documentation of success stories of food processing units in
TRANSCRIPT
i
DOCUMENTATION OF SUCCESS STORIES OF FOOD
PROCESSING UNITS IN KARNATAKA
Revised report
I Maruthi
Venkata reddy B.G
Agriculture Development and Rural Training Centre (ADRTC),
Institute for Social and Economic Change (ISEC),
Bengaluru 560072
ii
ACKNOWLEDGEMENTS
I am extremely grateful to the Agricultural Ministry Government of India, New Delhi, for
financing this study. I am very thankful to the Acting Director of ISEC Prof. K.S James for
encouraging me to work on this project and to former Director of ISEC, Prof. R.S Deshpande,
who has always inspired me to work harder. My special thanks to Prof. Parmod Kumar, Head
ADRT Centre, who helped me at various stages of this project. Further I thank to all my
colleagues in the ADRTC for their unstinted help.
I am greatly indebted to Dr. M. Devendra Babu, for reading the earlier draft of this report and
for giving valuable suggestions.
I thank Mr. Venkatareddy BG, Research Assistant for conducting fieldwork, graciously extended
his co-operation in inputting the tables in the report. I profusely thank him. Finally I thank
Entrepreneurs, District Industrial Centers for the information that they gave us.
The secretarial assistance by Mr.N Boopathi, and Mr. Muthuraja is thankfully acknowledged.
Dr I Maruthi
Associate Professor,
Agriculture Development and Rural Training Centre (ADRTC),
Institute for Social and Economic Change (ISEC), Bengaluru.
iii
CONTENTS
Page No
Acknowledgement (ii)
Contents (iii-vi)
Executive summary (vii-xix)
Chapter 1 Introduction
1-13
1.1 Background 1
1.2 Structure and composition of the food processing industries in India 4
1.3 Review of Literature 6
1.4 Objectives of the Study 11
1.5 Methodology and Data Sources 12
1.6 Overview
12
Chapter 2 Food Processing Industry in India and Karnataka
14-29
2.1 Introduction 15
2.2 Classification Of Food Processing Industry 15
2.3 Need for Food Processing Industry 17
2.4 Different Stages of Processing Food 19
2.5 Contribution of Food Processing Industry to GDP 21
2.6 Persons Employed in the Registered Food Processing units 22
2.7 Exports of Food Processing Related Items 22
2.8 Exports of Major Processed Food & Related Commodities from food
processing sector
23
2.9 Investment In Food Processing Sector 23
2.10 Food Processing Industry in Karnataka 24
2.11 Production of Major crops in Karnataka 28
2.11.1 Agriculture 28
2.11.2 Commercial crops 28
2.11.3 Horticulture 29
2.11.4 Dairy and Livestock 29
Chapter 3 Socio - Economic Characteristics of Entrepreneur s and Food Industries 30-37
3.1 Background of the Food Processing Industries 30
3.2 Ownership of Industries 31
3.3 Age Profile of the Entrepreneurs 32
3.4 Educational Background of Entrepreneurs 33
3.5 Caste background of Entrepreneurs 34
iv
3.6 Land Assets of Agro-Processing Entrepreneurs 35
3.7 Employment in Agro-Processing Industries
36
Chapter 4 Documentation of Success Stories of Food Processing units in Karnataka 38-47
4.1 Reasons/Factors for Success of Food Processing units 38
4.1.1 Quality Management 38
4.1.2 Good Customer Service 38
4.1.3 Reasonable Prices 39
4.1.4 Replacement for Damaged Products 39
4.3 Percent change in average annual income of food processing industries in
Karnataka
40
4.4 Case Studies 41
Case 1: Mahesh Cashew Industries 42
Case 2: Jain Agro Food Products 45
Case 3: Siddabasava Dhal Industries 46
Chapter 5 Problems, Prospectus and Challenges of Food-Processing units 48-56
5.1 Problems of Food-Processing Industry in India 48
5.1.1 Problems Relating to Raw Materials 48
5.1.2 Problems Relating to Marketing 48
5.1.3 Problems Relating to Processing 49
5.1.4 Financial and Fiscal Problems 49
5.1.5 Other Problems 50
5.2 Problems faced by Manufacturing Enterprises 50
5.2.1 Problems Relating to Raw Materials 50
5.2.2 Marketing Problems of Sample Food Processing units 52
5.3 Other Problems 54
5.4 Prospectus of Food Processing Units in Karnataka 56
Chapter 6 SWOT analysis of Food- Processing Industry in Karnataka 57-64
6.1 SWOT analysis of Fruit Vegetable Manufacturing Industry 58
6.2 SWOT analysis of Manufacture of Grain Mill Products Industry 60
SWOT analysis of Dairy Industry 61
6.4 SWOT analysis of Marine Industry 64
6.5 SWOT Analysis of Consumer /Packed Goods Industry
64
Chapter 7 Conclusions and Policy Recommendations 67-80
7.1 Introduction 67
7.2 Main findings 67
v
7.2.1. Background of Food Processing units 68
7.2.2 Ownership of Industries 68
7.2.3. Age Profile of the Entrepreneurs 68
7.2.4 Educational Background of the Entrepreneurs 68
7.2.5 Caste Background of the Entrepreneurs 69
7.2.6 Land Assets of Agro-Processing Entrepreneurs 69
7.2.7 Employment in Agro-Processing Units 69
7.3 Reasons for Success of Food Processing units 70
7.4 Problems faced by Manufacturing Enterprises 71
7.4. Problems relating to Raw Materials 71
7.5 Marketing Problems of Sample Food Units 73
7.6 Other Problems 74
7.7 SWOT analysis of food processing industries in Karnataka 75
7.8 Conclusions 76
7.9 Policy Recommendations 77
References 78
vi
LIST OF TABLES
Table 1.1 Structure and composition of the food processing industries in India 2011-12 05
Table 2.1 Classification of Organized Food Processing Industries in India 15
Table: .2.2 Percentage of Losses Estimated for Major Produces 19
Table: 2.3 Processing details of different Sectors of Food Processing Industry 20
Table 2.4 Contribution to GDP of Food Processing Industry at 2004-05 prices (Rs crore) 21
Table 2.5 Exports of Major Processed Food & Related Commodities from Food
processing sector
23
Table: 2.6 Foreign Direct Investment in Food processing sector in the India. 24
Table 2.7 size of food processing industries, capital investment, employees, value of
output & net Value added by manufacture 2012-13(value in lakh) in Karnataka
27
Table 2.8 Production of Agri-crops (in lakh MT) 28
Table 2.9 Production of these Commercial crops (in lakh MT) 28
Table 2.10 Production of Major Fruits in Karnataka. 29
Table 2.11 production statistics for major livestock products 29
Table 3.1 Distribution of Units by Year of Establishment 31
Table 3.2 Ownership Status of the Sample of Food Processing Industries 32
Table 3.3 Age Characteristics of the entrepreneurs 33
Table 3.4 Educational level of Sample Entrepreneurs 34
Table 3.5 Distribution of Entrepreneurs by their Caste 35
Table 3.6 Distribution of Entrepreneurs by Land Holding 36
Table 3.7 Distribution of Units by Size of Employment 37
Table4.1 Reasons/Factors for success of food processing industries 39
Table 4.2 Average annual turnover of food processing industries (Rs crores) 40
Table 4.3 Percent change in average annual income of food processing industries in
Karnataka
41
Table 5.1: Constraints faced by the Food Processing Units in Procuring Raw Materials 51
Table 5.3 Distribution of Units on the Basis of Other Problems
Table 6.1 SWOT Analysis of Fruit and Vegetables Industries 60
Table 6.2 SWOT Analysis of Manufacture of Grain Mill Products Industry 62
Table 6.3 SWOT Analysis of Dairy Industry 63
Table 6.4 SWOT Analysis of Marine Industry 65
Table 6.5 SWOT Analysis of Consumer /Packed Goods Industry 66
vii
EXECUTIVE SUMMARY
The food-processing industry in India plays a vital role in the national economic development
and has potential to meet the local needs and export requirements. It helps in processing
agricultural products such as field crops, pulses, horticultural crops, livestock and fisheries and
converting them to edible and other usable forms. Thus, transformation of agriculture through
creating forward and backward linkages with industry has been emerging as an important option
to overcome the increasing challenges of creating employment opportunities for increasing
labour force and sustaining the livelihood of households in rural areas. Most important point in
the food-processing is that a sizeable portion of raw material processed in them being rural based
it has a very high employment potential with significantly lower investment. Further the food-
industry generates new demand on the farm sector for more and different agricultural outputs,
which are more suitable for processing. On the other hand, development of these industries
would relax wage goods constraints to economic growth by enhancing the supply of their
products. In this context there is a need for improving the capacity of the food-units to harness
backward linkages with agriculture and allied activities in order to efficiently convert part of the
output to value added products acceptable to the domestic and international markets. This would
generate employment opportunities for different types of skills through food processing,
packaging, grading and distribution.
Keeping the above aspects in consideration the study was carried out in the state of Karnataka.
Objectives of the study
Keeping the above aspects in consideration this study is carried out with the following
objectives.
1. To bring in socioeconomic aspects of food processing units ,
2. To document success stories of food processing units,
3. To emphasize on the problems, prospects, challenges and concerns in the food processing
industries.
viii
Methodology and Data Source
The study has been based on both primary and secondary sources of information data.
The primary data is collected among a sample of different product groups of registered industries
of Karnataka state. It means that a detailed list of industries/ units has been prepared and number
of these units/industries has been decided on the basis of total number of industries in the
selected clusters. Selection of Belgavi, Dharwad, UttarKannada, DakishnaKannda, Udupi,
Hassan, Bangalore Rural, Bangalore Urban, Tumakur and Ramanagar districts has been done for
detailed analysis. Again 50 success units have been selected. Apart from Primary data,
Secondary and published documented data has been collected from District Industrial Centre,
Federation of Karnataka Chamber of Commerce and Industry and analyzed accordingly. To
make the study more meaningful and policy oriented available literature and studies have been
consulted and reviewed. It was also thought proper to obtain information on the perceptions of
entrepreneurs, officials of financial institutions and government agencies/departments including
industry through structured questionnaires with a view to suggest the suitable policy measures.
We have also interacted with the government departments for an in depth understandings their
observations may be considered for evolving the strategies of the revival of sick industrial units.
Primary data have been collected through interview schedule. Apart from this field observations
and open ended discussion have also been equally considered and incorporated in the present
study. The filled in questionnaires were thoroughly scrutinized and processed in computer for
drawing out inferences, patterns, trends and conclusions. The primary data in tabular form has
been discussed, interpreted and analyzed while critical appreciation of pertinent literature has
been ensured in the report. The policy recommendations are based on analysis of research
findings and critical review of pertinent literature.
Main Findings
Background of Food Processing Units;
The expansion pattern of food processing industries based on the analysis of 50 sample units
reveals that 100 per cent of industries were registered under District Industrial Centre in sample
districts together were started during the periods 2014-15. From table 3.1 one can see that 32 per
ix
cent all categories of units were started after 2006. Followed by 26 per cent during 1992-2000,
22 per cent before 1991 and 20 per cent during 2001-05.
Ownership of Industries
Looking into the legal ownership status of industries it brings out that the industries are
registered under single ownership is remarkably higher among the all product industries in each
of the product groups of food- Industries. However, a large proportion of industries registered
under the Shops and Establishment Act are also observed operating as the family enterprises. In
all, the proportion of industries operating under a signal ownership is highest at over 80 percent,
followed by partnership (12.00 %) and 8 per cent of industries are family enterprises.
Age Profile of Entrepreneurs;
Age of entrepreneurs in the food processing sector as an important determining, factor for their
growth expansion one can observe the pattern whether the young entrepreneurs are entering in to
this sector or the traditional business community themselves in this business it is significant to
observe that most of the entrepreneurs in the food-processing sector are middle aged (30 to 40
years). Their share comes to 68 per cent of the total food processing entrepreneurs. This is
followed by young entrepreneurs (below 30 years) who constitute28.00 per cent and 4 per cent
account for aged (45 years and above). The table thus reveals the dominance of middle aged
entrepreneurs in the sector. Industry wise analysis reveals that proportion of entrepreneurs in the
middle-age group is higher in industries such as marine products (100 %), Manufacture of
Packed food/ consumer foods (70 %), grain mills and fruit and vegetable manufacturers (66.66
%) and 60 per cent of dairy products.
Educational Background of the Entrepreneurs
Assessing into the educational background of the entrepreneurs it reflects that the different
groups of food processing industries especially small scale industries do not require any more
skill and professional education. Expansion of this sector can be successfully carried out by the
individual having even primary education or the secondary education. From the sample nearly 26
per cent entrepreneurs have education below primary level. However, a majority i.e., 38 per cent
x
entrepreneurs are having secondary level of education while only 2 per cent entrepreneurs, have
obtained technical/ professional level education.
Caste Background of the Entrepreneurs
Among the different product groups of food-industries, the domination of general caste
entrepreneurs has been noted and the highest at 50 per cent is in distilling, rectifying and
blinding of spirit while in registered units their share reaches to the extent of 50 per cent. In same
product group to 66 per cent in manufacturing of fruits and vegetables, In terms of the
proportionate share of different casts of entrepreneurs in various small scale registered industries
is concerned the study found that it again follows quite high at 28.00 percent in backward
classes, 14.00 per cent of SC and 8.00 per cent of ST. Industry wise analysis shows that 66.66
percent of entrepreneurs in fruit and vegetable manufacturers, 60.00 per cent in Manufacture of
dairy, 50.00 per cent in marine products , 44.44 per cent in manufacture of grain mill and 30.00
per cent in Manufacture of Packed food/ consumer foods.
Land Assets of Agro-Processing Entrepreneurs
Economic profile of food-processing entrepreneurs is analyzed in terms of area of land assets
they own. For this purpose, entrepreneurs are categorized into three groups; entrepreneurs with
land holding between zero and 2.5 acres (below one hectare), between 2.5 acres and 5 acres, and
entrepreneurs with land holding above 5 acres.
It is observed that 66.66 per cent of the total entrepreneurs have land holding between zero and
two and half acres (below one hectare). The proportions of entrepreneurs having land holding
between zero and 2.5 acres varies from 40.00 manufactures of dairy Products to 72.00.
Manufacture of grain mill products. The proportion of entrepreneurs having land holding
between two and half and five acres of land is 22.00 per cent for the food processing industries
as a whole and it varies from 11.00 per cent in manufacture of grain mill products industries to
50.00 percent in marine product industries and 12.00 per cent have land holding of more than
five acres. The table, thus, reveals that majority of entrepreneurs have small size of land holdings
and this indicate that economic profile of majority of food-processing entrepreneurs as a whole is
not so sound.
xi
Employment in Agro-Processing Units
Food-processing industries are generally regarded as labour intensive and are expected to employ
more labors and create more maydays of employment.
In order to analyze the employment level in sample food processing industrial units, they are
categorized into four groups namely industrial units employing 2 to 10 persons, 11 to 20 persons,
2 1 to 30 persons and above 3 I persons.
It shows that 46.00 percent of the total food-processing units are able to generate employment for
11 - 20 persons each. Within this 100 per cent of the marine product units, 60 per cent dairy
units, 46.66 percent manufacture of fruits & vegetables, 44.44 percent in Manufacture of grain
mills and 30.00 percent in Manufacture of Packed food/ consumer foods. It is also observed that
industrial units providing employment to 21-30 persons are and account for 24.00 percent of the
total food -processing industrial units, 18. Per cent in 2-10 persons and finally 12.00 per cent of
total food processing units generating employment for 31 above persons.
Reasons for Success of food Processing Units
The major reasons delineated for success of these units are reasonable price, skilled labour and
replacement for damaged products. The extent of influence of each of these factors is brought
out in following paragraphs.
Quality Management
The quality of produce is an important factor operation or success of units. The proportion of this
factor in food-processing units varies from 100.00 per cent in manufacturing of marine products
to 80.00 of manufacture of dairy products. However this factor is favor in Manufacture of
Packed food/ consumer foods and marine products (100.00 %), Manufacture of fruits &
vegetables (86.66%), Manufacture of grain mill products (83.33 %), and in Manufacture of dairy
products (80.00 %). Food quality is an important food manufacturing requirement, because food
consumers are susceptible to any form of contamination that may occur during the
manufacturing process. Many consumers also rely on manufacturing and processing standards,
particularly to know what ingredients are present, due to dietary, nutritional requirements or
medical conditions.
xii
Good customer service
Customer service proves to be one of the most important keys to the success of the food industry
78.00 per cent of food-processing units have reported that good customer service is an another
important factor for success of food processing units. This factor is favor in Manufacture of
Packed food/ consumer foods and marine products (90. %), Manufacture of fruits & vegetables
and Manufacture of dairy products (80 %) and Manufacture of grain mill products (77.77 %).
Reasonable prices
The reasonable price of a product is another factor to success of food processing units. About
64.00 per cent of the total food-processing units have reported reasonable price of as another
factor to continue the business in food processing. This is a major reason for industries like
manufacture of Packed food/ consumer foods (80.00%), manufacture of grain mill products
(66.66 %), Manufacture of dairy products and manufacture of fruits & vegetables (60.00 %).
Replacement for Damaged Products
The replacement for damaged products is another reason for operation or success of units. About
34.00 percent of the total food-processing units have reported replacement of damaged product is
another factor to continue the business in food processing. This is a major reason for industries
like Manufacture of grain mill products (66.66%), Manufacture of Packed food/ consumer foods
(34.00 %) and Manufacture of fruits & vegetables (13.00 %). Have reported the food-processing
industries.
Percent change in average annual income of food processing industries in Karnataka
It is observed from Table 4.3 percent change in annual income of food processing industries in
the state of Karnataka during 2009-10 to 2013-14. It is noticed from the table that although
manufacture of fruits and vegetables had highest income under processing (0.90 crores in 2009-
10 and 6.30 crores in 2013-14) followed by Manufacture of dairy products (306.66 percent),
Marine products(119.23 percent ) Manufacture of Packed food/ consumer foods(83.33 percent)
and Manufacture of grain mill products (81.11 percent).
xiii
SWOT analysis of food processing industries in Karnataka
SWOT analysis will help you to evaluate the current position of your operation to determine
management plans for the future. It helps in determining future plans by identifying strengths
and opportunities that can be used by the operation and pointing out weaknesses and threats that
should be managed. While not all plans will ultimately be implemented, completing a SWOT
analysis can ensure all current and potential positions of the business are considered. Those
beginning a SWOT analysis should remember that there are no set guidelines for completing the
analysis. Users of the final analysis should be comfortable with the format and should understand
the results. For the analysis to be most effective, though, it must be carried out fairly and
thoroughly. This will then put the management in a position to accurately forecast and prepare
for the future to meet the farms objectives and goals.
Problems Faced by Manufacturing Enterprises
Formulation of a proper-mix of policies for the healthy and rapid development of food-
processing units must take into consideration the various problems that inhibit their growth. With
this in view, the sample processing units were asked to identify their problems. In this section,
problems faced by sample of food-processing units in Karnataka in particular are analyzed in
detail. For this purpose, problems faced by selected sample food-processing units are categorized
into problems relating to raw materials, marketing problems and other problems.
Problems Relating to Raw Material
There is a problem of non-availability of raw materials, high prices of raw materials, poor quality
raw materials and competition among units to buy raw materials.
Non- availability Raw Materials
Non availability raw materials is an important problem affecting the operation of units. The
proportion of this problem affecting food-processing units varies from 54 per cent in
manufacturing of grain mill products to 10. of manufacture of packed food/consumer foods.
However this problem is severe in industries like rice mills (77.77 %), manufacture of fruits &
vegetables (66.66 %), marine products (50.00 %), and in manufacture of Packed food/ consumer
xiv
foods (10 %). This problem largely arises due to fluctuations in agricultural production due to
unfavorable climate, plant diseases and other natural calamities. However, many other factors
can be attributable to this problem in the case of individual commodities. Global agro industries
Kalburgi (Dhal mills), Sri Dharameshwari Rice Industries (rice mill) and Ravi Raj industries in
Tumkur pointed out that the problem of inadequate availability of paddy and dhal (raw material)
for rice mills and dhal processors can be attributed to inadequate production in the state.
High Market Price of Raw materials
The prices of raw materials are a major problem faced by food-processing units. About 44 per
cent of the total food-processing industrial units have reported high market price of raw materials
as a major difficulty in obtaining raw materials. This is a major difficulty for industries like grain
mills (66.66%), marine products (50 %), dairy and consumer foods (40.00 % and 20 %) in
manufacturing of fruits and vegetables.
Competition among units to buy raw materials
30 per cent of processing industrial units reported competition among processing units to buy
raw materials as another problem relating to raw material. This problem implies that raw
material availability in the market is less than the demand for raw material. This problem is
severe in the case of rice and pulse mills where 38.88 percent of grain mills face this problem.
30.00 percent Manufacture of Packed food/ consumer foods are also found to be facing this
problem. Kalburgi Dhal mills and rice mills in Tumakur have pointed out that this problem
pushes up the price of raw material in the market and makes raw material unavailable to small
scale grain mills.
Poor Quality of Raw Materials
20 per cent of food-processing units among five food-processing industries, grain mills, reported
that poor quality of agricultural raw material adversely affected the quality of their products and
the profitability of operation. This problem is severe for grain mills (27.77 %). Priyanka, Avinash
dhal industries have reported that due to various diseases affecting pulse quality is poor which
reduces the profitability of their operation. Tumakur rice mills have reported that high moisture
xv
content in paddy, presence of paddy with black rice and paddy without rice (empty paddy) in
the raw material (paddy) reduce the quality of raw material (paddy), and adversely affected the
quality of their product and profitability.
Marketing Problems of Sample Food Processing Units
Marketing problems relate to competition, credit sales, brand acceptability, mass media exposure
etc.
Competition
The most important marketing problem common to all sample food-processing industries is
competition. Food-processing units face competition from other units within the same industry,
from large-scale units, from multinational companies and also from other units, which produce
substitutes for the processing unit’s product. Table 5.2 reveals that 64.00 per cent of food-
processing units as a whole suffer from this problem. The proportion of units facing this problem
varies from 72.22 per cent in grain mills to 40 percent in dairy products making and 66.66 per
cent in fruits and vegetable processing industry. However, table shows that this problem is
serious in grain mills (72.22 %), manufacture of packed food/ consumer foods (60 %) and
marine products 50 per cent.
Lack of Brand Goodwill
Another marketing problem which the units have reported to be facing is the lack of brand
goodwill. It implies that their product brand have not received much public acceptance. It reveals
that 52 per cent of food processing industries as a whole are facing this problem. This problem
has been reported by 60 per cent of manufacture of packed food /consumer foods, 53 per cent of
manufacture of fruits and vegetables and 50 per cent of grain mills, marine product units. The
units have attributed it to inadequate publicity through mass media. Units reported that they are
reluctant to have media exposure because of lack of finance and high cost involved in it.
Inadequate Publicity through Mass Media
Mass media exposure is an essential ingredient for the smooth growth of an industry. It helps
entrepreneurs to plan their activities in accordance with market trends, introduce goods to suit
consumers' tastes and get consumers informed of their product through advertising. It shows that
46 per cent of food-processing units as a whole have reported inadequate publicity through mass
xvi
media as a marketing problem. This problem is faced by 60 per cent of Manufacture of Packed
food/ consumer foods 46.66 percent Manufacture of fruits & vegetables, 44.44 per cent of
Manufacture of grain mill products and its, 40 per cent of milk processing units.
Dependence on middleman for marketing the processed product
Middleman as one who carries all the activities involved in selling goods and services to those
who buy for resale or business use. It shows that 100 per cent of marine products, 55 per cent of
grain manufacturers, 46.66 per cent of manufacture of fruits & vegetables and 40 per cent of
manufacture of dairy and consumer goods units have reported that they are depend on marketing
of their produce through middleman.
Other Problems
Irregular supply of power
About 44 per cent of the total food-processing units have reported that irregular supply of power
affects their operation. Food-processing units, which are located in remote areas, face this
problem seriously. 55.55 per cent of the grain mills, 50.00 per cent of marine products, 40.00 per
cent of bakery and dairy product units and 33.333 per cent of manufacture of fruits and vegetable
industries reported. Lack of regular supply of power adversely affects the existing capacity
utilization resulting in low level of production on the one hand and an increase in cost of
production on the other.
Lack of Labour
32 per cent of the food-processing units in five industries namely fruits and vegetable
manufacturers and consumer foods (40.00 %), grain mills (33.33 %), and dairy products 20.00
percent. Have reported that lack of labour affected their operation Abhinandhan Food Processors
in Belgaum. Deepak cashew industries (Udupi district) has attributed lack of labour to migration
of labour from rural to urban or semi urban areas to work in shops particularly in textile shops, in
transportation service sectors drivers or conductors in private buses, or to work in other private
establishments in the urban or semi urban areas.
xvii
Multiplicity of Laws and Procedures
About13per cent of the food-processing units as a whole have reported difficulty in the operation
of units due to multiplicity of laws, procedures and periodical interference of bureaucracy in the
name inspection. This problem is faced by grain mills (44.44 %), Manufacture of Packed food
and manufacture of dairy Products (20 %) and 13.33 per cent in fruits and vegetable
manufacturers has reported. Global agro industries and Avinash dhal industries (Dhal industries)
have reported that Government of India has banned to export of dhal to other countries like US,
Singapore etc. And getting low subsidies in our state as compared neighboring states like
Maharashtra and others. This requires action on the part of the government in simplifying laws
and procedures in favor of food-processing industries to speed up their growth.
Conclusions
From the analysis of socio-economic characteristics of entrepreneurs, it can be concluded that
that ownership of units in this sector is characterized by the dominance of sole proprietorship
form of organization indicating one man show in the management of units and by partnership
among family members. In view of this, it can be concluded that there is a tendency in this sector
to confine ownership of the units to the family only.
Further, from the point of education, young educated youth are not much attracted to food-
processing sector as new entrepreneurs. This is a matter of concern. This sector is found to be
dominated by middle aged entrepreneurs and this cool borate with the above that –then as family
business.
Assessing into the educational background of the entrepreneurs it reflects that the different
groups of food processing Industries especially small scale industries do not require any more
skill and professional education. Expansion of this sector can be successfully carried out by the
individual having even primary education or the secondary education. From the analysis of
employment the food-processing unit is able to generate employment for 11 - 20 persons.
Quality of product and time by delivery of the product to customers is the key factor to run
continuously of any food industry
xviii
Short supply of raw materials, poor quality of raw materials and poorly developed marketing
facilities, lacking power for running the units shortage of skilled labour is the important
problems that comes in the way of development of this sector.
Policy Recommendations
Based on the finding presented on different issues the study makes the following
recommendations important for policy action.
Fruits and vegetable processing industries
As Indian economy is based on agriculture, there is a need to develop proper supply chain
models which may play an important role in increasing the shelf life and in turn reduce
the losses and wastages in fruits and vegetables, increase in farmer income, generate
employments opportunities for the local peoples, and improve the livelihood of the
farmers which leads to the development of Indian economy as a whole.
Most of the processing industries reported that non-availability of suitable varieties of
raw materials for processing was one of the major constraints. Thus, there is a need to
address this issue by the agricultural universities and R & D institutions.
The State Government would consider, on priority, providing road links for agro-
industries clusters and agro-processing units through the Marketing Development
Fund (MDF) or other Schemes/Programmes.
Agro-processing and agro-business, being emerging areas with a vast growth potential, is
facing a shortage of skilled manpower. The State Government would encourage
Universities in the State to commence courses in food processing, packaging and agri-
marketing.
Manufacture of grain mill products and Manufacture of packed food/ consumer foods
The State Government should ensure regularity in supply of power to industries.
xix
Introduction of a scheme as entrepreneurship training and apprenticeship for ITI diploma
holders seems too necessary for improving capacity building for both young generation
willing to start units and skilled laborers.
Product specific industrial clusters should be promoted through providing various
infrastructural facilities and developing market linkages.
Manufacture of dairy products
Training programmes on hygienic milk production, processing, packaging, and marketing
should be organized.
Establishment of a few state-of-the-art labs, with appropriate accreditation to estimate
contaminants, in different parts of the country would help the industry to ensure quality
of dairy products of international standard.
Manufacture marine products
MPEDA can develop a department for providing marketing information to the fish
processing units. This will help the industry updated with International scenario.
There is a need for market research studies to explore domestic and international markets
for processed products.
1
CHAPTER I
INTRODUCTION
1.1 Background
India is one of the key food producers in the world, with the second largest arable land area. It is
the largest producer of milk, pulses, sugarcane and tea in the world and the second largest
producer of wheat, rice, fruits and vegetables. India’s Food Processing industry is one of the
largest industries in the country - it is ranked fifth in terms of production, consumption, export
and expected growth. The Indian food industry is estimated to be worth over US$ 200 billion and
is expected to grow to US$ 310 billion by 2015. India is one of the world’s major food producers
but accounts for only 1.7 per cent (valued at US$ 7.5 billion) of world trade in this sector – this
share is slated to increase to 3 per cent (US$ 20 billion) by 2015.
India is called a predominantly agrarian economy since generations and the livelihood of more
than 50 per cent of Indians population is agriculture. India ranks second in the world in farm
output. Agriculture and allied sectors like forestry and fisheries accounts for 13.7% of the GDP
(Gross Domestic Product) in 2013 and about 50% of the total workforce (CIA Factbook: India").
Food and food products are biggest consumption category in India, with spending on food
accounting for 21 percent of India’s GDP and with the market size of $181 billion.
Food processing involves any type of value addition to agricultural or horticultural produce and
also includes processes such as grading, sorting and packaging which enhance shelf life of food
products. Food processing sector is indispensable for the overall development of India’s
economy as it provides a vital linkage and synergy between the agriculture and industry. The
motive behind diversification and commercialization of farming in India is that leads to
increased income for the farmers, employment generation and markets for exporting agricultural
produce. The proportionate expenditure of households on food items has considerably changed
after the breakthrough of processed food market in India which has shifted from staples to
processed food products. Along with that liberalization, privatization and globalization of the
post WTO regime have created new opportunities for growth of Indian food processing industry.
Any positive change in food processing industry will also contribute towards nation’s food
security.
2
Realizing this importance, the Central Government has accorded high priority for this sector and
toward it end it has undertaken several policy measures and initiatives. It has offered a number of
fiscal reliefs and incentives as well as approved a large number of joint ventures; foreign
collaborations, industrial licenses and 100% export oriented units (EOU) proposals in different
food processing areas. Some of the important steps in this direction are:- (i) Most of the
processed food items have been exempted from the purview of licensing under the Industries
(Development & Regulation) Act, 1951; (ii) Food processing industries are included in the list of
priority sector for bank lending in order to ensure easy availability of credit to them; (iii)
Automatic approval for foreign equity up to 100% is available for most of the processed food
items, excepting alcohol and beer and those reserved for small scale sector (subject to certain
conditions); (iv) In budget 2007-08, excise duty has been waived on all kinds of food mixes
including instant mixes, Soya Bari (food supplements) and ready to eat packaged goods as well
as on biscuits; etc.
In the process of reaping advantages of establishing food processed industries for achieving
increased employment and livelihood opportunities in rural areas it would be necessary to adopt
a comprehensive long term approach towards the development of various food processing
activities. Such planning exercise should be aimed firstly, to examine the overall situation and
pattern of existing industrial enterprises and then attempt should be made to identify most niche
based product groups of enterprises which possess certain location specific advantages in its
sustainable development. This would not only provide a strong base and alternative option for
creation of additional employment opportunities and avenues of income for rural households
owning very small size of cultivated land and landless laborers within the rural areas itself but it
would help in reduction in the rate of rural-urban migration of population.
Considering the importance of agro-processing industries in the development perspectives of
overall rural development in general and realizing the expected role of expanding this sector for
achieving increasing employment opportunities and income level and thus to overcome the
emerging challenges of unemployment and poverty in rural areas of the State the present study
attempted to examine the following issues:
The emerging structure, pattern and growth of different product groups of food
processing industries across the district, regional and state level in Karnataka.
3
Size of capital investment and its sources of financing, output and generation of value
added, production technologies, employment pattern, turnover and the contribution of
different product line of industries in all groups of industries.
The linkages established by industries for obtaining raw materials from the farmers and
other suppliers, procurement pattern, accessibility situation, prevailing practices of price
determination of different raw materials being supplied from different sources and the
arrangements of marketing the final products.
The development prospects and problems in operation of enterprises and required
measures to be initiated to strengthen the expansion of different groups of industries.
Evaluation of policy measures and incentives introduced by the Central and State
Governments and other institutions and agencies such as Commission, APEDA etc for
agro-processing industry and their usefulness in terms of the expansion and growth of
different product groups of agro- based industries.
Contribution and impact of expansion of food processing industries in increasing income
and employment of farm households.
The present study focuses on documentation of success and failure stories of a food processing
industries.
During the past few years, industrial sickness has assumed unmanageable proportions in India. It
is continuously on the rise and in this include of more and more small-scale industrial units
during the past few years. Sickness among small and medium industrial units is reported to be on
the increase.
Actually, this phenomenon is an accepted feature of a free enterprise economy. In advanced
economies the survival of the fittest and weeding out of inefficient industrial units is a natural
phenomenon. Whether it is a developing or developed economy, if disappearance of non-
competitive units is sporadically, it does not pose problem. But when it becomes endemic and
epidemic, the problem arises. Especially in a country like India, the problem of industrial
sickness cannot be left to market forces because of their adverse repercussions on the economy
as a whole.
Due to sickness in the industrial sector, scarce and valuable capital goes waste. Sickness
aggravates our existing problems of unemployment and underemployment. The closure of so
4
many units involves a heavy cost to the economy in terms of increasing unemployment, wastage
of scarce capital and raw-materials, entrepreneurial abilities, skilled labour and reduction in the
volume of production or national income of the country.
1.2 Structure and composition of the food processing industries in India
Structure and Composition of Indian Food Processing Industry the food processing or food
manufacturing industry includes companies that transform livestock and agricultural products
into products used for intermediate or final consumption. Processed foods are products in which
a raw commodity is transformed into a processed product regardless of whether the amount of
processing is minor, such as canned fruit, or more complex, such as snack foods (U.S. Census
Bureau 2004, Industry Outlook for Processed Foods). Through food processing value is added to
the agricultural or horticultural produce by using various techniques including grading, sorting,
packaging etc., which enhance the shelf life of food products. A strong and dynamic food
processing sector plays significant role in the overall economic setup of a country. The sector
provides vital linkages and synergies between industry and agriculture and has been identified as
a sector having immediate potential for growth of the economy. Processing also helps in
generating rural employment, additionally processed fruits and vegetables are a source of
earning foreign exchange e (Murthy and Dasaraju, 2011).
The extent of processing in India can be categorized as follows:
Primary Processing; cleaning, grading, powdering and refining of agricultural produce,
e.g., grinding wheat into flour.
Secondary Processing: basic value addition, e.g., tomato -puree, ground coffee,
processing of meat products.
Tertiary Processing: high value addition products like jams, sauces, biscuits and other
bakery products ready for consumption.
Food processing is a large sector in India that covers activities such as agriculture, horticulture,
plantation, animal husbandry and fisheries. It also includes other industries that use agricultural
inputs for manufacturing of edible products. The Ministry of Food Processing, Government of
India divides the industry into six segments: Dairy, fruits & vegetable processing; Grain
processing; Meat & poultry processing, Fisheries; and Consumer foods including packaged
foods, beverages and packaged drinking water.
5
In this section, an attempt is made to analyze the types in the food industrial growth of India in
order to assess the process of industrialization in the country. The main source of data for the
analysis of this section is Annual Survey of Industries. Table 1.1 shows the types and
composition of manufacturing industries in India during 2011-12
Table 1.1. Structure and composition of the food processing industries in India 2011-12
Food Processing Industries
No. of
Factories
No. of
Persons
Engaged
Fixed Capital
in (Rs.Crore)
Value of
Output
(Rs.Crore)
Grain Mill & Starch products
19010
(66.88)
366500
(38.39)
17553
(21.83)
158213
(28.35)
Vegetable & Animal oils and fats
3394
(11.94)
121232
(12.69)
18409
(22.89)
197325
(35.36)
Beverages
1997
(7.02)
147482
(15.44)
22420
(27.88)
53301
(9.55)
Dairy Products
1653
(5.81)
149775
(15.68)
10695
(13.30)
87015
(15.59)
Fruits and Vegetables products
1078
(3.79)
62448
(6.54)
5060
(6.29)
10309
(1.84)
Prepared Animal Feeds
755
(2.65)
44462
(4.65)
2741
(3.40)
26602
(4.76)
Fish, crustaceans etc. 390
(1.37)
42081
(4.40)
2150
(2.67)
15228
(2.72)
Meat Processing & Preserving
146
(0.51)
20621
(2.16)
1362
(1.69)
10008
(1.79)
Total
28423
(100.00)
954601
(100.00)
80390
(100.00)
558001
(100.00) Source : Ministry of Food Processing Industries Govt. of India.
It is observed from the table 1.1 Grain Mill & Starch products industries accounted 66.88 per
cent, 38.39 percent of persons employed in 2011 12 ,fixed capital of the industry is 21.83 percent
and value of output was 28.35 percent. Followed by Vegetable and Animal oils and fats,
Beverages, Dairy Products, Fruits and Vegetables products, Prepared Animal Feeds, Fish,
crustaceans and Meat Processing and Preserving. The shares of meat processing and preserving
very low in these respects compared with other food processing industries. For meat processing
and preserving, its shares in that of India were 0.51 percent in terms of number of units, 1.79
percent in terms of fixed capital, 216 percent in terms of employment and 1.69 percent in net
value added in 20011-12.From the above analysis of the food industrial scenario of India it is
concluded that Meat Processing & Preserving is industrially backward and the process of
industrialization is very low. The industrial backwardness of the India is manifested itself in the
6
form of remarkably low contribution of manufacturing sector to country income in comparison
with other sectors like Grain Mill ,fruits, and dairy sectors.
1.3 Review of Literature
The literature review is a text content written by authors, eminent personalities, scientists who
consider the significant points pertinent to current information and facts including substantive
findings, as well as theoretical and methodological assistance to a specific subject. Review of
related literature help to know about the studies which have already done in the related field.
Review of Literature are the secondary source of data collection collected from different national
and international Journals, Magazines, books, websites, government reports, NSSO survey and
unpublished Ph D. Theses and M. Phil dissertations, Annual Reports of government
organizations like (APEDA), (MFPI), (MPEDA), bulletins, food journals, management books
and some collected from other sources.
Katkar’s study (1996) on ‘Status and Prospects for Food Processing Industry in India’. It is based
on secondary data. It observes that although the food processing industry has attained the annual
growth rate of 5.7% in 1992-93, yet a vast majority of agricultural produce is consumed to 1.6%.
We are processing less than one percent of the total fruits and vegetables produced against 80%
in South Africa, 65% in USA, 70% in Brazil and 83% in Malaysia. Indian processed fruits and
vegetables exported constitute one eighth of those exported fresh. The lower level of Food
Industry Development Index (FIDI-415) indicates dismal position of food processing industry
development status mainly due to lower of various indices in comparison to developed countries.
The higher production level especially of fruits and vegetables (3rd largest producer of the
world) and higher Food Industry Potentiality Index (FIPI- 475.2) provides vital opportunity for
the potential investors in this industry. The changing socio-economic scenario, technological
development and environmental factors especially liberalization, globalization and export thrust
of agricultural sector is a need to develop the required infrastructural facilities and improved
technology in marketing, communication, processing, transportation and post harvest handling of
agricultural produce. The government should pay due attention to make this a viable industrial
7
sector and to earn more foreign exchange by capturing international market and to meet the
growing domestic demand for processed food items.
Rai et. al.(1996) study on status and potential of agro processing industries in Haryana. In the
present investigation an attempt has been made to examine the potential and problems of agro-
processing industries in Haryana State. The study revealed that there is tremendous scope for
agro-processing industries in the state where supply of raw material, processing and marketing
are not serious problems. Infrastructural facilities in the state are reasonably well developed. The
future potential of developing agro-processing industries lies in wheat milling and rice milling,
feed and concentrate industry, edible oil and cotton processing, sugarcane milling, fruit and
vegetable processing and all the bye-product processing of the entire commodity system. The
rising trend of converting the potential of main agro processing products as well as by-product
need to be accelerated in future years. It would provide proper farm-industry linkage which will
help development of agriculture by creating backward and forward linkage, generating more
employment, adding value to farmers produce and increasing their net income.
The study was undertaken by Srinivas et. al. (1996) on ‘Economics of Agro-processing: A Case
of Cashew-nut processing in Andhra Pradesh’ bring out the economics of processing of cashew-
nut at different stages. All the eleven registered processing units at Vetapalem were selected for
the study. Data were collected with the help of well structured and pre tested schedules.
Processing of cashew-nut has been discussed with considering different stages such as drying of
nuts, roasting of nuts, shelling of nuts, drying of shelled kernels, peeling, grading, conditioning,
packing etc. cost incurred at various stages of processing mainly confined to labourer and
material cost. It is concluded that processing is an important operation to get the final
consumable product from cashew nut. The major costs are processing of cashew-nut, packing of
graded kernels, shelling of roasted nuts and peeling of shelled kernels.
Bhat (1998) conducted study on the problems and prospectus of food processing industry in
western Karnataka. He has studied 339 food processing units with the objectives of the nature
and extent of food processing industry, opportunities available to these industries, and future
prospectus of processing industries. The study found that majority of food processing units are
8
located in urban areas and their investment range is up to Rs. 1000000 or less. They have
difficulties in production and marketing. Many units are totally unaware of the concession,
subsidies, special incentives provided by the government. Power problem is a serious hurdle to
these industries. The researcher has suggested that these industries should use proper selection
system. There is need of market research activity to study the changing market environment.
Traditional technology for production should be upgraded to maintain quality. There is need of
centralized food testing laboratory.
Bhagavat (2001) has completed a study of 100 bakery units in Kolhapur district. This study has
taken an overview of bakery industry and examines the various production problems of bakery
industry. He has found that most of the units are spread over the rural and semi urban area. Only
1/5th of the bakery owners have completed training for bakery or food craft. There is a system of
dual licensing policy. Only 50% of units have separate sections for carrying out different
production process. In most of the units machineries still to being used. He has suggested that the
legacy of traditionalistic is all pervasive throughout the bakery industry. Individual bakery units
may embrace a suitable total quality management method. Individual units should work out a
feasible and result-oriented financial and marketing management. There should be proper
machinery maintenance of machineries of the industries. There should be a system of scientific
management through maintenance of up-to-date records, inventory control, raw material
management, packaging etc.
The study was undertaken by Dixit (2005) titled as ‘Role of Financial Institutions in India’s
Industrial Development- Special reference to Small Scale Industries’. The main purpose of the
study is to analyze the role of financial institutions in promoting and rendering financial
assistance to small scale sector. The present study is mainly based on the secondary data
published in annual reports. The period of the study is 1990-91 to 2000-2001. The objectives of
the present study are, to review the government’s policies, to evaluate the performance of
financial institutions in the development of small scale sector, to examine the role of financial
institutions in the rehabilitation of sick SSI units. In order to streamline and strengthen the flow
of credit to SSIs from the various financial institutions the present researcher suggest that, there
is a need for creating awareness among the SSIs regarding the schemes and assistance of
9
financial institutions. The role of financial institutions in the revival of sick SSI units is
unsatisfactory. The amount distributed for the rehabilitation of sick units has been always less
than one percent. The amount distributed for revival of sick units is should be increase up to 5 to
10 percent of the total assistance. There is an imbalance in state wise distribution of financial
assistance. Karnataka, Maharashtra, Gujarat, Tamil Nadu and Kerala together accounted for the
largest share nearly 50 percent and remaining accounted for only 50 percent of total assistance.
The RBI guidelines said that, 60 percent of the SSI credit should go to tiny sector. But the
percentage share of tiny sector in the total credit to SSI sector was only 20 percent. The largest
share of the assistance is 50 to 65 percent to new units of the total amount sanctioned. The
existing units have achieved little share. There is a need to increase the amount sanctioned/
disbursed to the existing units in order to rebuild their competitive strength.
Ramakrishnappa. V. and Jagannatha Rao. R. (2006) opined that the dairy enterprise is an
established sector in rural India and is playing a vital role in generating additional income and
employment. In Karnataka, dairy development is a positive and significant as state contributes
towards milk production, marketing, and processing of various dairy products in India. The
microfinance programmes extended in dairy sector are helpful to take up dairy as main
occupation among economically backward communities in the state. In this paper, an attempt
was made to analyze the different aspects of microfinance scheme (New Swarnima)
implemented by KBCDC. The implementation of New Swarnima Scheme, one of the most
popular microfinance schemes in the state to promote dairy among backward communities, was
assessed at micro level by selecting 18 beneficiaries belonging to landless labourers, marginal
and small farmers in Kolar district in Karnataka state. The study found that the microfinance
scheme has positive impact on income and employment generation, and has improved the natural
resource management options.
Madan Lal (2007) in his article ‘Food Processing Industry poised for growth’ expressed that the
Food Processing Industry in India is one of the largest in terms of production, consumption,
export and growth prospects. The important sub-sectors of food processing industries are: Fruit
and Vegetable Processing, Fish Processing, Milk Processing, Meat and Poultry Processing,
packaged/Convenience Foods, Alcoholic Beverages and Soft drinks and Grain Processing, etc.
10
As a result of several policy initiatives undertaken since liberalization in July 1991, the industry
has witnessed fast growth in most of the segments. As per a recent study on the food processing
sector, the turnover of the total food market is approximately Rs.250, 000 crores (US$69.4
billion) out of which value-added food products comprise Rs.80, 000 crores (US$22.2 billion).
Primary food processing is a major industry with lakhs of rice-mills/hullers, flour mills, pulse
mills and oil-seed mills. There are several thousands of bakeries, traditional food units and
fruit/vegetable/ spices processing units in unorganized sector. In the organized sector, there are
over 820 flour mills, 418 fish processing units, 5,198 fruit/vegetable processing units, 171 meat
processing units.
Markman (2007) in a research findings pointed out that, entrepreneurs are those who possess the
knowledge, skills and abilities to be a strategic leader for their ventures, in which their actions
influence the ventures’ success. The entrepreneurs formulate strategy, recognize opportunities,
and transmute these opportunities into business success. Ibro, Fulton and Lowenberg-DeBoer
(2006) in their survey of 400 entrepreneurs revealed that food processing vendors with more
experience were more likely to be success-full.
Dhanabalan. M. (2009) opined that dairy has an important role in improving the overall
economic conditions of rural India. To maintain the ecological balance, there is need for
sustainable and balanced development of agriculture and allied sectors. From our first plan
onwards, planners have given priority to allied sector for the economic development of the rural
sector. Dairy farming is described as a small industry which provides gainful employment
opportunities. It comprises of about six per cent of the national income.
Naqvi (2011) in his research report enlisted the main key factors of success of SMEs of
Bahawalpur. The important determinants of success among others include improved customer
service, technical know-how of the business and the past experience of the manager and the like.
Zampe-takis and Kanelakis (2010) in their study emphasized that prior knowledge of the people
and level of education are significant predictors of opportunity entrepreneurship. It was revealed
that prior knowledge of markets, prior knowledge of ways to serve markets, and prior knowledge
of customer problems are the pre-requisite of the successful entrepreneur.
11
Misra (2012) in the article “Striving and thriving in the Era of Globalization” depicted nine
reasons as the causes for sickness in industry in India. He showed lack of demand 71.6%,
shortage of working capital 48.0%, non-availability of raw material 15.1%, power shortage
21.4%, labour problems 7.4%, marketing problems 44.5%, equipment problems 10.6%, and
management problems 5.5%.
Sujatha, Y.; Reddy, P. Sunilkumar and Rao, Dr. K. Prahlada; (2012) found that lack of finance:
bad production policies, wrong demand & forecasting, selection of in appropriate product mix,
absence of product planning, wrong market research methods and bad sales promotions,
ineffective corporate management, inappropriate personnel management, personnel problem,
marketing constraints, production constraints, and finance limitations are the major causes of
sickness to small scale industries. Besides, they provided various remedial steps to stop such
sickness.
S Saravanan and Sundaram.( 2013) states that India is experiencing shortage of capital, there
came a proposal to allow (FDI) into India, especially after 1991 economic reforms. In this paper
an analysis was made on FDI in India’s food processing sector and the results showed a positive
trend though much has be done in the policy level as well as practical aspects
1.4 Objectives of the study
Keeping the above aspects in consideration this study is carried out with the following
objectives.
4. To bring in socioeconomic aspects of food processing units,
5. To document success stories of food processing units,
6. To emphasize on the problems, prospects, challenges and concerns in the food processing
industries.
12
1.5 Methodology and Data Source
The study has been based on both primary and secondary sources of information data.
The primary data is collected among a sample of different product groups of registered industries
of Karnataka state. It means that a detailed list of industries/ units has been prepared and number
of these units/industries has been decided on the basis of total number of industries in the
selected clusters. Selection of Belgavi, Dharwad, UttarKannada, DakishnaKannda, Udupi,
Hassan, Bangalore Rural, Bangalore Urban, Tumakur and Ramanagar districts has been done for
detailed analysis. Again 50 success units have been selected. Apart from Primary data,
Secondary and published documented data has been collected from District Industrial Centre,
Federation of Karnataka Chamber of Commerce and Industry and analyzed accordingly. To
make the study more meaningful and policy oriented available literature and studies have been
consulted and reviewed. It was also thought proper to obtain information on the perceptions of
entrepreneurs, officials of financial institutions and government agencies/departments including
industry through structured questionnaires with a view to suggest the suitable policy measures.
We have also interacted with the government departments for an in depth understandings their
observations may be considered for evolving the strategies of the revival of sick industrial units.
Primary data have been collected through interview schedule. Apart from this field observations
and open ended discussion have also been equally considered and incorporated in the present
study. The filled in questionnaires were thoroughly scrutinized and processed in computer for
drawing out inferences, patterns, trends and conclusions. The primary data in tabular form has
been discussed, interpreted and analyzed while critical appreciation of pertinent literature has
been ensured in the report. The policy recommendations are based on analysis of research
findings and critical review of pertinent literature.
1.6 Overview
For easy grasp and understanding of the readers, the study report is divided in to six chapters.
The first chapter covers introduction to food processing industries and review of literature on the
studies carried out on food processing industries. It also outlines the main objectives, sampling
design of the study. The next chapter is based on secondary data which outlines status of food
processing industries in India and Karnataka. The third chapter discusses socio economic
13
characteristics of food processing industries, which includes age, caste, education and
employment in the food processing industries. The fourth chapter discusses the reasons for
running/ success of food - processing industries in the state. Chapter fifth based on the
information collected from entrepreneurs summarizes the constraints/ problems, prospectus and
challenges food processing industries in Karnataka. The seven and the last chapter summarizes
the main findings of the report and provides policy suggestions for improvement of food
processing industries.
14
CHAPTER 2
FOOD PROCESSING INDUSTRY IN INDIA AND KARNATAKA
2.1 Introduction
Agriculture continues to be one of the cornerstones of the Indian economy. Though the share of
agriculture in GDP has been declining over the years, its role remains critical as nearly 60-70%
of the Indians are directly or indirectly dependent on agriculture. It is estimated that if the
country has to maintain a GDP growth rate of over 8%, the agricultural sector has to grow at the
rate of at least 4%. Government has initiated massive programmes for investment infusion in
agriculture sector during 11th five year Plan through Rashtriya Krishi Vikas Yojana (RKVY)
and National Horticulture Mission. This has lead to increase in production and productivity. In
order to ensure proper return to stakeholders it is essential that suitable post harvest management
be adopted to add value and reduce wastage. In this background food processing industry in
India is increasingly seen as a potential source for driving rural economy as it brings synergy
between industry and agriculture.
Food Processing is all about converting raw food and other farm produce into edible, usable and
palatable form. It is the conversion of clean, harvested, butchered or slaughtered components into
marketable food products with value addition so as to improve their quality, reliability and shelf
life. Further Food processing is about preservation of food while providing greater potential for
export.
Food Processing began in the prehistoric age with drying of fruits in nature or animals storing
for coming winter feed need. There are crude food processing types such as over hear or fire,
fermenting, sun drying and preserving with salt and later humans learnt steaming for cooking.
Food preservation has become a key part for warriors ‘during wars and sailors’ as set travels
across continents during last two thousand years. Industrial revolution in 17th century began to
change food processing as Nicolas Appert developed a vacuum bottling 35 process to supply
food to troops in the French army. Canned tins were developed by Peter Durand in 1810. These
food processing technologies were largely developed to serve military needs in many countries.
As population rose in the early 20th century and travel became regularly for many business
people with added change in food habits led to newer development of food processing techniques
15
such as spray drying, juice concentrates, freezing, artificial sweeteners, colorants and
preservatives. Instant packaged foods such as biscuits, chocolates, bakery items, variety of fruit
drinks attracted higher percentage of students. As refrigerators along with microwave ovens
penetrated global markets dried instant soups, reconstituted fruit juices and self cooking meals
began to be developed. Thus it is clear that the former food processing techniques were limited,
and involved mere salting, smoking, curing, pickling, drying and curdling, with economic
progress, the development of food manufacturing has led to new technologies emerging in areas
such as milling, preservation, packaging, labeling and transportation, etc., all of which help in
enhancing product quality and food safety as well as bringing down costs.
2.2 Classification of Food processing industry:
The food processing industry is broadly classified into two groups:
1. Primary Food Industry: This consists of rice mills, flour mills, oil-seed crushing and sugar
manufacture, spice grinding etc., and
2. Processed Food Industry: This comprises units engaged in the manufacture of value added
products like preserved fruits and vegetables, meat, fish and dairy products, breakfast food
mixes, frozen foods, spice blends, extractives, snack foods, etc
Food processing industry possesses significant backward linkages with the agricultural sector
and presents tremendous potential for forward linkages with the rest of the economy.
Table 2.1 Classification of Organized Food Processing Industries in India
No Categories Product range
1. Fruits and vegetables Fruit pulp, juices, canned fruits, jam, pickles, squashes,
dehydrated and freeze dried vegetables, canned mushrooms.
2. Milk and milk products Sweetened condensed milk, milk powder, ghee, ice-cream,
malted milk food, butter, cheese, milk based baby food items,
dairy milk whitener, chilled and processed milk.
3. Meat and poultry Poultry products like eggs, egg powder, canned meat, pork
and other meat products, chilled and frozen sheep and goat
meat, buffalo meat.
4. Fisheries Canned and frozen forms of fish, individual quick frozen
16
products, minced fish products like fish sausage, cakes,
cutlets, pastes, surimi, texturised products and dry fish.
5. Beer and alcoholic drinks Draught beer, canned beer, country liquor, Indian made
foreign liquor (IMFL) that includes wines, whisky, rum,
vodka, gin and brandy.
6. Processing of grains Flour of rice, wheat, millets and oil seeds.
7. Packed food/ consumer
food
Pasta, bread, cakes, pastries, rusks, buns, rolls, noodles, corn
flakes, rice flakes, ready to eat, ready to cook products,
biscuits, mineral and packed water, cocoa products.
8. Packed drinks All types of soft drinks, non-alcoholic, Sweetened/flavored
beverages like cola, Orange, lemon etc.
Source: Ministry of Food Processing, Government of India, 2008-2009
Food Processing Units develop perishable and semi-perishable agricultural commodities into
storable items especially needed during the off-season. Food processing increases seasonal
availability of many foods across the globe with better nutrition and food security. Food
processing is a new development of ready-to-consumer products and saves time for cooking and
could be cheaper.
Food Processing Units can be defined in three-broad categories as:
1. Perishable foods: Those that deteriorate readily such as fruits and vegetables, unless special
methods of preservation are employed.
2. Semi-Perishable foods: Those that contain natural inhibitors of spoilage such as root
vegetables or those that have received some type of mild treatment which creates greater
tolerance to the environmental conditions and abuses during distribution and handling such as
pickled vegetables.
3. Non-perishable foods (shelf-stable): Those are non-perishable at room temperature such as
cereal grains, sugar, nuts. Some have been made shelf stable by suitable means, canning, or
processed to reduce their moisture content, dried fruits such as raisins. Food preservation in the
broad sense refers to all the measures taken against any kind of spoilage in food.
17
Indian food processing sector is one of the largest sectors in the country in terms of production,
consumption and export and Gross Domestic Product growth. It ranks 5th in size in the country. .
It covers many activities like agriculture, horticulture, animal husbandry etc. Food Processing
Industry has developed in India as a result of the diversification and commercialization of Indian
agriculture. This sector acquires high priority as it reduces post-harvest losses, brings value
addition in agriculture, creates high export potential, and gives greater bargaining power to the
farmers for their products and improves the living standards of people. The sector accounts for
around 14 percent of total industrial output and around 6 percent of the GDP. Its contribution to
the GDP of the country is expected to go up to 12% by 2020. The food processing market in the
country is growing at the rate of 7-8% per annum and is expected to grow at 10% in the coming
years. The size of the industry is estimated at US $ 70 billion. Presently, the sector employs
about 13 million people directly and about 35 million people indirectly. This industry is highly
labour intensive, and currently offers employment to 2.5 lakh people per annum. 75 food
processing sector in India had grown by 8% between 2006 and 2010 which is better than the
growth of the manufacturing sector but Agriculture has been growing only at 2-3%. According to
Piruz Khambatta, Chairman and Managing Director, Rasna at Food and Beverage conference in
2012 raised a Key statement, “Food processing can do to rural India what IT has done to urban
India.” Food processing would bring prosperity and growth for rural India. Business experts and
industrialists have to realize growth of food processing sector as 31% of spending done by
Indians is on food. Food processing would be crucial for an agricultural country like India.
Expansion of food processing is imminent with huge scientific, educational and management
talent along with vibrant and developed finance market. This sector will be a boon for SMEs and
lead to food security as supply varies because of inaccuracies in predictability of rains. Stable
food processing level would control food prices.
2.3 Need for Food Processing Industry:
In May 2011, the Food and Agriculture Organization (FAO) released a short study on ‘Global
Food losses and Food Waste’. FAO said that ‘in developing countries 40% of losses occur at
post-harvest and processing levels while in industrialized countries more than 40% of losses
happen at retail and consumer levels.’ Until now, India’s ministry of food processing industry,
ministry of commerce (Department of Industrial Policy and Promotion), Ministry of Agriculture
18
and our National Agricultural Research system have asserted that it is encouraging investment in
the retail ‘back end’ (collection, cold-storage, logistics, warehousing, modern markets, etc),
which will substantially reduce post-harvest food waste/loss, help farmers earn more and help
control food inflation.
According to DIPP paper Indian farmers realize only one-third of the total price paid by the final
consumer, as against two-third by farmers in nations with a higher share of organized retail.
The other reference is from the Leisa India journal. Leisa is the short form for low external input
and sustainable agriculture and the journal discusses the technical and social options open to
farmers who seek to improve productivity and income in an ecologically sound way. According
to vision 2015 document the objective is the doubling of India’s share in global food trade, from
1.5% to 3% by 2015. “An integrated strategy for promotion of agribusiness vision, strategy and
action plan for the food processing sector has also been approved by the government ,” the
minister of state for Food Processing Industry, Harish Rawat, told the Rajya Sabha in a written
reply in March 2011. The key word here is ‘agribusiness’ and both the central government and
the ministry of food processing industries appear to consider it a matter of pride-in the face of
continuing malnutrition in 17 major states- that the average annual growth rate of the food
processing sector has doubled in six years: from 7% in 2004 to over 14% in 2010.
The persistence of food waste argument and its proffered technological answer takes on a new
importance when the central government’s ‘mega food parks’ plan is brought into the scene. The
government has approved 50 such mega food parks for assistance across the country. This is the
second factor vital for an understanding of the emerging new industrial food model in India.
These mega food parks are designed to cluster food processing units – each will have around 30-
35 such units with a collective investment of Rs.250 crore ‘that would eventually lead to annual
turnover of about Rs.450-500 crores and creation of direct and indirect employment to the extent
of about 30,000 according to the MOFPI’s Mega Food Parks Scheme (MFPS) guidelines.
Critical to the success and profitability of this complex enterprise is the expectation that India
will have a large marketable surplus in crops-the India Brand Equity Foundation (IBEF),
described as a public-private partnership between the Ministry of Commerce, Government of
India and the Confederation of Indian Industry (CII) has estimated that ‘by 2012, India’s
marketable surplus will increase to 870 million tons per year, 40% of which is likely to be
accounted for by perishable foods, creating opportunities for the development of storage
19
infrastructure’. The expectation of a marketable surplus of this scale, and the concomitant
expectation that it will be readily available for commercial use and merchant profit is the third
factor vital for an understanding of the emerging new industrial food model in India.
Despite the large production of food in India, food inflation and food security issues are major
concerns for policy makers in the country as they affect the basic need for Indian citizens-to have
sufficient, healthy and affordable food.
A nation-wise study on quantitative assessment of harvest and post harvest losses for 46
agricultural produces in 106 randomly selected districts was carried out by CIPHET as follows:
Table: .2.2 Percentage of Losses Estimated for Major Produces
Crop Cumulative wastage (%)
Cereals 3.9-6
Pulses 4.3-6.1
Oil seeds 6
Fruits & Vegetables 5.8-18
Milk 0.8
Fisheries 2.6
Meat 2.3
Poultry 3.7
Source: A study of CIPHET, 2010
Table 2.2 reveals that most of the wastage is happening in fruits and vegetables (5.8-18%) ,
pulses (4.3-6.1%) and cereals(3.9-6%). With adequate processing facilities, much of this waste
can be reduced thus increasing remuneration to the producer as well as ensuring greater supply to
the consumer.
2.4 Different Stages of Processing of Food are:
Inputs > Production > Procurement & Storage > Primary Processing > Secondary Processing >
Retailing.
The table 2.3 highlights the processing details of different sectors of food processing industry.
20
Table: 2.3 Processing details of different Sectors of Food Processing Industry
Product Primary
Processing
Secondary
Processing
Tertiary
Processing
Fruits and
Vegetables
Cleaning, Sorting,
Grading, Cutting
Slices, Pulps, Flakes,
Paste preserved &
flavored
Ketchups, jam, juice,
pickles,
Preserves, candies, chips
Grains and
Seeds
Sorting & Grading
Flour, Broken Rice, Puff
Malt and Milling
Biscuits, noodles, flakes,
Cakes, namkeen
Oilseeds
Sorting & Grading
Oil Cakes
Sunflower, groundnut,
mustard, soya, olive oil etc
Beverages
Sorting, bleaching &
Grading
Leaf, Dust and Powder
Tea bags, flavored coffee,
soft drinks, alcoholic
beverages.
Milk
Grading&
Refrigerating
Cottage cheese, cream,
simmered & dried milk
Processed milk, spreadable
fats (butter and cheese),
and yoghurt.
Meat and
Poultry
Sorting and
Refrigerating
Cut, Fried, Frozen and
Chilled
Ready-to-eat meals
Marine Products
Chilling and
Freezing
Cut, Fried, Frozen and
Chilled
Ready-to-eat meals
21
2.5 Contribution of Food processing industries to GDP
The food processing sector has been growing faster than the agriculture sector which is a positive
development the details of this in table 2.4, broadly reveals the contribution of food processing
industries to GDP. The performance of this sector has improved significantly in the recent years.
Manufacturing sector was generally growing at a higher rate than FPI till 2009-10. Performance
of FPI improved substantially in 2011-12 registering a record growth of 21.6 per cent. In the year
2012-13, the growth of food processing sector decelerated along with slow growth both in
agriculture and manufacturing sectors though the growth of the sector was higher than both
agriculture and manufacturing sector
Table 2.4 Contribution to GDP of Food Processing Industry at 2004-05 prices (Rs crore)
Sl.
no
Particulars 2008-09 2009-10 2010-11 2011-12 2012-13
GDP at factor cost
,of which
41,5867
6
45,16,07
1
49,18,533 52,47,530 54,82,111
1 GDP-Agriculture* 5,88757 5,92,110 6,47,305 6,82,016 6,90,646
2 GDP: Manufacturing 6,56,302 7,30,435 7,95,152 8,54,098 8,63,876
3 GDP-FPI 60,378 58,752 67,508 82,063 84,522
Growth (%) AAGR$
4 GDP at factor cost 6.7 8.6 8.9 6.7 4.5 7.1
5 GDP-Agriculture* -0.1 0.6 9.3 5.4 1.3 3.3
6 GDP: Manufacturing 4.3 11.3 8.9 7.4 1.1 6.6
7 GDP-FPI 5.3 -2.7 14.9 21.6 3.0 8.4
Share of FPI in
GDP (%)
Average
8 GDP FPI as a share
of GDP in
Agriculture*
10.3 9.9 10.4 12.0 12.2 11.0
9 GDP FPI as a share
of GDP in
Manufacturing
9.2 8.0 8.5 9.6 9.8 9.0
22
2.6 Persons Employed in Registered Food Processing Units
Food Processing Industry is one of the major employment intensive segments constituting 12.13
per cent of employment generated in all Registered Factory sector in 2011-12. According to the
latest Annual Survey of Industries (ASI) for 2011-12, the total number of persons engaged in
registered food processing sector is 17.77 lakh. During the last 5 years ending 2011-12,
employment in registered food processing sector has been increasing at an Annual Average
growth rate of 3.79 per cent. Unregistered food processing sector supports employment to 47.9
lakh workers as per the NSSO 67th Round, 2010-11
2.7 Exports of Food Processing related items
All agricultural produce when exported undergo an element of processing. Hence all edible
agricultural commodities exported are included in the export data. The value of exports in the
sector has been showing an increasing trend with Average Annual Growth Rate (AAGR) of
20.53 per cent for five years ending 2013-14.
The value of processed food exports during 2013-14 (Provisional results) was of the order of US
$ 37.79 Billion (total exports US $ 312 Billion) constituting 12.1 per cent of India’s total exports.
The trends in exports of processed food & related commodities, is given below(fig 2.1):
Fig 2.1 Export of processed Food & Related Commodities (US $ Million)
Source: DGCI&S, Kolkata; P: Provisional Results
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
14,787
20,427
31,762
36,212 37,798
2009-10 2010-11 2011-12 2012-13 2013-14
Source: National Accounts Statisitcs-2014; * Excludes Forestry & Logging; $: Five Years Average Annual Growth Rate GDP:
Sum of GVA (value of output less the value of input used up in the process of production) of all
Resident producer units of the economy during the reference period.
23
2.7 Exports of major processed food & related commodities from food processing sector
The exports of major processed food & related commodities from Food processing sector, is
given Table 2.5.It shows that 13.3 percent of marine products,12.90 percent share of basmati rice
and 11.9 percent of meat and meat products are the major there export exports from India to
other countries.
Table 2.5 Exports of Major Processed Food & Related Commodities from Food processing
sector
Sl.no Items of 2012-13 2013-14 (P) 2013-14 (P)
(US $ Million) (%) Growth (%) Share
Total exports 3,00401 3,12,621 4.07 -
Exports-FPI, of which 36,212 37,798 4.38 12.1
1 Marine products 3,464.08 5,014.89 44.77 13.3
2 Rice – Basmati 3,564.04 4,866.33 36.54 12.9
3 Meat& meat products 3,291.98 4,481.35 36.13 11.9
4 Rice–other than Basmati 2,651.97 2,875.67 8.44 7.6
5 Cashew 746.97 842.39 12.77 2.2
6 Fresh vegetables 605.23 842.30 39.17 2.2
7 Fresh fruits 607.79 726.76 19.57 1.9
Source: DGCI&S, Kolkata; P: Provisional Results
2.8 Investment in Food Processing Sector
Foreign Direct Investment (FDI) is permissible for all the processed food products up to 100 per
cent on automatic route except for items reserved for Micro and Small Enterprises (MSEs)
subject to applicable laws/ regulations, securities and other conditioners For manufacture of
items reserved for Micro Small Medium enterprises, FDI is permissible under automatic route up
to 24 per cent of the capital. If foreign investment is more than 24 per cent, Industrial License
under Industries (Development & Regulation), Act 1951 is required a huge increase in FDI in
India is observed over the year (table 2.6). During 2007-08 in FDI in FPS was Rs.279 crore and
some has gone up to Rs 25,107 crores in the year 2013-14.
24
Table: 2.6 Foreign Direct Investment in Food processing sector in the India.
Source: Department of Industrial Policy and Promotion (DIPP) Govt of India.
In terms of fixed capital, FP sector is growing at an annual average growth rate of 20.35 per cent
during five years ending 2011-12. As per the latest, ASI 2011-12, the Fixed Capital in FP
Industry stood at Rs. 1,45,038 crore.
2.10 Food Processing Industry in Karnataka
There were approximately 1550 food products and beverage manufacturing units registered in
Karnataka state till end of 2011-12. Total investment in these units was estimated at Rs. 23,405
lakh and employment generated from these units was in excess of 15000.Various Agri-export
zones have been earmarked in the state for products like gherkin, rose onion, flowers and vanilla.
To be precise, eight zones have been earmarked for gherkin, three for rose onion, six for flowers
and six for vanilla. Ministry of Food Processing Industries (MOFPI) has sanctioned one Mega
Food Park project under its Mega Food Parks Scheme in Karnataka. The project is located in
Tumakur and the inauguration of the park has been done on 24th September, 2014 by Hon’ble
Prime Minister. Apart from MOFPI’s Mega Food Parks Scheme, the state Govt. also has a Food
Parks Scheme under which food parks are being established in 6 districts including Bangalore
(Rural), Tumakur, Shivamoga, Davangere, Bijapur and Belgaum. The state government is also
planning to set up a spice park at Byadagi in Haveri district.MoFPI has so far sanctioned five
cold chain projects in the state under its “Scheme for Cold Chain, Value Addition and
Preservation Infrastructure”. Under the scheme for Setting up of New/ Modernization of Existing
S. No. Year (April- March) FDI (Rs. Crore) FDI (US $ Million)
1 2007-08 279.01 70.17
2 2008-09 455.59 102.71
3 2009-10 1,314.23 278.89
4 2010-11 858.03 188.67
5 2011-12 826.16 170.21
6 2012-13 2193.65 401.46
7 2013-14 25,106.78 3,982.88
25
Abattoirs of Ministry of Food Processing Industries (MoFPI), Karnataka has been sanctioned 3
Abattoirs Projects so far - City Municipal Council Chitradurga, Mysore City Corporation and
Hospet City Municipal Council by the Approval Committee, commercial operations is expected
to commence shortly. Production of major crops in karanataka
The State of Karnataka is blessed with rich bio-diversity, ten agro climatic zones and nine
distinct soil types,
*is the only State where most varieties of fruits are available
*is the leader in floriculture
*contributes 70% of the India’s Coffee
*is the largest producer of spices, aromatic and medicinal crops
*is the second largest milk producing state in the country.
Due to factors like access to fruits and vegetables, industry friendly policies and the manpower
availability, the state is emerging as a Food and Beverage destination. To effectively utilize the
existing resources, minimize the post harvest losses and further value addition, Food Parks are
established across the State. Government of Karnataka has established Food Karnataka Limited,
a Special Purpose Vehicle, as the Nodal Agency for development of infrastructure to establish
Food Processing Industries in the State.
2.10.1 Economy of Karnataka
Karnataka is one of the high economic growth states in India with the expected GSDP (Gross
State Domestic Product) growth of 8.2% in the fiscal year 2010–2011. The total expected GSDP
of Karnataka in 2010–2011was about Rs.2719.56 billion. Per capita GSDP during 2008–2009
was US$1034.9. Karnataka recorded the highest growth rates in terms of GDP and per capita
GDP in the last decade compared to other states. In 2008–09, the tertiary sector contributed the
most to the GSDP amounting to US$31.6 billion (55 percent), followed by the secondary sector,
contributing US$17 billion (29 per cent), and the primary sector‘s contribution amounting to
US$9.5 billion (16 per cent). With an overall GDP growth of 56.2% and a per capita GDP
growth of 43.9% in the last decade, Karnataka surpassed all other states in India, pushing
Karnataka's per capita income in Indian Rupee terms to sixth place. Karnataka received
US$2,026.4 million worth of Foreign Direct Investment for fiscal year 2008–09 placing it at
26
third spot among states in India. At the end of 2004, the unemployment rate of Karnataka was
4.57% compared to a national rate of 5.99%. For the fiscal year 2006–07 the inflation rate of
Karnataka was 4.4% which was less than the national average.
2.10.2 The Vision of Karnataka Industrial Policy 2014-19
The vision of Karnataka Industrial Policy 2014-19 is to build a prosperous Karnataka through
inclusive, sustainable and balanced industrial development thereby creating large employment
opportunities.
2.10.3 The objectives of the Policy
(i) To maintain an industrial growth rate of 12 % per annum.
(ii) To enhance the contribution of manufacturing sector to the State
GDP from present level of 16.87% to 20% by end of policy period
(iii) To attract investment of ` Rs 5.00 lakh crore
(iv) To create employment opportunities for 15 lakh persons
(v) To create an environment to enhance ease of doing business in the State.
Government desires to achieve these objectives through the following policy measures:
(i) Creation of quality infrastructure with comprehensive facilities.
(ii) Human resource development through capacity building and skill up gradation.
(iii) Simplification of facilitation mechanism and procedural reforms.
(iv)Thrust for Hyderabad Karnataka area.
(v) Special thrust for encouraging SC/ST entrepreneurs, Women entrepreneurs, Non Resident
Kannadigas (NRKs) etc.
(vi) Encouragement for export promotion.
(vii) Support for R&D and Digital Direct Manufacturing
(viii) Encouragement for Anchor Industries
(ix) Attractive incentives and concessions
27
Table 2.7 size of food processing industries, capital investment, employees, value of output & net
Value added by manufacture 2012-13(value in lakh) in Karnataka
Characteristics 1 2 3
4
5 6
Number of Factories (In No.) 99 41 775 92 118 675
Factories in Operation (In No.) 71 38 647 82
99 581
Fixed Capital
20578 22866 156782 68186 186248 1001419
Physical Working Capital 16533
28395 153588 35711 61104 1033490
Working Capital
7410 9366 159946 11753 103727 452892
Invested Capital
37112 51260 310370 103897 247352 2034908
Gross Value of Addition to
Fixed Capital 6357 8155 33437 25008 69049 284056
Rent Paid for Fixed Assets 220
345 839 1190 1383 8617
Outstanding Loan
14351 15454 125164 36335 161991 745266
Interest Paid
2665 3791 18696 2550 14826 113105
Rent Received for Fixed Assets 21
44 153 340 725 1249
Interest Received
83 932 939 643 805 3854
Gross Value of Plant &
Machinary
10875
8472 52960 52310 144385 1042389
Value of Product and By-
Product
54560
159269 744276 590193 454436 2310073
Total Output
64285 162663 1126216 651368 473247 2676048
Fuels Consumed
1413 3667 19480 12589 12764 111783
Materials Consumed
41874 139338 663977 504083 247361 1681431
Total Inputs
55149 149373 1060846 605389 308317 2200470
Gross Value Added
9136 13290 65370 45979 164930 475578
Depreciation
1674 1985 12444 5870 11471 74090
Net Value Added
7462 11305 52926 40108 153459 401488
Net Fixed Capital Formation 3954
5898 20075 18145 24185 97445
Gross Fixed Capital Formation 5628
7884 32519 24015 35657 171535
Addition in stock of
880 11322 40263 12283 5280 151287
(a) Materials,Fuels etc.
237 375 33055 2512 467 ‐10690
(b) Semi Finished Goods
‐234 0 ‐148 65 921 ‐3094
(c) Finished Goods
877 10947 7356 9706 3892 165071
Gross Capital Formation
6509 19205 72782 36298 40937 322822
Income
4665 8101 34358 37338 138527 284518
Profit
‐498 1251 22989 8888 111710 130597
Source: compiled from various reports of annual survey of industries.
28
1: Processing and preserving of fruit and vegetables
2: Processing and preserving of fish, crustaceans and mollusks and products thereof
3: Manufacture of grain mill products, starches and starch product
4: Manufacture of dairy products
5: Manufacture of beverages
6: Manufacture of other food products
2.11. Production of Major crops in Karnataka.
2.11.1 Agriculture
Total production of food grains (cereals and pulses) in the state during 2012-13 was being
estimated at 125 lakh (metric tons)
Table 2.8: Production of Agri-crops (in lakh MT)
Crop/Group 2012-13 2011-12
Cereals 111.64 108.22
Pulses 13.36 10.61
Total Food grains 125 118.83
2.11.2 Commercial crops
Commercial crops such as oilseeds, cotton, sugarcane and tobacco roughly are prominent cash
crops grown in the state.
Table 2.9: Production of these Commercial crops (in lakh MT)
Crop/Group 2012-13
2011-12
Oilseeds 9.50
9.24
Cotton 10.91
12.79
Sugarcane 303.20
400.33
Tobacco 0.94
1.06
Source –Karnataka state agricultural department
2.11.3 Horticulture
During 2012-13, production of horticulture crops stood at 172.13 lakh metric tones. The state is
the largest producer of coffee and cocoa in the country, 2nd largest producer of flowers and
grapes, 3rd largest in plantation crops production, 4th largest in spices production and 5th largest
in fruits production.
29
Fruits: According to the advance estimates by National Horticulture Board for 2013-14, fruit
production in the state is estimated at 66.52 lakh MT.
Table 2.10: Production of Major Fruits in Karnataka.
Crop/Group Production (in lakh M.T.)
2012-13 2013-14
Banana 25.29 26.76
Mango 17.95 17.56
Papaya 4.60 4.76
Citrus 3.99 3.79
Grapes 3.20 3.02
Source -National Horticulture Board for 2013-14
2.11.4 Dairy and Livestock
Karnataka has livestock population of 3.29 crore and poultry population of 4.24 crore as per the
18th Livestock Census, 2007. Major livestock products are milk, eggs and meat. (table 5.7)
Table 2.11 production statistics for major livestock products
Product
2011-12 2012-13
Milk 5448 3242
Egg 347 221
Meat 139553 94858
Inland fish 199053 85640
Marine fish 347383 160028
Source- 18th Livestock Censu
30
CHAPTER 3
SOCIO - ECONOMIC CHARACTERISTICS OF ENTREPRENEUR S AND
FOOD INDUSTRIES
In continuation and the support of the analysis on expansion pattern and different indicators of
the performance shown in regard to different product group of food industries in the chapter the
study further attempts to present the background characteristics in matters of expansion pattern
and its origin, ownership, factors motivated in establishment and pattern and background of
entrepreneurs of different product groups of registered food-industries. This part of analysis is
based on primary data obtained among a sample of 50 food processing industries.
The existing food industries in the state may be broadly categorized according to their type and
size structure. The first category of them is as village industries which are owned and run at
household level mainly in rural areas. They form very little capital investment and a high level of
manual labour, mainly family labour and are operating without registration with any authority.
The second category of food processing units are operating as small scale industries with
medium level of capital investment and semi automation and are registered with Small Scale
Industries Act.
3.1. Background of the Food Processing Industries
The expansion pattern of food processing industries based on the analysis of a sample of 50 units
covered in the present study reveals that 32 per cent all categories of units have been started after
2006, 26 per cent during 1992-2000, 22 per cent before 1991 and 20 per cent during 2001-05.
31
Table 3.1 Distribution of Units by Year of Establishment
Sl.
no
Product group Year of Establishment
Before
1991
1992-2000 2001-2005 2006 &
After
Total
1. Manufacture of fruits &
vegetables
4
(26.66)
5
(33.33)
2
(13.33)
4
(26.66)
15
(100.00)
2. Manufacture of dairy
products
- 1
(20.00)
1
(20.00)
3
(60.00)
5
(100.00)
3. Manufacture of grain mill
products
6
(33.33)
3
(16.66)
4
(22.22)
5
(27.77)
18
(100.00)
4. Marine products -
- 1
(50.00)
1
(50.00)
2
(100.00)
5. Manufacture of Packed
food/ consumer foods
1
(10.00)
4
(40.00)
2
(20.00)
3
(30.00)
10
(100.00)
6 All groups 11
(22.00)
13
(26.00)
10
(20.00)
16
(32.00)
50
(100.00)
Note : (figures in parentheses indicates the percentages of total)
3.2 Ownership of Industries
The detail sample of ownership of food processing industries is presented in Table 3.2. Looking
into the legal ownership situation of industries it depicted that the industries are registered under
single ownership is remarkably higher among all product industries in each of the product groups
of food- Industries. However, fairly large proportion of industries registered under the Shops and
Establishment Act are also observed operating as the family enterprises. In all, the proportion of
industries operating under a signal ownership is highest at over 80 per cent, followed by
partnership (12.00 %) and 8 per cent of industries are family enterprises.
32
Table 3.2 Ownership Status of the Sample of Food Processing Industries
Sl.
no
Product Group Single
ownership
Family
enterprise
Partnership Total
1. Manufacture of fruits &
vegetables
12
(80.00)
1
(6.66)
2
(13.33)
15
(100.00)
2. Manufacture of dairy
products
5
(100.00)
- - 5
(100.00)
3. Manufacture of grain mill
products
14
(77.77)
2
(11.11)
2
(11.11)
18
(100.00)
4. Marine products 2
(100.00)
- - 2
(100.00)
5. Manufacture of Packed
food/ consumer foods
7
(70.00)
1
(10.00)
2
(20.00)
10
(100.00)
All groups 40
(80.00)
4
(8.00)
6
(12.00)
50
(100.00)
Note : (figures in parentheses indicates the percentages of total)
3.3. Age Profile of the Entrepreneurs
In the proceeding paragraphs the age structure of sample entrepreneurs in the food-processing
sector. For this purpose, sample entrepreneurs are categorized into three groups namely- young
(below 30 years), middle-aged (31 years to 45 years) and old (above 46 years). The Table 3.3
gives their distribution on the basis of their age. The Table reveals that most of the entrepreneurs
in the food-processing sector are middle aged. Their share is 68.00 per cent of the total food
processing entrepreneurs. This is followed by young entrepreneurs who constitute 28.00 percent
of the total entrepreneurs and 4.00 per cent of old aged entrepreneurs. The table thus reveals the
dominance of middle aged entrepreneurs in the sector.
Industry wise analysis reveals that proportion of entrepreneurs in the middle-age group is higher
in industries such as marine products (100.00 per cent), Manufacture of Packed food/ consumer
foods (70.00 per cent), grain mills and fruit and vegetable manufacturers (66.66 per cent) and
60.00 percent of dairy products.
33
Table 3.3Age Characteristics of the entrepreneurs
Sl.
no
Product group Age (years)
Below
30
31-45 46+
Above
Total
1. Manufacture of fruits &
vegetables
4
(26.66)
10
(66.66)
1
(6.66)
15
(100.00)
2. Manufacture of dairy
products
2
(40.00)
3
(60.00)
- 5
(100.00)
3. Manufacture of grain mill
products
5
(27.77)
12
(66.66)
1
(5.55)
18
(100.00)
4. Marine products - 2
(100.00)
- 2
(100.00)
5. Manufacture of packed
food/ consumer foods
3
(30.00)
7
(70.00)
10
(100.00)
All groups 14
(28.00)
34
(68.00)
2
(4.00)
50
(100.00)
Note : (figures in parentheses indicates the percentages of total)
3.4 Educational Background of Entrepreneurs
Assessing into the educational background of the entrepreneurs it reflects that the different
groups of food processing industries especially small scale industries do not require any more
skill and professional education. Expansion of this sector can be successfully carried out by the
individual having even primary education or the secondary education. It is well reflected from
analysis presented in Table 3.4 that nearly 26 per cent entrepreneurs in food processing
industries are processing below primary level of education. However, a majority of 38 per cent
of entrepreneurs have secondary level education while only 2 per cent entrepreneurs have
technical/ professional level of education.
34
Table 3.4 Educational level of Sample Entrepreneurs
Sl.
No Product group
Education level
Illiterate Primary Secondary Graduation Technical/
Professional
education
Total
1. Manufacture of
fruits & vegetables
- 4
(26.66)
5
(33.33)
5
(33.33)
1
(6.66)
15(100.00)
2. Manufacture of
dairy
products
- 1
(20.00)
1
(20.00)
3
(60.00)
- 5
(100.00)
3. Manufacture of
grain mill
products
- 5
(27.77)
9
(50.00)
3
(16.66)
1
(5.55)
18
(100.00)
4. Marine products - - - 2
(100.00)
- 2
(100.00)
5. Manufacture of
Packed food/
consumer foods
2
(20.00)
1
(10.00)
4
(40.00)
3
(30.00)
- 10
(100.00)
All groups 2
(4.00)
11
(22.00)
19
(38.00)
16
(32.00)
2
(4.00)
50
(100.00)
Note : (figures in parentheses indicates the percentages of total)
3.5 Caste background of Entrepreneurs
Among the different product groups of food-industries, the dominance of General category
entrepreneurs may be seen in Table 3.5 (50 %) within this group 66 per cent are in
manufacturing of fruits and vegetables. In terms of the proportionate share of different castes of
in various small scale registered industries 28.00 per cent in backward classes, 14.00 per cent SC
and 8.00 per cent of ST.
Industry - wise analysis shows that 66.66 per cent of entrepreneurs are in fruits and vegetable
manufacturers, 60.00 per cent in Manufacture of dairy products, 50.00 per cent in marine
products, 44.44 per cent in Manufacture of grain mill and 30.00 percent in Manufacture of
Packed food/ consumer foods.
35
Table 3.5 Distribution of Entrepreneurs by their Caste
Sl.
No
Product group
Caste of Entrepreneur
General SC ST Backward
castes
Total
1. Manufacture of
fruits & vegetables
10
(66.66)
1
(6.66)
- 4
(26.66)
15
(100.00)
2. Manufacture of
dairy
products
3
(60.00)
- 1
(20.00)
1
(20.00)
5
(100.00)
3. Manufacture of
grain mill
products
8
(44.44)
4
(22.22)
2
(11.11)
4
(22.22)
18
(100.00)
4. Marine products
1
(50.00)
- - 1
(50.00)
2
(100.00)
5. Manufacture of
Packed food/
consumer foods
3
(30.00)
2
(20.00)
1
(10.00)
4
(40.00)
10
(100.00)
All groups
25
(50.00)
7
(14.00))
4
(8.00)
14
(28.00)
50
(100.00)
Note : (figures in parentheses indicates the percentages of total)
3.6 Land Assets of Agro-Processing Entrepreneurs
Economic profile of food-processing entrepreneurs is analyzed in terms of area of land assets
they own. For this purpose, entrepreneurs are categorized into three groups-entrepreneurs with
land holding between zero and 2.5 acres (below one hectare), between 2.5 acres and 5 acres, and
entrepreneurs with land holding above 5 acres. Distribution of entrepreneurs by size of their land
holding is given in table 3.6.
It is seen from Table 3.6 that 66.66 per cent of the total entrepreneurs have land holding between
zero and two and half acres (below one hectare). The proportions of entrepreneurs having land
holding between zero and 2.5 acres varies from 40 per cent Manufacture of dairy Products to 72
per cent in Manufacture of grain mill products. The proportion of entrepreneurs having land
holding between 2.5 and 5 acres is 22 per cent for the food processing industries as a whole and
36
it varies from 11.00 percent in Manufacture of grain mill products industries to 50 per cent in
marine product industries and 12 per cent have land holding of more than five acres. The table,
thus, reveals that majority of entrepreneurs have small size of land holding and this indicate that
economic profile of majority of food-processing entrepreneurs as a whole is not so sound.
Table 3.6: Distribution of Entrepreneurs by Land Holding
Sl.
No
.
Product group
Land holding
Up to 2.5
Acres
2.5-5 Above 5 Total
1. Manufacture of
fruits & vegetables
10
(66.66)
3
(20.00)
2
(13.33)
15
(100.00)
2. Manufacture of
dairy
products
2
(40.00)
2
(40.00)
1
(20.00)
5
(100.00)
3. Manufacture of
grain mill
products
13
(72.22)
2
(11.11)
3
(16.66)
18
(100.00)
4. Marine products
1
(50.00)
1
(50.00)
- 2
(100.00)
5. Manufacture of
Packed food/
consumer foods
7
(70.00)
3
(30.00)
- 10
(100.00)
All groups
33
(66.66)
11
(22.00)
6
(12.00)
50
(100.00)
Note : (figures in parentheses indicates the percentages of total)
3.7 Employment in Agro-Processing Industries
Food-processing industries are generally regarded as labour intensive and are expected to employ
more laborers and create more maydays of employment.
In order to analyze the employment level in the sample food processing industrial units,they are
categorized into four groups namely the units employing 2 to 10 persons; 11 to 20 persons, 21 to
30 persons and above 31 persons. The distribution of units by the size of employment is brought
out in table 3.7.
37
Table 3.7 shows that 46 per cent of the total food-processing units have been able to generate
employment for 11 -20 persons each. Within this 100 per cent of the marine product units, 60 per
cent dairy units, 46.66 per cent manufacture of fruits & vegetables, 44.44 per cent in
manufacture of grain mills and 30.00 percent in Manufacture of Packed food/ consumer foods. It
is also observed that industrial units providing employment to 2 1-30 persons are and account for
24 per cent of the total food -processing industrial units, 18 per cent in 2-10 persons and finally
12.00 percent of total food processing units generating employment for 31 above persons.
Table 3.7 Distribution of Units by Size of Employment
Sl.
No
Product group
Number of persons employed
2-10 11-20 2 1-30 31 above Total
1.
Manufacture of
fruits & vegetables
3
(20.00)
7
(46.66)
3
(20.00)
2
(13.33
15
(100.00)
2. Manufacture of
dairy
products
1
(20.00)
3
(60.00)
1
(100.00)
- 5
(100.00)
3. Manufacture of
grain mill
products
4
(22.22)
8
(44.44)
3
(16.66)
3
(16.66)
18
(100.00)
4. Marine products
- 2
(100.00)
- - 2
(100.00)
5. Manufacture of
Packed food/
consumer foods
1
(10.00)
3
(30.00)
5
(50.00)
1
(10.00)
10
(100.00)
All groups
9
(18.00)
23
(46.00)
12
(24.00)
6
(12.00)
50
(100.00)
Note : (figures in parentheses indicates the percentages of total)
38
CHAPTER 4
DOCUMENTATION OF SUCCESS STORIES OF FOOD PROCESSING UNITS IN
KARNATAKA
4.1 Reasons for Success of Food Processing Units
In this chapter, an attempt is made to analyze the reasons for success of food processing units
face. Broadly the reasons relates to quality management, good customer service, Reasonable
prices, skilled labour and replacement for damaged products on the extent of interesting the
success is given in Table4.1
4.1.1 Quality Management
Table 4.1 unfolds that quality of produce is an important factor for operation or success of units.
The proportion of this factor in food-processing units varies from 100 per cent in manufacturing
of marine products to 80.00 of manufacture of dairy products. However this factor is favor in
Manufacture of Packed food/ consumer foods and marine products (100.00 %), Manufacture of
fruits & vegetables (86.66 %), Manufacture of grain mill products (83.33 %), and in Manufacture
of dairy products (80.00 %). Food quality is an important food manufacturing requirement,
because food consumers are susceptible to any form of contamination that may occur during the
manufacturing process. Many consumers also rely on manufacturing and processing standards,
particularly to know what ingredients are present, due to dietary, nutritional requirements or
medical conditions.
4.1.2 Good customer service
Customer service proves to be one of the most important keys to the success of the food industry
78.00 percent of food-processing units have reported that good customer service is an another
important factor for success of food processing units. This factor is favor in Manufacture of
Packed food/ consumer foods and marine products (90.00 %), Manufacture of fruits &
vegetables and Manufacture of dairy products (80.00 %) and Manufacture of grain mill products
(77.77 %).
39
Table4.1Reasons/Factors for success of food processing industries
Sl.
No
Product Group
Reasons
Total
Quality
management
Good
customer
service
Reasonabl
e price
Skilled
labour
Replacement
for damaged
products
1 Manufacture of fruits
& vegetables
13
(86.66)
12
(80.00)
9
(60.00)
7
(46.66)
2
(13.33)
15
2 Manufacture of dairy
products
4
(80.00)
4
(80.00
3
(60.00)
3
(36.00)
- 5
3 Manufacture of grain
mill products
15
(83.33)
14
(77.77)
12
(66.66)
9
(50.00)
12
(66.66)
18
4 Marine products 2
(100.00)
- - 2
(100.00)
- 2
5 Manufacture of Packed
food/ consumer foods
10
(100.00)
9
(90.00)
8
(80.00)
5
(50.00)
3
(30.00)
10
Total 44
(88.00)
39
(78.00)
32
(64.00)
26
(52.00)
17
(34.00)
50
Note : (figures in parentheses indicates the percentages of total)
4.1.3 Reasonable Price
Table 4.1 reveals that reasonable price of a product is another factor for the success in food
processing units. The table shows that 64.00 per cent of the total food-processing units have
reported reasonable price of as another factor to continue the business in food processing. This is
a major reason for industries like Manufacture of Packed food/ consumer foods (80.00%),
Manufacture of grain mill products (66.66 %), Manufacture of dairy products and Manufacture
of fruits & vegetables (60.00 %).
4.1.4 Replacement for Damaged Products
Table 4.1 shows that replacement for damaged products is another reason for operation or
success of units. The table shows that 34.00 per cent of the total food-processing units have
reported replacement of damaged product is another factor to continue the business in food
processing. This is a major reason for industries like Manufacture of grain mill products (66.66
%), Manufacture of Packed food/ consumer foods (34.00 percent) and manufacture of fruits &
vegetables (13.00%).
40
Table 4.2 Average annual turnover of food processing industries (Rs crores)
Sl.
No
Product Group
Average annual turnover of the industries (Rs crores)
2009-10 2010-11 2011-12 2012-13 2013-14
1 Manufacture of fruits &
vegetables
0.90 1.56 3.8 5.20 6.30
2 Manufacture of dairy
products
3.00 5.20 7.25 10.00 12.20
3 Manufacture of grain
mill products
4.40 5.50 6.26 7.50 8.00
4 Marine products 6.50 8.22 10.00 12.50. 14.25
5 Manufacture of Packed
food/ consumer foods
0.90 0.97 1.30 1.50 1.65
4.3 Percent change in average annual income of food processing industries in Karnataka
It is observed from Table 4.3 percent change in annual income of food processing industries in
the state of Karnataka during 2009-10 to 2013-14. It is noticed from the table that although
manufacture of fruits and vegetables had highest income under processing (0.90 crores in 2009-
10 and 6.30 crores in 2013-14) followed by Manufacture of dairy products (306.66 percent),
Marine products(119.23 percent ) Manufacture of Packed food/ consumer foods(83.33 percent)
and Manufacture of grain mill products (81.11 percent).
41
Table 4.3 percent change in average annual income of food processing industries in
Karnataka
Sl.
No
Product Group
Rs (in crores)
2009-10 2013-14 Percent change
1 Manufacture of fruits &
vegetables
0.90 6.30 600
2 Manufacture of dairy
products
3.00 12.20 306.66
3 Manufacture of grain mill
products
4.40 8.00 81.81
4 Marine products 6.50 14.25 119.23
5 Manufacture of Packed
food/ consumer foods
0.90 1.65 83.33
4.4 Case Studies
Beside the above, the following case studies reveal the reasons for success of the food processing
units in Karnataka
42
Case 1: Success story of Mahesh Cashew Industries
The credit of establishing the first cashew processing industry at Nellikatte in Moodubelle in 1999
under the name of Mahesh Cashew Industries belongs to Belle Nagaraj Kamath. Earlier, Nagaraj
Kamath’s family had a grocery shop and gradually began to deal with raw cashew nuts. Their area of
operation was right up to Bhatkal and Moodubidre-Kinnigoli acquiring raw nuts from the shops and
supplying to B.R. Kamath and Sons Cashew Factory at Karkala, considered to be the largest in
Karnataka.
Having been in the procurement of the raw cashew nuts business for quite a long time, Belle Nagaraj
Kamath, who had studied up to PUC in St. Lawrence PU College at Moodubelle and was a
commerce graduate (B.Com) from the MGM College, Udupi, decided to start his own processing
cashew factory under the Khadi Gramodyog Scheme with government subsidy.
Belle Nagaraj Kamath says that, as he himself had come up in life with great economic difficulties
and practically rose from nothing, he had a dream of providing employment to the poorer and
marginalised section of the village population by starting some kind of gainful enterprise. He could
fulfil this dream by establishing the Mahesh Cashew Industries and later another cashew factory
named Ashwini Cashew Industries at Arasikatte at Bhantakal. In both these cashew factories,
Nagaraj could provided employment to around 250 persons, most of whom are women.
According to Nagaraj, the cashew nut processing operations are carried out throughout the year. The
raw nuts required for the processing are procured locally and from the states of Kerala, Karnataka,
Goa and Maharashtra. Nagaraj also imports raw nuts from other countries such as Indonesia,
Vietnam, South Africa and Tanzania. On an average, the Mahesh Cashew Industries process around
40 bags of raw cashews nuts weighing about 3,500 Kgs. The processed and graded cashew kernels
are then filled in 65 tins of 10 Kgs each per day.
Nagaraj pointed out that the cashew nut processing operation has certain important stages. At the
first stage, the raw cashew nuts are sun dried for two days and then stored. In the second stage, the
required amount of nuts per day is steam-boiled. In the third stage, the women who work in the
cutting operation take the nuts from the boiler room to the cutting section and separate the kernels
from the nut-shells.
43
The cutting is done machines and the women’s have to be quite careful during this operation.
They take necessary precaution by applying castor oil to their hands and some of them even
use gloves. After the process of cutting the kernels are separated from the nut-shells and the
nut- shells are used as raw material for cashew nut oil mills.
In the fourth stage, the kernels are roasted in hot-chambers which look like huge cupboards
through electric power with heat up to 80 degree Celsius. The fifth is the pealing stage in
which the kernel is separated from the thin husk. Some of the women who are unable to
spend an entire day in the factory can carry fixed amount of roasted cashew nuts for pealing
and return on the next day and take home another fresh lot.
The sixth stage is the grading stage during which the cashew kernel is sorted out according
to its quality. According to Nagaraj, as per the quality, the cashew kernel can be graded into
35 varieties. In the final stage, the cashew kernels are packed in tins according to their
qualities indicated by embossed code letters and numbers indicating the quality of nuts
contained in the tin. They are then sealed and labeled. Two tins containing the same quality
of cashew nuts are then packed in a carton and kept ready for sending to the market by the
dealer. The processed cashew from the Mahesh Cashew Industries is marketed in Bangalore,
Mumbai and Delhi. There is also provision for retail selling of smaller packets of cashew
nuts in the factory.
Belle Nagaraj Kamath says that there are around 150 cashew processing units in the Udupi
District alone. These cashew factories are a boon for the villagers, especially for girls and
women as they are given preference in the cashew processing units. They are given all
monetary and other facilities. Transport is provided for picking up and dropping them at
their residences. The workers are provided cheaper food through canteen facility. They are
given monetary incentives such as Provident Fund (PF), Dearness Allowance (DA) and
Bonus. They are also eligible for Employees State Insurance Scheme (ESIS) in case of
illness. The payment to the workers is done on weekly basis.
Belle Nagaraj Kamath a fine entrepreneur who has a human touch. Soft spoken and
unassuming, Nagaraj had been active in cooperative movement. He was once the president
of the Belle Cooperative Agricultural Bank (CA Bank). He was also member of the belle
Grama Panchayat. As the president of the Old Students Association of the Church Aided
Higher Primary School, Nagaraj had worked for the betterment of the school.
In 1995, Nagaraj married Namitha Kamath and has two lovely sons-Nikhil (13 years) and
44
Gram Panchayat. As the President of the Old Students Association of the Church Aided
Higher Primary School, Nagaraj had worked for the betterment of the school.
In 1995, Nagaraj married Namitha Kamath and has two lovely sons-Nikhil (13 years) and
Vishwas (9 years) both studying in the St. Mary’s English medium School in Udupi.
Bellevision, while congratulating Belle Nagaraj Kamath for his entrepreneurship
appreciates his attempt to provide employment to the poorer and marginalized section of the
villagers and wishes him success in his future endeavors.
45
Case 2: Jain Agro Food Products
M/s Jain Agro Food Products, from Assam is the first applicant for acquiring the
technology and has succeeded in setting up the first industry in India at Maddur,
Karnataka in 2000. It was the beginning of a new era in disseminating a natural
drink in consumer packs. At the beginning, Mr. Ajay Jain, the hard working and
ambitious young dynamic personality and the proprietor of the unit faced a lot of
production and distribution problems. “Initially our brand, ‘Cocojal’ was neither
an accepted product by any super markets in the country nor I could find any agent
for distribution. I was willing to give the distribution on credit basis in order to
keep the factory running to avoid rusting deterioration of the machineries. I could
not even utilize 10 per cent capacity of the factory which has not only resulted in
default of the repayment schedule of the huge loan taken from the Federal Bank,”
Mr. Jain said. Finally after 5 years of untiring and incessant efforts with strong
confidence, Mr. Jain could establish not only a strong consumer base for his
product but also to push his product among the major buyers and hence acquired
strong buoyancy in both domestic and international markets. “To-day, I am
distributing my brand to various pioneer consuming sectors like, Indian Railway,
Indian Army, besides, placing my product to leading Super Market Chains like
Nilgiris, Food World etc. My product is also available in the leading supermarkets
of Gulf.” Shri. Jain added. “The support from the Coconut Development Board in
the form of financial grant and the aggressive product promotions were really a
relief and greatly contributed for the accomplishment of my difficult task,” he
complemented.
Today packed and preserved tender coconut has niche market under different
brands. Thirteen entrepreneurs in the country spread over different States have
procured the technology from the Board and two more units have already
commenced commercial production. Apart from M/s. Jain Agro Food Products Pvt.
Ltd., in Karnataka, M/s. Shakthi Coconut Products, Tamil Nadu and Chaithanya
Food Products Pvt. Ltd., Kerala have already set up their units and entered in to
this beverage markets. M/s. Sakthi Coco Products and M/s. Chaithanya Food
Products Ltd have set up their units in 2002 availing financial assistance from
the Board under Technology Mission on Coconut for the adoption of
technology.
46
Case 3: Success story of Siddabasava Dhal Industries
M/s.Siddabasava dhal Industries, Kalburgi is a partnership concern, doing dhal industries business
since 2005 by taking the Dhal industries on Lease, the leased dhal unit is set up at Shed C-15, 1st
Industrial Area, Kapnoor, Kalaburgi
After being successful run the Leased dhal industry for 3 years, the partnership concern has been
allotted a industrial plot of 1 Acres at Plot No. 2 (P), KIADB Industrial Area, 2nd Phase, Kalaburgi
by Karnataka Industrial Area Development Board.
Siddabasava Dall Industry has decided to setup a New dhal Industry at the allotted plot by KIADB.
The cost of the project estimated at Rs.82.50 Lakh. The unit proposed to manufacture Dhal namely,
Toor Dall and Bengal Gram. The total capacity of the project is 2000 Metric tones per annum. The
Unit works for 8 hours shift for 250 days in a year.
This is a Partnership firm consist of experienced entrepreneurs, All the Four Partners of the firm is
already running a Leased Dhal Unit successfully for the Past 3 Years of so.
One of the senior partners Shri. Shivaputrappa Patil is having vast experience in the field of
Business, has ventured Puller earth business for 10 years in partnership with others partner under
and name and style “INDIAN EARTHS”. He has also ventured the business of Stone Quarry at
Talikoti, in Vijapura district Karnataka.
Other Two partners Sri. Chandrashekar Kobal and Sri. Gangadhar Kobai hails from Business family,
who are activity involved for past more than 10 years in a family owned partnership firm
“PANCHANCHRYA TRADING CO., Commission Agents in Foods Grains and pulses” and for past 3
years, they are administrating successfully present Leased Dhal Industries
With vast background experience in the field of business and successfully running the dhal units for
past 3 years. All the partners in the Firm as every much confidence and sincerely in their effort to
setup and run their own Dhal industries instead of a Leased out dhal unit.
The availability of raw materials is very good in Kalaburgi District and also in the neighboring
districts, Bidar, Bijapur, Belgaum, Raichur and Dharwad. Etc., Hence, the unit will not suffer from
shortage of Raw Materials Considering the Demand for pulses and good availability of raw material
as well as the entrepreneurs background would result in running up the unit successfully in the
factors also.
Infrastructural facilities
Location:The unit is proposed to come up in the Plot No 2(2), at K.I.A.D.B. Kapnoor Industrial Area,
2 Phase, Humanabad Road -Kalburgi measuring one acre. The area of the plot is sufficient for
handling the manufacturing and storing of materials and finished goods.
The unit has got location advantage like good Broad gauge Railway connection throughout India. In
addition State High Way Bidar-Srirangapattanam passes through city of Kalburgi, Mumbai-
Hyderabad Highway is also nearby to transport the manufactured dhal to the major cities like
Hyderabad, Mumbai and also to Northern parts of India.
47
Power: The Proprietor of this unit requires about 50 HP Power, Since it is a industrial area develop
Karnataka Industrial Board, there arc sufficient supply of Power to the unit.
Water: The Unit requires about 10 KL of water per day for the production of dhal and also for
human consumption etc., The water supply will be made available from the K.I.A.D.B. In additional
to that, a bore well has been drilled in the premises, the yield of water from bore well is 2”, which is
sufficient for the Dall Industry.
Effluents: The unit does not generate any harmful effluents which might require treatment before its
disposal.
Manufacturing Process: It is proposed to procure the modern dhal mill for manufacturing dhal from
pulses. The modern dhal mill can give yield of 78.82% of dhal at lesser time and cost of processing
compared to traditional processes. Besides, the possible increased yield, the process is capable
operation throughout the year and is completely independent at climatic conditions. The brief
description of the process is given below.
A conditioning technique of heat treatment and moisture adjustment of the cleaned size graded grains
in specially designed unit losses the husk while making it tri able and brittle and the kernel becomes
hard. This is a continuous operation replacing the sun drying steps and carried out indoors. The
loosened husk is removed by machine to suit the nature and milling characteristics of the pulses.
These machines work either on abrasion or attrition principal and given highest dehusking in a single
operation. Dehusked whole pulse obtained from the dehusked and cleaned whole grains are then split
under appropriate conditions using Nylon Splitter.
Plant and Machinery: The details of the Plant and Machinery required are estimated at Rs.32 Lakhs.
Raw Materials: Major raw materials required are Toor (whole) and Bengal gram. The unit requires
2000 metric tons of Toor per annum. The total cost of raw materials works out to 4.20 Crores for
100% capacity utilization for one year.
Packing Materials: The major packing materials required is gunny bags of 50 Kg. and 100 Kg
capacity for packing the processed dall and husk.
48
CHAPTER 5
PROBLEMS, PROSPECTS AND CHALLENGE OF FOOD PROCESSING UNITS
Food processing units as a whole have been facing various problems according to the category
and type of the unit. This chapter is divided into two sections. In section 1, an investigation is
made into the problems faced by food processing industries in general in India and in section 2,
problems faced by sample food processing industries in Karnataka in particular are analyzed in
detail.
5.1 Problems of Food Processing Industries in India
Problems faced by food-processing industries in general in India have been categorized into
problems relating to raw materials, problems relating to marketing, problems relating to
processing and financial and fiscal problems.
5.1.1 Problems Relating to Raw Materials
In India, one of the major problems in food-processing sector is the inadequate and suitability of
raw materials. Because of this there is under unitization of the existing capacity. Chasha has
observed the following constraints on the fruit and vegetable processing industries: (a) Non-
availability or paucity of processing varieties of fruits and vegetables, (b) short period of raw
material availability, (c) excessive cost of raw materials. Lakdawala and Sandesara's study also
observed that small agro-industries are under a handicap in obtaining raw materials of requisite
quality at reasonable price. According to Sekhon, Rangi and Kaur, the major problems faced by
rice mills in Punjab were poor quality of raw materials due to higher moisture content which
poses problem in producing good quality rice, and short duration availability of raw material
which poses problems such as higher prices due to competition among the buyers in the market.
The main problem Indian block rubber industry (Indian Technically Specified Rubber Industry)
faces is the non-availability of fish field coagulum as raw material.
5.1.2 Problems Relating to Marketing
Food -processing industries face many problems in marketing their products. Most of the
industries face severe competition from larger firms and they find it difficult to face competition
in view of the higher cost of production and non standardized quality of the produce and due to
49
shortage of funds, these industries are unable to use wide media publicity. The most important
constraint on marketing relates to market development. Value added products from intensive
Processing require larger expenditure on market development. Besides the cost of packaging of
processed products is very high in India due to high prices of packaging materials. Poor sales
promotion and advertising campaigns due to financial constraints, and competition from
multinational companies with aggressive marketing support and high price discounts are serious
marketing problems faced by agro-processing units in India.
5.1.3 Problems Relating to Processing
Constraints on processing relate to obsolete technology. In the absence of modern equipment and
advanced technology, processing units are unable to produce high quality products and
processing of by- products for exports. Iqbal, in his study on agro-based industry, has observed
that agro-industries are confronted with acute shortage of modem machines and technology.
Inadequate technology has been found to be a major constraint which hinders the progress of
fruit and vegetable processing industries.
5.1.4Financial and Fiscal Problems
Inadequate capital for modernization and rehabilitation and high rate of interest on working
capital from commercial banks are the major financial constraints of food-processing industries.
Shehrawat and Makhija have observed that difficulty in procuring fixed capital and as well as
working capital from different agencies and lack of working capital constituted the very serious
financial problems of agro processing industries." Nare has conducted a study of 100 small scale
bakery units in Belgavi district. He found in his study that 68 percent of the units have taken
bank and credit security loan. Only 11 percent of the units have obtained loan through
government schemes. The opinions of entrepreneur about capital are as (i) there is no any
special provision by the government for financial assistance and also low rate of interest from
nationalized banks (ii) there are no separate marketing departments in these units. Marketing
system is as a channel of distribution, i.e. 1) Direct sale, 2) sale through retailers and
wholesalers. 38 percent of the units sell their product at local or Taluk level only. 83 per cent of
the units do not prefer advertisement as the sales promotional activity. The sales of these units
are only in terms of cash basis. It is due to maintaining the smooth cash flow and requirement of
working capital. There is lack of technology up gradation. Pant and Meena have observed that
50
lack of credit as serious financial problem faced by agro-processing industries. Due to lack of
sufficient working capital, processing units face difficulty in keeping stock of adequate raw
materials and utilize cheap and inferior materials which affect the quality of their finished
products. High tax on processed / packaged product is the major fiscal problem faced by the
processing industries. In India, processed / packaged food products have been considered luxury
items, and therefore, they have been subjected to high tax incidence at various stages of
processing.
5.1.5 Other Problems
Besides the inadequate supply of credit and raw material, agro-processing industries face other
problems which include lack of storage facilities, inadequate supply of labour, and electricity
throughout the year.
5.2 Problems faced by Manufacturing Enterprises: Analysis based on Primary Level Data
Formulation of a proper-mix of policies for the healthy and rapid development of food-
processing units must take into consideration the various problems that inhibit their growth. With
this in view, the sample processing units were asked to identify their problems. In this section,
problems faced by sample of food-processing units in Karnataka in particular are analyzed in
detail. For this purpose, problems faced by sample food-processing units are categorized into
problems relating to raw materials, marketing problems and other problems.
5.2.1 Problems relating to Raw Material
There is a problem of non-availability of raw materials, high market price of raw materials, poor
quality raw materials and competition among units to buy raw materials distribution of units on
the basis of problems relating to raw materials, they face is given in table 5.1
Non -availability Raw Materials
Table 5.1 shows that non availability of raw materials is an important problem affecting the
operation of units. The proportion of this problem affecting food-processing units varies from
54.00 percent in manufacturing of grain mill products to 10.00 of manufacture of packed
food/consumer foods. However this problem is severe in industries like rice mills (77.77 %),
51
Manufacture of fruits & vegetables (66.66 %), Marine products (50.00 %), and in manufacture of
Packed food/ consumer foods (10%). This problem largely arises due to fluctuations in
agricultural production due to unfavorable climate, plant diseases and other natural calamities.
However, many other factors can be attributable to this problem in the case of individual
commodities. Global agro industries Kalburgi (Dhal mills), Sri Dharameshwari Rice Industries
(rice mill) and Ravi Raj Industries in Tumakur pointed out that the problem of inadequate
availability of paddy and dhal (raw material) for rice mills and dhal processors can be attributed
to inadequate production in the state.
Table 5.1: Constraints faced by the Food Processing Units in Procuring Raw Materials
Sl.
No
Product group
Type of constraints
Total Non-
availability of
raw materials
High market
Price of Raw
materials
Competitio
n
among
units
to buy
raw
materials
Poor quality
raw materials
1 Manufacture of fruits &
vegetables
10
(66.66)
3
(20.00)
4
(26.66)
2
(13.33)
15
2 Manufacture of dairy
products
1
(20.00)
2
(40.00)
1
(20.00)
1
(20.00)
5
3 Manufacture of grain mill
products
14
(77.77)
12
(66.66)
7
(38.88)
5
(27.77)
18
4 Marine products 1
(50.00)
1
(50.00)
- - 2
5 Manufacture of Packed
food/ consumer foods
1
(10.00)
4
(40.00)
3
(30.00)
2
(20.00)
10
Total 27
(54.00)
22
(44.00)
16
(30.00)
10
(20.00)
50
Note : (figures in parentheses indicates the percentages of total)
High Market Price of Raw materials
Table 5.1 reveals that high market price of raw materials is a major problem of food-processing
units face in obtaining raw materials. Table shows that 44.00 per cent of the total food-
processing industrial units have reported high market price of raw materials as a major difficulty
in obtaining raw materials. This is a major difficulty for industries like grain mills (66.66%),
52
marine products (50 %), dairy and consumer foods (40.00 % and 20 % in manufacturing of fruits
and vegetables).
Competition among Units to buy Raw Materials
30.00 per cent of processing industrial units reported competition among processing units to buy
raw materials as another problem relating to raw material. This problem implies that raw
material availability in the market is less than the demand for raw material. This problem is
severe in the case of rice and pulse mills where 38.88 per cent of grain mills face this problem.
30.00 per cent Manufacture of Packed food/ consumer foods are also found to be facing this
problem Kalburgi dhal mills and rice mills in Tumakur have pointed out that this problem pushes
up the price of raw material in the market and makes raw materials unavailable to small scale
grain mills.
Poor Quality of Raw Materials
20.00 per cent of food-processing units among five food-processing industries, grain mills,
reported that poor quality of agricultural raw materials adversely affected the quality of their
products and the profitability of operation. This problem is severe for grain mills (27.77 %).
Priyanka, Avinash Dhal industries have reported that due to various diseases affecting pulse
quality is poor which reduces the profitability of their operation. Tumkur rice mills have reported
that high moisture content in paddy, presence of paddy with black rice and paddy without rice
(empty paddy) in the raw material (paddy) reduce the quality of raw material (paddy), and
adversely affected the quality of their product and profitability.
5.2.2 Marketing Problems of Sample Food Processing Units
Marketing problems relate to competition, credit sales, brand acceptability, mass media exposure
etc. Distribution of units on the basis of marketing problems they face is given in table 5.2
Competition
Table 5.2 clearly shows that the most important marketing problem common to all sample food-
processing industries is competition. Food-processing units face competition from other units
within the same industry, from large-scale units, from multi national companies and also from
53
other units, which produce substitutes for the processing unit’s product. Table 5.2 reveals that
64.00 per cent of food-processing units as a whole suffer from this problem. The proportion of
units facing this problem varies from 72.22 per cent in grain mills to 40 per cent in dairy
products making and 66.66 per cent in fruits and vegetable processing industry. However, table
shows that this problem is serious in grain mills (72.22 %), Manufacture of Packed food/
consumer foods (60%) and marine products 50 per cent.
Table 5.2 Constraints Faced by the Food Processing Units in Marketing of Processed
Products in Domestic Market
Sl.
No
Product group
Type of constraints
Total Competition Lack of
brand
goodwill
Inadequate
publicity
through
mass
media
Dependence on
middleman for marketing
the processed product
1 Manufacture of
fruits & vegetables
10
(66.66)
8
(53.33)
7
(46.66)
5
(46.66)
15
2 Manufacture of
dairy
products
2
(40.00)
2
(40.00)
2
(40.00)
2
(40.00)
5
3 Manufacture of
grain mill products
13
(72.22)
9
(50.00)
8
(44.44)
6
(55.55)
18
4 Marine products 1
(50.00)
1
(50.00)
- 2
(100.00)
2
5 Manufacture of
Packed food/
consumer foods
6
(60.00)
6
(60.00)
6
(60.00)
4
(40.00)
10
Total 32
(64.00)
26
(52.00)
23
(46.00)
19
(38.00)
50
Note : (figures in parentheses indicates the percentages of total)
Lack of Brand Goodwill
Another marketing problem which the units have reported to be facing is the lack of brand
goodwill. It implies that their product brand have not received much public acceptance. Table 5.2
reveals that 52.00 per cent of food processing industries as a whole are facing this problem. This
problem has been reported by 60.00 per cent of manufacture of packed food /consumer foods,
53.00 per cent of manufacture of fruits and vegetables and 50.00 per cent of grain mills, marine
54
product units. The units have attributed it to inadequate publicity through mass media. Units
reported that they are reluctant to have media exposure because of lack of finance and high cost
involved in it.
Inadequate Publicity through Mass Media
Mass media exposure is an essential ingredient for the smooth growth of an industry. It helps
entrepreneurs to plan their activities in accordance with market trends, introduce goods to suit
consumers' tastes and get consumers informed of their product through advertising. Table 5.2
shows that 46.00 per cent of food-processing units as a whole have reported inadequate publicity
through mass media as a marketing problem. This problem is faced by 60.00 per cent of
Manufacture of Packed food/ consumer foods 46.66 per cent Manufacture of fruits &
vegetables, 44.44 per cent of Manufacture of grain mill products and its, 40.00 per cent of milk
processing units.
Dependence on middleman for marketing the processed product
Middleman as one who carries all the activities involved in selling goods and services to those
who buy for resale or business use. Table 5.2 shows that 100.00 per cent of marine products,
55.00 per cent of grain manufacturers, 46.66 percent of Manufacture of fruits & vegetables and
40.00 per cent of manufacture of dairy and consumer goods units have reported that they are
depend on marketing of their produce through middleman.
5.3 Other Problems
Distribution of units on the basis of other problems affecting operation of food-processing
industries is given in table 5.3.
Irregular supply of power
Table 5.3 shows that 44.00 per cent of the total food-processing units have reported that irregular
supply of power affect their operation. Food-processing units, which are located in remote areas,
face this problem seriously. 55.55 per cent of the grain mills, 50.00 per cent of marine products,
40.00 per cent of bakery and dairy product units and 33.333 per cent of manufacture of fruits and
vegetable industries reported. Lack of regular supply of power adversely affects the existing
55
capacity utilization resulting in low level of production on the one hand and an increase in cost
of production on the other.
Table 5.3: Distribution of Units on the Basis of Other Problems
Sl.
No
Product group
Type of constraints
Irregular
Supply of
Power
Lack of
Labour
Multiplicity
of Laws and
Procedures
TOTAL
Manufacture of fruits
& vegetables
5
(33.33)
5
(40.00)
2
(13.33)
15
Manufacture of dairy
products
2
(40.00)
1
(20.00)
1
(20.00)
5
Manufacture of grain
mill products
10
(55.55)
6
(33.33)
8
(44.44)
18
Marine products 1
(50.00)
- - 2
Manufacture of
Packed food/
consumer foods
4
(40.00)
4
(40.00)
2
(20.00)
10
Total 22
(44.00)
16
(32.00)
13
(26.00)
50
Note : (figures in parentheses indicates the percentages of total)
Lack of Labour
Table 5.3 shows that 32.00 percent of the food-processing units in five industries namely fruits
and vegetable manufacturers and consumer foods (40.00 %), grain mills (33.33%), and dairy
products 20.00 percent. Have reported that lack of labour affected their operation Abhinandhan
Food Processors in Belgaum. Deepak cashew industries (Udupi district) has attributed lack of
labour to migration of labour from rural to urban or semi urban areas to work in shops
particularly in textile shops, in transportation service sectors drivers or conductors in private
buses, or to work in other private establishments in the urban or semi urban areas.
Multiplicity of Laws and Procedures
Table 5.3 shows that 13.00 percent of the food-processing units as a whole have reported
difficulty in the operation of units due to multiplicity of laws, procedures and periodical
56
interference of bureaucracy in the name inspection. This problem is faced by grain mills (44.44
%), Manufacture of Packed food and Manufacture of dairy Products (20.00 %) and 13.33 per cent in
fruits and vegetable manufacturers has reported. Global agro industries and Avinash dhal industries (Dhal
industries) have reported that Government of India has banned to export of dhal to other countries like
US, Singapore etc. And getting low subsidies in our state as compared neighbor states like Maharashtra
and others. This requires action on the part of the government in simplifying laws and procedures
in favor of food-processing industries to speed up their growth.
5.4 Prospectus of Food Processing Units in Karnataka
5.4.1 Food Production and Processing: The scenario
There were approximately 1550 food products and beverage manufacturing units registered in
the state till end of 2011-12. The total investment in these units was estimated at Rs. 23,405 lakh
and employment generated in these units was in excess of 15000. Various agri-export zones have
been earmarked in the state for products like gherkin, Rose onion, flowers and vanilla. To be
precise, eight zones have been earmarked for gherkin, three for rose onion, six for flowers and
six for vanilla. has sanctioned one Mega Food Park project under its Mega Food Parks Scheme
in Karnataka. The project is located in Tumakur and was the park inaugurated on 24th
September, 2014 by Hon’ble Prime Minister.Apart from MoFPI’s Mega Food Parks Scheme, the
state Govt. also has a Food Parks Scheme under which food parks are being established in 6
districts including Bangalore (Rural), Tumakur, Shivamoga, Davangere, Vijapura and Belgavi.
The state government is also planning to set up a spice park at Byadagi in Haveri district.MoFPI
has so far sanctioned five cold chain projects in the state under its “Scheme for Cold Chain,
Value Addition and Preservation Infrastructure”. Under the scheme for Setting up of New/
Modernization of Existing Abattoirs of Karnataka has been sanctioned 3 Abattoirs Projects so far
- City Municipal Council Chitradurga, Mysore City Corporation and Hospet City Municipal
Council by the Approval Committee, commercial operations is expected to commence shortly.
57
CHAPTER 6
SWOT Analysis of Food- Processing Industry in Karnataka
6.1 Introduction
The SWOT (strengths, weaknesses, opportunities and threats) analysis is a measurement tool
applied in business to understand the positive and negative factors that may exists in the cource
of operation, in other words it stands for the analysis of internal strengths and weaknesses of an
operation and external opportunities and threats to the operation. Below is a description of each
of these elements that should be considered when performing a SWOT analysis.
Strengths
The first element of a SWOT analysis describes the strengths of an operation. The strengths
include what an operation does well, and should be viewed from both own point of view as well
as from the point of view of people with whom it come in contact. In some cases an
organization’s strengths are very obvious, for example, being a low cost producer. In other cases,
it is a matter of perspective, for instance the product is of high quality. It is important to note that
operations that are in a bad position also have strengths. Whether these strengths are adequate
should be determined through further analysis.
Weaknesses
The other internal element of the SWOT analysis describes the weaknesses of an operation.
Examining weaknesses include identifying what an operation does not do well. As with the
strengths, weaknesses should be examined from both own perspective and from the perspective
of those outside the operation. It is also possible for weaknesses to be obvious such as a
limitation of resources or be more of a perspective issue such as a lack of teamwork. All
operations, regardless of size or profitability have weaknesses. How badly these weaknesses will
affect the operation should be left to further analysis.
Opportunities
The first external element of the SWOT analysis is opportunities. The opportunities include any
favorable situation in the business’s environment that the operation may realize gains from.
These could range from diversification and the use of new technologies to market trends and
58
relationship developments. It is important to note that all operations have some opportunities:
identifying these opportunities is the sign of a good analyst.
Threats
The final element of the SWOT analysis is the external threats that the operation faces.
Regardless of size or profitability, all operations face threats. These threats could range from
lower international prices to key relationships that are not going well. Whatever the threat, the
operation should have a plan in place to resolve the problem.
6.2 SWOT Analysis of Fruit and Vegetables Industries
Karnataka occupies a prominent place in the horticulture map of the country. Horticultural crops
occupy an area of 18.00 lakh hectares and a production of 136.38 lakh tonnesin the year 2013-
14. Although the area comprises only 14.44 per cent of the net cultivated area in the state, the
total income generated from the horticulture sector accounts to over 40 per cent of the total
income derived from the combined agriculture sector. This accounts for 17 per cent of the
agricultural share of GDP in the state. Horticulture provides excellent opportunities in raising
the income of the farmers even in the dry tracts. A significant shift towards horticulture is
evident in the state with an increase an area and production. For instance, an area of about 58,000
hectares has been brought under horticultural crops through the watershed programmes.
Horticulture provides higher unit productivity and offers great scope for value addition and this
sector is taking inroads throughout the length and breadth of the state. Karnataka having the
highest acreage under dry farming in the country next only to Rajasthan, has a great potential to
grow high value but less water demanding horticultural crops.
As per the study survey a maximum number of respondents ranked abundant availability of raw
materials, vast network of manufacturing facilities, supportive producers, good global demand
and vast domestic market for their processed produce. Contract farming involves agricultural
production being carried out on the basis of an agreement between the processor and farmers.
Industries specify the quality they require and also fix the price for each crop in advance
benefiting both as the better rate and processers get best quality. The weakness mentioned by the
processors of the fruit and vegetables were that that lack of adequate quality control and testing
59
methods, high requirement of working capital and seasonality of raw material and perishability
nature. Inadequate infrastructure is the top most problem hindering the growth of the sector,
support infrastructure which is the biggest bottleneck in expanding the food processing sector, in
terms of both investment and exports includes: long and fragmented supply chain, inadequate
cold storage and warehousing facilities, road, rail and port infrastructure. Also, lack of modern
logistics infrastructure such as logistics parks, integrated cold chain solutions, last mile
connectivity, dependence on road over rail, customized transportation, technology adoption and
government support via incentivizing private public partnerships are some of the lacunae that
exist in supply chain and logistics sector in India.
Large crop and material base offering a vast potential for agro processing activities, setting of
SEZ/AEZ and food parks for providing added incentive to develop green field projects
Integration of development in contemporary technologies such as electronics, material science,
bio-technology etc, offer vast scope for rapid improvement and opening of global markets were
the important opportunities identified in fruit and vegetable processing industries. Fruit and
vegetable processers responded that affordability and cultural preferences of fresh food, high
inventory carrying cost, high taxation and high packaging cost were the major threats of the
industry. The summary of the SWOT analysis is provided in the following Table 6.1
60
Table 6.1: SWOT Analysis of Fruit and Vegetables Industries
6.3 SWOT Analysis of Manufacture of Grain Mill Products Industry
Karnataka’s food grain production is set to witness a marginal dip of 2.3 per cent to 13 million
tonnes for the 2014-15 over the previous year. The fall in production is mainly due to a deficit
rainfall and dry spell during the second fortnight of June, the first week of July, August and
September in major parts of north and south interior districts last year. This affected the rain-fed
crops over an area of 1.82 million hectares. Major crops that were affected included red gram,
Strengths
Weaknesses
* Abundant availability of raw materials.
*Vast network of manufacturing facilities all over
the country.
*Supportive producers.
*High global demand.
*Vast domestic market.
* Low availability of adequate infrastructural
facilities
*Lack of adequate quality control and testing
methods as per international standards.
*High working capital requirement.
*Inadequately developed linkages between R&D
labs and industry.
*Seasonality of raw material.
*Perishability of raw materials.
Opportunities Threats
*Large crop and material base offering a vast
potential for agro processing activities.
*Setting of up SEZ/AEZ and food parks for
providing added incentive to develop green field
projects.
*Integration of development in contemporary
technologies such as electronics, material science,
bio-technology etc. offer vast scope for rapid
improvement and progress.
*Opening of global markets
*Affordability and cultural preferences of fresh
food
*High inventory carrying cost
*High taxation
*High packaging cost
61
soyabean, maize, green gram, groundnut, ragi, bajra, sunflower, cotton and sugarcane.
Cumulative rainfall from June 1 to September 30, 2014 was 833.37 mm as against a normal
rainfall of 838.70 mm, a drop of one per cent, according to Economic Survey of Karnataka 2014-
15.
As per the study survey a maximum number of respondents ranked skilled for traditional
technology, technological infrastructure and good demand for the product, the weaknesses are
control by MSP (minimum support price) of paddy, and lack of skilled labouers and shortage of
raw materials, the opportunities like cost reduction and quality enhancement by use of
appropriate technology large domestic /international market and tremendous growth potential
with institutional and policy support and threats are poor monsoons, Government policies and
levy of taxes and duties in comparison to neighboring states may further lead to closure /shift of
industries to neighboring states. This problem largely arises due to fluctuations in agricultural
production due to unfavorable climate, plant diseases and other natural calamities. However,
many other factors can be attributable to this problem in the case of individual commodities.
Global agro industries Kalaburagi (Dhal mill), Sri Dharameshwari Rice Industries (rice mill) and
Ravi Raj Industries in Tumakur pointed out that the problem of inadequate availability of paddy
and dhal (raw material) for rice mills and dhal processors can be attributed to inadequate
production in the state. Abhinandhan Food Processors in Belgaum and Deepak cashew industries
(Udupi district) has reported that lack of skilled labour affected their operation. The summery of
SWOT is given in Table 6.2.
6.4 SWOT Analysis of Dairy Industry
The Karnataka Milk Federation ( KMF) is the largest Cooperative Dairy Federation in South
India, owned and managed by milk producers of Karnataka State. KMF has over 2.32 million
milk producers in over 13157 Dairy Cooperative Societies at village level, functioning under 14
District Cooperative Milk Unions in the State. Quality Excellence from Cow to Consumer” – is
the motto of the Federation to obtain better-quality milk and milk products from the value chain
(procurement to processing to marketing). Thus milk and milk products, under brand name, are
unmatched in quality made available to consumers at most competitive prices.
62
Table 6.2. SWOT Analysis of Manufacture of Grain Mill Products Industry
Strengths
Weaknesses
* Workers mostly skilled for traditional technology
*Technological infrastructure availability
*Good demand for the products.
*Adopting new technology.
*Strong labour force.
*Good market relationship
* Controlled MSP of paddy and compulsion of levy
rice supply.
*Lack of skilled labourers.
*Shortage of raw materials
Opportunities
Threats
*Cost reduction and quality enhancement by use
of
appropriate technology
*Large domestic /international market availability
*Tremendous growth potential with Institutional and
Policy support.
*Poor monsoons.
*Government policies.
*Imposition of taxes and levies in comparison to
neighboring states may further lead to closure/shift
of industries to neighboring states.
*skill base needs up gradation to adopt latest
Technology and management systems.
In a way Nandini Milk and Milk Products are “Spreading wealth of health”. Karnataka Milk
Federation sells about 31 lakh litres of milk in the state and the rest is converted into powder,
curd and ice creams. With abundant milk production, the Karnataka Milk Federation is now
planning to export surplus milk powder to bring stability in the prices. Industry has identified six
countries for exporting milk powder and a licence is expected any time. Based on the
observations in the milk dairies, the researcher has carried out a SWOT analysis. The strengths
and weaknesses pertain to the factors in the internal environment. The opportunities and threats
pertain to the factors in the external environment. The strengths and weaknesses have been
analyzed on the basis of interviewing the dairy personnel and the physical observations made by
the researcher. The opportunities and threats have been analyzed on the basis of interviewing the
63
dairy personnel and also through secondary research. The summary of SWOT relating to dairy
industry is presented in Table 6.3.
Table 6.3 SWOT Analysis of Dairy Industry
Strengths Weaknesses
*Nandini milk enjoys good brand recall in the minds
of the milk consumers in Karnataka. It has become a
household name in Karnataka.
*In the present market situation, experience matters a
lot. Dairy movement started in 1965in Karnataka and
KMF possesses a good knowledge of the market.
*Enhanced milk production with consequently
increased availability of milk processing.
*Large number of dairy plants in public and
cooperative sector besides several others coming
up in the private sector.
*Improved transportation facilities for movement of
milk and milk products.
*Improved purchasing power of the consumer.
*The shelf life at the customer end is low since
they are not able to transport at low temperatures
till the point of consumption.
*The smaller dairies are yet to adopt quality
management systems and other world class
manufacturing practices.
*Tropical climate conditions.
*Seasonal fluctuations in milk production
pattern.
Opportunities
Threats
*Great improved export potential for milk
products of western as well as traditional types.
*Increasing demand for fluid milk as well as value
added products.
*Market information intelligence system for milk and
milk products.
*There is a growing market demand with the growth
in population as well as improvement in the standard
of living of the people.
*The surplus milk can be used for making sweets
which can be exported to many countries.
* Inflow of foreign products to the in Indian
market.
*Poor microbiological quality of milk increased
competition.
* Products from neighbouring states freely
entering Karnataka
64
6.5 SWOT Analysis of Marine Industry
Karnataka state has 300 km of coastline and 27,000 sq km continental shelf area, rich in pelagic
fishery resources. Traditionally, Karnataka coast is known as “mackerel coast”. The marine
fisheries resource potential of the state has been estimated at 4.25 lakh metric tonnes, of which
2.25 lakh metric tons come from inshore areas up to a depth of 70 m and the remaining 2.0 lakh
metric tonnes hail from off shore/deep sea zone. The state has 5.60 lakh hectares of inland water
resources comprising 1.72 lakh ha of major and 1.21 lakh hectares of Gram Panchayat / small
tanks 2.67 lakh ha of reservoirs, besides 5,813 km length of rivers which provide immense scope
for development of inland fisheries.
The fish production, both from the marine and inland sector of the state has been increasing over
the years. The demand for marine products has led to increase in prices also. The Table 6.4
shows
That there exists well known local species, high survival rates in all stages of production,
restocking can secure protection of depleting stocks are the major strengths of the industry the
industries they have little experience and lack of latest technology are the major weaknesses,
coming to the opportunities for the industry there exists that highly commercial species, good
growth potential and there is a good demand for marine products across the world. The threats of
the industry are existing lake spawning stocks at risk due to environmental conditions sea water
level may increase due to global warming and more market competitions.
6.6 SWOT Analysis of Consumer /Packed Goods Industry
Increasing influence from consumer food service chains such as Starbucks resulted in changes in
the eating preference of consumers over the review period. Many consumers have started to have
baked goods such as croissants or bread for breakfast or for evening snacks. Additionally, baked
goods such as croissants and bread continue to be considered as convenient breakfast options. As
a result, 2015 current value sales grew by 10%. Baked goods remained mainly led by artisanal
manufacturers in 2015. Indian baked goods continued to be highly fragmented during 2015 and
remained flooded by small or independent players.
65
Table 6.4 SWOT Analysis of Marine Industry
Strengths Weaknesses
* Well known local species
*High survival rates in all stages of production.
*Restocking can secure protection of depleting
stocks.
*National local market for white fish products.
* Little experience on aquaculture and quality.
*Very little known on the world / European
market.
*Lack of latest technology for processing of fish
and other marine products.
Opportunities Threats
*Highly commercial species.
*Good growth potential.
*High value species of both fish meat and roe.
*Worldwide market.
*Existing lake spawning stocks at risk due to
environmental conditions.
*Sea water level may increase due to global
warming.
*Market competitions.
*Clarification of the fishery rights of released
fishes.
The leading branded players within baked goods in 2015 were Britannia Industries Ltd,
Hindustan Unilever Ltd and Monginis Foods Ltd. The results of the SWOT analysis of consumer
and packed goods industry is presented in table 6.5.The major strengths of packed goods industry
are providing products of excellent quality, providing a staple product and providing good
customer services. As for as weaknesses are concerned there is high competition among the
industries, high input cost and lack of skills, both technical baking and business/entrepreneurial
skills. Coming to the opportunities available to the industry are scope for market expansion,
Improving the quality of human resources through training was a worthwhile opportunity and
There are networking opportunities and it is possible to establish strategic alliances especially
with the supply of raw materials, and reduction in the costs. Competition and High cost of raw
materials in relation to the price that the market is prepared to pay for the finished product are the
major threats among all the food processing industries.
66
Table 6.5 SWOT Analysis of Consumer /Packed Goods Industry
Strengths Weaknesses
* Providing products of excellent quality
*Providing a staple product
*Providing good customer services
*Meeting customer demands
*Often a family business and loyal family support
was available
*Almost all sales over the counter, thus reducing
delivery costs
*Knowledge of their specific target market.
* Competition.
*High input costs.
*Lack of skills - both technical baking and
business/ entrepreneurial skills.
*Lack of infrastructure (especially in remote areas)
such as: Telephones, Transport for raw materials
and products.
*Poor knowledge and understanding of market
forces and marketing of products
Opportunities
Threats
*Scope for market expansion
* Scope to the quality of human resources through
training.
*Networking opportunities and it IS possible to
establish strategic alliances especially with the
supply of raw materials, and reduction of costs.
*Competition
*High cost of raw materials in relation to the price
that the market is prepared to pay for
the finished product
*The cost of setting up with equipment is high and
usually beyond the financial capabilities of most
bakers.
*Inability to always comply with health, hygiene
and safety regulations can reduce clientele and
cause losses of market share and even product
67
CHAPTER 7
CONCLUSIONS AND POLICY RECOMMENDATIONS
7.1 Introduction
The food-processing industry in India plays a vital role in the national economic development
and has potential to meet the local needs and export requirements. It helps in processing
agricultural products such as field crops, pulses, horticultural crops, livestock and fisheries and
converting them to edible and other usable forms. Thus, transformation of agriculture through
creating forward and backward linkages with industry has been emerging as an important option
to overcome the increasing challenges of creating employment opportunities for increasing
labour force and sustaining the livelihood of households in rural areas. Most important point in
the food-processing is that a sizeable portion of raw material processed in them being rural based
it has a very high employment potential with significantly lower investment. Further the food-
industry generates new demand on the farm sector for more and different agricultural outputs,
which are more suitable for processing. On the other hand, development of these industries
would relax wage goods constraints to economic growth by enhancing the supply of their
products. In this context there is a need for improving the capacity of the food-units to harness
backward linkages with agriculture and allied activities in order to efficiently convert part of the
output to value added products acceptable to the domestic and international markets. This would
generate employment opportunities for different types of skills through food processing,
packaging, grading and distribution.
Keeping the above aspects in consideration the study was carried out in the state of Karnataka.
7.2 Main Findings
7.2.1. Background of Food Processing Units;
The expansion pattern of food processing industries based on the analysis of 50 sample units
reveals that 100 per cent of industries were registered under District Industrial Centre in sample
districts together were started during the periods 2014-15. From table 3.1 one can see that 32 per
cent all categories of units were started after 2006. Followed by 26 per cent during 1992-2000,
22 per cent before 1991 and 20 per cent during 2001-05.
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7.2.2 Ownership of Industries
Looking into the legal ownership status of industries it brings out that the industries are
registered under single ownership is remarkably higher among the all product industries in each
of the product groups of food- Industries. However, a large proportion of industries registered
under the Shops and Establishment Act are also observed operating as the family enterprises. In
all, the proportion of industries operating under a signal ownership is highest at over 80 percent,
followed by partnership (12.00 %) and 8 per cent of industries are family enterprises.
7.2.3. Age Profile of Entrepreneurs;
Age of entrepreneurs in the food processing sector as an important determining, factor for their
growth expansion one can observe the pattern whether the young entrepreneurs are entering in to
this sector or the traditional business community themselves in this business it is significant to
observe that most of the entrepreneurs in the food-processing sector are middle aged (30 to 40
years). Their share comes to 68 per cent of the total food processing entrepreneurs. This is
followed by young entrepreneurs (below 30 years) who constitute28.00 per cent and 4 per cent
account for aged (45 years and above). The table thus reveals the dominance of middle aged
entrepreneurs in the sector. Industry wise analysis reveals that proportion of entrepreneurs in the
middle-age group is higher in industries such as marine products (100 %), Manufacture of
Packed food/ consumer foods (70 %), grain mills and fruit and vegetable manufacturers (66.66
%) and 60 per cent of dairy products.
7.2.4 Educational Background of the Entrepreneurs
Assessing into the educational background of the entrepreneurs it reflects that the different
groups of food processing industries especially small scale industries do not require any more
skill and professional education. Expansion of this sector can be successfully carried out by the
individual having even primary education or the secondary education. From the sample nearly 26
per cent entrepreneurs have education below primary level. However, a majority i.e., 38 per cent
entrepreneurs are having secondary level of education while only 2 per cent entrepreneurs, have
obtained technical/ professional level education.
69
7.2.5 Caste Background of the Entrepreneurs
Among the different product groups of food-industries, the domination of general caste
entrepreneurs has been noted and the highest at 50 per cent is in distilling, rectifying and
blinding of spirit while in registered units their share reaches to the extent of 50 per cent. In same
product group to 66 per cent in manufacturing of fruits and vegetables, In terms of the
proportionate share of different casts of entrepreneurs in various small scale registered industries
is concerned the study found that it again follows quite high at 28.00 percent in backward
classes, 14.00 per cent of SC and 8.00 per cent of ST. Industry wise analysis shows that 66.66
percent of entrepreneurs in fruit and vegetable manufacturers, 60.00 per cent in Manufacture of
dairy, 50.00 per cent in marine products , 44.44 per cent in manufacture of grain mill and 30.00
per cent in Manufacture of Packed food/ consumer foods.
7.2.6 Land Assets of Agro-Processing Entrepreneurs
Economic profile of food-processing entrepreneurs is analyzed in terms of area of land assets
they own. For this purpose, entrepreneurs are categorized into three groups; entrepreneurs with
land holding between zero and 2.5 acres (below one hectare), between 2.5 acres and 5 acres, and
entrepreneurs with land holding above 5 acres.
It is observed that 66.66 per cent of the total entrepreneurs have land holding between zero and
two and half acres (below one hectare). The proportions of entrepreneurs having land holding
between zero and 2.5 acres varies from 40.00 manufactures of dairy Products to 72.00.
Manufacture of grain mill products. The proportion of entrepreneurs having land holding
between two and half and five acres of land is 22.00 per cent for the food processing industries
as a whole and it varies from 11.00 per cent in manufacture of grain mill products industries to
50.00 percent in marine product industries and 12.00 per cent have land holding of more than
five acres. The table, thus, reveals that majority of entrepreneurs have small size of land holdings
and this indicate that economic profile of majority of food-processing entrepreneurs as a whole is
not so sound.
7.2.7 Employment in Agro-Processing Units
Food-processing industries are generally regarded as labour intensive and are expected to employ
more labors and create more maydays of employment.
70
In order to analyze the employment level in sample food processing industrial units, they are
categorized into four groups namely industrial units employing 2 to 10 persons, 11 to 20 persons,
2 1 to 30 persons and above 3 I persons.
It shows that 46.00 percent of the total food-processing units are able to generate employment for
11 - 20 persons each. Within this 100 per cent of the marine product units, 60 per cent dairy
units, 46.66 percent manufacture of fruits & vegetables, 44.44 percent in Manufacture of grain
mills and 30.00 percent in Manufacture of Packed food/ consumer foods. It is also observed that
industrial units providing employment to 21-30 persons are and account for 24.00 percent of the
total food -processing industrial units, 18. Per cent in 2-10 persons and finally 12.00 per cent of
total food processing units generating employment for 31 above persons.
7.3 Reasons for Success of food Processing Units
The major reasons delineated for success of these units are reasonable price, skilled labour and
replacement for damaged products. The extent of influence of each of these factors is brought
out in following paragraphs.
7.3.1 Quality Management
The quality of produce is an important factor operation or success of units. The proportion of this
factor in food-processing units varies from 100.00 per cent in manufacturing of marine products
to 80.00 of manufacture of dairy products. However this factor is favor in Manufacture of
Packed food/ consumer foods and marine products (100.00 %), Manufacture of fruits &
vegetables (86.66%), Manufacture of grain mill products (83.33 %), and in Manufacture of dairy
products (80.00 %). Food quality is an important food manufacturing requirement, because food
consumers are susceptible to any form of contamination that may occur during the
manufacturing process. Many consumers also rely on manufacturing and processing standards,
particularly to know what ingredients are present, due to dietary, nutritional requirements or
medical conditions.
7.3.2 Good customer service
Customer service proves to be one of the most important keys to the success of the food industry
78.00 per cent of food-processing units have reported that good customer service is an another
71
important factor for success of food processing units. This factor is favor in Manufacture of
Packed food/ consumer foods and marine products (90. %), Manufacture of fruits & vegetables
and Manufacture of dairy products (80 %) and Manufacture of grain mill products (77.77 %).
7.3.3 Reasonable prices
The reasonable price of a product is another factor to success of food processing units. About
64.00 per cent of the total food-processing units have reported reasonable price of as another
factor to continue the business in food processing. This is a major reason for industries like
manufacture of Packed food/ consumer foods (80.00%), manufacture of grain mill products
(66.66 %), Manufacture of dairy products and manufacture of fruits & vegetables (60.00 %).
7.3.4 Replacement for Damaged Products
The replacement for damaged products is another reason for operation or success of units. About
34.00 percent of the total food-processing units have reported replacement of damaged product is
another factor to continue the business in food processing. This is a major reason for industries
like Manufacture of grain mill products (66.66%), Manufacture of Packed food/ consumer foods
(34.00 %) and Manufacture of fruits & vegetables (13.00 %). Have reported the food-processing
industries.
7.4 Problems Faced by Manufacturing Enterprises
Formulation of a proper-mix of policies for the healthy and rapid development of food-
processing units must take into consideration the various problems that inhibit their growth. With
this in view, the sample processing units were asked to identify their problems. In this section,
problems faced by sample of food-processing units in Karnataka in particular are analyzed in
detail. For this purpose, problems faced by selected sample food-processing units are categorized
into problems relating to raw materials, marketing problems and other problems.
7.4.1Problems Relating to Raw Material
There is a problem of non-availability of raw materials, high prices of raw materials, poor quality
raw materials and competition among units to buy raw materials.
72
7.4.1.1 Non- availability Raw Materials
Non availability raw materials is an important problem affecting the operation of units. The
proportion of this problem affecting food-processing units varies from 54 per cent in
manufacturing of grain mill products to 10. of manufacture of packed food/consumer foods.
However this problem is severe in industries like rice mills (77.77 %), manufacture of fruits &
vegetables (66.66 %), marine products (50.00 %), and in manufacture of Packed food/ consumer
foods (10 %). This problem largely arises due to fluctuations in agricultural production due to
unfavorable climate, plant diseases and other natural calamities. However, many other factors
can be attributable to this problem in the case of individual commodities. Global agro industries
Kalburgi (Dhal mills), Sri Dharameshwari Rice Industries (rice mill) and Ravi Raj industries in
Tumkur pointed out that the problem of inadequate availability of paddy and dhal (raw material)
for rice mills and dhal processors can be attributed to inadequate production in the state.
7.4.1.2 High Market Price of Raw materials
The prices of raw materials are a major problem faced by food-processing units. About 44 per
cent of the total food-processing industrial units have reported high market price of raw materials
as a major difficulty in obtaining raw materials. This is a major difficulty for industries like grain
mills (66.66%), marine products (50 %), dairy and consumer foods (40.00 % and 20 %) in
manufacturing of fruits and vegetables.
7.4.1.3 Competition among units to buy raw materials
30 per cent of processing industrial units reported competition among processing units to buy
raw materials as another problem relating to raw material. This problem implies that raw
material availability in the market is less than the demand for raw material. This problem is
severe in the case of rice and pulse mills where 38.88 percent of grain mills face this problem.
30.00 percent Manufacture of Packed food/ consumer foods are also found to be facing this
problem. Kalburgi Dhal mills and rice mills in Tumakur have pointed out that this problem
pushes up the price of raw material in the market and makes raw material unavailable to small
scale grain mills.
73
7.4.1.4 Poor Quality of Raw Materials
20 per cent of food-processing units among five food-processing industries, grain mills, reported
that poor quality of agricultural raw material adversely affected the quality of their products and
the profitability of operation. This problem is severe for grain mills (27.77 %). Priyanka, Avinash
dhal industries have reported that due to various diseases affecting pulse quality is poor which
reduces the profitability of their operation. Tumakur rice mills have reported that high moisture
content in paddy, presence of paddy with black rice and paddy without rice (empty paddy) in
the raw material (paddy) reduce the quality of raw material (paddy), and adversely affected the
quality of their product and profitability.
7.5 Marketing Problems of Sample Food Processing Units
Marketing problems relate to competition, credit sales, brand acceptability, mass media exposure
etc.
7.5.1 Competition
The most important marketing problem common to all sample food-processing industries is
competition. Food-processing units face competition from other units within the same industry,
from large-scale units, from multinational companies and also from other units, which produce
substitutes for the processing unit’s product. Table 5.2 reveals that 64.00 per cent of food-
processing units as a whole suffer from this problem. The proportion of units facing this problem
varies from 72.22 per cent in grain mills to 40 percent in dairy products making and 66.66 per
cent in fruits and vegetable processing industry. However, table shows that this problem is
serious in grain mills (72.22 %), manufacture of packed food/ consumer foods (60 %) and
marine products 50 per cent.
7.5.2 Lack of Brand Goodwill
Another marketing problem which the units have reported to be facing is the lack of brand
goodwill. It implies that their product brand have not received much public acceptance. It reveals
that 52 per cent of food processing industries as a whole are facing this problem. This problem
has been reported by 60 per cent of manufacture of packed food /consumer foods, 53 per cent of
manufacture of fruits and vegetables and 50 per cent of grain mills, marine product units. The
74
units have attributed it to inadequate publicity through mass media. Units reported that they are
reluctant to have media exposure because of lack of finance and high cost involved in it.
7.5.3 Inadequate Publicity through Mass Media
Mass media exposure is an essential ingredient for the smooth growth of an industry. It helps
entrepreneurs to plan their activities in accordance with market trends, introduce goods to suit
consumers' tastes and get consumers informed of their product through advertising. It shows that
46 per cent of food-processing units as a whole have reported inadequate publicity through mass
media as a marketing problem. This problem is faced by 60 per cent of Manufacture of Packed
food/ consumer foods 46.66 percent Manufacture of fruits & vegetables, 44.44 per cent of
Manufacture of grain mill products and its, 40 per cent of milk processing units.
7.5.4 Dependence on middleman for marketing the processed product
Middleman as one who carries all the activities involved in selling goods and services to those
who buy for resale or business use. It shows that 100 per cent of marine products, 55 per cent of
grain manufacturers, 46.66 per cent of manufacture of fruits & vegetables and 40 per cent of
manufacture of dairy and consumer goods units have reported that they are depend on marketing
of their produce through middleman.
7.6 Other Problems
7.6.1 Irregular supply of power
About 44 per cent of the total food-processing units have reported that irregular supply of power
affects their operation. Food-processing units, which are located in remote areas, face this
problem seriously. 55.55 per cent of the grain mills, 50.00 per cent of marine products, 40.00 per
cent of bakery and dairy product units and 33.333 per cent of manufacture of fruits and vegetable
industries reported. Lack of regular supply of power adversely affects the existing capacity
utilization resulting in low level of production on the one hand and an increase in cost of
production on the other.
75
7.6.2 Lack of Labour
32 per cent of the food-processing units in five industries namely fruits and vegetable
manufacturers and consumer foods (40.00 %), grain mills (33.33 %), and dairy products 20.00
percent. Have reported that lack of labour affected their operation Abhinandhan Food Processors
in Belgaum. Deepak cashew industries (Udupi district) has attributed lack of labour to migration
of labour from rural to urban or semi urban areas to work in shops particularly in textile shops, in
transportation service sectors drivers or conductors in private buses, or to work in other private
establishments in the urban or semi urban areas.
7.6.3 Multiplicity of Laws and Procedures
About13per cent of the food-processing units as a whole have reported difficulty in the operation
of units due to multiplicity of laws, procedures and periodical interference of bureaucracy in the
name inspection. This problem is faced by grain mills (44.44 %), Manufacture of Packed food
and manufacture of dairy Products (20 %) and 13.33 per cent in fruits and vegetable
manufacturers has reported. Global agro industries and Avinash dhal industries (Dhal industries)
have reported that Government of India has banned to export of dhal to other countries like US,
Singapore etc. And getting low subsidies in our state as compared neighboring states like
Maharashtra and others. This requires action on the part of the government in simplifying laws
and procedures in favor of food-processing industries to speed up their growth.
6.1 SWOT analysis of food processing industries in Karnataka
SWOT analysis will help you to evaluate the current position of your operation to determine
management plans for the future. It helps in determining future plans by identifying strengths
and opportunities that can be used by the operation and pointing out weaknesses and threats that
should be managed. While not all plans will ultimately be implemented, completing a SWOT
analysis can ensure all current and potential positions of the business are considered. Those
beginning a SWOT analysis should remember that there are no set guidelines for completing the
analysis. Users of the final analysis should be comfortable with the format and should understand
the results. For the analysis to be most effective, though, it must be carried out fairly and
thoroughly. This will then put the management in a position to accurately forecast and prepare
for the future to meet the farms objectives and goals.
76
7.7 Conclusions
From the analysis of socio-economic characteristics of entrepreneurs, it can be concluded that
that ownership of units in this sector is characterized by the dominance of sole proprietorship
form of organization indicating one man show in the management of units and by partnership
among family members. In view of this, it can be concluded that there is a tendency in this sector
to confine ownership of the units to the family only.
Further, from the point of education, young educated youth are not much attracted to food-
processing sector as new entrepreneurs. This is a matter of concern. This sector is found to be
dominated by middle aged entrepreneurs and this cool borate with the above that –then as family
business.
Assessing into the educational background of the entrepreneurs it reflects that the different
groups of food processing Industries especially small scale industries do not require any more
skill and professional education. Expansion of this sector can be successfully carried out by the
individual having even primary education or the secondary education. From the analysis of
employment the food-processing unit is able to generate employment for 11 - 20 persons.
Quality of product and time by delivery of the product to customers is the key factor to run
continuously of any food industry
Short supply of raw materials, poor quality of raw materials and poorly developed marketing
facilities, lacking power for running the units shortage of skilled labour is the important
problems that comes in the way of development of this sector.
7.8 Policy Recommendations
Based on the finding presented on different issues the study makes the following
recommendations important for policy action.
Fruits and vegetable processing industries
As Indian economy is based on agriculture, there is a need to develop proper supply chain
models which may play an important role in increasing the shelf life and in turn reduce
77
the losses and wastages in fruits and vegetables, increase in farmer income, generate
employments opportunities for the local peoples, and improve the livelihood of the
farmers which leads to the development of Indian economy as a whole.
Most of the processing industries reported that non-availability of suitable varieties of
raw materials for processing was one of the major constraints. Thus, there is a need to
address this issue by the agricultural universities and R & D institutions.
The State Government would consider, on priority, providing road links for agro-
industries clusters and agro-processing units through the Marketing Development
Fund (MDF) or other Schemes/Programmes.
Agro-processing and agro-business, being emerging areas with a vast growth potential, is
facing a shortage of skilled manpower. The State Government would encourage
Universities in the State to commence courses in food processing, packaging and agri-
marketing.
Manufacture of grain mill products and Manufacture of packed food/ consumer foods
The State Government should ensure regularity in supply of power to industries.
Introduction of a scheme as entrepreneurship training and apprenticeship for ITI diploma
holders seems too necessary for improving capacity building for both young generation
willing to start units and skilled laborers.
Product specific industrial clusters should be promoted through providing various
infrastructural facilities and developing market linkages.
Manufacture of dairy products
Training programmes on hygienic milk production, processing, packaging, and marketing
should be organized.
78
Establishment of a few state-of-the-art labs, with appropriate accreditation to estimate
contaminants, in different parts of the country would help the industry to ensure quality
of dairy products of international standard.
Manufacture marine products
MPEDA can develop a department for providing marketing information to the fish
processing units. This will help the industry updated with International scenario.
There is a need for market research studies to explore domestic and international markets
for processed products.
79
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