tamil Nadu*
Rama Newsprint
NR Aggarwal Group
Andhra Pradesh
News
West Coast Paper
UMF
JK Paper
CWF
Century
Tissue
Seashasayee
Liner/fluting
Kedia Group
Cartonb
Mysore Paper Mills*
Others
Birla Group
Sree Rayalaseema
Jatia Group
Star Paper Mills
Sirpur Paper Mills
Nath
Nepa
0 100 200 300 400 500 600
Capacity 1000 tons/a
UWF- uncoated wood free printing and writing paper; CWF- coated wood free printing and writing paper;
Source: http://dipp.nic.in/first_new/g lobalrep/Final_9092002.pdf, (accessed on August 9, 2006)
non-edible oils obtained from plant species such seeking substantive bio diesel supply contracts. The
as Jatropha curcas (Ratanjyot), Pongamia pinnata government, too, is in the process of mandating its
(Karanj), Calophyllum inophyllum (Nagchampa), blending with mineral diesel. A 5 percent blend is
Hevcca brasilliensis (rubber), etc. Jatropha is an to be introduced shortly, with an implied demand
indigenous oilseed tree, a perennial crop, has the for 2.5 million tonnes of bio diesel, and this is to
same characteristics as diesel, and can be used neat rise to 20 percent by 2020, implying a demand of
or mixed with conventional diesel. To top it, this is a around 16 million tonne. Looking ahead, Jatropha
clean fuel option. For India, Jatropha curcas is a non- appears to be one of the most promising feedstocks
edible oil tree, unlike in the West, where bio diesel upon which the industry will be built (http://www.
is derived from edible oilseeds. Moreover, Jatropha financialexpress.com/fe_full_story.php?content_
can thrive in wasteland, and offers the opportunity id=100174, accessed on 7 August, 2006).
to reclaim much of this land and lead to local
economic development. Planning Commission The Ministry of Petroleum, GoI, is playing an
figures state that a 10 million hectare crop could important role through the Petroleum Conservation
yield 30 million tonnes of oil a year. Further, of the Research Association (PCRA), by launching the
130 million hectares of wasteland in India, about National Mission on Bio Diesel and replicating
33 million hectares are available for reclamation. the existing synergy between the Ministry of
The railways, the largest diesel consumer in India, Agriculture, Rural Development and Non-
have reported much success with this option and are conventional Energy Resources of the Government

A Fact Sheet
of India. The mission was launched to give a and Rural Development (NABARD) has also
boost to bio fuel production, which can reduce initiated a pilot project on bio fuel in the Jatropha
the country’s dependence on imported diesel by as and Jojoba variety. At the same time, the National
much as 20 percent. The domestic production is Oilseeds and Vegetable Oil Development Board,
only 30 percent of the country’s demand and the under the Ministry of Agriculture is providing
remaining 70 percent of the demand is met through a back ended subsidy of 30 percent for the
imports. Government invested Rs. 90 million on promotion of tree borne oil seeds like Jatropha
the bio fuel project in 2004-05. The allocation and Jojoba. The government has estimated the
for the current year has been scaled up to Rs. 450 cost of production at Rs.20 per litre if the cost of
million and government has announced a purchase seeds is taken at Rs.5 per kg.
policy for ethanol and bio diesel fuels on a per litre
basis, that is Rs 18.75 for ethanol and Rs. 25 for In India, Gujarat is the first state to run commercial
bio diesel, for a stipulated quality. buses using bio diesel fuel. So far, Indian corporates
like the Tata Consultancy Services (TCS), Reliance
India has also formulated an action plan for the Industries Limited (RIL) and Godrej Agrovet
setting up of the Bio-Fuel Development Authority Limited have signed bio diesel agreements with
(BDA) and identified government-owned waste some of the foreign firms. The public and private
or fallow land as well as constituted task forces sector companies such as IOC, IFFCO, ONGC
in various states to take the initiative for planting and Emami have started bio diesel projects in the
jatropha. The action plan envisages encouraging collaboration with state governments for CF of
the private sector to invest in CF and the setting up this plant. In the southern part of the country, the
of an oil-expeller and transesterification plant for Bannari Amman group, a bio diesel production
bio diesel production. The Indian Government has company, has installed a bio diesel plant with a daily
identified 39 mm hectares (almost 100 mm acres) of crushing capacity of 3000 litres and CF in 2000
land suitable for growing jatropha, cheerily termed acres of land (http://www.ris.org.in/document_
“the wonder plant” by Rajasthan state’s “Centre of v8n2.pdf, accessed on 7 August, 2006). Labland
Excellence for Jatropha Bio diesel Promotion”. Biotech, for instance, has a long-term contract
with the UK-based global firm, DI Oils, to supply
The government claims that, if fully exploited, one crore Jatropha plants a year for the next 10
the said 100 mm acres could produce be a bio years, besides supplying 10,000-50,000 tonnes of
diesel that can substitute for 20 percent of the Jatropha crude oil annually over the next 15 years.
country’s diesel consumption in five years, far Farmers in Karnataka and the neighbouring states
higher than the present 2 percent. (http://www. are being roped in through the CF route (table 14).
gasandoil.com/goc/news/nts62525.htm, accessed Reliance Industries is reported to have earmarked
on 7 August, 2006). 200 acres of land in Andhra Pradesh, which too
will be scaled up depending on the progress of
The Indian Oil Corporation (IOC) and Hindustan the project. Southern Online Biotechnologies
Petroleum Corporation Limited (HPCL) of the Limited, Andhra Pradesh, Jain Irrigation System
Government of India are experimenting with Ltd. (planning to set up in Chhattisgarh by 2008)
various mixes of bio diesel with diesel in consultation and Nova Bio Fuels Pvt. Ltd., Panipat are new
with the automobile industry. The IOC has also entrants with capacities of 30,000, 1,50,000 and
signed a memorandum of understanding with 30,000 litres per day, respectively (http://www.
the Indian Railways for plantation of Jatropha on svlele.com/biodiesel_in_india.htm, accessed on 7
railway land. The National Bank for Agriculture August, 2006).

A Fact Sheet
TABLE 14
State-wise Jatropha/Karanja Plantation in India (Area in ha.)
State 2003-04 2004-05 2005-06 Total

Jatropha Karanja Jatropha Karanja Jatropha Karanja Jatropha Karanja
Andhra Pradesh 1 290 100 160 200 - 301 450
Arunachal - - 65 - 135 - 200 -
Pradesh
Bihar 10 - - - - - 10 -
Chhattisgarh 50 270 200 646 240 75 490 991
Delhi (TERI) 60 - - - - - 60 -
A.P & Rajasthan
Gujarat 79 40 550 - 650 100 1279 140
Goa - - - - - 10 - 10
Haryana - - 300 - 225 5 525 5
Jharkhand - - 200 - 300 100 500 100
Karnataka 16 30 102 280 198 250 316 560
Kerala - - 50 - - - 50 -
Madhya 240 100 302 100 412 25 954 225
Pradesh
Maharashtra 144 4 480 18 640 - 1264 22
Manipur - - 60 - 140 - 200 -
Meghalaya - - 98 - 102 - 200 -
Mizoram - - 100 - 180 - 280 -
Nagaland - - 90 - 150 - 240 -
Rajasthan 150 - 150 - 350 - 650 -
Tamil Nadu - 6 134 20 766 - 900 26
Uttar Pradesh 54 36 450 70 450 80 954 186
Uttaranchal - - 380 - 230 - 610 -
West Bengal - - 50 - 50 - 100 -
India 804 776 3861 1294 5418 645 10083 2715
Source: http://www.indiastat.com/india/showdata.asp?secid=394254&ptid=209&level=3 (accessed on 7th August, 2006).
3 Food Retailing in India

Retailing in India is, by and large, unorganised, workforce directly employed in retailing. Retail
highly fragmented and predominantly small, sales in India accounts for about 69 percent of the
family owned businesses. About 78 percent of consumer expenditure. The turnover of the retail
these businesses engage only household labour; industry stood at Rs. 7400 billion (1690 US$) in
and a few of them employ two to three workers 2003, with an estimated growth rate of 8.3 percent
only. Nearly, 96 percent of the five million-plus per year for the period 2003-08. The retail sector
outlets are small with less than a 500 sq. ft. area, in India employs nearly 21 million people which
which is indicative of the fact that in India the is 7 percent of total employment and second only
per capita retailing space is smallest (2 sq. ft.) in to agriculture (The Economic Times, 13 March,
contrast to 16 sq. ft. in the United States. The 2006). Organised retailing accounts for about less
Retailing sector accounts for about 44 percent of than 2 percent of the food retailing industry in
the total GDP. It is also the largest employment India (Chengappa et al., 2005). However, with a
provider with about 15-20 percent of the total projected growth rate of 8.3 percent per annum, it is

A Fact Sheet
expected to appropriate a share of 20 percent of the market price and the method of calculation is fully
total retailing by 2008. In India, food is the largest transparent. Farmers deliver from up to 50 kms.
sector with a large number and variety of retailers. away to a consolidation centre which, in turn, is
Food retail outlets (36,82900) account for about up to 300 kms. from the stores. There is no cool
one third of the total retail outlets (1,11,65000 chain so losses are high, although significantly less
in 2001) as well as 63 percent of the total retail than in the traditional supply chain. Foodworld
sales in the country (Chengappa et al., 2005). The has negotiated with seed and fertiliser companies
number of retail outlets has grown at the rate of on behalf of the farmers to ensure that the right
26 percent during the period 1996-2001. Food varieties are supplied. Farmers receive loans from
and groceries represents 48 percent of what Indian these companies. At present, Food World plays
consumers spend their money on. Supermarkets no role in loan repayment although it would
in India presently account for a very small share cease buying from farmers who fail to repay their
of the fresh produce retail sales. However, sales loans. Discussions with banks were underway to
are growing rapidly and an attractive fruit and set up a quadripartite arrangement, whereby the
vegetable sector is perceived as an important way banks finance the inputs supplied to farmers and
of attracting customers. Foodworld repays the banks out of the farmer’s
earnings (Shepherd, 2005).
3.1 Retail Formats of Major Food Chains
in India Reliance is launching 2500 Feel Fresh Stores
Supermarkets represent the most popular form of to retail fresh fruits and vegetables. Feel Fresh
organised retailing in India, of which the organised plus stores numbering 2400 will retail apparel
food and grocery sector accounts for about 14 and electronics besides fruits and vegetables
percent of the total sales after clothing and textiles (The Economics Times, 05 August, 2006).
(at 36%), watches and jewellery (at 17%). Euro The competition from large retail chains and
Monitor Report (2004) indicates that there are manufacturers like Adani, Cargil, Vimal Bharat,
about 385 super market stores operating (2003), Jmd and Gokul in the vanaspati sector has led
mostly with one outlet, while there are only 14 to the closure of most of the vanaspati units in
companies that run department stores and two Saurashtra which contributes 40 percent of the
with hypermarkets. In the recent years, a number countries total vanaspati consumption (The
of corporate players such as Pyramid, the Tatas, Economic Times, 04 August, 2006). Reliance
the Rahejas, ITC, Pantaloon and RPG group, have is getting into the cooking oil market with soy
entered the organised food retail sector in India. oil through sourcing from third party. Its major
The major food retailers in India include RPG’s competitors are Adani and Ruchi Soya.
Food World, Nilgiris and Subhiksha, while others
like Big Bazaar, Star India Bazaar also deal with Adanis are investing Rs.160 crores in Himachal
food and fibre products. Some facts regarding their Pradesh to procure high quality fruits and
profiles are given in table 15. Food World, India vegetables through their new venture -Adani Agri
operates 50 stores, primarily in south India and Fresh limited (AAFL). It will procure apples from
has developed supply relationships with about 100 Himachal and will be announcing procurement
small farmers. Its farmers have an average holding of prices on a weekly basis (The Times of India, 08
five acres each. There is no contractual relationship. August, 2006). Diageo India — a liquor company
For the time being, the company has agreed to — is tying up with Food Bazaar to sell its premium
purchase everything its farmers produce, although brands like Smirnoff and Johnny Walker and will
if quality considerations begin to override quantity be the first liquor company to bag shelf space at
requirements, this may not last. Prices are set on a Food Bazaar outlets (The Hindu Business Line, 09
daily basis with reference to the prevailing wholesale August, 2006).

A Fact Sheet
TABLE 15
Profile of Major Food Retailers in India
Retail formats Group name Store brands Number of Employment 2004 net sales
stores (US$ m)
Hyper market Pantaloon Retail Food Bazaar 19 2500 (total for 72
(typically 3,500- Tata Trent Star India Bazaar 1 Pantaloon retail) n/a
5,000 sq.ft.) Shoprite Checkers Shoprite 1 n/a
RPG# Spencer’s (Giant) 3 33
Super market Nilgiris Nilgiris** 32 FW-300 per store 33
(typically 1,000- RPG & DFI Food World (64% 93 78
2,000 sq. ft.) Apna Bazaar market share in 86 33
Zakaria Shahid 2000-01)* 24 n/a
Group Apna Bazaar 92 24
Trinethra Super Sabka Bazaar 31 n/a
Retail Trinethra
Pantaloon Retail Food Bazaar
Fab Mall***
Valdel Retail
(Family Mart)****
Discount Viswapiya Subhiksha***** 164 50
Margin Free Margin Free 300 n/a
Markets
Convenience Bharat Petroleum In & Out 240 n/a
(typically 750- Company (BPCL)
1000 sq.ft.)
Cash and carry Metro Cash and Metro****** 2 300 in each 15
Carry centre
Note: # With the Dairy Farm and the RPG group parting ways in Foodworld Super market Ltd. the brand has been now renamed, Spencer’s Daily. The Food
World brand has been retained by Dairy farm. The RPG group has taken over 49 of the 93 Food World stores (The Hindu Business Line, 10 January, 2006).
It is the only chain procuring directly from growers.
* Food World : With 3000-3500 sq. ft. space it carries about 5000 stock keeping units (SKU). (A Stock Keeping Unit is one particular variety of a product
in one size/volume. For instance, if company X manufactures two brands of soap, each in three sizes, then the number of SKUs the company has is six). Food
Worlds handle on an average 600 customers per day per store, which translates to 1.8 million transactions per month. Offers a private label for about 150
products, for which 10-15 percent discount is offered. Sale of private label products accounts for about 22 percent of the total sales.
** Nilgiris: The annual turnover of the company is about Rs. 240 crore (US$ 54.5 million), with Rs. 80 crore (US$ 18.1 million) from the super market, Rs.
20 crore (US$ 4.54 million) from their bakery, Rs. 100 crore (US$ 22.7 million) from lodging, and the remaining from other business.
***Fab Mall : Food items, which number about 120 (all of which are Fab Mall — their private label), account for about 30 percent of the turnover and stocks.
The remaining 70 percent is split between processed foods (30%), non-food items (30%) and fresh fruits and vegetables (constituting about 10%). Their
product mix also includes both packaged and branded meat. They have created their own private label, particularly for food items, with strict quality control
procedures, including cleaning and sorting, fumigation, etc. (which initially included expertise from CFTRI, Mysore).
**** Family Mart : consists of a Department store called ‘Centra’, a Supermarket – called ‘Daily’, a food court and an entertainment centre for kids. The super
centre is housed in a one lakh sq. ft. area located on Kanakapura, Bangalore. Supermarket ‘Daily’ is in Mysore. They maintain about 5000 SKUs. About 20
percent of the items (mainly food) constitute 80 percent of the total business. They have an in-house brand known as ‘Daily’s’, which make up about 30 percent
of the total products for which price discounts are given. They also sell fresh F&V; fresh meat is however, not sold, given the sensitivities of people, although,
branded and packed frozen meat is available at their supermarket.
***** Subhiksha : This is based on a discount retailing format. To cut costs, they have taken measures such as small sized functional stores with an approximate
area of 1500 sq. ft., long lease (10 years) of outlets, fixed vendors for the store furniture and equipment as well as providing customer service and eliminating
self-service (to reduce customer pilferage). It also expanded its operations to Bangalore, Hyderabad and other cities in India like Ahmedabad. Subhiksha has
also been in step with technological advancement; their e-shop facility helps customers to order their goods on the net.
****** The Metro : This Group is one of the world’s largest trading groups and a Fortune 500 company created in 1996 through the merger of several important
retail companies. In 2003, it started operations in India, and opened its first outlet in Yeshwanthpur, Bangalore on a sprawling area spread over 6,500 sq. m.
and the second on Kanakapura Road, Bangalore. Capital expenditure for both the stores is 199 crore (US$ 45.67 million). It has sophisticated logistic systems
and claims to produce high quality merchandise, in both food and non food areas. The company is involved in wholesale trade only due to FDI restrictions
in retail. Their distribution system envisages bringing together producers, farmers, agricultural cooperatives and manufactures with the community of traders,
retailers and small and medium enterprises. It sources most (90%) of their products from local producers and suppliers. They have about 17,500 SKUs. Each
centre employs 300 local people and the headquarters would employ 750 local people. Metro has regulated access to its stores by letting only those (having
registration number) with ‘access cards’ to purchase from its outlets. Metro does not deal with primary agriculture commodities such as food grains and F&V.
Recently, it made forays into the meat and meat products market through backward integration involving contractual farmers.
Source: The Hindu Business Line, 27 October, 2005; Chengappa et al., 2005.

A Fact Sheet
Reliance is investing in retail across 1500 towns 3.1.1 Food processors and exporters as retailers
and cities with sourcing directly from farmers Many of the basmati firms like KRBL, LT,
through CF. It will have a multiple format like and Satnam Overseas have recently renamed
convenience stores, specialty stores, super markets themselves as KRBL Limited, LT Overseas and
and hyper markets. The major agro products will Kohinoor Foods Limited, respectively in order to
be fresh produce, groceries, apparel, footwear and give a new corporate identity to their brands in the
farm products. It will have a presence in Punjab, national and international markets as their brands
Haryana, and West Bengal for agri procurement. are better known than the companies themselves.
It is planning to procure 10 million litres of milk In fact, LT overseas has already registered a
daily from the farmers to be sold as liquid milk or subsidiary called Daawat Foods Pvt. Ltd. based
processed dairy products. (Business Today, 30 July, on it brand name Daawat (The Hindu Business
2006, pp. 76- 80). The Government of Punjab has Line, 05 August, 2006).
given a fiscal concession of the order of Rs. 1500
crore to Reliance for setting up its agri venture Global Green — a subsidiary of BILT — is
worth Rs. 500 crore. These incentives have been in supplying to over 15 retail stores in the US, Canada
the form of subsidies, sale and lease of government and Europe and gherkin to 22 countries with a
and common land, exemption on power duty for turnover of Rs.100 crores. It has also subsidiaries in
20 years and other tax concessions. (The Economic the Europe and the US. It produces 30,000 tonnes
Times, 21 July, 2006). of gherkin every year (The Hindu Business Line,
Brand Line, 27 April, 2006). Global Green is one
Interestingly, some of the big retail chains like of the top 10 gherkin suppliers in the world.
Big Bazaar, V Mart and Foodland have begun
supplying small kirana stores as a B to B model on Pepsi is reviving its CF in tomatoes for the
the lines of Wal-Mart’s Sam’s Club. The wholesale domestic market. It will not process the entire
business will be a separate business model like that crop for export like in the past, but grade it
of Metro cash and carry which sells primarily to according to quality and process only a portion
large distributors. There are about 10 million retail of it with the rest going to domestic market.
outlets in India, the majority of them being small Tomato produce will be graded in to A, B, C,
mom and pop outlets (The Economic Times, 19 and D with A grade going to retail outlets for
July, 2006). Some of the corporates like Reliance, table use, B grade for the wholesale market,
Tata, Coca Cola, ITC and M&M have signed while C and D for processing (Hindu Business
Public-Private-Panchayat Partnership agreements Line 17 June, 2006). It will be supplying fruits
to set up Rural Business Hubs which will focus and vegetables to Big Bazaar and others retail
on food processing, agri products, poultry, animal chains whose fruits and vegetable business
husbandry, fisheries, bio fuel and handloom and contribute 10 percent of the total turnover. It
handicrafts. (The Hindu Business Line, 13 July, is also planning to use the surplus land in its
2006). Satnam Overseas Ltd. is tying up with bottling plants as nurseries for growing plants
Reliance Retail for selling its branded basmati to supply these to the farmers (The Economics
rice in the domestic market. (The Hindu Business Times, 15 November, 2005).
Line, 09 July, 2006).

A Fact Sheet
4. Global Supermarket Chains in India
Wal-Mart entered India in 2002 for procurement Bharti’s Field Fresh is also partnering with retail
with an office in Bangalore and today procures chains like Wal-Mart and Tesco (The Economic
annually $1.2 billion worth of products from India. Times, 27 July, 2006). Field Fresh will export
Since 1985 it was sourcing products through buying onions, chilies, okra and other vegetables to
agents. It is now likely to open its first B2B cash and Western retailers, including Tesco of Britain. The
carry store (Sam’s Club, a division of Wal-Mart which joint venture partner in Field Fresh Food namely,
is the largest warehouse chain in the USA and serves the Rothschild group, has a large holding in Tesco.
small businesses) and also more procurement offices. Field Fresh Food is likely to use the Tesco brand for
It has now 40 suppliers in India for supply of towels, food retailing under licence arrangement as foreign
shoes, jewellery and fans, as in the case of other global investment in food retailing is still not allowed in
retail chains who source from India like Target, Tesco India. The venture has already leased 1,860 hectares,
and Gap. Since 2004, it has also started training or 4,600 acres of land and sent its first shipments
suppliers in the retail link system to track the sales of to Europe. It expects to be a leader in an Indian
their products in Wal-Mart stores. It is also working food export market for fruits and vegetables that
towards sourcing spices, Basmati, tea, and shrimps the company expects will reach $5 billion by 2011.
from India as Tesco has been doing for sometime now What is being created, as per industry sources, is
for its Central European stores. $93 million are largely something akin to a BPO in the agricultural sector
made up of clothing and home textiles with only $ 3.3 where food will be grown for the world.
million worth of other products which is growing over
the years. Gap, the US retail chain procured apparels Starbucks Coffee is also procuring its tea from India
worth Rs. 2000 crore from India. Similarly, German and sells under the brand name of Tazo. It buys tea
retail chain, Metro sourced apparels and leather goods from Apeejay T, Warren Tea, Assam Tea and some
worth $53 million in 2004. Similar are the stories merchant exporters. It is also planning to set up Tezo
of emerging chains like Chico, the women’s apparel tea outlets in the country (The Economic Times,
chain which gets 20 percent of its supplies from India, 25 July, 2006). Similarly in the textile sector, there
Decathlon- the French sports goods retailer, Target, are many companies which are supplying to high
JC Penney, Marks & Spencer, and H&M which are end US apparel brands like, Reese, Bill Blaus and
expanding their sourcing operations in India. The Dan River. Wellspun India is making towel and
sourcing of food products from India is also growing sheets for brands like Nautica, Feild crest, Cannon
across chains (John, 2005; John et al., 2005). and Tommy Hillfiger for the last five years (The
Economic Times, 25 July, 2006).
Wal-Mart, the world’s largest retailer, is currently
barred from opening its stores in India, because Pepsi Co has designated India as a farm-products
of fears that large-format retailers will displace hub for all of Asia. The company was originally
millions of India’s small shops. But the company forced to export farm products from India, in the
is exploring India as a source of ‘premium exports’, late 1980s, as a condition for selling soft drinks in
including items like long-grain basmati rice, the country. But now the company has decided
spices and fresh fruits like mangoes. It has stores that what was once its obligation is now a profitable
in 15 countries, and there are some very attractive business opportunity. The company is contracting
products grown in India that it would like to export with Indian farmers to procure seaweed, potatoes,
(Giridharadas, 2006). Similarly, Hindujas are also chilies, tomatoes and oranges for export. Jallowal,
entering into the Indian supply chain and tying up a village in Punjab state, in northern India, is one
with international retailers. of the only places outside the United States that

A Fact Sheet
PepsiCo has chosen to transplant the Florida and Tesco is buying more than Rs.25 crores worth
California oranges used in its Tropicana brand of of greens from India every year under its nature
juice. The company aims to export orange-juice choice standards for food through companies like
concentrate to its operations across Asia. PepsiCo Mahindra and Field Fresh. The 80 outlet strong
sells farmers saplings, trains them and contracts Apna Bazaar will be dealing with fresh foods to
with them to buy their harvest at an agreed price. the extent of 10 percent of its turnover where food
sales account for 60 percent of total sales. It is a
With international brands like Nike and Paul Smith cooperative chain set up in 1948 by Mumbai mill
dealing in the infant and home textile segment that workers (The Hindu Business Line, 01 August,
are demanding complete product traceability, the 2006). Garment retail chains like Wal Mart, J.C.
cotton producers in India like Arvind, Vardhman, Penney, Target, and Gap have doubled the sourcing
Nahar, TT and Royal Classic are going in for CF of garments from India during the last two years
of cotton. Royal Classic which supplies to Sara Lee and they are setting up their wholly owned sourcing
is already contracting 5000 acres in Tamil Nadu. and buying offices. Wal Mart has faced 40 cases
Some of them have started organic farming of of work place violations in the US in 2005 (The
cotton which is being supported by multinationals Economic Times, 21 September, 2005).
like Monsanto and Dupont in extension especially
with Vardhman and Trident in Punjab. Some others 4.1 Procurement Practices of
like Gokuldas and Orient Craft prefer to work with Supermarkets
channel partners or spinners for getting supervised In general, super markets purchase larger volumes
and certified organic cotton for manufacturing and have created new systems of procurement
organic garments (The Economic Times, 18 i.e. they deal directly with individual growers, or
July, 2006). Wal Mart has been procuring, many specialised wholesalers, and specialised suppliers
products like apparel, textile, home furnishing and (see figure 5). Most of the time, they work with
shoes directly from Indian factories. It also buys multiple channels of supplies. They insist both on
products worth $ 1.2 billion indirectly from India. a lower price and higher quality from the suppliers
Figure 5
More recently, several European supermarket chains Supply Chain Mechanism Adopted by the
like Sainsbury’s, Safeway, and Tesco have extended Retail Chains
their procurement into India with EUREPGAP
standards which is being followed strictly by local Branded Products Suppliers
suppliers and farmers. Tesco alone has procured

greens worth more than Rs. 25 crore annually from W/H
India and it has its own global standard for food

Distributor
called Nature’s Choice. Some of the local companies
involved with these chains are Mahindras and CFA
Bharti-Rothschild. There are more than 400 farmers Fruits &
Bakery,
in Maharashtra, Andhra Pradesh and Uttaranchal Vegetables
Dairy, F&V Source
Consolidation
supplying to these chains. The crops include litchi, Suppliers
Point/Vendor
mango, grape, potato and gherkin (Srinivas, 2005).
Warehouse
There are also many Indian supermarket chains like
Food World, Nilgiris, Subhiksha, Fab Mall, Valdel
Repack Section
Retails, and Giant which have started off in fruits
and vegetables more recently but only one of them
Supplier
–Food World is procuring directly from farmers
(Chengappa et al., 2005; figure 5). Source: Abhishek et al., 2005.

A Fact Sheet
which means that only efficient and large growers that chains consider attract people to their stores
will be able to work with them in the long run. rather than to competitors. Destination categories
They use both fixed and variable pricing methods are thought to be important because consumer
and delay payment to suppliers upto as long as 60- loyalty to an individual chain is considered to be
90 days despite regulations to pay within the week weak. It is clearly easier to create an individual
in some countries like Malaysia. Further, farmers identity for product groups such as fruits and
need to make large investments in order to be able vegetables, fish or meat than it is for household
to supply to supermarkets successfully despite the goods. However, in order to do this, the stores need
fact that credit is still a problem for the farmers to be assured of a reliable supply of consistent quality.
(FAO, 2004). In many countries, supermarket managers have
little individual freedom to buy produce directly
Relatively few chains in Asia have adopted centralised from suppliers. Not only do chains seek to offer
buying – a global practice among supermarket chains, a consistent product range over all their stores,
in part because they presently operate insufficient but purchases at each store are time-consuming
stores to make a distribution centre viable. Where and involve complex paperwork. It is far better
they have done so, facilities may just be simple for a store to receive dependable deliveries from a
warehouses and far from state-of-the-art. Both Food few wholesalers or from a centralised distribution
World in India and Saigon Co.op. in Vietnam have centre than to have to worry about buying from
such centres, but neither presently uses cold chains. farmers or wholesale markets on a daily basis
Many chains in Asia continue to purchase through (Shepherd, 2005).
wholesalers, in preference to establishing distribution
centres. Some chains are not prepared to buy from Thus, supermarkets in Asia presently use a wide
suppliers who are unable to supply all stores in the variety of fresh fruit and vegetable procurement
chain, with clear indications for the size of companies practices which are likely to see consolidation. At
who will be able to survive in such an environment. present, the following channels can be seen:
Others, however, are gradually shifting from those  direct, uncontracted purchases from farmers at
traditional wholesalers to “specialised/dedicated individual supermarkets;
wholesalers” that are specialised in a few products  purchases from wholesalers, who either work
and dedicated to supplying one supermarket chain. directly with farmers or through wholesale
In many countries, the leading chains are promoting markets;
“preferred supplier” systems. This is done in order  purchases through independent procurement
to select producers or wholesales capable of meeting companies (dedicated suppliers) who often work
the quality and safety standards of the supermarkets with farmers approved by the supermarkets
which, on the basis of experiences in other regions, chains (preferred suppliers);
are likely to become stricter as consumers become  purchases through government-sponsored
more affluent. Such linkages permit more rapid distribution centres;
movement of produce from farm to store, enabling  purchases through informal farmer groups,
supermarkets to sell much fresher produce. To farmer associations or cooperatives;
achieve this, supermarkets often require that their  purchases through large individual farmers,
suppliers adopt practices and make investments that who often sub-contract part of the supply to
simplify movement of produce along the supply smaller farmers;
chain. Insistence on these “Good Commercial  leasing of space within the store on a commission
Practices” can eventually be expected to become basis to traders, farmers and cooperatives
widespread in Asia. In supermarket jargon, fruits (Shepherd, 2005).
and vegetables are considered by many stores to be  multiple channels, and
a “destination category” i.e. a category of products  integrated chains (Shepherd, 2005a)

A Fact Sheet
4.2 Agri Export Chains, Primary –1.0 acre) per farm family is allowed by the sponsors
Producers and Labour of contract production (Singh and Asokan, 2005).
In India, in the cashew commodity chain, there It is mostly the medium and large farmers who have
were only a few large importers who tended to sell been beneficiaries of such backwardly-coordinated
to large processing companies which then sold to commodity chains. The small and marginal farmers
the supermarkets who did their own packaging and have not been able to enter high value agricultural
marketing under their own brand names. In some production like fruits and vegetables because of lack
clusters in some parts of southern India, each export of resources (Deshingkar, et al., 2003; Singh, 2002).
house had 40-50 small processors in their network Further, under contracts, there has been use of low
who produced almost entirely on their own and paid female adult and child labour for reasons
employed wage labour to supplement family labour. of ‘nimble fingers’ i.e. it is docile, low wage, and
This small processor dominated activity allows the quality labour, besides poor working conditions
surplus generated through processing to be spread for such labour (Singh, 2003). Even for producers,
more evenly across many players besides generating there have been instances of lack of sustainability
employment for local people. The small processors of the contract arrangements and ‘agribusiness
in the rural areas had better control over logistics and normalisation’ i.e. supply chain driving firms to
quality as they were located in the cashew growing reduce procurement prices over time in order to
areas and knew most of the growers in the region. cut down their costs and resorting to open market
In cashew plantations, a complex nexus of power procurement to weaken the bargaining power of
relations among government officials, politicians, the contract growers (Singh, 2002).
traders and village leaders seemed to govern the
benefits to communities. But, despite the export Similarly, the garment sector labour force
boom in cashew, the domestic resource cost of predominantly comprises of first generation
earning foreign exchange increased over time. There women workers. Due to pressure from buyer-
was also a potential danger of the Indian parts of the imposed mechanisms like social audits, most of the
chain engaging in a ‘race to the bottom’ by reducing garment manufacturers pay minimum wages but
cost particularly labour cost which could mean this does not necessarily mean fair wages. Some of
exploitative conditions and even complete exclusion the international retailers are also putting pressure
from the much needed employment for local people. on the suppliers to prevent child labour. They
Further, the suppliers were facing higher standards send inspection team to the factories to conduct
of quality in globally driven markets for cashew at spot audits. This is in addition to the mandatory
the same time when the processing shifted from the annual social audit. Recently, the Swedish retailer
factory based systems earlier to non-factory, cottage Ikea took action against a supplier in Maharashtra
and commission-based processing. Further, labour after its subcontractor in Chennai violated the
standards and working conditions seemed to be child labour norms. It asked the supplier to fund
deteriorating in terms of employment becoming the education of the child till matriculation (The
more seasonalised and informalised, particularly for Economic Times, 26 September, 2005 and The
women who accounted for more than 90 percent of Hindu Business Line, 03 March, 2006).
the workers in this industry (Eapen et al, 2003).
More recently, Carrefour has been fined in South
Small producers have also been excluded from various Korea for unfair business practices i.e. forcing
commodity chains which operate with CF schemes suppliers to cut prices to save the 1.737 billion
at the producer level (Singh, 2002; Deshingkar et al., won supply order for 10 months last year. It is
2003), with the exception of some crops like gherkins also accused of intentionally delaying the signing
in India which require family labour and constant of contracts with suppliers (The Hindu Business
supervision, and therefore, only small acreage (0.5 Line, 05 July, 2006).

A Fact Sheet
5. Agri Retail Chains in India
In the agri retail sector, there are many large corporate Godrej Agrovet is opening 1000 outlets in the next
players like ITC with its e-choupals and E-sagars, five years with a focus on Punjab, Haryana, Gujarat
M&M with its Krishi Vihars, Godrej Agro with its and Maharashtra with each costing Rs.30 lakh to 1.5
Adhars and the Tatas Kisan Sansars being the major crore. These would retail besides agri inputs, food
ones. M&M’s MSSL is tying up with international and grocery, apparel and foot wear and consumer
retailers like Tesco, Target and Carrefour for products durables. It has tied up with Apollo Pharma for
like pomegranates, and vegetables like, tomatoes medical centres and Bajaj Alliance for insurance.
and onions and potatoes which account for almost It is also tying up with oil and LPG companies for
50 percent of the total vegetables produce in the retailing their products. The company also holds
country. (Economic Times 21 July, 2006). The ITC’s 10-15 percent of the frozen chicken market which
e-choupal project has already become the largest is 5 percent of the chicken market in India (The
initiative among all internet-based interventions in Hindu Business Line, 06 August, 2006).
rural India reaching more than 10 lakh farmers in
11,000 villages through 1900 kiosks in four states ITC has plans to upscale its e-choupal centres to
i.e. Madhya Pradesh, Karnataka, Andhra Pradesh 20,000 by 2010 with a projected revenue of $
and Uttar Pradesh in crops of soyabean, coffee, 2.5 billion from rural retail. Reliance has plans to
fish, and wheat, respectively. It is also planning invest Rs. 250 billion in retail. Food and grocery
to get into other crops such as bajra, basmati rice, will account for 77 percent of retail volumes with
sesame seeds and handpicked groundnut besides another 7 percent is to be accounted for by clothing
spices and fruits and vegetables. These projects will and 1 percent by footwear besides 2 percent by
be spread across 14 states over the next few years home furnishing (Business and Economy, 14 July
(Sanganeria, 2003). 2006, pp. 84-85).
6. Contract Farming in India

Contract Farming (CF) can be defined as a system 1987). It basically involves four things - pre-agreed
for the production and supply of agricultural and price, quality, quantity or acreage (minimum/
horticultural produce by farmers/primary producers maximum) and time (Singh, 2002).
under advance contracts, the essence of such
arrangements being a commitment to provide an CF is known by different variants like centralised
agricultural commodity of a type, at a specified time, model which is a company farmer arrangement;
price, and in specified quantity to a known buyer. In outgrower scheme which is run by the government/
fact, CF can be described as a halfway house between public sector/joint venture; nucleus-outgrower
independent farm production and corporate/captive scheme involving both captive farming and CF by
farming and can be a case of a step towards complete the contracting agency; multi-partite arrangement
vertical integration or disintegration depending involving many types of agencies; intermediary
on the given context. Due to the efficiency (co- model where middlemen are involved between
ordination and quality control in a vertical system) the company and the farmer; and satellite farming
and equity (smallholder inclusion) benefits of this referring to any of the above models (Eaton and
hybrid system, it has been promoted aggressively in Shepherd, 2001; GoI, 2003). In fact, CF varies
the developing world by various agencies (Glover, depending on the nature and type of contracting

A Fact Sheet
agency, technology, nature of crop/produce, and and ethical trade, promotion by the central and
the local and national context. state agencies, banking and input industry push for
CF, farming crisis and reverse tenancy, and failure
The contracts could be of three types namely : of traditional cooperatives, will help in the spread
(i) procurement contracts under which only sale of CF across crops and regions as they provide
and purchase conditions are specified; (ii) partial new space to this arrangement in the context of
contracts wherein only some of the inputs are withdrawal of the state from the agricultural space.
supplied by the contracting firm and produce is Even the new Intellectual Property Rights regime
bought at pre-agreed prices; and (iii) total contracts which encourages protection and exploitation of
under which the contracting firm supplies and proprietary genetics is likely to accelerate the CF
manages all the inputs on the farm and the farmer practice (Wolf et al., 2001).
becomes just a supplier of land and labour. The
relevance and importance of each type varies from But, generally, contracting agencies especially
product to product over time and these types are private, tend to prefer large farmers for CF because
not mutually exclusive (Hill and Ingersent, 1987; of their capacity to produce better quality crops
Key and Runsten, 1999). Whereas the first type is due to the efficient and business-oriented farming
generally referred to as marketing contracts, the other methods, the large volumes of produce which
two are types of production contracts (Scott, 1984; reduces the cost of collection for the firm, their
Welsh, 1997). But, there is a systematic link between capacity to bear risk in case of crop failure, and
product and factor markets under the contract various services provided by these large producers
arrangement as contracts require a definite quality of like transport, storage, etc. (Wilson, 1986; Winson,
produce and, therefore, specific inputs (Scott, 1984; 1990; Burch and Pritchard, 1996; Fulton and Clark,
Little, 1994). Also, different types of production 1996; Key and Runsten, 1999). On the other hand,
contracts allocate production and market risks small farmers are picked up by firms for contracts
between the producer and the processor in different only when the area is dominated by them, there is
ways. The price of the contracted produce can be a government directive to do so or they are found
the growers’ fixed price, residual (profit/loss) sharing to be low cost producers in certain areas and crops
by sponsor and grower, open market based price, (CDC, 1989). Further, firms may work with small
spot market price, consignment based, two part split farmers to make use of the state support (financial
price, tournament price (fixed plus variable based on and technical) to these producers under various
relative performance), base price plus quality-based development programmes (Glover and Kusterer,
incentive price, or administered price. 1990) and to benefit from lower cost production on
these farms as these farmers have access to cheaper
Some others recommend CF as the only way family labour, and being residual claimants of
to make small scale farming competitive as the their labour, work more conscientiously than hired
services provided by contracting agencies can not labour (Key and Runsten, 1999). In fact, some of
be provided by any other agencies (Eaton and them even use large growers, rural elite, and local
Shepherd, 2001). Contract farming also lowers small processors as sub-contractors to procure from
transaction costs for the farmers as many of the the small growers for the company (Kirk, 1987).
transactions are internalised by the procuring The seed companies in India use small companies
firm (IFPRI, 2005). CF is also an alternative to as subcontractors to procure seeds produced under
corporate farming which may be costly, risky, and contracts (Shiva and Crompton, 1998). In Canada,
difficult to manage and still not viable (Payer, small tomato growers were preferred as the crop
1980). Further, in India, supermarket chain growth required hand-picking which only small farmers
including FDI in retail, international trade and do as the large ones do mechanical harvesting,
quality issues like SPS, organic trade, fair trade, especially when weather limits the use of mechanical

A Fact Sheet
harvesters (Winson, 1990). Similarly, in India, resulting in lower productivity and in final prices
gherkin CF is carried out by small and marginal paid to farmers. Also, delayed delivery schedules can
farmers as the crop requires plenty of labour inputs lead to farmers receiving lower prices as the quality
which these farming families can provide from gets deteriorated. Firms avoiding transparency in
within (Dev and Rao, 2004). Also, working with pricing and agribusiness normalisation are other
many small farmers in the case of small processors problems reported in CF. Ecological degradation
gives the required flexibility in the procurement and monoculture are the other potential problems
schedule helping to extend the processing season in CF for farmers and local areas (da Silva, 2005).
and use the equipment efficiently; and help spread
the risk of supply failure as compared to working The contracting firms tend to aggravate the natural
with a few large farmers. resource crisis as most of the contracts are short term
(one or two crop cycles) and the firms tend to move
In Turkey, the vegetable contract growers did not on to new growers and lands after exhausting the
read the contract before signing and others (20%) natural potential of the local resources, particularly
who read it did not understand it. Though the land and water, or when productivity declines due to
contracts were group contracts they were not happy some other reason (Morvaridi, 1995; Torres, 1997).
with the group approach as there was no group The over-exploitation of groundwater, salination
feeling and interaction. Most of them wanted third of soils, soil fertility decline, and pollution are
party intervention and felt the need for organising typical examples of environmental degradation due
and bargaining cooperatives. Even those who to CF (USAID, 1994; Rickson and Burch, 1996;
were not in contracting had later withdrawn from Siddiqui, 1998). The firms do not care for this as
contracting due to dispute related to pricing and the costs of such effects are externalised so far as the
the method of payment. On the other hand, the firm is concerned.
processors reported farmer default and competition
in contracting as the major problems. Similarly in The growing importance of CF has serious
the US, the major problem in broiler contracting implications for the agribusiness co-operatives,
included early contract termination, manipulation which have been practising some form of contract
of quality or cost of input, underweighing of poultry procurement in the past simply because they are
and feed, additional costs and misevaluation of the producer-owned organisations. They will have to
performance of producers (Rehber, 2000). now compete with the private and/or multinational
firms at the farmer/producer level in terms of
Further, agribusiness companies working with providing competitive price and other incentives
farmers are driven by the profit motive alone most so that producer members do not turn away from
of the time, and therefore, tend to ignore the the cooperative organisation. This will require
social dimensions of their operations. Examples of more efficient functioning of the cooperatives.
such behaviour include abandoning an area if not In Australia, the lack of financial support to co-
profitable to continue, and exclusion of small and operatives by the state and the competition from
marginal growers from their operations (Andreas et the MNCs and other local agribusiness firms, under
al., 2006). the deregulated environment, led to the closing of
some co-operative processing plants and a change
Besides reneging on contracts and holding up in the form of organisation in others (Burch and
problems in the guise of quality based rejection Pritchard, 1996).
of produce, the agribusiness firms may also make
farmers dependent on their technology, for example Also, an agribusiness firm generally does not
an animal feed supplied may be formulated to delay encourage the cooperative formation and
the growth cycle or decrease the daily weight gain, expansion in its area of operation as it may become

A Fact Sheet
a competitor in the relatively longer term and spoil in for more direct arrangements with the farmers
the procurement base of the firm (Wilson, 1986). for ensuring an adequate supply of quality raw
This happened in the case of a Unilever subsidiary material at more reasonable prices for acquiring
in Cameroon wherein as farmers tried to organise a international competitiveness, by providing them
co-operative to strengthen their bargaining power, with necessary inputs. Now, most of this demand
the company refused to procure and farmers’ crop for wood is being increasingly met from agro- and
was wasted. This happened despite the fact that social forestry rather than from forests. There are
the cooperative was dominated by large farmers. 12 major companies in India which distribute 63
Finally, the cooperative failed (Konings, 1998). million seedlings annually to tens of thousands
However, it is seen that a para-statal may encourage of farmers (with WIMCO alone having 15,000
cooperatives genuinely and if that happens, then farmers and ITCBPL over 6000 farmers), with an
they do succeed as well, as happened in Kenya in annual area coverage of 45,000 hectares (Mayers and
case of tea (Konings, 1998). But, the success of the Vermeulen, 2002). In India, WIMCO, JK Paper,
contract system per se in the case of Kenya was the ITC, and BILT had major CF projects during the
result of the coming together of the state, donors and 1980s and the 1990s with mixed results. Appendix
transnational capital, favourable market conditions, table A-1 gives a bird’s eyeview of CF in India.
access to capital, and a relatively decentralised
management system (Little and Watts, 1994). CF has various models/variants being practiced in
India at present (Appendix 1). There have been some
6.1 Status and Experience of CF in India studies of the CF system in India more recently.
Other than seed, it was tree CF that was one of the However, most of these look at the economics of
first to happen in India. Globally, plantations provide the CF system in specific crops, compared with that
20 percent of wood and are estimated to provide 50- of the non-contract situation and/or competing
70 percent by 2050 as per FAO projections (Mayers traditional crops of a given region, e.g. in gherkins
and Vermeulen, 2002). Further, 60 percent of the (hybrid cucumber) in Tamil Nadu (Chidambaram,
wood pulp companies were sourcing some of their 1997) and Andhra Pradesh (Haque, 2000; Dev and
raw materials through outgrower schemes or were Rao, 2004), tomato in Punjab (Bhalla and Singh,
involved in some extension to the growers in the 1996; Haque, 2000; Rangi and Sidhu, 2000)
mid 1990s. Similarly, 57 percent of the countries and Haryana (Dileep et. al., 2002), and cotton
out of 76 studied had at least one example of in Tamil Nadu (Agarwal et al., 2005). It is found
such farmer linkage in the late 1990s (Saigal and that contract production gave much higher (almost
Kashyap, 2002). This linkage is co-ordinated three times) gross returns compared with that from
either through intermediaries, contractual land the traditional crops of wheat, paddy and potato
leasing from farmers for captive wood production in case of tomato (Bhalla and Singh, 1996; Rangi
or CF system. Some prominent examples, besides and Sidhu, 2000), and in the case of gherkin when
companies in India, are those of PICOP in compared to tomato and onion (Chidambaram,
Philippines and the tree outgrower schemes in 1997), and cotton (Agarwal et al., 2005) due to
KwaZulu-Natal in South Africa (Baumann, 2000). higher yield and assured price under contracts. The
Poplar has been a major source of wood supply studies of tomato contract production in Punjab
after the decline of eucalyptus, which is used for and Haryana (Haque, 2000; Dileep et. al., 2002),
board and ply board manufacturing by large firms of cucumber in Andhra Pradesh (Haque, 2000)
like WIMCO, Sai Biotech, BILT (Yamunanagar) and cotton in Tamil Nadu (Agarwal et al., 2005)
and Nuchem (Tohana, Hissar), and for furniture also found the net returns from these crops under
and housing. Both domestic and multinational contracts being much higher than those under
corporate agri-business houses, especially those in non-contract situations though the production cost
the paper board and match sticks industries, went in tomato was higher under the contract system

A Fact Sheet
(Dileep et al., 2002). A more recent study across by farmers as well as firms has also been reported
crops, companies and locations in Punjab also (Bhalla and Singh, 1996; Singh 2002; Haque,
confirms this (Kumar, 2005). In the case of cotton 2003). Some of these studies recommend further
in Tamil Nadu, the contract growers had lower expansion and promotion of the CF system due to
input cost, lower interest loans, faster payment for its benefits (Bhalla and Singh, 1996; Chidambaram,
produce, and the crop insurance facility (Agarwal 1997; Rangi and Sidhu, 2000; and Dileep et al.,
et al, 2005). The studies in the states of Punjab and 2002). The eligibility criteria for participation in CF
Haryana also reveal that contract growers faced projects/schemes like irrigated land, suitable land,
many problems like undue quality cut on produce land near main road, literacy level of the farmer are
by firms, delayed deliveries at the factory, delayed themselves discriminatory in terms of who can be a
payments, low price and pest attack on the crop contract grower. In fact, in CF everywhere, private
(Bhalla and Singh, 1996; Singh, 2002; Rangi agribusiness firms have less interest and ability to
and Sidhu, 2000; and Dileep et al., 2002; Satish, deal with small scale farmers on an individual basis
2003). More recently, DSCL run input supply and (Hazell, 2005). Some of the coping strategies and
the CF programme one (Haryali Kisan Bazaar) for innovations adopted by farmers in CF situations
potato in Haryana also showed higher net returns include the following: labour-water exchange, share
for growers compared with non-growers due to cropping, and group leasing of land by marginal
higher yields and higher prices, though the cost of and landless farmers (Singh, 2002; Deshingkar et
cultivation was also higher (17-24%) (Tripathi et al., 2003).
al., 2005).
The more recent models of CF like franchising
It was also found by all of the studies that most of the being practiced by the Tatas (Tata Kisan Sansar)
firms work mostly with large and medium farmers for wheat in the states of UP, Haryana and Punjab;
(Bhalla and Singh, 1996; Singh 2002; Haque, 2003; and by the Mahindra Shubhlabh Services Limited
Dev and Rao, 2004; Singh and Asokan, 2005; (Mahindra Krishi Vihar) for paddy in Tamil
Kumar, 2005; Khairnar and Yeleti, 2005) with the Nadu, Andhra Pradesh, Karnataka and basmati
exception being firms in Karnataka, Tamil Nadu, and maize in Punjab and Haryana are also not
and Andhra Pradesh which worked with small delivering as expected. Mahindra and Mahindra’s
and marginal farmers due the nature of the crops recent involvement in Punjab agriculture has not
(cucumber/gherkin, and broiler chicken). Gherkin worked to the advantage of the farmers. In fact,
contracting was also smooth as there was no local this model creates a monopsony where a single
market for the crop, there was flexibility in contracts buyer buys produce of hundreds and thousands
due to the short term nature of the crop, and farmers of farmers. This system works to the disadvantage
maintained alternative sources of income (Singh of those farmers who lack adequate information
and Asokan, 2005). Similar was the case of iceberg about the market, which is termed as asymmetry of
lettuce grown for McDonalds in India which had information. This model increases the buyer’s power
a very thin market (Khairnar and Yeleti, 2005). disproportionately and puts the seller entirely at the
Surprisingly, even a state sponsored cooperative buyer’s mercy. Small and marginal farmers have not
(Markfed) in Punjab does not entertain farmers who gained from these experiments. Wherever any gain
can not spare at least three acres for its basmati paddy has been reported, it is reported for the farmers in
CF programme (The Tribune, Chandigarh, 08 June, general and distinction between big/rich and small/
2006). This bias in favour of large/medium farmers is poor farmer’s gains is not reflected in any way. The
perpetuating the practice of reverse tenancy in regions interests of the poor farmers are not synonymous
like Punjab where these farmers lease in land from with those of large/rich farmers (Gill, 2004).
marginal and small farmers for contract production One of the limiting factors in the performance
(Singh, 2002; Haque, 2003). Breach of contracts of the contract scheme in Punjab seems to be

A Fact Sheet
the MSP which introduces price rigidity and acts which meant losses for contract growers. They also
unfavourably for the buyers and exporters. On the delayed payments upto 60 days. But, growers were
other hand, because Basmati is out of the purview locked into these contracts due to the firm-specific
of the MSP, its contracting performance has been fixed investments they had made (Singh and
quite favourable for the processors and exporters as Asokan, 2005). Thus, many of the CF projects also
they could discover a market price. Also, being an failed due to either the poor design of the project or
export crop, it enjoys a well established high value default by any of the contracting parties.
market which in turn has created a lot of comfort
for the exporters. The performance of CF in Punjab Most of the companies do not provide any crop
has been tardy despite the fact that the state (PAFC) insurance service to the farmers. Pepsi is the first
has been reimbursing the extension service fees to company to rope in the Agricultural Insurance
the companies, on behalf of the growers. Company of India to insure a potato crop of 3000
farmers at a premium of Rs. 1000 per acre. If the plant
Further, the contracts protect company interest at population falls below 12000 per acre, the farmer
the cost of the farmer and do not cover farmer’s can claim Rs. 25,000 per acre as compensation.
production risk e.g. crop failure, retain the right The scheme is individual farmer specific and run
of the company to change price, and generally through the company’s CF programme.
offer prices which are based on open market prices
(Singh, 2002; Singh, 2005a; Singh and Asokan, Even the state sponsored programme of CF did
2005; Khairnar and Yeleti, 2005). Even organic not deliver in Punjab. The contracted winter maize
produce buyers offer conventional produce market- and hyola crops failed almost completely due to
price based prices to their growers (Singh, 2006a). inclement weather and poor quality seeds. In case
This is a serious issue as even a significant premium of green peas, the contract growers were forced to
over market price may not help a farmer if open dump their produce in the open market, after being
market prices go down significantly which is not rejected by the PAIC on quality grounds as per
uncommon in India. The market price based price the contract specification. There had been fungus
is offered to avoid grower defaults as they can, infection due to inclement weather marked by heavy
otherwise, sell the produce in the open market due rains in the winter season and then a sudden rise in
to availability of alternative market due to product temperature. An area of 500 acres under the contract
symmetry. However, an important contracting production of green peas in Patiala and Fatehgarh
agency in India offers two alternative prices to the Sahib districts had been affected. Some farmers
grower: a fixed price different for different times of found fault with the fungicide supplied by the
the season (staggered prices) plus a quality incentive contracted company in this regard. The dumping
based on produce quality in terms of content and of contract-produced crop in the open market led
defects, and a market price (preceding three days’ to a fall in the local market prices and it was being
average market price in the local mandi) linked sold at Rs. 3 per kg. now as against a promised price
price (which is slightly lower than prevailing market of Rs. 5 per kg. by the PAIC (Singh, 2003; Rangi
price) and a quality incentive again based on content and Sidhu, 2003). In general, across crops and
and defects. This is quite innovative and fair system regions, the CF programme could not achieve the
which gives the flexibility and choice to the grower stated area goal. Not only did it short in terms of
and rewards quality (Fig. 7 in Appendix 1). the contracted area being less than that stated by the
agency, but also the farmers did not plant the entire
The firms also manipulated provisions of the contracted area with the contract crops. The gap was
contracts in practice, e.g. in case of broiler chickens much larger in the latter case and even as high as
in Tamil Nadu where they picked up birds before 50 percent in the winter maize in Ludhiana and 20
the due date or delayed it depending on the demand percent in hyola in both Ludhiana and Patiala. There

A Fact Sheet
was a different private seed company for each crop those tests. Normally, it takes about 60 days to get
and they only provided seed and no other extension the payment. If the germination of parent seed/
service. Finally, none of the companies procured foundation seed goes down to 70 percent or lower,
the produce and advised the farmers to sell in the the growers are advised to ‘ plough down’ because
open market either because open market prices were it will not be economical to pursue the production
higher than the contract price or the quality was till the harvest. Plough down can be ordered at
not as desired. Except the oilseed crops (hyola and subsequent stages in case of severe pest attack or
sunflower), the net returns from contract crops were cross-pollination being not effective. The company
found be lower than what farmers would have got certainly loses some quantity of quality seed, but
from the wheat crop. Most of the problems farmers the growers’ loss is much more in terms of not only
faced related to the production and quality (like costs incurred but also loss of income from the area.
quality of seed and extension) and not marketing of There is no provision for compensation against
produce (except peas) as the open market could take ‘plough down’ of the crop. The companies, however,
care of the contract produce. Due to this experience, take care of their risk by planning 10-20 percent
a large majority (60%) were not willing to enter into more acreage than required (Singh and Asokan,
the CF arrangement again (Dhaliwal et al., 2003). 1997). Sometimes, companies give incentive for
There have also been instances of corruption and better germination rate and better quality of seed
malpractice in the PAFC run CF programme due production. The default rates of contract growers
to conflict of interest among implementing agencies have been low as they are assured grain price for
and lack of monitoring (Ramachandran and Dogra, seed crop at least and yields are better than grain
2006; Singh, 2006). crops (Shiva and Crompton, 1998).
The recent World Bank reports also point to If the seed is found rain damaged or the container
deficiencies in the CF programme launched by the is found damaged or torn and unsealed during the
State Government of Punjab. It states that for the transit, the grower is not entitled for any payment
CF programme to be successful, it should take into for such rejected/damaged seeds. The rejected seeds
account the aspects such as selection of crops for can be used for food/feed or for sale to other agencies
contracting, development of a quick and effective for edible/non-edible purposes. The minimum
contract enforcement and dispute resolution procurement price for the seed crop in most of
system, limiting fiscal risks to the state government, the states is decided by the representatives of the
limiting the number of parties in a contractual industry, e.g., in Andhra Pradesh, the AP Seedsmen
arrangement, and developing farmers’ organisations Association (which has 147 seed companies as
capable of contracting with sponsors, with a view members), seed production organisers, and the
to reduce transaction costs, increasing information growers decide the prices. However, this rate varies
flow, and improving farmers’ negotiation position and is dependent on the demand and supply factors
(WB, 2003; WB, 2004). to a larger extent, and each company may have its
own rate with the growers. But, generally the seed
In seed contracting, the growers bear all the costs price is higher than the price of the crop output
including cost of parent/foundation seed, cost of in the grain/agricultural produce market. The
cultivation, quality monitoring cost, transporting contract growers are to supply the entire produce
seed to the processing plant, and wastages and losses of seeds to the company under contract at the
at the farm, and in transit, grading and packaging. agreed price and time. Though there is generally
They also bear all risks like low germination, a clause in the contract for penalty for default, it
reduced yield, poor quality, and rejections. They is rarely implemented due to practical difficulties.
are paid a pre-agreed price only after the quality of The SSCs and companies pay about 80 percent of
seed is tested and for only the quantity that passes the price at the time of seed procurement and the

A Fact Sheet
remaining 20 percent after the seed passes the final each of phosphorus and potassium per acre as per
quality test (Kumar and Barua, 1998). the Pepsi Foods manual. The tomato crop requires
60-90 kg. of nitrogen, 60-100 kg. of phosphorus,
It is not incidental that most of the CF projects and 60-120 kg. of potash per acre depending on the
are in the states of Punjab, Haryana, Gujarat, quality of soil as per HLL manual. Similarly, the chip
Maharashtra, Karnataka and Tamil Nadu which potato crop requires 4-5 pesticide sprays and the seed
are agriculturally developed states. On the other potato crop 6-7 sprays as per the Pepsi Foods manual.
hand, vast areas of the country such as Bihar, Tomato crop under contract requires as many as 14
Jharkhand, Chhattisgarh, Orissa, West Bengal, the sprays as per the HLL manual, which is even higher
entire north-east India and areas of Uttaranchal, than that in cotton. This, in a situation where farmer
Himachal Pradesh, Kerala and Jammu and Kashmir awareness of the negative effects of pesticides on the
have been bypassed by CF projects. Does it mean environment, other than human and animal lives,
that these areas and farmers would not benefit especially food-related aspects, is very low (Gandhi
from commercialisation and vertical integration and Patel, 1997), can be quite problematic.
of agriculture? These are areas with the highest
concentration of small and marginal farmers (Gill, CF has led to the increased incidence of the practice
2004). This essentially means that contracting of reverse tenancy in the region as the returns from
companies do not encourage the participation farming have increased for those who can invest in
of those who need to be helped to participate as it and take risk of crop failure, and these are mostly
risk preference and innovativeness require not the large landholders or those who have other non-
just attitude but also resources and risk taking farm sources of income. This is certainly leading
capability to undertake risky crops and ventures to higher orders of economic differentiation in the
(Glover, 1987). The aspects of contracting which region as those who lease out land are only worse
contribute to CF excluding small producers are: off (Singh, 2002).
enforcement of contracts, high transaction costs,
quality standards, business attitudes and ethics like In India, the legal reform process is already under way
non/delayed/reduced payment and high rate of with the Union Government enacting the Model
product rejection, and weak bargaining power of Act for the state Agricultural Produce Marketing
the small growers (Kirsten and Sartorius, 2002). (Development and Regulation) Act, 2003 and
many states (8 as suggested, and 10 partially like
Repeated cultivation of the same crop without Gujarat, Haryana, Karnataka, Maharashtra, U.P.,
rotation can lead to a variety of soil infestations, Delhi, and Chandigarh permitting only direct
most commonly nematodes, which has happened marketing/CF or private/cooperative markets
in many situations in the case of tomatoes. In fact, (only Karnataka)) carrying out the amendment in
sometimes, the land becomes unfit for any kind their Acts. This amended act deals with the setting
of crop cultivation (Glover and Kusterer, 1990; up of private markets, selling of produce by growers
Torres, 1997). Irrigation intensity of contract crops, outside the APMCs (regulated markets), setting
i.e., tomato, potato and chilly is more than that of up of direct markets, specialised commodity
wheat. For example, potato requires 8-12 irrigations specific markets, regulation and promotion of CF,
compared with only 5-6 for wheat and other crops provision for agencies and measures to promote
(Chand, 1999; Pepsi Foods manual for potato quality, standards, and alternative markets, and
production in Punjab). Pesticides and fertilisers are public-private partnerships to facilitate more and
also used at much higher levels than in the traditional better linkage between firms and farmers (GoI,
crops. For example, potato cultivation requires 108 2004). The amended APMC Act has certain
kg. of NPK (inorganic fertiliser) per acre as against mandatory and optional provisions regarding
only 78 kg. for wheat (Chand, 1999) and 60 kg. CF wherein mandatory ones include aspects like

A Fact Sheet
who can undertake CF (type of sponsor and of makes it mandatory to pay the prescribed cess to
contract grower), details about the land under the concerned APMC or in case of multi-location
contract, duration of contract, description of operations, to the GSAMB which will apportion it
farm produce, other contract specifications like to the concerned APMCs. Though the monitoring
quantity i.e. acreage, entire crop, or fixed quantity, role of APMC is desirable, but making it a party to
produce quality specifications and penalties for the contract is totally unnecessary and undesirable
lower quality like rejection, or lower price, crop as that is not the best way to protect the farmer’s
delivery arrangements i.e. at farm/factory gate/ interest, if that, at all, is the logic for giving the role
collection centre and transport arrangements, of a party to the contract to the APMC in contracts
pricing and credit mechanisms, farmer asset/land between sponsors and the growers. Further, it is
indemnity, compulsory registration of contracts not known how far the model contract agreement
with the local authority and the procedure for will be adopted by the agencies unless it is a
dispute resolution. On the other hand, the conditionality to avail certain other incentives or
optional features include those relating to farm policies. In Thailand, even after three years of its
practices, joint crop insurance, support services notification, the standard agreement was used only
to be provided, farmer-management forum for by two companies (Singh, 2005d).
monitoring of contract system performance, and
monitoring of quality and yields. 6.2 Impacts of Contract Farming on Rural
Women and Child Workers in India
The model contract agreement is quite fair in terms There have been many studies of conditions for
of sharing of costs and risks between the sponsor women workers and gender discrimination in export-
and the grower (GoI, 2003). But, it leaves out many oriented industries across the world during the past
aspects of farmer interest protection like delayed 30 years (Lim, 1990; Pearson, 1998; Barrientos et
payments and deliveries, contract cancellation al., 1999; Balakrishnan, 2002). While some (e.g.,
damages if the producer made firm specific heavy Lim, 1990) see the employment of women in such
investments, inducement/force/ intimidation enterprises as a natural economic process driven
to enter a contract, disclosure of material risks, by business dynamics and labour family needs (as
competitive performance based payments, and demand and supply factors respectively), others
sharing production risks. Also, there are state level view it in more gendered frameworks and have been
variations in the amended Acts and the spirit has critical of the way female labour is treated and paid
been diluted. For example, in Gujarat, the amended in these factories. The latter studies term the whole
Act makes the APMC as a party in the tripartite process of industrialisation as not only export-led,
contract stating the logic that APMCs have a useful but also female-led (Pearson, 1998). However,
role as facilitator as they have a long standing female labour conditions in the farm sector under
relationship with farmers and can disseminate the agribusiness expansion have not yet been subjected
CF concept and practice besides monitoring its to similar analysis.
practice. It makes the Gujarat State Agricultural
Marketing Board (GSAMB) and the local APMC Agriculture is becoming increasingly ‘feminised’
as the registering authority for contracts. The MD, globally as men are moving out of the sector more
GSAMB will examine the contract for its fairness quickly than women. The reasons for increasing
to the farmers and can refuse to register the same female representation in agriculture vary from
if found inadequate in the protection of the farmer voluntary and involuntary withdrawal of men from
interest. It is also the arbitrator in case of disputes. farming, to growing wage opportunities for women
The registration costs Rs. 200 for the sponsor. in export-oriented, non-traditional crops and
Though the central model Act exempts contract activities. While these new labour arrangements
procurement from market fee, the Gujarat Act have led to marginal increases in real income for

A Fact Sheet
some women workers, they have also changed and harvesting of grapes, are reserved for women,
relationships between workers and employers, and this work differentiation extends even to the
workers and work, and led to differentiation processing sector (Torres, 1997; Barrientos et al.,
within labour. For example, women’s wages are 1999; Rath, 2003). Such ‘gendering’ of tasks is a
lower and stickier (i.e. do not rise as fast) than problem as it can exclude women from activities that
men’s, working conditions poorer and bargaining are better paid, less strenuous or less hazardous.
power more limited. These are, to some extent, the
result of structural factors (Mehra and Gammage, 6.2.1 Child labour and gender
1999). Others argue that labour markets are not Child labour is one of the major problems in CF,
only bearers of gender, they also reinforce gender and this is the case throughout the developing
inequality (Elson, 1999). world (Porter and Phillips-Howard, 1997; Torres,
1997; Raynolds, 2002). However, no data on its
Women have increasingly been employed to do global or regional magnitude are available because
more delicate work because of their supposedly CF is practised in small pockets in each developing
feminine traits, such as docility, obedience and country. Similarly, there are no estimates of the
nimble fingers. But these are not natural or innate magnitude of child labour in CF in India. India is
skills; rather they are social skills embedded during one of the main users of child labour in the Asian
girls’ upbringing as part of their socially defined region. The 1991 Census of India reported that
subordinate position within society. In fact, the there were 12.6 million full time and 10.4 million
expanding employment of women in agribusiness marginal child workers in India, with Andhra
has many parallels with female employment in Pradesh having the highest number of child workers
industry, where women are also preferred for (15% of the total child workers in India; cited in
their so-called nimble fingers, and their work is Kar, 2002). In the 1990s, about half the child labour
insecure, badly paid, and flexible. In agribusiness, in rural India was concentrated in the five states of
some of these aspects are the result of the nature of Andhra Pradesh, Karnataka, Maharashtra, Madhya
production in a sector characterised by seasonality, Pradesh and Tamil Nadu (Lieten, 2002b).
mono-cultivation and natural risk (Collins, 1993;
Barrientos et al., 1999; Elson, 1999). Any kind of work by children under the age of
18 is often considered exploitation in developed
Though there have been studies of gender impacts countries. In India, however, the term ‘child labour’
of CF within producer households (Carney, 1988; applies only to children aged between 5 and 14.
Bulow and Sorensen, 1993; Porter and Phillips- The Child Labour (Prohibition and Regulation)
Howard, 1997; Jayaweera, 2002), such studies of Act, 1986 states that no child below the age of 14
labourers’ households are more unusual. In many shall be employed to work in any factory or mine
cases, rural women working in processing plants or in any other hazardous employment which
and related activities reported that employment excluded farm work (cited in Mishra, 2000).
had given them greater self-esteem and power The disaggregation of child labour into different
within the household (Glover and Kusterer, 1990; occupational categories reveals that almost 80
Dunham, 1995). However, CF does lead to gender percent of working children are in the agricultural
inequalities in the quantity and quality of work, as sector (Gayatri and Chaudhri, 2002). Since child
well as wages for women and children, who work labour tends to be concentrated in agriculture, it
longer hours as they are considered better workers, may be reasonable to expect that the incidence of
but are paid less (Collins, 1993; Porter and Phillips- child labour will be higher in agriculturally less
Howard, 1997). Employment on contract farms is developed regions. But, that is not the case; Bihar
also temporary and sporadic. Some activities, such state, usually referred to as an underdeveloped
as pruning, spraying, thinning, pinching out, tying state, has one of the lowest child labour ratios in

A Fact Sheet
the country. On the other hand, Tamil Nadu and Pradesh, mainly drawn from Ramamurthy (2000)
Andhra Pradesh, more advanced agriculturally, have and Venkateshwarlu and Corta (2002), are based
the highest incidences of child labour. Also, there is on intensive field research by these authors on
a significant correlation between child labour and the labour processes, conditions and households
the economic participation rate, especially female involved in hybrid cottonseed production. The
participation rate. The states with the highest Punjab case study is mainly based on my own
incidence of child labour are also the ones with a interactions and observations in the field as part of
high per capita income and a much higher female a larger study of CF in the state (Singh, 2005).
work participation rate than many other states
(Lieten, 2002a). This is because in contexts where 6.2.3 Contract cottonseed production in
there are extended labour opportunities yet a low Andhra Pradesh
degree of labour empowerment, poor families are In 1999-2000 Andhra Pradesh had the highest
tapped for additional labour power. Since adults incidence of child labour in India, with 25
usually have some form of alternative employment percent of children aged between 10 and 14 in
in such regions, child labour is more likely to be the rural areas working, compared with only
used (Lieten, 2002b). 9 percent in India as a whole (Lieten, 2002b).
This was also accompanied by the highest rural
Employers/contractors prefer girls for a number female work participation rate in the state (48%),
of labour supply traits like docility, obedience and compared with only 30 percent in India in 1999-
stability; a phenomenon which is well documented 2000. Furthermore, 47 percent of the total rural
in the literature. Most of the girl labourers belong to employment in Andhra Pradesh in 1993-94 was
the scheduled caste and scheduled tribe households, casual compared with 36 percent for rural India as
poor backward castes and other such communities. a whole. The proportion of casual employment was
The lower status assigned to girls in Indian society, much higher for female labour (53%) than male
where male preference rules, further propels their labour (43%) (Dev and Mahajan, 2001). Contract
employment in a number of activities. Even if farm labour is generally casual labour, though
parents do not wish to exploit their children, they workers may be tied by advance loans.
are often trapped in a vicious cycle of indebtedness,
bondage and other obligatory relations which This sets the context for the first case study: labour in
compel them to send their daughters to work. Yet CF of hybrid cottonseed. Three districts of Andhra
the employers or contractors of girl labour have no Pradesh (Kurnool, Mahboobnagar and Rangareddy)
requirement to take care of these children; if any account for 70 percent of India’s cottonseed
health problems arise, they are simply replaced with production and 97 percent of the total area (28,000
a new group. With no social security obligations, acres in all) under cottonseed production in the
there is hardly any cost involved for the employers state. About 60 percent of the state’s seed production
or contractors (Rustagi, 2002). Child labour under is destined for sale in other states of India or abroad.
contracting is not subject to any legal or public Hybrid cottonseed production is highly labour and
disapproval. capital intensive. It requires four times more capital
and nine times more labour per acre than ordinary
6.2.2 Case studies cotton production. Labour accounts for 60 percent
The states of Andhra Pradesh and Punjab have been of the total cost of cottonseed production, and the
pioneers in contract seed production and contract most labour intensive operation is cross-pollination
vegetable production respectively in India. These (see box 1), which has to be done manually. It involves
case studies bring out the gender and child labour about 90 percent of the total labour input and 45
dimensions in the practice of farm labour under percent of the total capital input (Venkateshwarlu
the CF system. The case studies from Andhra and Corta, 2001).

A Fact Sheet
Most of the cross-pollination work is done by generally easier to control. It is reported that one
young girls who work daily from July to February. girl can do the work of three adults. Though the
Cross-pollination and harvesting (picking cotton) agreement obliges these female children to work
are carried out for six months and four months for only one season (six-nine months), in practice
each by the girls, with some overlap between the they tend to work for several years for the same
two tasks during November to February. The farmer. Children are given incentives in the form
predominant task is cross-pollination, which takes of chocolates, biscuits or snacks, or prizes and
95 percent of their time. The involvement of young bonuses like a stainless steel tiffin carrier every
girls in cottonseed production is so high that it is two years for better and faster work. They are even
estimated that 0.25 million girls are employed in taken to a cinema twice a month and allowed to
this activity throughout Andhra Pradesh. In one watch television or videos while separating cotton
case, on a 70-acre cottonseed farm dispersed over from seeds (an activity where children are paid on a
14 different villages, 560 girls were employed piece rate basis). In some cases, girls are brought in
and were monitored by 14 supervisors. The girls from outside the local area and made to stay in the
and their parents are contacted well in advance employer’s house and cattlesheds throughout the
of the crop season and credit is extended to the season (Ramamurthy, 2000; Venkateshwarlu and
parents who agree to assign their daughters to the Corta, 2001).
cottonseed farmers for the season (July-February).
This credit (cash/grain) advance, which ranged Whilst young girls are the most popular labour type
from Rs. 100-3000 in 1997-98 and was obtained on cottonseed farms, women are also employed,
by more than 90 percent of the girls’ parents, serves though for much less of the time and for fewer tasks.
to interlink the credit and child labour markets; The most common labour arrangement for women
this has become an important part of the MNCs’ in contract farms is daily casual work. Though this
CF strategy (Venkateshwarlu and Corta, 2001). work ensures instant wage payment, in practice the
wages are held back till a task is completed. There
Generally, 10-15 children are hired for 100-150 is also increased micro management of labour time
days per acre of cottonseed production. Children and supervision of daily wage labour by landowners,
as young as six years old work from 8.30 am to who may threaten women workers with losing their
6-7 pm; some boys even return to the field again jobs or withholding their wages. Labour time is
from 9-12 pm at night. The cottonseed production controlled by the landowners in various ways, such
calendar has been standardised by companies for as going to workers’ homes each morning to fetch
seed certification and marketing. This has resulted them early for work, ensuring that lunch is brief,
in the regimentation of children’s work schedules, prolonging the work day, and insisting on workers
who are continuously employed for six to nine making up for any tardiness in work. Often, even
months a year. Children’s labour is extended well the supervisors are women. In order to reduce the
beyond the standard workday (9-10 hours a day need for supervision and control, another labour
with a one hour lunch break). They are paid a piece arrangement (the piece rate system) has emerged,
rate of Rs. 10/- per 25 kg. cotton for delinting especially for cotton picking and weeding. The
(separating cotton from seeds), and Rs. 0.05 per piece rate system leads to workers lengthening
pest/worm caught. Many girls also accompany the workday themselves, magnifying the pace and
their mothers for casual work. They are paid daily intensity of work and even monitoring each other’s
wages or piece rates (Ramamurthy, 2000). performance. Daily wage labourers pick about
10-15 kg. of cotton a day; those working under
Girls are preferred in cottonseed production the piece rate system can pick as much as 20-30
because their wages are lower than adults’, they kg., with some even reaching 40 kg. This leads
work longer hours and more intensively, and are to a change in the relationship between efficient

A Fact Sheet
and less efficient workers and creates a hierarchy 6.2.4 Contract tomato and potato
of workers. As individual wage earnings become production in Punjab
more uneven, average wage costs for producers are Agricultural labour accounts for as much as 88
reduced (Ramamurthy, 2000). percent of the total rural labour in the state of
Punjab (Gill, 2000). More than two-thirds of the
Since the 1980s, the cross-pollination work in agricultural labour in the state, including contract
cottonseed farms has shifted from daily adult labour farm labour, is casual. The Major reasons behind
to almost entirely labour by girls, who are fully the casualisation of farm labour in the state include
bonded i.e. obliged to work only for the contract mechanisation of major farm operations, inflow of
grower who advanced the loan. In fact, adult women migrant labour, slowdown of agricultural growth,
are discouraged from cross-pollination work, and and non-viability of small and marginal holdings
girls over 14 or those who have reached puberty at (Rangi et al., 2001). Women’s labour participation
the time of agreement are not permitted to work in rate in agriculture in Punjab has been extremely
contract farms by the seed producers, organisers or low (4.5% in 1991), though higher than their
companies. Many rumours are spread to discourage participation rates in the national, rural and urban
women from undertaking such work, such as that workforce (2.8%, 2.2%, and 4.3%, respectively).
post-pubescent girls working in the fields will cause Only 1 percent of cultivators (farmers who own
crop failure. This is no different to countries like or lease land) were female in 1991 (Gill, 2001).
Japan and Korea, where until the 1980s married Punjab also has had one of the lowest incidences of
women were prevented from working by law or child labour (2.7%) in the country (Lieten, 2002a).
strong social customs (Tzannatos, 1999). However, Punjab has been a pioneer in India in the
CF of perishable produce, a sector which tends to
The employment of female children in cottonseed rely on women and children’s labour.
farms has had many impacts on gender relations at
the household level. For example, girls have more Fruit and vegetables require more intensive labour
responsibility for household provisioning, and than other crops. Contract farms under company
with more money coming in, men may withdraw supervision are little more than ‘factories in the
from work and often resort to drinking. There fields’ from the point of view of labour. Their labour
are also health implications for girls involved system resembles the industrial sector because of
in cottonseed work; higher levels of pesticides timing, quality and standardisation requirements
are used in this crop than in ordinary cotton which cannot be met by mechanical methods. This
cultivation. Girls working in cotton fields for requires ‘quality labour’, i.e. efficient, timely and
many years have been reported to suffer menstrual paced; ‘flexible labour’, that is readily available
problems (Venkateshwarlu and Corta, 2001). This and cheap; and ‘docile labour’, in other words
is similar to the conditions of grape farm workers politically trouble-free labour. These conditions are
in Maharashtra; major problems faced by women met more easily by women, who are perceived to
grape workers included lower backache, neck be homemakers and, therefore, low cost, sincere
pain, headaches and menstrual problems. The and more obedient workers. This amounts to
women working on grape farms had the highest manipulation of the cultural understanding of
morbidity rate among all groups of women gender (Collins, 1993).
agricultural workers. More than 60 percent of the
women working on grape farms reported health That contracting has led to more and better
problems, compared with only 32 percent for all employment opportunities for labour, especially
women workers (Rath, 2003). Further, more and women, is true and acknowledged by the labourers
more girls are being taken out of school to do such (Singh, 2005). The labour intensity of vegetable
work (Ramamurthy, 2000). crops, except potato, is much higher than for

A Fact Sheet
traditional crops like wheat or paddy. The labour output, i.e. Rs. 2-2.5 per crate of tomatoes picked (a
intensity is 3,600-4,000 hours per hectare for crate contains 20 kg. of tomatoes). Thus, the more a
tomatoes (depending on whether it is a summer or woman or girl picks in a day, the better she gets paid.
winter crop), compared with only 740 hours per Harvesting one acre of tomatoes takes 15-20 women
hectare for paddy (Gill, 2001). This has created a big two days as one woman can pick only 25-30 crates a
employment boom in the contract production areas day. Wages go up when tomato harvesting competes
of the state, especially as the mechanisation of sowing with that of potato and wheat in some areas (Singh,
and harvesting operations of paddy and wheat crops 2005). But wages soon become depressed with the
has reduced manual work to almost nothing. While large seasonal inflow of migrant male labour to the
employment has grown as a consequence of the state. In fact, migrant agricultural labour accounts
labour intensive nature of the crops, accompanied by for 25 percent of the total agricultural labour force
the emergence of some employment in processing, in the state (Gill, 2000). The daily wage rate for
the wage levels have been pushed to subsistence female workers is only two-thirds of that received by
levels as a result of the increased competition. This men. In tomato harvesting, half-day wages are also
has come about through in-migration and the common as harvesting should be completed before
cessation of out-migration because of the higher noon (Singh, 2005).
incomes available locally. At the same ti me, those
in work have to deal with insecure employment and 6.2.6 Labour in potato fields
poor working conditions. Potato cultivation, especially under contract, has
increased women’s employment; a large number of
According to Gill (2001), during the mid-1990s, women can be seen picking and grading potatoes
three-quarters of all workers employed in the state’s during harvest time, though in general, female
vegetable production sector were hired labour. labour accounts for only 38 percent of all labour
Further, female labour accounted for 58 percent of used in this crop (Gill, 2001). Generally, female
the total labour hours, compared with 34 percent labour is preferred for these jobs as they require
in paddy. And 49 percent of all those working in patience and care, yet women’s pay amounts to only
the vegetable production sector was hired female two-thirds of that received by men. A lot of child
labour, compared with 25 percent in paddy. In labour is also used, especially for grading. Even
tomato production alone, female labour accounted mothers with infants can do such work, which is
for almost 60 percent of the total labour hours. generally in one place and under the shade of some
Child labour accounted for about 3-4 percent of tree or in a shed (Singh, 2005). Daily wages are
the total labour hours in vegetable crops, as part generally paid for harvesting; usually Rs. 40/day for
of family labour. However, a woman’s wage is only women and Rs. 20/day for girls. Groups of workers
75 percent of a male worker’s wage; a child worker may receive a fixed payment contract to harvest
receives only half that of a male worker (when paid an entire potato field; this was Rs. 500 per acre
a daily wage rather than a piece rate wage). in 1999-2000. Group labour contracts were also
noted for seed cotton weeding in Andhra Pradesh
6.2.5 Labour in tomato fields (Ramamurthy, 2000). Bagging potatoes is a separate
Women and girls mostly transplant and harvest labour activity and is paid at the rate of Rs. 5-10/
tomatoes as such workers are more available, cost bag (Singh, 2005). In some cases, women members
less, are more honest and better suited to picking of the contract grower households supervise potato
and transplanting jobs (Singh, 2005). Mothers with grading, especially when the produce is graded at
infants also work in contract farms and infants and the grower’s farmhouse. This is preferred as most
children remain on the farm throughout the day, of the grading labour is female, and it is easy and
with implications for their health and nutrition. more effective for a female member of the farming
There is a piece rate system of wages linked to household to control their work.

A Fact Sheet
As shown in these case studies, contract farm hazardous conditions. Unilever and Hindustan Lever
production is primarily carried out by female Limited (HLL) — its Indian subsidiary that markets
labour, and increasingly by young girls. There is a several popular brand-name products, e.g. Close-Up,
need to address the whole question of a changing Surf, and Lipton - have rejected the accusation of
agrarian production structure under CF from a using child labour in hybrid cotton seed production.
gender perspective, especially issues associated with Unilever stated that it made sure that its suppliers
transfer of skills, choice of technology, organisation complied with the agreement not to use child labour.
of labour, working conditions and terms of work. Both HLL and ‘Paras’ (in which HLL now has a 26
percent share) were present in Hyderabad (India
There has been a variety of corporate responses to the Together, accessed on 27 July, 2006).
problem of child labour, ranging from withdrawing
operations from affected countries; dismissing Non-government organisations (NGOs) and
child workers, thus abruptly affecting people’s lives; government agencies need to monitor working
abandoning the factory-based mode of production conditions and wage rates in CF in order to prevent
in favour of contracting work to home-based long hours of work, temporary employment, exposure
producers; to adopting a code of conduct for child to hazardous pesticides and below minimum wages.
labour; and finally, acknowledging child labour as a The employer should make provision for childcare,
problem and working to eliminate its practice (Bissell such as creches; and both NGOs and government
et al., 2002; Frenkel and Scott, 2002). Instead of should provide education and skill building facilities.
banning child labour as proposed by some of the If the education level of these children improves,
international agencies and the agribusiness players they will be able to get out of these fields and escape
in the developed world, a better approach would be poverty and exploitation. The literacy of both girls
to improve conditions for working children, as such and women seems to have a bearing on the incidence
work contributes to the family income on which the of female child labour (Rustagi, 2002).
child’s well-being depends. A ban on child labour
in Bangladesh, for example, only aggravated the There have been many programmes at the state
problem as the children went from jobs in garment level to eradicate the practice of child labour.
factories to much worse jobs, such as breaking For example, there were more than a dozen such
bricks in the hot sun or even prostitution. Thus, a government programmes during the 1980s and
ban on child labour under pressure can be counter- 1990s in the state of Karnataka and there are also a
productive (Kar, 2002). dozen NGOs working to eliminate the practice of
child labour in various districts of the state (Gayathri,
Seed multinationals Monsanto, Emergent Genetics, 2002). The NGOs’ strategies, in general, include
Hindustan Lever, Syngenta, Advanta and Proagro (a supporting the children with health and education
subsidiary of Bayer) as well as some big Indian seed facilities and offering income compensation for
companies, have agreed to co-operate with the MV children and their parents. But, while NGOs are
Foundation in Andhra Pradesh — Magsaysay award doing good work at the micro level, it does not add
winner Dr Shantha Sinha is the group’s general up to a major strategy to address the huge problem
secretary — to eliminate child labour from the of child labour. This is partly because of a piecemeal
cotton seed industry. These developments took place approach, lack of scale and sustainability, and high
four to five months after the publication of a report costs, as well as the dominance of donor demands
on child labour in hybrid cotton seed production and competition between NGOs. What is required
by the India Committee of the Netherlands (ICN). is an holistic and integrated approach focusing on
It was revealed that almost 250,000 children under all the activities which involve children in a given
fourteen years of age, mainly girls, work on hybrid area, followed by replication of programmes on a
cotton farms in Andhra Pradesh for long hours under larger scale in a sustainable manner (Wazir, 2002).

A Fact Sheet
7. Agribusiness in Sri Lanka
Sri Lanka is a small but highly populated country. though, in terms of quantity, imports were four
A large majority of Sri Lanka’s population (75%) times that of exports. In 2000, shrimps/prawn and
still lives in rural areas and depends on agriculture tuna exports accounted for about 54 percent of the
or related agribusiness activities directly or indirectly total exports of fish and fishery products and Japan
for their livelihoods. The land holdings are small, was the main market for Sri Lankan exports. The
on the average, being only 0.6 hectare with 71 fisheries sector employs a wide spectrum of people
percent cultivating less than one hectare land each of different ethnic and religious background and
and 90 percent cultivating less than two hectares of socio-economic status. Of the coastal, offshore and
land each. Further, 86 percent of the land is state inland fishing sectors, coastal fisheries have made
owned and there is a ceiling of 50 acres for private the most important contribution to the production
land ownership. But, an amendment in 1981 of fish in Sri Lanka (60% in 2000) compared with
made it possible to lease land above 50 acres. This 20 percent by offshore and 10 percent by inland
has led to companies opting for out-grower or CF fisheries. Most fish in Sri Lanka are landed in fresh
schemes instead of corporate farming. Though the form with the catch kept in fresh form at the bottom
contribution of agriculture to GDP is down to 20 of the hull. Only the multi-day offshore fishing
percent now, its textile and garment sector which vessels are equipped with large insulated iceboxes
accounted for 51.6 percent of total exports in 2005, or built in ice holds with varying capacities. Wet
is now facing increasing competition from countries fish which were marketed mainly within coastal
like China after the phasing out of the quota regime areas earlier, have now become popular all over
in early 2005. Sri Lanka’s agribusiness sector is the country. Landings of fish are marketed to
rather diversified and has a long history of serving consumers, assemblers, fish traders or the Ceylon
international markets with products like rubber, tea, Fisheries Corporation (CFC). Some assemblers
and spices due to its early adoption of an outward consign the fish to the wholesalers operating on a
oriented development strategy. Consequently, commission basis at the St. John’s fish market in
exports account for 30 percent of its GDP and Colombo. Fish is then distributed throughout the
imports 37.5 percent which are considerably higher island through wholesalers and the retailers. CFC
than those for India (9.1 and 10.7) and lower than directly sells fish through their retail shops. There
those for Thailand (56 and 48.9). is no well-established marketing channel for fresh
water fish and they are marketed through retailers
7.1 Tea and Rubber Sectors (Ariyawardana, 2005).
Tea and rubber account for 2.6 percent and 0.4
percent of GDP respectively and 9 percent and 7.3 Livestock and Dairy Sector
1.5 percent, respectively of agricultural GDP. Dairy industry is one of the most important
Small holders account for 42 percent and 71 industries within the livestock industry of Sri Lanka.
percent of all tea and rubber holdings in Sri Overall, the livestock industry is highly integrated
Lanka. They also account for 4.7 percent and 7 with agriculture and it contributes around 8 percent
percent of all agricultural land (Wickramasinghe to the gross value of agricultural production.
et al., 2003). Approximately, one third of the land holders have
livestock as part of their enterprise mix either in
7.2 Fish and Fisheries Products Sector combination with crops or as a sole enterprise. It
In the year 2000, the fisheries sector contributed is estimated that around 3.5 million people in the
2.6 percent to the GNP. The Sri Lanka fisheries country are involved in livestock rearing. Cattle
industry maintains a positive trade balance, even (15,57,000), buffaloes (694,000), goats (495,000),

A Fact Sheet
pigs (71,000) and poultry (10,62,2000) are the retailers as well as dairy producers who sell directly
major livestock sectors in the country. The wet to hotels and restaurants or to consumers. Poultry is
zone shows the highest average milk production another well organised sector in Sri Lanka (see figure
level of cow of 7-8 litres per day whereas the dry 6 below and figure 7 on the next page).
intermediate zone shows the least productivity of
1.5-2 litres (Ariyawardana, 2005). There are 300 export companies in the
agribusiness sector exporting multiple products.
The formal processed diary market consists of It is estimated that 30-40 percent of the country’s
small primary dairy cooperatives, larger local agricultural production is lost because of poor
cooperatives, district level cooperatives, dairy post-harvest handling against an acceptable level
cooperatives unions, and a network of collection of 20 percent. But, FDI in the agricultural sector
points and milk chilling centres operated by the was only 2.7 percent of the total in 2000. The
cooperatives or the main dairy processors such as agribusiness value chains in Sri Lanka, with the
Kiriya Milk Industries of Lanka (Pvt) Ltd. (KMILL; exception of some new and younger companies,
formerly Milk Industries of Lanka Company Ltd.), are not well organised and efficient as these are
Nestle Lanka (NLL), and International Dairy fragmented, not co-ordinated with other agents
Products Ltd. (IDPL). The informal dairy sector in the chain, and driven by historical ‘trading
consists of small private milk collectors, small local mentality’ looking for short-term financial gains
processors of traditional dairy products and small (Andreas et al., 2006).
Figure 6
Milk/Dairy Channels in Sri Lanka (% of Production)
Domestic Production (100%)
40% 45% 15%

Collection Centre Sales Local Sale Home Consumption
15% 6% 17% 7%
Traders Hotels Neighbours Curd/Yoghurt
7% 2%
Dairy Co-ops Local Sale/Products
17% 20%
Nestle Milco/Kiriya Others Local Raw Milk/Products
17% 20% 2% 13% 34%
Consumers (36 kg. LME/Capital/Year)
83%
Imports
Source: Ariyawardana, A. (2005)

A Fact Sheet
Figure 7
Broiler Supply Chain in Sri Lanka
Import
Group of Company
Contract farmer
Processing Unit
Private Company
Storage unit
Processing Unit
Outlets
Storage
Individual
Farmer
Supermarkets Retailers Outlets
Consumers
Source: Ariyawardana, A. (2005).
7.4 Horticultural Supply Chains and the centres buy only good quality produce
A study of vegetable supply chains created by on the spot. These supermarkets have promoted
newly-emergent supermarkets revealed that quality consciousness among growers by paying
the supermarkets with small number of outlets for quality produce higher prices than the local
procured from the traditional vegetable market market, reduced post harvest losses by procuring at
through intermediaries known as vegetable the local level. These improvements were possible
suppliers. Those with a larger number of outlets due to a lesser number of intermediaries in these
(7-8) procured from growers on order, through chains than the traditional market chain (Perera et
vegetable collectors, who travel around the rural al., 2005; Andreas et al., 2006).
areas and procure from the roadsides. There are
no contracts with growers by the supermarkets or Only fair trade and organic trade companies (e.g.
export-oriented value chains. There are forward Renuka Agro Exports in organic coconut and
sales contracts between growers or suppliers and Lanka Organics which works with 1300 growers
buyers mediated by banks, government agencies for various organic products and whose tea is
or NGOs as facilitators and accepted as collateral fair trade certified by FLO) have a strong linkage
by the Bank of Ceylon and other commercial and with primary producers as the very process and
development banks (Andreas et al., 2006). Similarly, market demand it and they are growing. Here
supermarkets with very large number of outlets too, outgrower schemes where the agribusiness
have regional vegetable collection centres where company leases out land to the growers who
farmers and vegetable collectors bring their produce work under company supervision of the farms,

A Fact Sheet
or work on their own farms under contract are value chains were not buyer driven as they were
the norm for backward co-ordination. But, these not structurally linked to any large international
schemes were not socially inclusive as they had buyer and were operating through middlemen
minimum land and basic know how as criteria for who enjoyed the confidence of farmers (Andreas
being eligible for the scheme. Also most of the et al., 2006).
8. Agribusiness in Bangladesh
The economy of Bangladesh is predominantly tonnes in 1995-96, 1.59 million tonnes in
agrarian with the agricultural sector accounting for 1996-97 and 1.62 million tonnes in 1997-98.
31.6 percent of the GDP in 1997-98 at 1984-85 The production of meat was 0.54 million tonnes
prices, 84 percent of its population residing in rural in 1995-96, 0.58 million tonnes in 1996-97 and
areas and 63.2 percent depending on the agricultural 0.62 million tonnes in 1997-98. The numbers for
sector for employment (Ahmed, 2003). Within the egg-production were 2830.9 million in 1995-96,
agricultural sector, the crop sector contributes 71 3020.0 million in 1996-97, and 3252.5 million
percent, forestry and fisheries 10 percent each and in 1997-98 (http://banglapedia.search.com.bd/
livestock 9 percent. Agricultural exports accounted HT/L_0115.HTM, accessed on 02 August, 2006).
for 10.4 percent of all exports in 1997-98. The The total number of dairy farms in 1997-98 was
sector has seen major policy changes in the recent 29649, and there were 30,760 duck farms and
past like liberalisation of trade in micro irrigation, 60,670 poultry farms besides 53,200 beef fattening
fertilisers, agricultural machinery, and seed industry programmes in Bangladesh (Alam, 2003).
which has encouraged the private sector involvement
and imports. The country also exports high value 8.2 Forestry Sector
crops like vegetables to European countries. The The share of the forestry sector in the economy is
major export agribusiness sectors are potato, shrimp continually declining, primarily because of a ban
and seeds. Potato is the third largest food crop on felling in many areas. Production of timber and
after rice and wheat and is now being exported to fuel wood has fallen by more than 50 percent since
neighbouring countries like Malaysia, Singapore the felling ban was introduced in 1988-1989. The
and Sri Lanka. Similarly, fisheries is the third largest contribution of forest-based industries to GDP is
export earner after ready made garments and knitwear small and is increasing at a very slow rate. At the
accounting for 7.74 percent of the total exports in national level, the total value added by the forestry
1996-97 (Sikder, 2000). The total cultivated area sector totals to about 7 percent of the total value
of horticultural crops is about 0.69 million hectare added by the agricultural sector and is about 2.3
which covers about 5 percent of the total cropped percent of national GDP. Bamboo provides the
area (BBS, 1996). The area and production of fruits greatest contribution to GDP, followed by timber,
in 1995-96 were 181,000 ha and 14.88 million fuel wood and non-wood forest products. The
tonnes respectively. Banana constitutes 42 percent of share of fuel wood’s contribution to GDP has been
the total production of fruits in the country (http:// increasing, while that of timber has been decreasing.
www.hridir.org/countries/bangladesh/index.htm, The forestry sector provides employment of
accessed on 02 August, 2006). about 0.8 million workdays. Among forest-
based industries, cottage-scale industries provide
8.1 Livestock Sector the greatest employment. Annual round wood
It contributes 6.5 percent in the GDP of the production is estimated at about 28 million cubic
country. The production of milk was 1.58 million metres. About 80 percent of the production comes

A Fact Sheet
from private sources, mainly homestead woodlots. 51 percent, aquaculture 21 percent, the marine
Annual per capita wood consumption for all industrial fishery 1 percent, and the marine artisanal
purposes is among the lowest in the world. fishery 27 percent to the total production. Demand
for fisheries products is strong and is expected to
An estimated 80 percent of Bangladeshi wood continue to grow.
production is used for fuel; most of the remainder is
converted to sawn wood. Bangladesh also produces The majority of people living in coastal communities
cultural papers based on hardwood and non- make their living from fishing, and unlike inland
wood fibres, and some hardboard panels for the fishing communities they almost totally depend on
domestic market. Paper and paperboard comprise fishing. Fisheries in Bangladesh, and in particular
the bulk of Bangladeshi imports of forest products. marine and brackishwater fisheries, are faced
Important non-wood forest products used in with a dilemma. Fisheries provide the people of
Bangladesh include fodder, grasses for thatching, Bangladesh with protein at a reasonable price;
matting and ropes, bamboo, tannins, essential oils it generates employment, income and foreign
and medicinal plants (http://www.fao.org/forestry/ exchange. Inshore marine and estuarine fisheries
foris/webview/forestry2/index.jsp?siteId=5081&si are particularly under stress due to over-fishing,
tetreeId=18308&langId=1&geoId=3, accessed on environmental and habitat degradation, and
02 August, 2006). multiple uses of water systems. For different types
of fisheries, different market outlets are found.
8.3 Fisheries Sector (http://www.fao.org/fi/fcp/en/BGD/body.htm,
The fisheries sector is important for Bangladesh’s accessed on 02 August, 2006).
economy. It accounts for some 4 percent of GDP
and more than 11 percent of annual export Chittagong is the main landing site for marine and
earnings. The sector provides income to some 1.5 inland fisheries as well as aquaculture products.
to 2 million full-time fisher folk and for around Barisal, Noakhali, Comilla and Mymensingh are
12 million part-time fisher folk. Furthermore, fish important landing places for inland fisheries and
producers are among the extremely and moderately aquaculture. No recent landing figures in volume
poor people, male as well as female. About 70 or value are available. Table 16 gives the extent of
percent of the country’s population is rural, of shrimp farming in the southwest coastal region.
which 50 percent live in poverty and more than But, there are also issues of long working hours,
one in five live in extreme poverty. Sixty percent of hazardous working conditions, and exploitation
the national protein is supplied from fish. Within of labour, especially female labour in these farms
the sector, the inland capture fisheries contribute (table 17, table 18 and table 19).
TABLE 16
Total Number of Ghers and Area under Shrimp Farming in Southwest Coastal Region
(Bangladesh)
District Number of ghers* Area in hectare Bagda (Brackish water) Golda (Fresh water)
Number of Area in Number of Area in
ghers hectare ghers hectare
Khulna 37,908 51,667 4,606 38,906 33,302 12,761
Bagerhat 45,023 59,393 11,336 44,439 33,687 14,954
Satkhira 10,868 45,885 10,213 44,929 655 696
Total 93,799 1,56,945 26,155 1,28,274 67,644 28,411
* The fields under shrimp culture.

Source: Tutu (2004).

A Fact Sheet
TABLE 17
Number of Working Hours/Day (Bangladesh)
Name of Type of work No. of working hours No. of working hours per week
Upazila* Men Women Child Men Women Child
Bagerhat Shrimp 16 - - 7 7 5
Non-shrimp 10 9 9 7 7 5
Batiaghata Shrimp 16 - - 7 - -
Non-shrimp 10 9 7 7 7 5
Debhata Shrimp 16 9 - 7 7 -
Non-shrimp 11 9 - 7 7 -
Dumuria Shrimp 16 8 6 7 7 6
Non-shrimp 11 8 - 7 7 -
Rupsha Shrimp 14 10 8 7 7 5
Non-shrimp 11 9 6 7 7 5
Koyra Shrimp 12 8 5 7 7 5
Non-shrimp 10 9 5 7 7 4
* Sub district.
TABLE 18
Hazardous Conditions for Workers in the Shrimp Farms (Bangladesh)
Upazila* Hazardous condition

Bagerhat - Injuries related to work
Batiaghata - Over time works and low wage rate
Debhata - Have to work in times of natural disasters
Dumuria - No financial security
Khulna - Health problem
Koyra - Terrorism
Mongla - Virus infection
Morelgong - Wage deduction in times of illness
Paikgacha - Injuries during conflict between owners
Rampal - No health facility
- Work of polluted environment
* Sub district.
TABLE 19
Harassment of Female Workers in Shrimp
Farms (Bangladesh)
Upazila* Hazardous condition

Bagerhat - Discriminatory wage rate
Batiaghata - Vulgar comments
Debhata - Physical torture
- Continuous work in cold water
Dumuria
- Rape
Khulna
- Verbal abuse
Koyra - Indecent remarks
Mongla - Low prestige in the community
Morelgong
Paikgacha
Rampal
Shyamnagar
* Sub district.

A Fact Sheet
8.4 Major and Emerging Players in entrepreneurs are just at the initial stages of
Agribusiness developing CF and, therefore, have limited
8.4.1 The PRAN Group experience in this field of activities. Apart from
The Pran Group’s flagship — The Agricultural scores of private entrepreneurs involved in different
Marketing Co Ltd — was formed in 1985 by its areas on wide varieties of experiments, there are
founder, Maj Gen Amjad Khan Chowdhury (Retd) some well-known entrepreneurs in this area — i.e.
and delved into various agricultural activities in NGOs like BRAC and Proshika.
Bangladesh including farming demonstration plots
for various HYV fruits and vegetables, exports in 8.4.2 BRAC (Bangladesh Rural
fresh form, fertiliser distribution, canning, bottling, Advancement Committee)
pickling, pulping, dehydration and the crops of BRAC (Hortex) — the second largest NGO in
mango, rice, peanuts, moong dal and tomato. Bangladesh, has a project of agricultural exports.
While the mango and tomato are pulped/processed Under the technical support of Hortex foundation,
at the factory strategically located in nearby Natore, it developed contract growers to produce and
the aromatic rice is milled at the modern rice mill supply vegetables fulfilling the requirement of
set up in Rangpur. In 2003, it had a total of six European Retailers’ Good Agricultural Practices
factories in food processing. The farmer groups (EUREPGAP). In many ways, BRAC is a pioneer
agree in advance to grow certain crops during an in this field and in collaboration with the Hortex
appropriate period. PRAN provides seeds/saplings Foundation in 1997, ventured into CF for
at cost and technical expertise, the individual retains producing French bean. It began with 61 farmers in
ownership of his land, works on it and if possible 1997-98 producing 32 metric tonnes of vegetables
funds the cultivation himself with assistance from that expanded to 965 farmers producing 272
local agricultural/commercial banks if needed. All metric tonnes of vegetables by December 2002.
these operate smoothly because PRAN provides Farmers have been trained to use less of pesticides
the most important element, a buy-back umbrella and chemical fertilisers and use more of organic
paying pre-determined prices for all the harvest. fertilisers. They have also been told the ways
Over the last three years (1999-2002), a band of and means to attain the objective of producing
closely knit contract growers has emerged who healthy and clean vegetables. Sometimes seeds are
are now beginning to perform with increasing supplied to farmers, sometimes credit is ensured
confidence. Only a lack of management capacity and sometimes training is imparted depending on
(not capability) has restricted PRAN’s loyal contract the need of the hour (Bayes and Ahmed, 2003).
growers to just over 3,000 families on about 4,000 The BRAC experiment has shown that farmers
acres of land. PRAN’s sales have increased — 10,000 could rely on an entrepreneur to provide seeds
fold from a mere Tk. 200,000 in 1992, employment and other inputs and buyback the produce at a
has increased over twenty fold from less than 200 rate higher than what is available in the market.
in 1992, with 80 percent of its work-force being But it has also established that while the farmers
poor women mostly from the rural area. PRAN’s benefited substantially, the full potential of the
investments have increased twenty fold in just seven product’s export could not be achieved because of
years from a miniscule Tk. 20 mill. From nil in non-availability of adequate cargo space in airlines
1996-97 PRAN products are now exported to over at a reasonable price to airfreight the products to its
50 countries in all continents except South America market abroad.
and total over US$ 2 million p.a.
8.4.3 Proshika
Major player in soyabean is National Agri Proshika is one of the largest NGOs in Bangladesh.
Products Limited (NAPL) which is promoting It is not only a micro finance institution but also
soya seed production (Sikder, 2000). Bangladeshi an institution that inducts social indicators in its

A Fact Sheet
TABLE 20
Grower’s Price in Traditional and Modern Marketing Chain, 2003
Products From Proshika From vendor Grower price as % of

consumer price
Grower price Super market Grower Rural market Proshika Vender
price price
Gourd 13 Tk/pc 22 Tk/pc 9 Tk/pc 18 Tk/pc 59 50
Papaya 5 Tk/kg 10 Tk/kg 4 Tk/kg 7 Tk/kg 50 55
Brinjal 14 Tk/kg 22 Tk/kg 11 Tk/kg 24 Tk/kg 64 46
Bitter gourd 16 Tk/kg 20 Tk/kg 15 Tk/kg 24 Tk/kg 80 63
Green banana 1.3 Tk/pc 3 Tk/pc 1 Tk/pc 2 Tk/pc 43 50
Green pepper 13 Tk/kg 40 Tk/kg 11 Tk/kg 24 Tk/kg 33 46
Arum 4 Tk/kg 10 Tk/kg 3.5 Tk/kg 12 Tk/kg 40 29
Kakor 8 Tk/kg 16 Tk/kg 6 Tk/kg 15 Tk/kg 50 40
Source: Bayes and Ahmed (2003).
innovative initiatives. Of late, Proshika embarked RDRS will provide training to the farmer groups
on crop diversification activities embracing contract on improved cultivation techniques and primary
growers in some specified areas of Bangladesh. processing and PRAN will procure agricultural
Proshika provides credit, training, seeds and other commodities produced by RDRS supported farmer
opportunities to farmers to grow mostly ‘green groups (RDRS, Bangladesh Konka Newsletter,
vegetables’ where farmers have to adhere to health June-July, 2006).
and sanitary rules. Its intervention shows that grower
remuneration has improved substantially (table 20). 8.5 Value Chains
In Bangladesh, employment in the value chains
Many more NGOs and RD agencies have also driven garment industry was found to be prone
made forays into agribusiness. A Memorandum of to poor and exploitative working conditions with
Understanding (MoU) was signed between PRAN high worker turnover. Not many workers regarded
Group, a large agro-based industry of Bangladesh their job as a sustainable option for the future
and RDRS Enterprise Private Ltd on 7 July 2005 (Kabeer and Mahmud, 2004). In the Dhaka city,
under the mediation of Small Farmers and Agro- reportedly, there are about 36 super markets that
forestry Development Programme (SFADP) deal in agricultural products. These super markets
implemented by the Department of Agricultural have grown within the last three years. Very few
Extension (DAE) with financial assistance from of them buy directly from farmers but NGOs
the German Technical Cooperation (GTZ). Under have been stepping into procuring products from
this Memorandum, RDRS and PRAN will work farmers under the CF system. In the whole retail
together to assist the small and marginal farmers chain, dominated by middlemen and agents,
of greater Rangpur-Dinajpur region to ensure NGOs and super markets are increasingly playing
quality production and marketing. In this regard, a pivotal role (Bayes and Ahmed, 2003).

A Fact Sheet
9. Organic Produce Chains in South Asia
The newly-emergent organic produce supply percent of food sales. Most large food companies
chains across Asia have also been excluding small have acquired organic brands and small firms,
producers due to reasons of high certification costs, set up partnership with organic companies,
the smaller volumes they produce, and tighter or have their own organic lines. Mergers and
control by the chain leaders in the absence of any acquisitions of organic brands and companies
local market outlets for the organic producers impact production, processing, certification and
(Raynolds, 2004; Singh, 2004a). In fact, this is distribution pathways: in California, 2 percent of
the result of the dominance of organic produce organic growers represent 50 percent of organic
markets retailed by supermarkets in the West, for sales; Coleman owns half of the United States’
which organic produce is targeted. Today, Nike is organic pastures; Hain-Celestial is the world’s
the largest consumer of organic cotton in the world. largest processor of organic foods (annual revenues
In 2003, 3 million pounds of the 120 million of US$400 million); Tree of Life is the world’s
pounds of cotton it consumed was organic. Nike largest organic food distributor (US$3.5 billion of
projects that in 2004, approximately 30 percent of sales); the Hein-Heinz partnership has 71 percent of
all Nike apparel cotton materials contained some the global market share of organic baby foods. This
percentage of organic cotton, and 47 percent of all industry concentration sets prices, limits farmers’
cotton-containing Nike apparel garments (more return, leverages supply and controls market access:
than 48 million) were manufactured with materials In 2001, Horizon Organic reported a 200 percent
that contained a minimum of 5 percent organically increase in profit (net sales US$160 million) but
grown cotton. Nike’s goal is for all of its cotton actually cut contractually-promised premium to
apparel to contain at least 5 percent organic cotton farmers after it was bought out the Organic Cow
by 2010. Retailer Coop Switzerland is the second- of Vermont, decreasing farmers’ income by US$15
largest consumer of organic cotton, using 2 million 000 per family. Thus, opportunities are mixed
pounds in 2003 (Speer, 2005). with risk for the integrity of organic principles
(Scialabba, 2005). India is one of the major
The “supermarketisation” trend is evident in many producers and exporters of organic products.
countries: in Australia, Chile and the United Appendix table A 2 gives a profile of the major
Kingdom, three to four chains own up to 70 players and their product portfolios and markets.
10. Conclusions
The above review and analysis of the nature, profile nature of players and the nature of vertical co-
and functioning of agribusiness sector in south ordination of the various crop and commodity
Asia shows that the sector is quite diverse in its sectors. Some sectors like perishable produce esp.
content ranging from pure commodities being fruits and vegetables, fisheries, and milk including
sold to highly sophisticated processing sectors organic are already witnessing new systems of co-
with major value addition taking place. Different ordination of production and processing activity
sectors, driven by their markets are at different wherein new players including MNCs are making
stages of restructuring of their backward linkages an entry and working indirectly (Sri Lanka) or
with primary production sector. But, most of them directly (India) with primary producers due to
are in for a major change in terms of number and the demands of the market in terms of timing of

A Fact Sheet
availability and quality of produce. It is important regular employment. In some other regions like
to examine the implications of such changes as most Bangladesh, NGOs are making an entry in the
of the primary producers in the region are marginal agribusiness sector by directly involving in contract
or small producers who face various constraints farming and working with food supermarket chains.
dealing with markets and market drivers. Contract There are also issues of environmental liability and
farming is spreading fast as a mode of co-ordination natural resource use due to the overexploitation
of procurement activity. The Indian evidence on of certain resources like fisheries, land and water.
this mode of co-ordination shows many positive There is a need to understand various commodity
and ill effects of the system especially on small and and product sectors in agribusiness sector from
marginal producers who are the bulk of the primary the small producer perspective to design relevant
production sector in these countries. There are policies and interventions so that they are no left
issues of small producer exclusion, biased contracts, out of the process of agro-industrialisation of the
lack of effective delivery of various services, sector due to the application of biotechnology and
including procurement. The impacts on labour, information technology. There is also need to look
especially female and child, have been negative at the institutional and organisational dimensions
in terms of gendering of tasks, discrimination in of the agribusiness sector for better understanding
wages and lack of proper working conditions and for policy design and action.
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A Fact Sheet
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A Fact Sheet
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http://www.fas.usda.gov/gainfiles/200504/146119288.doc

A Fact Sheet
Appendix
TABLE A 1
Major Agencies, Crops/Commodities, Locations and Types of Contract Farming in India
Organisation Crop/commodity Place Terms and conditions

Hindustan Lever Limited Chicory cultivation Nadiad Seeds are given free of cost
Anand to the farmers
Mehsana
Jamnagar Per acre 40 bags are to be
Districts supplied by the farmers to
the company
Each bag has to contain 50
kgs of chicory
Payments will be made
within 15 days of delivery of
chicory
Two inspections of the crop

before harvest
The crop has to be

harvested and cut into
different sizes and dried for
15 days after harvest by the
farmer
Rs.100/20 kgs will be paid

by the company
Hindustan Lever Limited, Tomato Paste Zahura in Punjab and Pepsi’s plant was acquired in
Nijjer Agro, BEC Foods, Karnataka, 1995 alongwith the contract
Bhilai Chhattisgarh, Sun Sip Amritsar in Punjab and farming system in Punjab
Ltd. Sirsa in Haryana, and
Chhattisgarh
Hindustan Lever Limited Tea Assam and Nilgiris

Pepsi Chilli paste, ginger, garlic, Sangrur and The guarantee covers
basmati, potato Jalandhar in Punjab around two tonnes
Maharashtra Karnataka and production per farmer while
MP the balance can be sold in
the open market.
WIMCO Mango products Andhra Pradesh
Foodpro Tobacco Andhra Pradesh
National Dairy Development Fruit concentrate Delhi, Haryana, Himachal Fruits and vegetables
Board’s F & V project at Tomato puree Pradesh, Rajasthan and UP. are procured from 100
Mongolpuri in Delhi Vegetables and fruits and growers’ associations with
sells 250 tonnes of F&V membership of 18000
daily through 279 retail growers
outlets in Delhi
Maxworth Orchards Fruits and vegetables Tamil Nadu
Cadbury India Cocoa Karnataka
WIMCO, BILT, ITC and JK Match and paper (poplar Punjab, Haryana, UP and
Paper and eucalyptus) MP
TABLE A1 (Contd...)

A Fact Sheet
TABLE A 1 (Contd...)
A V THOMAS Natural Marigold and caprica chillies Hindupur in AP, Total of 6000 acres under
Products Ltd. Kochi Sathyamangalam in TN and contract farming.
Karnataka
MSSL Guar Gum Uttaranchal
C & M Group of Nashik, Maize and Soyabean Nashik in Mah, Punjab and 2036 farmers for maize and
Markfed, Punjab, Tina cultivation MP 150 for soyabean.
Oils and Chemicals, for poultry feed plants The Nashik District Central
Maharashtra, ITC-IBD, MSSL Cooperative Bank, the
Dena Bank, SBI and Bank
of Maharashtra have
participated in the project.
Tripartite agreement would
be signed by the company,
the respective farmer and
NABARD, which would
finance the farmers.
The company has procured
20 tonnes of high yielding
seed varieties of maize
and 10 tonnes of soyabean
seeds and about 30 tonnes
of chemical fertilisers.
Green Agro Pack, Global Gherkins Mostly in Karnataka and AP Small acreage under gherkin
Green, Sterling Agro, Ken for each grower (0.25-1.0
Agri Pack, Unicorn Agro acres)
Tech, Golden Sluis, Bharat
Copper, Koelman India,
Vishal Natural Products,
BHC Agro India
Global Ostrich and Ostrich farming Karnataka. The Australian firm provides
Chamundi Hatcheries breeding stock, technical
knowhow and a buy-back
guarantee
Reliance Agrotech Pvt Ltd. Cashew, mango, bamboo MP
and teak
(Proposed)
Godrej Agro Oil Palm AP (West, and East Godavari Under the AP Oil Palm Act,
Navabharat and Krishna districts in AP, zonalisation of procurement
AP Oilfed Karnataka, Gujarat and whereby farmers would be
Palmtech of ITC Mizoram tied to processors in their
area and buying by others
has been barred. It has
been made obligatory on
the part of the farmers to
deliver palm bunches to the
business enterprises

A Fact Sheet
Suguna Broilers, Pioneer, Sri Broiler chickens Mostly in AP and TN A farmer having a minimum
Venkateshwara, Swathi of 5000 sq.ft area of poultry
shed is provided with day-
old chicks, along with their
own feed
Around 45th day grown

birds are collected at an
average live weight of
2.00 kg. per bird.
Growing charges at a
specific rate per kg. is paid
to the farmers
If the farmer improves on

the standards set in terms
of weight, mortality and
feed to liveweight, he gets
an additional incentive.
If his flock results are
lower than the standard,
deductions will be made
from growing charges paid
United Breweries, Ugar Barley Punjab, Karnataka
sugar,
PAFC
Sukhjit Starch Ltd., MSSL Maize Punjab, Tamil Nadu
Coimbatore Cots and Cotton Anaikatti-Attapadi hill ranges
Coatings Ltd, Appachi, including organic cotton in Coimbatore, Tamil Nadu,
Super Spinning Mills and Punjab, Gujarat, and MP
Syngenta, Rasi Spinning,
Vardhman, Nahar,
Agrocel, Pratibha,
Maikaal bioRe, Arvind,
Mafatlal, Ashima
Nestle, private dairies in Milk Punjab, Gujarat, Uttar Nestle follows two types of
Gujarat, HLL Pradesh contracts— direct legal with
large farmers with more
than 25 animals and indirect
(through agents with legal
contracts) for small farmers
with a few cattle/buffalo
only. The latter mode
dominates procurement
KHDC’s Naddukara Agro Pineapple including organic Kerala, Maharashtra and
Processing Co. (NAPC), Ion West Bengal
Exchange, Pune, Dabur
India

A Fact Sheet
Adat Farmers’ Co-operative Ordinary paddy and basmati Kerala, Punjab, Haryana, (1000 hectares by 2300
Bank for Nest Group, paddy including organic and Uttaranchal farmers in Kerala for the
Cochin, Trissur (Kerala), basmati paddy AFCB)
Satnam, Markfed, L&T,
KRBL, Agrocel, Rallis,
Escorts, EID parry, HLL,
Pepsi, DCM-Sriram, MSSL,
Satnam, Amira foods, Grain
tech, and DD intl.
Pepsi, McCain, Chambal Potato seed and other Pb., Haryana, HP, There are two systems
Agritech, MSSL, NSC, SSCs vegetable seed Maharashtra and other of contract farming: One,
and hundreds of other states growers are selected from a
private companies number of villages scattered
over a large area as is the
case with many small seed
companies and the SSCs.
Secondly, a few villages
are selected for intensive
coverage of farmers as in
the case of Advanta India
Ltd (formerly ITC Zeneca)
which offers a seed village
scheme under which 5000
farmers produce seeds
from the parental line seeds
supplied by the company.
Further, there are direct
contracts as well as indirect
contracts through seed
production organisers.
Pepsi, Nijjer, OSGF, Kerala Spices like chilly, ginger and Punjab, Kerala
garlic, including organic
Hundreds of private sugar Sugarcane UP. Pb., Mah. Guj, Karnataka
mills esp. Shakti sugars, and TN
Renuka sugar
PAFC, M&M, HAFED, Sunflower, safflower Punjab, Haryana,Tamil
Foodpro in AP and Prime Bio Nadu, Maharashtra
products, Marico Industries
Rallis for HLL, Wheat MP and Punjab
Markfed Punjab
Pepsi, McCain, Golden Fries, Potato Punjab, Maharashtra,
MSSL, DSCL (HKB), NAFED Karnataka, MP, Haryana,
and Tamil Nadu
A M Todd & Mint Punjab and UP, Haryana
Co, HAFED
Sami Labs, Medicinal plants and herbs Uttaranchal, Karnataka, and
Himalaya intl., Dabur, and vanilla Kerala
Nandan Agro, Hexagon, A V
Thomas

A Fact Sheet
Jain irrigation, SYP agro, Onion, White Onion and Gujarat, MP

Garlico industries Ltd., garlic
Mark Hort Potatoes (India)
– a subsidiary of MARKFED
Punjab, and many small
players in Saurashtra region
Bharati (field fresh), Shyam Vegetables Punjab, WB and Rajasthan
Telecom, Keventer Biotech,
Tata Tea
Bannari Amman group Jatropha (for bio diesel) Coimbatore, Tamil Nadu (2000 acres)
JK paper, BILTSEWA, ITC Poplar and eucalyptus Orissa, AP and MP
Natural Remedies Pvt. Ltd. Coleous Karnataka
L&T, HAFED Safed Musli Chhattisgarh, Haryana
HAFED Turmeric Haryana
Sungrow Beetroot Punjab
Mohan Breweries and Jatropha (amrjyot) Thiruvallur, Karur, Dindigul, 80000 ha.
Distilleries, Shiva Distilleries, Erode and Coimbatore, 3800 ha.
Dharani Sugars and Virudhunagar, Tirunelveli 2100 ha. all in 2005-06
Chemicals, Riverway Agro and Thoothukudi (all in TN) The last two were yet to
Products plan their operations
PAFC Hyola (rapeseed), Guargum, Punjab

Castor
Source: compiled from various popular and research sources including field research.also: http://www.tn.gov.in/policynotes/agriculture-2.htm (accessed on 07
August, 2006, for Jatropha.)

A Fact Sheet
TABLE A 2
Indian Organic Products, Players and Markets (Domestic and Export)
Product Players Quantity (tonnes/y) Season Markets

Tea Arya Tea Co. Ltd, Kolkata: 3500 Throughout the year Domestic: Mumbai,
Bombay Burmah Trading Bangalore, Delhi &
Corporation, Coimbatore; Hyderabad
Chamong Tea Pvt. Ltd., Export: Australia,
Kolkata; Hindustan Lever Ltd., Germany, Japan,
Nilgiri: Tea Promoters India, Netherlands, UK, USA.
Kolkata.
Coffee Arogya Organic Coffee 600 Monsoon (June to Domestic: Bangalore,
Cultivators, Chikmagalur September) Chennai, Hyderabad,
Bombay; Burmah Trading Mumbai and Delhi
Corporation, Coimbatore. Export: Australia,
Germany, Japan,
Netherlands, Sweden,
UK, USA.
Spices Accelerated Freeze Drying 700 Throughout the year Domestic: Bangalore,
Co. Ltd., Cochin; Cochin Spice Chennai, Hyderabad,
Ltd., Cochin; Lotus Spice Mumbai, Delhi
Ltd., Cochin; Peeremade Export: France,
Development Society, Idduki; Germany, Japan,
Unicorn Natural Products Ltd., Netherlands, South
Hyderabad, Organic Spice Africa, Singapore,
Growers’ Forum. UAE, USA.
Rice Indian Organic Food, Delhi; 3500 Kharif: April to Domestic: Bangalore,
Ion Exchange Enviro Farms, September Chennai, Hyderabad,
Pune; Grewal’s Organic Rabi: November to Mumbai, Delhi
Agriculture Farms, Sirsa; February Export: Japan,
Agrocel Industries, Mandvi, Singapore, UAE, USA,
Picric Ltd., Sonepat; Sunstar Canada, Germany.
Overseas Ltd., Bahalgarh
(Haryana), Satluj Organics,
Delhi; Pciric Ltd, Delhi.
Wheat Giraff International, Hissar; 1400 Kharif: April to Domestic: Mumbai,
Grewals Organic Agriculture September Bangalore, Delhi &
Farms, Sirsa; L & T Overseas Rabi: November to Hyderabad.
Ltd., Bahalgarh; Sunstar February Export: Australia,
Overseas Ltd., Bahalgarh. Germany, Japan,
Netherlands, UK, USA.
Pulses Grewals Organic Agriculture 400 March to May Domestic: Mumbai,
Farms, Sirsa; Ion Exchange Chennai, Bangalore,
Enviro Farms, Pune; Pratibha Delhi, Hyderabad
Syntex Ltd., Indore, Fab India, Export: Japan,
New Delhi. Singapore, Germany,
UAE, Saudi Arabia.
Pulses Grewals Organic Agriculture 400 March to May Domestic: Mumbai,

Farms, Sirsa; Ion Exchange Chennai, Bangalore,
Enviro Farms, Pune; Pratibha Delhi, Hyderabad
Syntex Ltd., Indore, Fab India, Export: Japan,
New Delhi. Singapore, Germany,
UAE, Saudi Arabia.
TABLE A2 (Contd...)

A Fact Sheet
Indian Organic Products, Players and Markets (Domestic and Export)
Oilseeds Enfield Agrobase Pvt. Ltd., 100 Kharif – April to Domestic: Negligible
Chennai; Grewals Organic September Export: European
Agriculture Farms, Sirsa; Ion countries
Exchange Enviro Farms, Pune.
Fruits & Grewals Organic Agriculture 2500 Throughout the year Domestic: Mumbai,
Vegetables Farms, Sirsa; Mahesh Agri Chennai, Bangalore,
Exim Pvt. Ltd., Surat; Ion Delhi & Hyderabad
Exchange Enviro Farms, Pune; Export: Australia,
IQF Foods Ltd., Bangalore; France, Germany,
Namadharis Fresh, Bangalore; Italy, Sweden,
Picric Ltd., New Delhi, Fab Switzerland,
India, New Delhi Netherlands, USA, UK
Cashewnut Narayan Ganesh Prabhu 375 March to June Domestic: Nil
Zantye & Co. Goa; Trading Export: European
Organic Association, Goa. countries
Others: Pratibha Syntex Ltd., Cotton 1200, Herbs Domestic: Mumbai,

Cotton, Indore; Agrocel Industries, 250 Bangalore, Delhi, &
medicinal Mandvi, Maikaal bioRe Pvt. Hyderabad
herbs & Ltd., Mhow; Rohini Herbal, Export: Australia,
extracts, aloe Chennai; Khadinge Plants Belgium, Germany,
vera, and Herbs Pvt. Ltd., Chetna Switzerland, Italy,
project of Solidaridad and ETC Japan, Netherlands,
India in AP UK, USA.
Source: Org-Marg, 2002

Fieldwork, Various Publications from – APEDA, Tea Board, Spice Board and Coffee Board) and own updation.
FIG. A 1
Bi-partite Contract Farming Model
Company
Supply of produce
Supply of inputs on Farmer

credit
FIG. A 2
Tri-partite Contract Farming Model
Company Payment Farmer
Payment for inputs

Supply of produce
Supply of Credit and

inputs on Farmer/AoF/ Payment after
credit Cooperative deduction of dues
(in some cases)

A Fact Sheet
FIG. A 3
State-led Contract Farming System in Punjab (original model)
Input supply & payment State Seed

for produce at MSP plus or (PAFC) supplier
comfort price
Produce
Produce at will payment
Farmer
MoU
Per acre payment
for service Processing/
marketing
Company
Extension under
PAFC supervision Input Company/Extension MoU
service provider
FIG. A 4
State-led Contract Farming System in Punjab
(revised model)
Farmer Direct
Machines Extension
and co./buying co./
equipment PAFC
PAFC Reimbursement of extension

fee, waiver of purchase taxes,
and approval of CF
FIG. A 5
The Quad-partite Contract Farming Model
Farmer selection &

Bank
documentation
Agri input P
Company/ Payment a Processor/
for y
facilitator/ Marketer
e
trader/ inputs
n
intermediary t
Supply of inputs Farmer Produce supply

under agreement

A Fact Sheet
FIG. A 6
The Six-partite (networking) Contract Farming Model
Farmer selection &

documentation under
Agri input cos. Bank
agreement Payment for
produce under
C agreement
O
Franchisee Payment for inputs
N
T
R
A Supply of inputs/
C extension for a fee
T
contract
contract Processor/
Agri input co./ Marketer
facilitator
agreement
agreement
agreement
Subfranchisee
PAFC
Produce supply Farmer
under agreement
FIG. A 7
Tri-partite (Intermediary) Model of Contract Farming
Grower Contract production Local Middleman/

organisation, supply of Facilitator/ production
Farmer selection, company seed (with organiser
package of practices, part advance payment
payment for produce by grower), extension,
(thru bank* to farmer and input credit under Seed supply,
Procurement and facilitator), and agreement with no payment of
at fixed or supervision under liability on company commission
mkt. linked agreement for extension,
price, grading Farmer adoption and tripartite procurement & seed
& quality agreements & procurement, local distribution services
Supply of produce through
testing of quality lab mgt. under agreement under agreement &
facilitator under tripartite
produce by reimbursement of
agreement with no liability
facilitator seed/other costs &
on company for any loss
seed replacement
Company Collection
Centre/Factory Company
* Bank finances contract production @ Rs. 10,000/acre (NABARD norm is Rs. 13,000/acre for the given crop) at 7.5 percent rate of interest. It receives the
money from the company for payment to the farmer for his produce, from which it pays the facilitator (as per authorisation given by the grower), deducts its own
dues, and transfers the remaining amount in the farmer’s bank account.

A Fact Sheet
MAKE TRADE FAIR campaign aims to secure a fair deal for 650
million poor people depending on agriculture so that they
have the Power to Decide the pace and scale of opening up of
their agriculture markets to ensure food security, livelihood
security and rural development Agribusiness in South Asia
A Fact Sheet
For details visit

www.maketradefair.com

Agribusiness South Asia Final 27-04-07

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MAKE TRADE FAIR campaign aims to secure a fair deal for 650

million poor people depending on agriculture so that they

For details visit

Edited and coordinated by

Design and Printing by

Agribusiness in South Asia iii

iv Agribusiness in South Asia

3. Food Retailing in India 17

5. Agri Retail Chains in India 25

6. Contract Farming in India 25

6.2.1 Child labour and gender 34

6.2.2 Case studies 35

6.2.3 Contract cottonseed production in Andhra Pradesh 35

6.2.4 Contract tomato and potato production in Punjab 37

6.2.5 Labour in tomato ﬁelds 38

6.2.6 Labour in potato ﬁelds 38

9. Organic Produce Chains in South Asia 48

vi Agribusiness in South Asia

List of Appendix Tables and Figures

Agribusiness in South Asia vii

Palash Kanti Das

viii Agribusiness in South Asia

Agribusiness in South Asia ix

x Agribusiness in South Asia

Country Agriculture Industry Services

Agribusiness in South Asia 1

Country Average Size of % of marginal % of farm area % of small % of farm area

2 Agribusiness in South Asia

Agribusiness in South Asia 3

TABLE 3 The Employment growth in the agro processing

4 Agribusiness in South Asia

Soft drinks/mineral water 7000 (5%) Pepsi 3000

Notes: Figures in percentage (%) terms indicate growth rates

Agribusiness in South Asia 5

6 Agribusiness in South Asia

Category Industry size (Rs. in million) Key players in organised segment

Source: http://mofpi.nic.in/visdoc/volume2.pdf Accessed on 31 July 2006, p 5.

Agribusiness in South Asia 7

Type of % of Arable land Distribution of milch animals Average dairy holding

*Usual status activity. Figures relate to 1983, 1993-94 and 1999-2000.

8 Agribusiness in South Asia

Source: http://www.fas.usda.gov/gainfiles/200504/146119288.doc accessed on 20 July, 2006.

Company Brands Major products

Source: http://mofpi.nic.in/industryspecificinformation/milk/milk_players/milk_players.htm accessed on 20 July, 2006.

Agribusiness in South Asia 9

10 Agribusiness in South Asia

Company Products Brand/s

Source: http://mofpi.nic.in/industryspecificinformation/meat/meat_players/meat_players.htm accessed on 20 July, 2006.

Agribusiness in South Asia 11

Marine Inland Aquaculture

Deep Sea Coastal Brackish water Fresh Water

Pelagic River Shrimp

Demersal Ponds Carps

Crustaceans Reservoirs Catﬁsh

Source: http://mofpi.nic.in/visdoc/volume2.pdf, (accessed on 4 August, 2006).

Feed Fisherman Mandi Processor Exporter Consumer

Source: http://mofpi.nic.in/visdoc/volume2.pdf, (accessed on 4 August, 2006).

12 Agribusiness in South Asia

ITC Labs Aqua Choupal ITC processing ITC packaging

10,000 farmers Fish farmers Input