operationalising the agribusiness infrastructure development investment program … ·...

F I N A L R E P O R T

Operationalising the Agribusiness Infrastructure Development Investment Program- Phase II

-Bihar-

March 2010

Client:

A s i a n D e v e l o p m e n t B a n k

Prepared by

OPERATIONALISING THE AGRIBUSINESS INFRASTRUCTURE DEVELOPMENT INVESTMENT PROGRAM- PHASE II FINAL REPORT

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Table of Contents

1 Introduction 1 1.1 Project outline and intent 1 1.1.1 Value chain approach 1 1.1.2 Hub and spoke model 2 1.2 Integrated value Chain Regions 3 1.2.1 Agri‐Marketing and Infrastructure 3 1.2.2 Selection of Region 4 1.3 Methodology 5 1.4 Structure of the Report 9

Muzaffarpur Integrated Value Chain 10

2 FOCUS CROP: LITCHI 12 2.1.1 Post harvest infrastructure 12 2.1.2 Value chain analysis 13 2.1.3 Gaps in the value chain 18 2.1.4 Potential for intervention 19 3 FOCUS CROP: MANGO 20 3.1.1 Value chain analysis 21 3.1.2 Post harvest infrastructure 24 3.1.3 Gaps in the value chain 24 3.1.4 Potential for intervention 25 4 FOCUS CROP: BANANA 26 4.1.1 Value chain analysis 27 4.1.2 Post harvest infrastructure 31 4.1.3 Institutional Infrastructure 32 4.1.4 Gaps in the value chain 32 4.1.5 Potential for intervention 32 DPR: Muzaffarpur Integrated Value Chain Project 33 5 HUB: MUZAFFARPUR 35 5.1 Focus Crops and Estimated Throughput 36 5.2 Existing Facilities 36 5.2.1 Traders’ Shops 37 5.2.2 Open & Covered Platforms 37 5.2.3 Godowns 37 5.2.4 General Amenities and Support Infrastructure 37 5.3 Proposed Facilities 37 5.3.1 Pack House (with cold infrastructure) 37 5.3.2 Banana Ripening Facility 41 5.3.3 Potato Cold Store 41 5.3.4 Dry Warehouse 42 5.3.5 Ambient Onion Stores 42 5.3.6 Multi Fruit Processing Plant 42 5.4 Other Facilities 42


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5.4.1 Business Centre 42 5.4.2 Knowledge Centre 42 6 SPOKE: HAJIPUR 44 6.1 Focus Crops and Estimated Throughput 45 6.2 Existing Facilities 45 6.2.1 Traders’ Shops 45 6.2.2 Open & Covered Platforms 46 6.2.3 Godowns 46 6.2.4 General Amenities and Support Infrastructure 46 6.3 Proposed Facilities 46 6.3.1 Pack House (with cold infrastructure) 46 6.3.2 Banana Ripening Facility 49 6.3.3 Dry Warehouse 49 6.4 Other Facilities 50 7 SPOKE: DARBHANGA 51 7.1 Focus Crops and Estimated Throughput 51 7.2 Existing Facilities 52 7.2.1 Traders’ Shops 52 7.2.2 Open & Covered Platforms 52 7.2.3 Godowns 52 7.2.4 General Amenities and Support Infrastructure 52 7.3 Proposed Facilities 53 7.3.1 Ambient Pack Shed 53 7.3.2 Banana Ripening Facility 53 7.3.3 Other Facilities 54 8 SPOKE: DALSINGHSARAI 55 8.1 Focus Crops and estimated Throughput 55 8.2 Existing Facilities 56 8.2.1 Traders’ Shops 56 8.2.2 Open & Covered Platforms 56 8.2.3 Godowns 56 8.2.4 General Amenities and Support Infrastructure 56 8.3 Proposed facilities 56 8.3.1 Pack house (ambient) 56 8.3.2 Banana Ripening Facility 58 8.3.3 Dry Warehouse 58 8.3.4 Ambient Onion Stores 58 8.3.5 Other Facilities 58 9 SPOKE: BEGUSARAI 60 9.1 Focus Crops and estimated Throughput 60 9.2 Existing Facilities 61 9.2.1 Traders’ Shops 61 9.2.2 Open & Covered Platforms 61 9.2.3 Godowns 61 9.2.4 General Amenities and Support Infrastructure 61 9.3 Proposed facilities 61 9.3.1 Pack house (ambient) 61 9.3.2 Ripening Facility 62 9.3.3 Dry Warehouse 63


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9.3.4 Ambient Onion Stores 63 9.4 Other Facilities 63 10 FINANCIAL ANALYSIS 65 10.1 IVCs in Bihar 65 10.2 Muzaffarpur IVC 65 10.2.1 Project Details 65 10.2.2 Project Cost 66 10.2.3 Means of Finance 69 10.2.4 Key Operating Assumptions 69 10.2.5 Financial Performance 72 10.2.6 Sensitivity Analysis 73 11 ECONOMIC ANALYSIS 74 11.1 Methodology and Assumptions 74 11.2 Muzaffarpur IVC 75 11.2.1 Quantification of Benefits 75 11.3 Quantification of Costs 77 11.3.1 Recurring Costs 78 11.4 Cost‐Benefit Statement 78 11.5 Calculation of Economic IRR (EIRR) 79 11.6 Economic Appraisal Results 79 11.6.1 Major Economic Indicators: 79

PATNA‐NALANDA INTEGRATED VALUE CHAIN 80

12 FOCUS CROP: POTATO 82 12.1 Value Chain Analysis 82 12.1.1 Value Chain Actors and Functions: 84 12.1.2 Post Harvest Infrastructure 86 12.1.3 Institutional Arrangements 86 12.2 Gaps in the value chain 86 12.3 Proposed Interventions 87 13 FOCUS CROP: VEGETABLES 88 13.1 Value Chain Analysis 89 13.1.1 Price Build up in the value chain of Cauliflower 92 13.1.2 Price Build up in the value Chain of Brinjal 94 13.2 Post Harvest/Marketing Infrastructure 95 13.3 Gaps in the value chain and Proposed Interventions 96 DPR: PATNA‐NALANDA INTEGRATED VALUE CHAIN PROJECT 97 14 SPOKE: MUSALLAHPUR 99 14.1 Focus Crops and estimated Throughput 99 14.2 Existing Facilities 100 14.2.1 Traders’ Shops 100 14.2.2 Open & Covered Platforms 100 14.2.3 Godowns 100 14.2.4 Cold Storage 100 14.2.5 General Amenities and Support Infrastructure 100 14.3 Proposed facilities 100 14.3.1 Pack house (ambient) 100


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14.3.2 Ripening Facility 102 14.3.3 Potato Cold Store 102 14.3.4 Dry Warehouse 102 14.3.5 Ambient Onion Stores 102 14.4 Other Facilities 103 15 HUB: BIHAR SHARIF 105 15.1 Focus Crops and Estimated Throughput 106 15.2 Existing Facilities 106 15.2.1 Traders’ Shops 106 15.2.2 Open & Covered Platforms 106 15.2.3 Godowns 106 15.2.4 General Amenities and Support Infrastructure 107 15.3 Proposed Facilities 107 15.3.1 Ambient Pack‐shed for vegetables 107 15.3.2 Banana Ripening Facility 108 15.3.3 Potato Cold Store 109 15.3.4 Dry Warehouse 109 15.3.5 Ambient Onion Stores 109 15.3.6 Other Facilities 109 16 SPOKE: GAYA 111 16.1 Focus Crops and estimated Throughput 111 16.2 Existing Facilities 111 16.2.1 Traders’ Shops 112 16.2.2 Open & Covered Platforms 112 16.2.3 Godowns 112 16.2.4 General Amenities and Support Infrastructure 112 16.3 Proposed facilities 112 16.3.1 Pack house (ambient) 112 16.3.2 Ripening Facility 113 16.3.3 Potato Cold Store 113 16.3.4 Dry Warehouse 114 16.3.5 Ambient Onion Stores 114 16.4 Other Facilities 114 17 SPOKE: ARRAH 116 17.1 Focus Crops and Estimated Throughput 116 17.2 Existing Facilities 116 17.2.1 Traders’ Shops 117 17.2.2 Open & Covered Platforms 117 17.2.3 Godowns 117 17.2.4 General Amenities and Support Infrastructure 117 17.3 Proposed Facilities 117 17.3.1 Pack House 117 17.3.2 Potato Cold Store 118 17.3.3 Dry Warehouse 118 17.3.4 Ambient Onion Stores 118 17.3.5 Other facilities 119 18 SPOKE: BUXAR 120 18.1 Focus Crops and Estimated Throughput 120 18.2 Existing Facilities 121


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18.2.1 Traders’ Shops 121 18.2.2 Open & Covered Platforms 121 18.2.3 Godowns 121 18.2.4 General Amenities and Support Infrastructure 121 18.3 Proposed Facilities 121 18.3.1 Ambient Pack House 122 18.3.2 Potato Cold Store 123 18.3.3 Dry Warehouse 123 18.3.4 Onion Store 123 18.3.5 Other Facilities 123 19 SPOKE: NOKHA 124 19.1 Focus Crops and Estimated Throughput 124 19.2 Existing Facilities 124 19.2.1 Traders’ Shops 124 19.2.2 Open & Covered Platforms 125 19.2.3 Godowns 125 19.2.4 General Amenities and Support Infrastructure 125 19.3 Proposed Facilities 125 19.3.1 Pack Shed 125 19.3.2 Potato Cold Store 126 19.3.3 Dry Warehouse 127 19.3.4 Onion Store 127 19.3.5 Other facilities 127 20 FINANCIAL ANALYSIS 129 20.1 Patna‐Nalanda IVC 129 20.1.1 Project Details 129 20.1.2 Project Cost 129 20.1.3 Means of Finance 132 20.1.4 Key Operating Assumptions 132 20.1.5 Financial Performance 135 20.1.6 Sensitivity Analysis 136 21 ECONOMIC ANALYSIS 137 21.1 Patna‐Nalanda IVC 137 21.2 Quantification of Benefits 137 21.3 Quantification of Costs 138 21.3.1 Recurring Costs 139 21.4 Cost‐Benefit Statement 139 21.5 Calculation of Economic IRR (EIRR) and NPV 139 21.6 Economic Appraisal Results 140 21.6.1 Major Economic Indicators: 140

BIHAR: INTEGRATED VALUE CHAINS 141

22 CONCEPTUAL PLANS FOR FACILITIES 142 22.1 Conceptual Plans for facilities at selected locations of the IVCs 142 22.1.1 Planning Concept 142 22.1.2 Master Plan 143 22.1.3 Buildings 143 22.1.4 Services 143


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1 INTRODUCTION

IL&FS Cluster Development Initiative Limited (IL&FS Clusters) has been appointed by Asian Development Bank (ADB) to prepare a Detailed Project Report for operationalising the Agribusiness Infrastructure Development Investment Program Phase II in the states of Bihar and Maharashtra. The Agribusiness Infrastructure Development Investment Program (AIDP) is a Program of Asian Development Bank in the agriculture sector in India.

This document is the Final Report.

1.1 PROJECT OUTLINE AND INTENT AIDP is aimed at addressing three main constraints to agriculture growth- outdated technologies; lack of public investment in basic infrastructure and limited diversification. Taking into account the Integrated Value Chain (IVC) approach, the program targets improving physical and institutional linkages along agricultural value chains through support of agribusiness market infrastructure; support infrastructure like last mile roads, power, water; systems relating to market intelligence; and, capacity building and strengthening/establishing value chain linkages.

The intent of the program is to achieve accelerated investment in agriculture and to support related infrastructure in rural areas, along the Integrated Value Chains. The interventions may target several or all of the following:

• Aggregation facilities

• Sorting, grading, packaging

• Storage (ambient and controlled temperature)

• Value addition and market intelligence

• Distribution facilities including logistics

• Value chains for end-to-end linkages

1.1.1 Value chain approach

The Integrated Value Chain approach guides the process and forms the underlying structure for this initiative. Of the several motivations to employ a value chain approach, the ‘development’ orientation is partial to one that drives economic growth with the aim of poverty reduction through the integration of large numbers of micro- and small players (in this case, farmers, traders, agents etc) into increasingly competitive value chains. By influencing the structures, systems and relationships that define the value chain the aim is to help farmers, traders and other stakeholders to improve (or upgrade) their products and processes, and thereby contribute to and benefit from the chain’s competitiveness. Through


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this approach, the government would enable the small and mid-size players—including small-scale farmers—to create wealth and escape poverty1.

The value chain approach; as discussed here, though not especially different from other economic development approaches is distinct in that it simultaneously emphasizes several features like:

A market system perspective

A focus on end markets

Understanding the role of value chain governance

Recognition of the importance of relationships

Facilitating changes in behaviour

Transforming relationships

Targeting leverage points

Empowering the private sector through its greater involvement

Taking a value chain approach necessitates understanding a market system in its totality: from input supply to end market buyers; the support systems that provide technical, business and financial services; and the business/market environment in which the sector operates. Such a broad scope of analysis is needed because the principal constraints to competitiveness may lie within any part of this system or the environment in which it operates. While it may be beyond the capacity or outside the mandate to address certain constraints, the failure to recognize and incorporate the implications of the full range of constraints generally leads to limited, short-term impact or even counter-productive results.2

A careful understanding of these dynamics underpinned the project from its early stages right up to the final proposal. In particular, with an eye to effective implementation, special attention has been directed at the proposed institutional arrangements and capacity building support across levels. To elaborate, this approach envisages to bring about positive changes through increased competitiveness, to make visible and measurable differences across the board. The focus of the value chain approach is thus on transforming relationships—particularly between players linked vertically in the value chain—to:

facilitate upgrading to become competitive, and

adapt to changes in end markets, in the enabling environment or within the chain to remain competitive

1.1.2 Hub and spoke model

Use of the concept of the hub and spoke model in the value chains is another key aspect of the project. This takes into account existing players in the supply chains and resolves them into the new, ordered and

1 “The Value Chain Framework” Briefing Paper www.microlinks.org/ev.php?ID=21629_201&ID2=DO_Topic 2 ibid


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more efficient structures that employ the use of improved infrastructure and systems. Assignment and clarification of roles along with support of the appropriate infrastructure, or the wherewithal to execute the functions leads to improved efficiencies, greater value realisation and, finally, improved competitiveness.

The illustration alongside demonstrates the flow and activities from spoke to hub and from there to the consumption markets.

1.2 INTEGRATED VALUE CHAIN REGIONS

In Bihar, though agriculture and agro-based industries comparatively, have a high contribution to the gross value addition the performance level of the sector has much scope for improvement. More so given that it is the third largest vegetable producing state (14.07 mn MT annually accounting for more than 11% of the country’s total production) and the seventh largest fruit producing state (3.25 mn MT annually, accounting for just under 6% of the total fruit production in the country). It is the only producer of makhana, the second largest producer of okra and cauliflower, 3rd largest producer of brinjal, cabbage, onion and potato and the largest producer of litchi. It is also the second largest producer of guava, the fourth largest producer of pineapple and fifth largest producer of banana and mango

Presently, agriculture is the livelihood of over 76% of the population and it drives the state’s economy. Given these conditions, the introduction of a structured Integrated Value Chain approach in the belts with the best potential has been proposed.

1.2.1 Agri‐Marketing and Infrastructure

Currently, Bihar does not have state regulated agriculture market infrastructure after the APMC Act was repealed by government of Bihar in 2006. There were about 100 main wholesale agricultural markets in the state before the repealing of APMC Act. Out of these, 54 are erstwhile APMC mandis of a larger scale. Most of these mandis have some vacant areas in their yards; 13 have more than 8 Ha of vacant land at each location. These mandis provide opportunity for setting up of requisite infrastructure along the value chain.

The focus of the program in the state has therefore, focused on the modernization of these markets. At present, most of these markets have very basic infrastructure such as trading sheds, roads, auction areas, etc. with several drawbacks in terms of facilities, amenities and overall organisation. Required infrastructure/services for the agri-business value chain like warehouses, cold stores, pack houses, waste management, etc. are largely absent or in short supply; interventions along these lines therefore, will not only address this gap but also provide opportunity hitherto unavailable for up-scaling. . Total food grain warehousing capacity of Bihar is about 1.34 mn MT –only 12% of total production of food grains in the state. There are around 240 cold stores with a capacity of just under a million MT, the


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majority of which is used for storing potato. Most of these cold stores use dated technology; using ammonia, with glass wool insulation and no planned air circulation.

1.2.2 Selection of Region

The regions selected for the Integrated Value Chains in Bihar are based on considerations of crop mix, with focus both on horticultural crops and food grains, taking into account volumes of production and seasonal spread and overall development indicators for the area.

The selection has taken into account the diverse crop mix in the two regions, with one being a predominantly fruit production area and the other focusing on vegetable and grain. The two selected regions also account for the production of major food grain crops: maize and paddy respectively, which are both significant in the state’s consumption pattern and have been taken into account in the proposed infrastructure along the Integrated Value Chain. The selected areas are:

Muzaffarpur region in North Bihar

Patna-Nalanda region in South Bihar

Muzaffarpur region:

The region includes Muzaffarpur, Darbhanga, Vaishali, Samastipur, Bugusarai districts in North Bihar, as shown in the map. This region accounts for almost 1 mn MT of fruit production per year (fruits like mango, litchi guava and banana). It also accounts for just under 800,000 MT of vegetable production and over 1 mn MT of grain production (including staples like paddy, maize and wheat).

This region is especially well-known for litchi and mango and accounts for 50% of the total litchi produced in the country.

Patna‐Nalanda region

This region includes Patna, Nalanda, Buxar, Sasaram, Gaya districts and is a major vegetable producing belt. It has recorded more than 2 mn MT of vegetable production and about 1.1 mn MT of grain production annually. Vegetables like cabbage, cauliflower, cucurbits, onion, potato, tomato and okra are the major produce here.

Based on the selected area and taking an end-to-end integrated value chain approach, surveys undertaken for the regions brought out the area’s latent potential that may be given a fillip with appropriate infrastructure and systems support. .

Muzaffarpur

Patna‐Nalanda


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Details pertaining to these regions, focus crops and proposed strategies developed are described in detail in the report.

1.3 METHODOLOGY

In the course of the assignment, an assessment was made of the current status of produce, existing supply linkages and systems of aggregation, transportation, trade, sale and processing in the identified areas. Feasible clusters of high value agricultural /horticultural produce and high volume produce in Bihar, were specially flagged for examination along with an assessment of gaps, as also of the extant infrastructure.

The different phases of the assignment were as follows:

Phase I: Identification of regions for the integrated value chains of high value/volume agricultural/horticultural produce in the regions.

Phase II: Detailed field survey and analysis, gap analysis, identification of stakeholders

Phase III: Stakeholder-consultations

Phase IV: Structuring and detailing of project components (including locations and financials) for each of the selected integrated value chains

Phase V: Stakeholder-consultations for pre-testing models and project finalization

PHASE I: Identification of regions for the integrated value chains of high value/volume agricultural/horticultural produce in the region

IL&FS Clusters undertook to identify the major regions for Integrated Value Chains of high value/volume agricultural/horticulture produce based on primary and secondary studies and in consultation with some key stakeholders; representatives of the concerned departments of the state. The methodology adopted for the purpose was:

A study of various existing data e.g. relating to production, processing, marketing, infrastructural facilities, along with a mapping of the same.

To validate findings of secondary data, limited field assessments have been carried out.

A team of agribusiness supply chain experts mapped the state for production clusters, related infrastructure, existing systems and assessed the market demand and supply for different crops. Based on this, different high value and volume crop regions for the integrated value chains were flagged for consideration. The potential for value addition to the produce through processing at different levels to increase efficiency, preserve quality and/or reduce wastage/spoilage was additionally taken into account and assessed

Detailed production data of agri/horticultural crops was collected and analyzed. The status of agri/horticultural processing, marketing and infrastructure including storage, connectivity, etc. in the clusters were also assessed in the context of production on the one hand and its consumption market on the other.

Focused field assessments were undertaken (of a limited scope) to validate the secondary data in some areas in the envisaged integrated value chains.


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PHASE II: Detailed field survey and analysis, gap analysis, identification of stakeholders

A survey team was put in place to undertake detailed field surveys for each of the identified integrated value chains. As part of this exercise, IL&FS Clusters undertook an assessment of the range of activities under the value chain to understand the gaps and inefficiencies in order to identify sub-sectors with the most potential for growth. The methodology adopted is outlined below:

A detailed structured questionnaire survey was canvassed for mapping the entire value chain. This included assessment of marketable surpluses, mapping of the existing supply chain and identification of gaps at each stage, with added focus on institutional arrangements and infrastructure including marketing infrastructure, existing technology in use and potential for appropriate technology induction etc. The process of mounting the survey involved:

o Identification of blocks to be surveyed, based on production areas of the district that are known for the identified crops; villages from the identified blocks were visited by the survey team to collect data

o A two-level assessment- to gauge from farmers about the clusters, crops and quantity, and also obtain information regarding the same from DHOs, DAOs and market players such as commission agents to know their assessment of clusters and quantity. This helped check, verify and triangulate information and views.

The survey team was led by the agribusiness supply chain experts, and in addition to the canvassed questionnaire, included focus group discussions at the cluster level, interviews with key stakeholder representatives and group consultations. This process was spread over six weeks.

Consultations were a key part of the project development exercise, extending beyond the survey period, and, included stakeholders such as farmers, consumers, traders, agro-enterprises, processors, exporters of raw and value added products, as also private sector firms not currently involved but with the potential for participation in the project.

The prepared action plan was validated through focus group discussion and bring out environmental and social acceptability, financial feasibility, legal and other issues.

Social and environmental impact experts made independent assessment to understand the context

The agribusiness supply chain experts assessed the demand for high-value crops and value-added products in the domestic and international markets in consultation with the product specialists on the team, and identified sub-sectors in the integrated value chains with the most growth potential. Institutional, infrastructural and logistical barriers for product categories were also identified.

The cold chain experts conducted an independent assessment in the field to assess the cold chain needs for the identified integrated value chains, in view of the highly perishable high-value products to suggest cold chain solutions for each integrated value chain. The cold chain experts along with the logistics expert mapped the existing supply chains to identify the


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temperatures ranges ideal for the selected produce types and their requirements throughout the supply chain. For the focus crops, the following type of information was collected.

Crop harvest times;

Processes required for different crops – picking, washing, grading, packaging, storage;

Existing types and numbers of facilities for undertaking these operations;

Transport-types used, to and from these facilities;

Road networks connecting the clusters and markets, and also the facilities;

Main sources of consumption for the different crop types – un-organized retail, organized retail (supermarkets), export;

Typical number of stages in the existing supply chains – commission agents, aggregators, traders, markets, etc.

Cold chain technology such as temperature controlled facilities and transport that is in use in the existing supply chains.

Based on findings from the field studies, areas where key improvements can be made towards quality, waste reduction and greater value realisation from the produce, with the development of cold chain facilities, were flagged. The identification of cold chain interventions focused on post harvest cold-chain management, reducing metabolic rates (respiration and degradation by enzymes) and water loss/volume reduction and wilting, appropriate time for handling and processing, and, maintaining predictable consistent quality at delivery points. Based on this, facilities, relevant technologies and transportation have been identified and scoped.

Infrastructure specialists worked closely with the agribusiness supply chain specialists and the cold chain specialists to identify and rationalize requirements and evolve the applicable Hub and Spoke concept, located within the Integrated Value Chains.

A parallel assessment of the consumption markets in the existing supply chains took into account the following aspects:

1. Key market requirements and factors that affect price and shelf life such as quality, packaging, presentation, processing and Good Agricultural Practice (GAP) requirements.

2. The specific activities and unit cost of the specific activities needed to meet market requirements, e.g. mechanical harvesting, grading and packaging, cool storage, etc.

3. The commodity volumes and the synergies that may be developed between different products for harvesting, grading, packaging, processing, storage and transport.

Outputs from these were used to define the scope of the infrastructure requirements and provide the design parameters for value-adding plant and equipment as well as agribusiness centres, storage and handling facilities.

A social development specialist assessed aspects of the project critical for the project’s sustainability. Poverty and Social Assessment was undertaken by the social development specialist on a sample basis pertaining to key indicators of poverty and human development.


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Given the nature of the activities, the project does not have a significant land acquisition component that involves resettlement or any significant impacts to the indigenous peoples in the areas.

PHASE III: Stakeholder‐consultations

The program aims at developing commercially sustainable integrated agri-infrastructure projects; inputs and suggestions of potential investors in developing the projects have been used to further develop the projects.

After the detailed field survey, the analysis and the gaps identified were discussed with a range of key stakeholder groups, among them, farmers, consumers, agro-enterprises, research and extension organizations, food processing industry, intermediaries in the value chain, exporters and food retailers and private sector firms with potential for participation, etc. to get their feedback on the analysis and understanding of the issues.

These valuable inputs have been used at several instances for the accurate structuring and detailing of project components in the integrated value chains.

These inputs have also informed the need to build capacities along the envisaged integrated value chains.

PHASE IV: Structuring and detailing of project components (including locations and financials) for each of the selected integrated value chains

Based on the need assessment for each value chain, action plan were drawn-up and stakeholder consultations undertaken to identify locations of hubs and spokes in each integrated vale chain. International best practices were also used as applicable to benchmark and inform the practises to be instituted along the value chains.

The cold chain specialist developed detailed designs of the identified cold chain elements of the selected value chains along with costs- the infrastructure specialists developed the costs of civil works and technical equipment, in consultation with the cold chain experts. Improving efficiencies along the supply chain and greater value realisation were kept in focus.

The infrastructure specialist made an estimate of the civil works for buildings as well as for supporting infrastructure like water and power supply, effluent treatment etc. using tabled standard cost norms. The master plans of identified project structures in the selected value chains have been included.

A market intelligence and information system has been envisaged an integral part of the proposed interventions and knowledge centres have been proposed at hub/spoke locations.

The project finance/PPP specialists along with agribusiness supply chain experts, cold chain experts and infrastructure experts have developed detailed project costs for each value chain. The project finance/PPP specialists have considered various PPP options for project structuring. After detailed analysis of various operation models, most feasible options have been recommended to ensure smooth project implementation. Project structuring for determining various PPP options and identification of procurement options for various components along with sources and quantum of investment from different sources and the possible ways of meeting the O&M expenses of the assets for the value chain of each selected product of project, are also included..


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The agribusiness supply chain specialists explored existing farmer organizations (groups/clubs/cooperatives/associations) in the identified value chains, and recommendation for further formation of groups and capacity building have been included in the project with a suitable institutional mechanism, to ensure that small and marginal farmers are included in benefiting from the project.

PHASE V: Pre‐testing models and project finalization

In consultation with the strategic advisor, pre-testing of project components with potential private sector investors and existing stakeholders has been carried out.

The legal/PPP contracts experts undertook to review existing legal frameworks in the states with respect to the sub-project construction and implementation aspects.

1.4 STRUCTURE OF THE REPORT

The document, for Bihar, covers both Integrated Value Chains; Muzaffarpur and Patna-Nalanda and the layout is as follows:

Muzaffarpur Integrated Value Chain

Map of region

Introduction- Separate sections detailing focus crops litchi, mango, banana

Spoke description, proposed system

Proposed Locations for Hub and Spoke model, system

Proposed Integrated Value Chain Project

Patna‐Nalanda Integrated Value Chain

Map of region

Introduction- Separate sections detailing focus crops potato, vegetables

Spoke description, proposed system

Proposed Locations for Hub and Spoke model, system

Proposed Integrated Value Chain Project

Conceptual plans of facilities

Stakeholder consultations

Market assessment

Impact assessment

Capacity building

Policy and regulatory aspects

Implementation framework

Project implementation structure


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MUZAFFARPUR INTEGRATED VALUE CHAIN

Muzaffarpur region, Bihar

Focus Crops

Litchi Mango Banana

DPR: Muzaffarpur Integrated Value Chain Project

Description of Hub and Spokes


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Muzaffarpur region

Muzaffarpur region, comprising six districts viz. Muzaffarpur, Darbhanga, Vaishali, Samastipur and Begusarai, has been selected as one of the regions under the integrated value chain. The region is less developed, rain fed and flood prone, having low per capita income levels and poor infrastructure and connectivity. The identified districts constitute major agriculture trade centers of the region and any kind of interventions in these districts will give the much required impetus to the overall agribusiness activities in the state.

As mentioned earlier, the state was analyzed based on the overall horticulture production scenario in the districts. Also, the seasonality and scale of Production of major produce have been considered for the choice of the districts. Other factors like socio economic profile of the districts and existing infrastructure facilities like rail & road connectivity, rural electrification, etc have been taken into account to determine the regions.

While districts like Muzaffarpur, Vaishali and Samastipur have been major hubs for production of fruits like Litchi, Mango and Banana, Darbhanga and Begusarai are major grain producers thereby ensuring diversity and round the year availability of the produce. Though the seasonality is skewed towards winter, the region has a seasonal spread almost round the year.

The focus crops for Muzaffarpur region are Mango, Litchi and Banana. The choice of crops is

based on the adequacy of volume to make any intervention sustainable in the long term. Also, these crops have high-value addition potential.

The focus crops in this region are:

Litchi

Mango

Banana

Muzaffarpur


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2 FOCUS CROP: LITCHI

Litchi is a speciality fruit which is very famous for its taste. Bihar is the leading state in litchi production accounting for about 70% of the total production of the country. In Bihar, total area and production of litchi in 2007-08 was 29,843 Ha and 2.2 lakh MT respectively. Litchi production in Bihar has grown at a rate of 2.1% per annum in the last decade while for the rest of India; growth has been at the rate of 1.4%.

Muzaffarpur, Vaishali and Samastipur districts are well known for cultivation of litchi. The agro climatic condition of North Bihar particularly that of Muzaffarpur region is very congenial for commercial litchi cultivation. In addition to this, the region is also endowed with rich fertile calcareous soil that is very suitable for cultivation of high quality litchi. ‘Shahi’ and ‘China’ are the commonly grown varieties of Litchi. ‘Shahi’ commands premium over ‘china’ in retail markets because of its colour, taste and aroma.

Area and production of Litchi in the identified region

Districts Area in Ha Production in MT

Muzaffarpur 7206 56006

Vaishali 3513 26498

Darbhanga 808 5879

Samastipur 1107 8634

Begusarai 584 4322

Total 13,218 1,01,339

*Source: Directorate of Horticulture, Govt. of Bihar

Around 13,000 Ha is under litchi cultivation in Muzaffarpur region with production of around 1 lakh MT. Thus, Muzaffarpur region accounts for 50% of the total production of litchi in the state.

Harvesting of litchi in the region commences during the third week of May and continues up to first to second week of June. Marketable surplus in case of litchi is about 99%. More than 80% of litchi produced in the state is marketed out of the state and rest is consumed within the state. Around 1000-1200 MT of Litchi is processed annually in Bihar. Around 30 MT of fresh produce is also exported from the state to Nepal, UAE etc., which accounts for only 18% of the total volume of litchi exported out of the country.

2.1.1 Post harvest infrastructure

The region has five pack houses which are operated by private litchi processors. Around 1600-1700 MT of produce, which is less than 2% of the region’s production, is handled annually by them. The pack houses handle fresh as well as processed litchi. About 500-600 MT of fresh litchi is traded and around 1000-1200 MT is processed annually by them. The pack houses have facility for pre-cooling and cold storage (around 100 MT each). Mostly the pre-coolers are of 4-10 MT capacity and their maintenance is poor.


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Pre-coolers used for Litchi Brick Structures with inner Polystyrene Foam cladding.

As litchis are highly perishable, the cold stores are used by pack house operators to store litchi for 10-15 days only and thus for transit purpose only. Around 50 -60% of fresh litchi is transported through reefer trucks because its availability is a huge concern. Some of the pack house operators also hire reefer trucks from Delhi. The reefer trucks are of 9 MT/7 MT capacities and they can carry around 4-5 MT of fresh litchi. Rest of the produce is transported through normal trucks.

These pack houses also have facility for pulping and around 1000-1200 MT of litchi is processed annually by them. The installed capacity of pulping units is around 7 MT/hr and the resulting pulps are stored in deep freezers at -18° to -22°Celsius. Other products manufactured by them include litchi shreds/whole in sugar syrup. The same facility is also used by the processors for processing tomatoes, strawberry, pineapple etc.

2.1.2 Value chain analysis

Trade channel of fresh litchi

The following illustration depicts the various actors in the litchi supply chain:

Various channels of litchi supply chain are mentioned below:

1. Pre-harvest contract: This is the most commonly used sales system of litchi. More than 95% of the litchi farmer’s lease out their orchards to contractors. The farm owners do not want to go through the process of selling litchi themselves owing to the risks associated with marketing a highly perishable fruit and therefore they lease out their litchi orchards to pre-harvest contractors. These contractors act as agents of wholesale merchants located in cities like Delhi, Mumbai, Lucknow and Amritsar. They take credit facilities from the wholesale merchants/commission and supply produce directly to them. The contractors also supply litchi directly to processing units/pack houses and wholesalers of various districts of Bihar.

Pre‐harvest contractor

Farmer

Wholesaler

Commission agent

Retailer

Pack house


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2. A few large farmers have direct linkages with commission agents and they send the produce directly to them.

3. Some of the farmers supply directly to the pack houses. Some of these pack houses also provide extension services to the farmers to improve their crop yield.

The role played by various actors in the litchi supply chain and the value added at each stage is briefly captured below:

Farmer: The average landholding of litchi farmers is around 1.5 ha. The average size of a litchi orchard is around 0.75 ha. Litchis are planted in pits of 1x1x1 m with a row to row and plant to plant distance of 10m x 10m. Thus 100-130 trees are planted in a hectare. Farmers incur a cost of Rs 15,0003 in establishment of litchi orchard and the trees start bearing fruit from 5-6 years of age. The cost of establishment of orchard in a hectare is represented in table below:

Activity Cost per Ha (in Rs)

Cost of sapling (120 sapling) 1800

Labour cost (levelling, digging, weeding, sapling plantation, manure spread, filling etc) 1800

Cost of irrigation (8 times for 6 hours each day) 4320

Compost and fertilizers 4800

Pesticide application 600

Others (Thymate, colidol application) 1560

Total in Rs 14880

Besides the initial establishment cost, farmers incur a cost of Rs 7000-12,000/ha annually on maintenance of orchard. The average yield per tree is around 70 kg. Yield of litchi depends upon the age of orchard, variety, locality, agro climatic condition as well as management of orchard. Thus, there is wide variation in yield which varies from 40-100 kg per tree.

Farmers lease out their orchards to contractors when trees are in flowering or early fruiting stage i.e. in the months of January-February. The agreement between farmer and contractor is based on mutual understanding (verbal agreement) and there is no formal contract/lease system. The contractors negotiate price with farmers on the basis of number of plants in fruiting stage and entire orchard is taken on lease by the contractor. On an average, farmers get a price of Rs 600-1000 per tree. About 50% of the total value of contract is paid as advance to the farmer and the remaining amount is paid to the farmer after plucking of fruits from the orchard. The cost of maintenance (Rs 7000-12,000 per ha) of orchard, which mainly comprises of irrigation, pruning and spraying costs, is borne by the farmer. The economics of litchi cultivation is represented in table below:

Economics of Litchi cultivation

No of litchi trees in 1 ha 120

Average yield per tree (kg) 70

Total yield per ha (kg) 8400

3 Cost of land has not been taken into account for calculation of total cost of establishment of litchi

orchard


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Price received by farmer (Rs/kg) 10

Total income from sale of litchi (Rs) 84000

Annual cost of maintenance of I ha of orchard (Rs) 10,000

Net income to farmer per ha (Rs) 74,000

Net income per kg (Rs) 9

Thus farmer’s net income is around Rs74, 000/ha only, without taking into account his initial spending on establishment of orchard. On per kg basis, farmer’s net realization is around Rs 9 to 14/kg.

Intercropping is only practised until tree is of 3-4 years of age. Hence, litchi farmers are able to generate annual returns from only one crop. In case of other crops, farmers may maximise their returns through cultivation of 3-4 crops annually. Litchi tree does not bear fruit until it attains 5 years of age; hence farmer’s investment is blocked for five years and thus it acts as an entry barrier for small and marginal farmers.

Pre-harvest contractor: There are about 150 pre-harvest contractors operating in the region. Each of them takes around 50-100 acres of litchi orchards on lease from farmers for the duration of 1-3 years. When orchard is leased to the contractor for more than a year, the price is fixed every year at the time of fruit setting itself and the cost of maintenance is also borne by the farmer.

As the contractors are interface between the farmer and other stakeholders in the chain, they play a very important role in the value chain of litchi. When fruits attain maturity, the contractors hire local labourers for plucking, pooling, grading and packaging and its cost is borne by the contractor, which comes to around Rs 2/kg. Litchis are mostly packed in wooden boxes and dried leaves are used for cushioning. However, for shorter distances plastic crates are used.

Pre harvest contractors, who handle relatively lesser volumes (5-7 MT), operate in local market and they do not have well established linkages. However, those contractors who deal with larger volumes (150-200 MT) have strong linkages with commission agents of distant markets, local wholesalers within Bihar, litchi processing units and pack houses. The contractors send the produce directly to them in trucks and the cost of interstate transportation as well as commission at outstation markets is borne by the contractor. Thus, the marketing risk of litchis procured from various farms of the region is borne by him.

Commission agent: They provide credit to pre-harvest contractors, which in turn provide advance payment to farmers. Since they bear financial risk as well as facilitate trade between contractor and wholesaler, they charge a commission of 6-8%.

Wholesaler: They play an important role in distribution of produce to various locations in the country. Wholesalers deal with large volumes and thus bear marketing risk.

Pack house operators: As mentioned earlier, there are 5 litchi pack houses in the region. They procure litchi either through the pre-harvest contractors or directly from the farmers.


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The process flow of pack house operations is represented below:

Litchis are sorted/ graded manually at the pack house and thereafter, the best grade meant for fresh market goes for fumigation and the rest goes for peeling. Packaging of fresh litchi is done manually in CFB boxes of 2 kg, 6 kg capacity and the boxes are pre-cooled with forced air pre-coolers. Pre-cooled litchis are transported in normal trucks or reefer trucks depending on reefer truck’s availability. Some of the boxes, awaiting transport, are also cold stored at 2°Celsius for 10-15 days and further transported in reefer trucks to Mumbai, Pune etc.

As litchi is highly perishable, the pack house operators send litchi to various markets rather than holding stock in anticipation of future gains. The cold stores are mostly used by pack house operators for transit purpose.

The pack houses also have facilities for processing and the resulting products are stored in deep freezers. The operators have marketing linkages with a few processing units of Dabur, Unilever etc, who are located outside the state. Based on demand from the processing units, pulps are transported in reefer trucks. One of the litchi processors also has a processing unit at Mumbai.

Price build up along the value chain of Litchi

A value chain indicating the various activities and cost build-up at every step has been mapped for 1 kg of litchi. Some of the assumptions of the price build up are:

The most commonly observed trade channel has been selected for the price build up of litchi, i.e. Farmer-PHC-Wholesaler-Retailer.

Farmer’s margin has been calculated based on his annual cost of maintenance of orchard. The cost of establishment of orchard has not been taken into account.

The cost of interstate transportation has been calculated for New Delhi.

The cost of retailing, which includes the cost of shop, wages, rent etc, has not been considered.

As described earlier, a litchi farmer receives a price of Rs 10-15/kg and he spends around Rs 1/kg in maintenance of the orchard. If the farmer’s price is Rs 12/kg (as depicted above), his net margin is around Rs 11/kg. The pre-harvest contractor has an important role to play and he bears the cost of plucking, pooling, packaging, interstate transportation expenses and commission at the wholesale market. The commission agent facilitates trade between contractor and wholesaler, for which it charges a commission of 6-8%. While the wholesale price of litchi is around Rs 30-40/kg (APMC Mumbai/Delhi), retail price in Mumbai/Delhi

Litchi

Sorting/Grading

Packaging

Fumigation

Processing

Peeling

Pre‐cooling

Reefer transport

Normal transport

Deep‐freeze

Fresh Litchi Processed Products

Cold storage


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varies from Rs 55- 70/kg. In case of litchi sold in retail markets of Bihar, retail price varies from Rs 25- 30 during the season.

The price build up can be summarized, as below: Particulars (in Rs/kg) Farmer Pre-harvest contractor Wholesaler Retailer Cost of maintenance/ Purchase price 1 12 30 35 Cost of marketing, transport, wastage 0 15 3 5 Selling price 12 30 35 50 Price spread 11 3 2 10

Some of the salient features of the price build up are mentioned below:

There are 4 intermediaries between the farmer and the consumer in the litchi supply chain.

The price build up from farmer to consumer is more than four times.

Pre-harvest contractor incurs a cost of around Rs 12 in various activities such as plucking, packaging, transportation etc. Besides this, around 10% produce is wasted in transit that also adds up to his cost. Thus the total cost incurred by the contractor is around Rs 15 per kg. The contractor earns a margin of Rs 3 per kg that is around 7 paisa of a consumer rupee.

The commission paid by the contractor to the commission agent constitutes 5 paisa of a consumer rupee.

Interstate transportation,

Rs 30 (Contractor’s Price)

Rs 35 (Wholesaler’s Price)

Plucking & Packing

Rs 12

Rs 2.1

Rs 7

Rs 2.9

Rs 2.5

Contractor’s margin

Wastage

Rs 3.2

Rs 1.0

Wholesaler’s margin

Rs 1.8

Retailer’s margin

Farm gate Price

Rs 2 Local transport & storage

Commissio

Wastage Rs 0.5

Expenses Rs 10

Rs 50

Consumer price

Rs 5

Wastage


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Since litchi is highly perishable, wastages are quite high i.e. around 20-30% at various stages in the value chain.

2.1.3 Gaps in the value chain

The structured questionnaire survey was instrumental in identifying the gaps pertaining to the pre harvest practices in litchi cultivation. The Agri supply chain experts carried out exhaustive interviews with various stake holders like Litchi farmers, intermediaries in the value chain, litchi processors and consumers in order to identify the gaps. Most of the interviews were held in the field purposefully. The idea behind conducting these meetings in the field is to validate the information by observing the prevalent practices. These were further validated by triangulation of information from varied sources during the subsequent visits to the identified regions. The potential interventions have been arrived at after in-depth understanding of the context and numerous brainstorming sessions between survey team and subject matter specialists. This formed a critical step and is found to be extremely useful, as the parties involved in these exercises brought in conceptual clarity and contextual familiarity to the table Each of the intervention suggested has been analyzed by the Agri supply chain experts and Cold chain experts based on the practical applicability in Bihar Context, and whether the suggested interventions were socially and economically meaningfulSome of the gaps identified in the value chain of litchi are as follows:

There is no pre-cooling facility at farm level except a few pack houses operating in the region. Less than 2% of litchi produced in the region is pre-cooled before packaging. Even pre-coolers currently in use are forced air type with marginal maintenance evident.

Litchis are packed in wooden boxes, which enhance respiration because of higher temperature leading to quality loss.

Mostly the produce is transported in normal trucks, which lead to around 15-20% of wastage during transit.

Case study: Litchi

A cold store owner in the Muzaffarpur region found difficulty competing against many newer and larger potato stores in the area. His store had a capacity of 2,000 MT whilst many other stores had capacities over 7,000 MT. He created a niche by expanding his infrastructure to leverage his existing business. A processing plant was set up to wash, peel, pulp and pasteurise the litchi before packing it to drums then blast freezing at -30 0C and storing in a frozen store at –20 0C. He started supplying frozen Litchi pulp to multinationals like Unilever and Pesico in Nepal and Pune.

To have strong backward linkages, the store owner purchased directly from the litchi farmers and cooperatives to acquire the product rather than use the APMC markets. As the finished product is frozen, refrigerated transport is required to ship to the processing plants in Nepal and Pune. Since there is no availability of suitable refrigerated transport in Bihar, it is sourced from Delhi. This income stream is seen to be low risk and as the litchi is immediately frozen there is little risk of product deterioration.

Besides this, the store owner also trades fresh litchi. It is pre-cooled and held in a cold store at 2 0C for up to a month beyond the harvest season in June when litchi supply becomes scarce and prices rise. Transportation to local markets is done through ambient vehicles but for further distances refrigerated vehicles are used. The frozen store is also being used to hold other frozen fruits such as strawberry and pineapple for the ice cream market.

The store represented a good example where a relationship had been established with farmers and their cooperatives and also the major multinational corporations to provide a reliable income stream to justify the investment in processing and cold store technology. Having established the facility, opportunities then present themselves for storage and supply of fresh litchi and other frozen fruits.


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Lack of credit & crop specific insurance is one of the major gaps identified at farm level. There are no risk mitigation efforts which would encourage growers to channelize their efforts towards increasing area and hence production of litchi.

Despite being the most concentrated belt for production of litchi, the growth of processing and other value addition in the litchi value chain has been slow. Some of the major reasons for slow development of processing facilities in the region are:

Lack of knowledge and exposure about the markets for finished products.

High production cost due to poor electricity and transportation infrastructure.

Low level of awareness regarding the sources of finances and subsidy.

2.1.4 Potential for intervention

Potential areas for intervention are:

Pack houses may be set up at spokes which would mean that the first stage in cold chain would commence between 5-6 hours of harvest. The pack houses may provide following facilities to litchi growers:

Pre-cooling chambers: It will help in maintaining the quality of the produce by reducing the temperature shock between harvesting and transportation to the destinations. Pre-cooling of litchi may be done at relative humidity of 85% to avoid desiccation. Instead of forced air cooling, use of hydro-cooling may be explored.

Sorting/Grading facility

Fumigation: Litchis may be subjected to fumigation by sulphur dioxide to control browning of pericarp. In other countries, oxalic acid is also used, which may be explored for this region.

Packaging: Litchi bunches may be packed in modified atmosphere packing (MAP) which allows for breathing ports.

Cold storage: Litchis packed in MAP can be stored at 1.5 degree Celsius, which increases its shelf life by 5 to 8 weeks. For short term storage i.e. less than 2 weeks, it may be stored at 7 degree Celsius.

Considering the concentrated production area and distance the produce has to travel to reach the consumption market, produce should be transported in reefer trucks from point of pre-cooling to destination markets. This would prevent quality deterioration during transit.

Since litchi is also transported to southern states and some quantities are also exported out of the country, use of rail as well as air transport may be explored.

Since litchi is available for short duration and the marketable surplus is more than 90%, setting up of more processing facility in the region would bring better returns to stakeholders.


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3 FOCUS CROP: MANGO

Bihar ranks third in mango production in the country and it occupies a share of 12 % in national production. Mango occupies a share of 48% of total area under fruit cultivation and about 41% of total production of fruits in Bihar. In 2008-09, total area under cultivation in Bihar was around 1.4 lakh Ha with production of 13.3 lakh MT. Productivity of mango in the state is 9.3 MT/ha that is higher than the national average of 6.3 MT/Ha for the year 2008-09. The production trend of mangoes is captured in table below:

Year Area in Ha (000 Ha) Production in 000 MT Productivity (MT/Ha) 2005-06 140.2 1222.7 8.7 2006-07 140.7 1306.9 9.2 2007-08 142.2 870.3 6.1 2008-09 144 1339.2 9.3


The irregularity in production and productivity over these years is owing to the alternate fruit bearing characteristic of mango tree. In Muzaffarpur region, total area under cultivation in 2008-09 was 0.4 lakh Ha and production was 2.9 lakh MT.

Districts Area in Ha Production in MT Muzaffarpur 9608 64295 Vaishali 8172 56204 Darbhanga 12863 76750 Samastipur 10384 70612 Begusarai 3958 24539 Total 44985 292400


Safed Maldah, Fazli, Sukula, Jardalu, Dashahri etc are the major varieties cultivated in the state. Safed Maldah produced in Muzaffarpur region is a very good variety of mango for table purpose. It is famous for its unique taste and flavour.

Grafted Mango trees start bearing fruits from fourth or fifth year onwards and a full crop from the tenth or fifteenth year depending up on the variety. Mango is available mainly during June and July. However the produce starts arriving in the markets from May and continues till August. Some of the varieties grown in Bihar and their time of availability are represented in table below:

Maturity Class Time of ripening Varieties Early varieties 20-30 May Bombay green, Jaradalu and Gulab Khas Mid early varieties 30 May - 10 June Himsagar and Krishnabhog Mid time varieties 10 - 25 June Maldah (Langra) and Dushahari Mid late varieties 20 June - 05 July Mallika Late varieties 25 June - 25 July Amrapali, Chausa, Sipia, Fazali Extreme late varieties 15 July - 10 August Kataki, Latra

Almost 90% of the total produce is marketable surplus and around 70% is consumed in the state itself. Around 20% is sent to Ranchi (state capital of Jharkhand) and other markets of Jharkhand state and the rest is sent to Kolkata, Siliguri etc.

Most of the varieties are used for table consumption and are not suitable for processing and pulp extraction because of its high fibre content. Some of the varieties are suitable for processing into pickles; however less than 1% of the mango produced in the region goes into pickling. Some of the varieties are being transported to distant places like Punjab and are being utilized for preparation of pickles. There is no mango processing unit (in the organised


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sector) in the state and some local entrepreneurs are making pickles at small scale for sale in local market.


Trade channel of mango

The following illustration depicts the various actors of the mango supply chain:

Various channels of the mango supply chain are mentioned below:

Pre-harvest contract This is the most commonly used sales system of mango. Around 70% of the mango farmer’s lease out their orchards to contractors. Under the pre-harvest contract, the farms are auctioned at the time of flowering stage i.e. in the month of January. After harvesting of fruit, the contractor either brings the produce to local wholesale market or sends directly to the commission agent of distant markets. The wholesaler works either on commission or wholesale basis depending upon the market as well as seller/buyer.

Some farmers directly bring their produce to nearest wholesale market.

A few retail companies/small processors procure directly from the farmers.

The major players involved in trade of mango are farmer, pre-harvest contractor, wholesaler, commission agent, semi-wholesaler and retailer. The role played by each stakeholder and the value added at each stage is briefly captured below:

Farmer: Mango saplings are planted by the farmers in pits with a row to row and plant to plant distance of 10x10x10 m. Many orchards of the region have been established unscientifically and random planting and inadequate spacing have been observed. Farmers incur a cost of around Rs 17,0004 in the 1st year in establishment of mango orchard. The cost of establishment of orchard in a hectare is represented in table below:

Activity Cost per Ha (Rs) Material Cost Cost of Grafts @ Rs. 40/Grafts 4000 Manure and fertilisers 750 Fencing 1500 Plant protection 250 Irrigation 1250 Intercropping 5000 Labour Cost Land preparation 1000 Digging of pits and filling 1000 Planting 250

4 It does not include cost of land.

Retailer

Farmer

Pre‐harvest contractor

Wholesaler

Semi‐wholesaler

Commission agent (distant markets)

Outstation buyers


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Intercultural operations 1000 Manuring & plant protection 200 Others 800 Total 17000

Besides the initial investment, farmers incur a cost of around Rs 4000-5000 annually on maintenance of mango orchard. It includes cost of pruning of dead and diseased branches, costs involved in plant protection and fertilizer application. Farmers lease out their orchard to contractors when tree is in flowering stage, i.e. in mid-January. The contract is based on trust and there is no formal leasing system in place. The price of an orchard is fixed based on fruiting cycle, price trend in previous years, variety and age of orchard. Around 75% of the contract value is paid in advance to the farmer and the rest is paid after plucking of fruits.

Pre-harvest contractor: When contract is agreed upon, maintenance of the orchard is taken up by the contractor. Time of harvesting is decided by the contractor on the basis of market demand and price trend. When the fruits are mature, plucking is carried out manually. It usually consumes a day to pluck fruits of one tree, when two labourers are involved per tree and the cost is around Rs 0.4/kg. Mangoes are packed in wooden boxes, bamboo baskets or gunny bags depending upon the destination market. For distant markets, wooden boxes of 20 Kg or 40 Kg capacities are used for packaging. Loading is a cumbersome process in a few cases where the farms are away from the main road and are not accessible by road. This would involve carrying the boxes to the truck on the main road. Light trucks of 4MT capacity are used for transportation of the produce from the farm to markets like Munger, Bhagalpur, Patna and Ranchi. However, for distant markets 10 MT capacity trucks are used. The produce is unloaded in mandi and traded. Though Bihar has repealed APMC act, still contractors pay around 4-8% as market charges to private mandi operators. The entire cost of harvesting to transportation to mandis, which is around Rs 3.5/kg, is borne by the contractor. Thus contractor is responsible for harvesting, packaging, transportation to nearest mandi and payment of market charges in private mandis.

Wholesaler: The wholesaler also pays around 2-4% as market charges to the private market operator. The wholesaler is a bulk trader and it brings the produce from mandi to the wholesale point and further supplies to semi-wholesalers and retailers. Some of these wholesalers supply to outstation markets on the basis of commission, which is around 6-8%.

Semi-wholesaler: Ripening is mostly carried out at this level. The cost of ripening of Mango is around 25 paisa/kg. Ripe mangoes are supplied to various retail points.

Retailer: Retailer deals with small volumes and hence its margin is around Rs 3-4/kg, after incurring expenses like transportation, spoilage during handling of the produce and sorting by the consumers.

Price build up along the value chain of Mango

Value chain of 1 kg of mango indicating the various activities and cost build-up at every step has been mapped, as shown below. Some of the assumptions of the price build up are:

The most commonly observed trade channel has been selected for the price build up of mango i.e. Farmer-PHC-Wholesaler-Semi-wholesaler-Retailer.

The price build up has been shown for Safed Maldah variety of mango.


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Farmer’s margin has been calculated based on his annual cost of maintenance of orchard. The cost of establishment of orchard has not been taken into account.

It is assumed that mangoes are procured from orchard in Muzaffarpur district and sold in retail market of Patna.


As depicted above, the farm gate price is Rs 15/kg and the farmer’s margin is Rs 13/kg. Thus farmers spend around Rs 2/kg on maintenance of mango orchard. The contractor bears the cost of harvesting of mangoes, grading and packaging, loading, transportation to nearest mandi and pays market charges to the private mandi operator. The total expenses incurred by him is around Rs 3.5/kg. As evident from above, pre-harvest contractor earns highest profit margin in the mango value chain because he performs many marketing functions like harvesting, packing, transport and it a vital link between farmer and wholesaler. Since farmers do not have the capacity to bear marketing risk, it is borne by the contractor for which it earns a margin of Rs 3-4/kg.

Mangoes are traded in local mandis, which is bought by the wholesaler. The wholesaler is a bulk trader and supplies to semi-wholesalers and retailers. The wholesaler does further grading of mangoes for better price discovery and earns a margin of around Rs 1-1.5 per kg. Ripening is carried out at semi-wholesale level and the semi-wholesale incurs a cost of around Rs 0.3 for ripening of 1 kg of mango. Semi-wholesaler and retailer’s margin is around Rs 2/kg and Rs 3/kg respectively. The accumulated wastage observed in case of Mango is

Harvesting

Rs 15.0

Rs 0.4

Rs 3

Rs 1.8

Loading and transport to mandi

Rs 1.4

Rs 2.0

Contractor’s margin

Retailer’s margin

Consumer price

Farm gate price

Rs 36 Semi‐wholesalers margin


Packaging

Rs 0.4

Rs 3.0

Rs 2.4

Rs 0.8

Rs 0.8

Rs 1.3

Market charges

Transport to wholesale point

Ripening and other expenses

Losses

Rs 21 (Contractor’s Price)


Rs 29 (semi‐wholesaler’s Price)


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anywhere between 15 to 22%. Thus the price of mango jacks up to around Rs 36 per kg, when it reaches retail markets. The price build up can be summarized, as below:

Particulars (in Rs/Kg)

Farmer Pre-harvest contractor

Wholesaler Semi-wholesaler

Retailer

Cost of maintenance/Purchase price 2 15 21.5 24 29 Cost of marketing, transport, wastage 3 1 3 4 Selling price 15 21 24 29 36 Price spread 13 3 1.5 2 3


There are 4 intermediaries between the farmer and the consumer in this supply chain.

The price build up from farmer to consumer is around two times.

As evident from figure below, farmers share in a consumer rupee is around 36 paisa for mangoes, which is around 14 paisa higher, compared to litchis. However, mangoes have alternate bearing cycle, which affects the annual income of mango farmers.

The contractors earn a net margin of Rs 3/kg that is around 8 paisa of a consumer rupee.

Wholesaler, semi-wholesaler and retailer earn around 4 paisa, 6 paisa and 8 paisa respectively of a consumer rupee.

In the value chain of mango, wastages account for 16 paisa of a consumer rupee. Unripe mangoes are less prone to damages and hence wastage is quite low till the produce reaches wholesale level. Wastages mostly happen at semi-wholesale and retail level when ripe mangoes are handled.


There is no post harvest infrastructure in the region for mango. The initial grading and packaging is done at the farm level by the contractor. Mangoes are packed in wooden boxes, bamboo baskets or gunny bags depending upon the destination market. Unripe/green mangoes are not stored in cold stores. There is no farmers’ cooperative or any other institution which is engaged in the marketing of mango in the region. There is no mango processing unit in the organized sector in the region at present.

3.1.3 Gaps in the value chain

Since the post harvest infrastructure is almost absent in the region, the inadequacies in the value chain are limited to harvesting, handling and marketing of Mango.

The gaps have been identified during the survey and focused group discussions with various stakeholders like Mango Farmers, Pre harvest contractors, traders and others in the value chain. The Agri Supply chain experts also triangulated the information with consumption markets to verify the findings pertaining to the gaps in the value chain of Mango. The


25

interventions suggested are such that they could be implemented in the given context. Emphasis has been given to include post harvest infrastructure considering that it is almost absent in the state.

Some of the gaps identified in the value chain of mango are as follows:

Mangoes are plucked, graded and packed manually at farm level. Farm level pre-processing facilities like pre-cooling, washing, grading, sorting are absent.

Unripe/green mangoes are not stored in cold stores in Bihar. Hence the stakeholders forego the opportunity of better price realization.

Ripening of the fruit is done by carbide, which is a banned practice and it also has harmful implications on health. Ripening chambers for mango are absent in the region.

Most of the varieties of Mango grown in the region are of table purpose consumption and hence suitability for pulping is very limited. Mango processing is limited to pickling, which is a household/cottage industry.

Mango farmers are highly dependent on contractors for marketing their produce as well as for credit/ advance payments, which reduces their bargaining power.


Potential areas for intervention are:

Integrated pack houses may be set up at spokes. The pack houses may have facilities for:

De-sapping

Washing: may include hot water treatment and fungicidal application.

Sorting/grading

Packing in corrugated boxes

Pre-cooling

Cold storage

Modern cold stores may be set up to store unripe mangoes. Mature green mangoes may be stored at 13 degree Celsius and RH of 90-95%, which increases its shelf life by 1-2 weeks.

Ripening chambers may be set up at hub for uniform ripening of mangoes. Exposure to 100-ppm ethylene for 12 to 24 hours at 20 to 22°C and 90-95% relative humidity results in accelerated and uniform ripening of mangoes within 5-9 days.

Mango should be transported in reefer vans to avoid physical and quality loss during transit

Since mango produced in the region are not suitable for pulping, other processing opportunities like canned mango cubes, pickles etc can also be explored.


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4 FOCUS CROP: BANANA

Banana is one of the prominent fruits grown in Bihar. In respect of production, it ranks second to Mango. The state accounts for 5.5% of country’s production. In 2007-08, banana was cultivated in an area of around 30,000 Ha with production of 1.32 million MT. There is just a marginal increase in the area under cultivation of Banana; however productivity has seen significant jump over the last three years. The productivity has gone up by 32% from 05-06 to 08-09. Though Banana is grown in almost every part of Bihar, commercial cultivation with high scale of production has been found in Muzaffarpur region.

In Muzaffarpur region, area and production of banana in 2007-08 was around 12,500 Ha and 0.57 million MT respectively.

Area and production of banana in the identified region

Districts Area in Ha Production in MT Muzaffarpur 4892 214780 Vaishali 3084 150499 Darbhanga 1742 77844 Samastipur 1946 94964 Begusarai 897 41442 Total 12561 579529


Muzaffarpur and Vaishali together account for 63% of the regions production. Major growing areas in Vaishali district include Biddupur, Raghopur, Goraul, Jandaha, Chehrakalan and Mahnar. Banana growing areas in Vaishali district have sandy loam type of soil and river Ganga is the source of irrigation. In Muzaffarpur district, Banana is mainly cultivated in calcareous soil and source of irrigation is river Gandak.

Banana is propagated through suckers and the planting is preferred during the rainy season. Major varieties grown in the region are Muthia and Chinia. Harichaal and Robusta are the other varieties grown in the region. Both these varieties produce dwarf type of Banana fruits. The varietal characteristics are mentioned below:

Chinia: Chinia is a medium tall variety producing fruits that are small (3” to 4 “) and remain yellowish green throughout their development but turn pale yellow to golden yellow after ripening. The crop is of longer duration with less shelf life of the fruit in comparison to varieties like Hari Chaal and Robusta. Also, this variety is less preferred in retail markets when compared to long varieties.

Muthia: The Plants on an average grow up to 3 meters in height with about 120-130 days from flowering to harvesting. The fruits are bright yellow in colour and are used for table purpose. The fruit is heavier with more girth when compared to dwarf variety but is less sweet in taste.

The varieties grown in the region are not processable and are used mostly for table purpose and culinary purpose. The varieties cultivated in this region have lesser acceptance in the market when compared to the long varieties cultivated in other parts of Bihar and wastage is also high due to poor shelf life of the produce. The marketable surplus of Banana is about 88%.


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Trade Channel of Banana

The supply chain can be classified into three main types based on the Point of Sale which in turn is influenced by the variety.

Channel 1- Sourcing from the Farm Gate: Direct Sourcing from farm is the most preferred mode of sales accounting for 70-80 % of total banana trade. Under this, commission agents/traders directly liaison with farmers or village aggregator for purchase of Banana. Trade terms and negotiations like quantity, quality and rates are generally fixed over phone through the local aggregator. In this system, local aggregator is the only interface between buyer and grower. The trader or local aggregator, then, arranges for transportation and the produce is directly picked at the farm gate.

Channel 2- Direct Marketing by Farmer –– Accounts for 15 - 20 %

Channel 3- Sourcing from Distant Markets –Accounts for 10 - 15 % of the trade

The major players involved in the trade of banana are Farmer, Aggregator, Commission agent, Wholesalers and Retailer. The role played by each stakeholder and value added by each of them is briefly captured below:

Farmer: Farmer does planting of suckers during the months of July to October in the region. Banana suckers are planted in pits which are generally 50*50*70 cm in size. However, it was observed that pits are not of uniform size and depth is not enough leading to a poor holding to the plant. As a result of this, plants droop when the fruits attain full maturity. Around 1100 to 1200 suckers are planted in an acre. Banana is an annual crop and around three crops are taken from a sucker. One plant gives only one bunch of fruit in a season and the plant is cut after harvesting of the bunch. Farmers incur a cost of around Rs 50,000 in cultivating banana in a hectare.

A bunch of fruit takes 100-120 days to mature after shooting. The maturity of fruit is indicated by drying of top leaves and change in colour of fruits. In case of ‘Chinia’, the average weight of a bunch is around 12-14 kg and in case of HariChaal, the average weight is 20-24 kg. The average weight of a finger is around 150-180 gm in harichaal and around 120-150 gm in case of Chinia and Muthia.

Retailer in Local Market

Aggregator

Commission agent

Wholesaler/CA in Distant Market

Farmer

Consumer Retailer

Consumer

Aggregator/wholesaler in distant market

Channel 1

Channel 2 Channel 3


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When fruits attain 80-90% maturity levels, bunches are harvested manually by the farmer. In case of Harichaal harvesting begins from Aug and goes up to January and the peak period is Sep to early Jan. In case of Chinia, fruits are harvested between Aug and Oct with just very low quantity in Nov. Harvesting of the crop in a particular field is not done at one time by the farmer, since bunches produced by different plants do not attain uniform maturity due to difference in their shooting times.

Traditionally, Banana is sold by the farmers to aggregators in bunch along with its central stem at the farm gate. Price fixation between the farmer and the aggregator is by negotiation. The aggregator offers a price based on his information of price in the local market. The difference in price in local market and the price offered to the farmer depends on the distance of the market from the farm. When price is decided upon, banana bunches are harvested manually by the farmers. The cost of harvesting, which is around Rs 0.5/gaudh5 is borne by the farmer. Banana bunches are cut at different stages of maturity and basically depends on demand from buyers and transportation time to destination markets. Based on present market scenario, the price received by farmer was approximately Rs 60 to Rs.80 per Gaudh for Chinia variety.

Aggregator: The produce is often bought by aggregators at the farm gate level. Aggregators often belong to the same village and have personal contacts with both producers and commission agents in the markets. The aggregator offers a price to the farmers based on his information about production for the season, quality of the produce and prevailing price in the local market. The aggregator is responsible for loading, transportation to the markets and unloading of the material. He incurs the cost towards all these activities. The aggregator retains about Rs.15 per gaudh towards his margin.

Commission agent: The commission agents are based out of the market yards and play key role in facilitating the trading activity. The commission agents are well connected with the retailers from local as well as distant markets. The prevailing commission charged by them is about 6%.The commission agents have an important role to play in the value chain as they bear the financial risk to a large extent. The commission agent pays the farmers/aggregators on the spot but receives money from traders/ buyers after a week or more depending upon the terms and conditions agreed upon. Sometimes, the CA also acts as a wholesaler (especially in case of Banana arriving from Andhra) wherein he purchases the produce and trades it.

Also, they carry out ripening process wherever required at their end. The process involves placing the produce which needs to be ripened in a small ante-room and by burning saw dust in tin containers. The doors/windows of the room are closed and sealed with mud and the produce is subjected to this treatment for about 18 hours (In Summer it takes about 10 Hrs and in extreme cold weather it takes 24-30 hours). Depending upon the destination market, the produce is either left in ventilated room(in case of local/nearby destination) or transported to farther destinations (next step in ripening where the produce is left open in ambient conditions and ripening takes place during the transit). Thus by the time the produce reaches the destination it is more or less ripe and ready. Almost 70 -80% of the produce reaches the destination in ripened/ ripening stage while only 20 - 30% of the produce is sent in unripe stage.

5 Banana bunches are called gaudh in local dialect.


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Carbide is also used for ripening the produce. Also, there have been cases where the produce is subjected to Ethrel treatment by dipping the bunches in 50ppm Ethrel solution before ripening. The treatment did not show any improved results and hence this practice is not common now.

Traders: Most often they form the penultimate point in the supply chain. They buy the produce through commission agents and in turn sell it either directly/ through other retailers in the consumption markets. The trader bears the costs towards loading, transportation charges to the destination markets, unloading and wastage. After incurring all these expenses the traders retain about Rs.15-20 per gaudh.

Price build up along the value chain of Banana

A value chain indicating the various activities and cost build-up at every stage has been mapped for a gaudh/bunch of banana.

Channel 1: Farmer-Aggregator In the price build up depicted above, the farmer is responsible for cultivation of banana and harvesting of bunches. The cost of cultivation incurred by the farmers is around Rs 25/goudh. The average price realized by a farmer for a goudh is around Rs 60 and his net margin is around Rs 34.5/goudh. The aggregator bears the expenses towards loading, transportation to market and unloading charges at the market, which comes to around Rs 4/goudh. The price realized by the aggregator is around Rs 80 and his net margin is Rs 15/goudh.

Banana is traded in the market and the trade process is facilitated by a commission agent, who charges 6% commission from the buyer. The ripening is carried almost in 70 – 80% of the cases at the market yard and the produce is sent to the destination markets (i.e. to

Wastage

Rs 15

Rs 1.0

Rs 60

Rs 2

Rs 120

Rs 4

Rs 2

Rs 2

Rs 6

Rs 12

Rs 15

Rs 1

Farm gate price

Loading

Transportation to Market

Unloading charges

Aggregator’s margin

Ripening

Commission

Retailer’s margin

Consumer Price

Loading/U/L

Transportation

Rs 79 (Aggregator’s Price)


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trader/retailer) as it ripens during transit. The commission agent carries out the ripening process, on behalf of the buyer, at his end and charges Rs 12/goudh from the trader. The rest 20 – 30% of the volumes are traded and transported in unripe condition only. The cost of ripening, commission to the agent, loading in the market, unloading at the point of sale is borne by the trader/retailer. The retailer earns a margin of Rs 15/goudh.

The price build up can be summarized, as below:

Particulars Farmer Aggregator Retailer Cost of cultivation/ Purchase price (Rs/goudh) 25 60 79 Cost of marketing, transport, wastage (Rs/goudh) 0.5 4 26 Selling price(Rs/goudh) 60 79 120

Price spread 34.5 15 15


There are 3 intermediaries between the farmer and consumer. The intermediaries are aggregator, commission agent and trader/retailer.

The price build up from farmer to consumer is almost 2 times.

The price realized by the farmer is around Rs 60 per goudh that forms 29 paisa of a consumer rupee.

The aggregator bears the product risk and thus gets 12 paisa of a consumer rupee.

The commission agent bears the financial risk as well as does ripening on behalf of the trader and thus gets a share of 5 paisa of a consumer rupee. Ripening constitutes 10 paisa of a consumer rupee.

Channel 2: Direct marketing by the farmer

In the above diagram, the farmers pay for the initial loading, transportation to the nearest mandi and unloading charges at the mandi. The total cost incurred by the farmer is around Rs 4/goudh. The price realized by the farmer at mandi is around Rs 80 and his net margin is around Rs 50/goudh. Because farmers do not want to bear marketing risk of bananas, use of this channel is limited. The trader pays for the commission agent’s charges, ripening, loading,

Wastage Rs 120

Rs 15

Rs 4

Rs 2

Rs 2

Rs 12

Rs 80

Rs 6

Farm gate price

Commission

Ripening

Loading, U/L

Transport

Trader’s margin

Consumer price


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further transportation and unloading. The expenses incurred by the trader is around Rs 26/goudh that includes wastage of 4% and the net margin realized by him is Rs 15/goudh

Channel 3: Bananas from Andhra are procured from October to April, which coincides with the lean production season for local chinia variety. The purchase price of theses banana is around Rs 150/goudh. In case of Bananas being sourced from distant markets, major expense is incurred in transporting the produce. About Rs.40000 is the cost incurred per trip which includes loading and transportation of about 1000 gaudhs of Banana. The commission agent of Bihar often plays the role of wholesaler in this channel. These costs are borne by him, that comes to around Rs 42/goudh, and along with a margin of about Rs.15/ guadh the produce is sold to traders at the market yards. The trader bears the expenses towards loading, transportation to destination markets and unloading. The margin earned by the retailer is around Rs 15 and the produce reaches consumers at a price of Rs 235/goudh.

The price build up for this channel is represented below:

The major markets for Banana are the district head quarters and major towns in all the districts and distant markets like Hazaribagh, Ranchi, Nawada, Ramgarh, Ranchi, Tata nagar, Girdi, Dhanbad, Bokaro, Siliguri, Assam, etc.


In case of Banana, farm level infrastructure is very minimal and restricted to hand sickles for harvesting. Produce is packed using the dried leaves from the farm. Sorting and Grading of bunches is mostly done by the commission agents in the market yard Ripening is done mostly in the erstwhile APMC markets. There are no specific facilities being provided at the market yard for ripening. Most of the Banana trading modules are equipped with small ante-room which is sealed for smoking and ripening by the agents.

There is no banana processing unit in the state.

Purchase price

Rs 150

Rs 7

Rs 35

Rs 2.

Rs 15

Transportation


Loading, U/L

Rs 2

Transportation Rs 8

Wastage

Rs 234

Rs 15

Trader’s margin

Consumer price

Loading, U/L



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4.1.3 Institutional Infrastructure

In terms of institutional set up, the Banana Research Centre in Vaishali district has now been converted to Krishi Vigyan Kendra for the district and most of the research work related to Banana is limited to Agriculture University farms in Pusa. There are informal producers groups in case of Banana for facilitating market linkages and for market intelligence.

4.1.4 Gaps in the value chain The gaps in the value chain have been identified based on stake holder consultation involving subject matter specialists and various players in the value chain like Banana cultivators, Pre harvest contractors, Commission Agents, etc., and a survey conducted in the area for the purpose. Some of the gaps in the value chain of banana are as follows:

There are no farm level facilities for washing, dehanding and packing. Traditional methods of post harvest mechanism is followed which leads to damage of fingers.

The bunches are transported along with the central stem that adds up to the cost of transportation.

Presently the ripening carried out is either by smoking using saw dust or using carbide pellets. This might prove to be hazardous and have ill effects on the end consumers as well.

The waste disposal mechanism (after stem and hand removal) is far from being satisfactory in most of the markets. In Hajipur, where large volumes of Banana are traded most of the waste like hands, stems, leaves used for packing are used for fuel purpose by the local community


It is proposed to set up facilities for banana handling at proposed hub in Muzaffarpur as well as at 3 spokes in the region. The proposed locations for spokes are Darbhanga, Hajipur and Dalsighsarai. The spoke shall have facilities for:

Washing

Sorting/Grading

Dehanding

Packaging

The estimated throughput at the hub shall be 8000 MT. In case of spoke at Hajipur, the estimated throughput shall be 5000 MT and other two spokes would handle around 3000 MT each.


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DPR: MUZAFFARPUR INTEGRATED VALUE CHAIN PROJECT


Hub Muzaffarpur

Spoke Hajipur

Spoke Darbhanga

Spoke Samastipur

Spoke Begusarai


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DPR: Muzaffarpur Integrated Value Chain Project

In case of Muzaffarpur region the hub is proposed in the town of Muzaffarpur itself while the spokes are proposed at Hajipur (Vaishali District), Darbhanga, Dalsinghsarai (Samastipur district) and Begusarai.

Certain common gaps merge in the case of all three focus crops identified for this region. High dependence on pre-harvest contractors for credit/advance payments is predominant in the region. This reduces the bargaining power of the farmers. The on-farm activities at the time of harvesting and packing are found to be basic. Considering the nature of produce and their availability, pack house facilities are found critical for maintaining the quality of produce and better price realization. Lack of adequate processing facilities is another conspicuous gap in the region. The reasons for this vary according to the crop. For Eg: in case of Mango, processing is almost non-existent because of the varieties grown and in case of Litchi there are just few processors due to the limited window of availability. A processing unit is proposed at Hub in order to explore the potential of value addition in these focus crops. Other fruits reaching the hub from distant markets can be processed round the year in order to make it viable. Both Hub and Spokes shall have pack houses so that the stakeholders will not forego the opportunity of better price realization due to lack of storage facilities.

All the proposed sites are well connected with each other and with production and consumption areas. However it is important to note that each of the proposed facility can be treated as a strategic business unit in itself where smooth operations are plausible without dependence on other spokes or Hub. This is owing to the fact that each facility is a viable commercial market in itself currently with sizeable throughput and shall have strategic advantage due to strong backward and forward linkages. Synergy with other markets will prove fruitful specially in areas like market intelligence, logistics, etc

It is also found that the existing facilities in the proposed project are far from being satisfactory. Traders’ modules, platforms, internal roads, waste disposal mechanisms, etc need complete revamp and refurbishing. The existing as well as proposed facilities are classified into four types of infrastructure namely Basic, Agribusiness, Add-on/Commercial and Link infrastructure. Depending on the specific site conditions these infrastructure is included in the project as per the requirements.

The agribusiness infrastructure suggested includes dry warehouses for grains like Paddy, Wheat and Maize and storage space for Potato & Onion. This has been included taking into account the production of major grains in the region. These crops are significant in the state’s consumption pattern. Also, the total food grain warehousing capacity in Bihar is just about 12% of the total production in the state. This forms an important consideration in developing Agri business infrastructure for grains apart from that being proposed for Horticulture produce.


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5 HUB: MUZAFFARPUR

The existing APMC market at Muzaffarpur has been proposed as the location for the Hub for the Muzaffarpur Integrated Value Chain. This location has been chosen because of its proximity and connectivity to the production clusters of fruits (litchi, mango and banana) in the region. The market is well linked by road to supply consumption centres like Patna in Bihar and cities in Uttar Pradesh, West Bengal and the North-east. Muzaffarpur district and town are themselves big consumption centres with populations of 3.7 mn and 0.3 mn respectively.

Located within the town of Muzaffarpur; the yard is situated on the highway connecting Muzaffarpur and Darbhanga (NH57). Muzaffarpur as a hub-location is also strategic as several National Highways and State roads connect it to the hinterland of production clusters on the one hand and consumption markets on the other: Sitamarhi, Darbhanga, Samastipur, Saran, Gopalgunj, Hajipur and to major cities like Ranchi, Kolkata etc.

National Highway 77 passes through this town linking Bochahan, Saraiya, Manipur, Gaighat clusters. Some clusters: Motipur, Sakra, Kurhani and Kanti blocks are connected through both rail and road network. Muzaffarpur Railway station is the nearest railhead. With the improvement of railway perishable transport system in India, the road to the railhead from the market may be developed in the next phase by making it a two-lane highway for speedy transport of produce to destination markets. The total area of the market yard is 8 Ha with very limited vacant space. The details of the existing infrastructure in the market are covered in previous sections on focus crops.

Daily arrivals of fruits at the Muzaffarpur market yard are about 150 to 200 MT during normal season and may go up to 300-350 MT during peak season. Apart from this, about 200 MT of onion and potato arrive daily at the market, and seasonally, 800-900 MT of cereals and pulses too. Maize arrives in the highest volume followed by wheat, paddy and pulses.


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The Muzaffarpur APMC market also has a fish market which accounts for an arrival of 110-130 MT of fish every day. Most of the fish (about 70%) comes of Andhra Pradesh while the rest is locally sourced.

The major aggregation points and production clusters in the catchment of Muzaffarpur market are Motipur (30 Kms), Sahebgunj (65 Kms), Saraiya (20 Kms), Muraul (30 Kms), Aurai (35Kms), Minapur (20 Kms), Bochahan (10 Kms) for fruits, vegetables and grains.

5.1 FOCUS CROPS AND ESTIMATED THROUGHPUT

Muzaffarpur region has a very vibrant trade of various fruits and vegetables. The present APMC market caters to almost all kinds of produce grown in the region. For the purpose of the proposed Integrated Value Chain, the identified focus crops for the Hub are litchi, mango, banana and vegetables. The focus crops and estimated throughputs have been identified based on present production in the catchment area, the present capacities of existing similar infrastructure/facilities, potential for interventions, and stakeholders’ consultations (see value chain analysis of focus crops).

Based on the above, the estimated annual throughput of the pack house in MT is as follows:

Spoke Litchi Banana Vegetables Mango

Muzaffarpur 3000 8000 10000 4000

The arrival pattern of the focus crops for the pack house will be as follows:

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Litchi

Banana

Vegetables

Mango

The arrival pattern shows that there will be round-the-year arrivals of produce which will support optimum capacity utilization of the facilities at the pack house.

5.2 EXISTING FACILITIES

As already discussed, the objective of the project in Bihar is the upgradation of existing APMC markets, hence the effort has been to refurbish/renovate the existing usable facilities in the market and also to propose new facilities as per the assessed requirement.

Crop wise production clusters in the catchment of Muzaffarpur Market

Paddy is produced in Motipur, Sahebgunj, Paroo , Saraiya, Aurai, Minapur, Katra, Mushahari, Sakra blocks of the district

Maize and wheat are produced in Mahinwara, Siwaipatti, Gaighat Chatra, Aurai chatra and Madhepura

Mango is produced in Kanti, Mushahari, Gaighat, Kurhani, Muraul, Minapur, Aurai majorly

Litchi is produced in Mushahari, Kanti, Minapur, Saraiya,Kurhani, Gaighat and Bochahan blocks of the district.

Guava is produced in Mushahari, Kanti, Minapur,Saraiya,Kurhani, Gaighat , Bochahan and Sahebgunj blocks

Banana is traded in Purnea, Katihar and Naugachia these are also the major production areas for this region. Major production areas within the district from where the produce reaches the market are Motipur, Sahebgunj, Bochahan, Muraul and Saraiya


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The existing facilities are outlined below:

5.2.1 Traders’ Shops

The Market yard can be conveniently divided into various sections where trading of different produce takes place. There are about 350 traders’ shops in various sections of the market. Viz. Fish, Fruit, Grain, Potato/Onion and Oil trading sections. The trading modules mentioned above are permanent in nature with area varying anywhere between 150 s.ft to 500 s.ft. They have a display area and most of them are in dilapidated. Apart from these, there are also semi permanent structures made of bamboo which are erected within the covered platforms which are also being used for trading. Muzaffarpur market yard also accommodates more than 600 hawkers who carry out trade for few hours every day. There is a shortage of modules in almost all the sections of the market and the existing structures are far from being satisfactory.

5.2.2 Open & Covered Platforms

There are about 13 covered and one open platform which are currently being used by traders as their modules. The platforms are broken and need repair.

5.2.3 Godowns

The godowns are four in number with storage capacity of 1200 MT and spread over an area of 8000 s.ft. These are leased in by various organizations like FCI, BSWCL, Beej Nigam,etc. The storage capacaity is inadequate vis-à-vis the arrival volumes.

5.2.4 General Amenities and Support Infrastructure

Other amenities like eateries (eleven in number and operated by vendors) and restrooms(three in number and operated by private entity) are inadequate considering the daily footfalls which are not less than 15000 daily. The Bank building is operational but needs renovation. Other facilities like Weigh Bridge, Water tank, etc are non operational.

5.3 PROPOSED FACILITIES

The proposed new facilities are outlined below.

5.3.1 Pack House (with cold infrastructure)

The pack house will have cold chain infrastructure as well as space for ambient handling of produce. As the focus crops are litchi and mango, the cold infrastructure is designed keeping in mind the varied handling and temperature parameters for both. The planned capacity too takes into account introductory and viable volumes for both produce types. Infrastructure space is provided to cater to other vegetables and the remaining volumes of litchi and mango to ensure synergy with existing ambient supply chain practices, and for the optimal utilisation of facilities through the year.

The proposed facility design is in compliance with EHS regulations and provides segregated amenities and working zones, by gender. Amenities like rest rooms and changing rooms in the


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work stations are segregated by gender. This is available currently and will be a design feature in the proposed facility.

Cold Chain:

The peak arrival of litchi is estimated to be 50 MT per day out of which 30% (i.e. 15 MT is expected to pass through the cold chain. The remaining 35 MT will be handled in the ambient section and only sorting, grading, packing and fumigation of that lot will be carried out. The selected cold chain throughput has been optimized taking into account existing availability of cold chain transportation in the region. Greater volumes of cold handling may lead to a break in the cold chain due to non-availability of refrigerated trucks. It is proposed that this infrastructure include at least two reefer vehicles or reefer containers for captive utility, thereby offsetting some of the dependence on 3rd party evacuation of packaged cold chain produce.

To allow capacity utilization and spread, across seasons, the facility is intended for use for both mango and litchi, in season. Additionally, the facility design proposed allows simultaneous handling of both produce in the overlap periods, with peak capacity handling of each produce in its individual season.

The basic sub components of the pack house are as follows:

Sorting and grading facilities – suitable for both product types. o For mango – complete mechanized line:

De-sapping racks Hot water dip/vapour treatment system Waxing and drying system Grading system

o For litchi – partial mechanized line: Sorting grading conveyor – manual sorting. Additionally static S&G tables (for low volume handling). Fumigation room, incorporating SO2 evacuation system.

Inspection and packaging area – tables standard stainless steel type. Weighing and unitization area – certified weighing machines and palletisation

equipment Buffer store (Anteroom) – holding area for 24 pallets pending cold application Pre-cooler – Forced air pre-coolers: capacity 5 MT, each running 3 batches in 18-

hour period. In peak season, more than 15 MT will be pre-cooled daily through these pre-coolers

Cold Store - 25MT capacity (daily output and an additional 50% stock overrun to cater for transport delays). The pre-coolers can also be used to supplement contingency storage

Both pre-cooler and cold store refrigeration will cater to 2ºC to 12 ºC temperatures Staging Area (Ante Room) – 24 pallets pending dispatch/transport Material handling equipment – pallet movers, trolleys Waste disposal systems Vehicle waiting areas Crate washing system


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Ambient Supply Chain:

To facilitate relationship-building with produce growers and in alignment with existing supply chain, an ambient handling yard with associated amenities is proposed. Additionally, this will provide for the produce not suitable as cold chain output to find an appropriate revenue channel. The cold chain interface has not been proposed to be perceived as a selective acquirer but as a friendly facilitator. Through this facilitation, greater farmer footfall is provided for.

In the ambient handling yard, adjoining the cold chain facility, the following infrastructure will be provided:

Covered pack shed (open to ambient) with landing area. Requisite weighing equipment and transaction recording arrangement. Sorting and grading areas (with tables). Packaging store and packing tables. Waste disposal systems. Vehicle parking areas.

Litchi process flow: Cold Chain

Litchi cannot be stored at room temperature for more than a few days. It loses its bright red colour and turns brown within 2 - 3 days of harvesting. Cold chain technology interventions aid in extending shelf life and support quality enhancement.

The process flow for litchi handled through cold chain in the pack house is shown in the diagram.

Technology / Facilities

Description

Quality Check • The litchi that comes to the pack house after harvesting will be checked thoroughly and would be segregated for cold and ambient handling. The better lot in terms of size and maturity level be taken for cold handling and the remaining would go to ambient

Sorting and Grading

• Manual sorting and grading is suggested in the pack house. Automation is not suggested due to availability of inexpensive labour in the region. Sorting and grading tables are proposed for the same.

Fumigation • Litchi will be treated with sulphur fumes to prevent peri‐carp browning

Packing • Manual packing of litchi in Corrugated Fibre Board (CFB) boxes will be done. Tables are proposed for packing. Each box will hold about 2 Kg of litchi. The boxes will be arranged in pallets (one pallet will hold 284 boxes).

Pre‐cooling and Storage

• Pre cooling will be done at 1.5 ‐ 2oC, 90‐95% RH by forced air method. The duration of one batch of pre‐cooling will be about 6 hrs

• Storage of litchi in CFB boxes will be done at 2‐7oC at 90‐95% RH till the time it is transported to destination market. The maximum time for which litchi can be stored is 3‐4 weeks.

Transport • For export and distant domestic market, Reefer containers (at 1 ‐ 2oC) will be used. Litchi will be transported in pallets as mentioned earlier.


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For short term storage of less than 2 weeks, a temperature of 7°C is sufficient. When the market is more than two weeks away, a range closer to 2°C is applied. For a combination of quality and shelf life, a temperature between 5 to 7 °C is used.

Judicious energy application in the cold chain, with adjustments in accordance with estimated market demand, can optimize energy costs.

Bulk, long term storage is recommended closer to the consumption market, where the last leg distance to retail centres is shortest.

Litchi process flow: Ambient

In season, about 35 MT of litchi will be handled at ambient temperature in the pack house. For ambient handling, a separate space will be provided in the pack house. After receiving the produce from the field sorting, grading and manual packing in CFB boxes will be done. The produce will then be dispatched to markets, in normal trucks of 9-10 MT capacity.

Mango Process Flow: Cold Chain

The process flow for mango handled through the cold chain in the pack house is shown in the diagram:

It is envisaged that in the long run, a large amount of the sorting for all produce will occur at farm level itself, by incentivising farmers to sort and grade as per size and quality requirements, before delivery to the facility; for example, mangos can be de-sapped at farm level. Where bore-well water (which is 10-15 °C below ambient) is available, mangos can be kept in water troughs at the farm, pending transport; to remove field heat; this helps in reducing pre-cooling time, and washing off latex to minimise the chance of latex burns.


Description

Quality Check • The mango that comes from the field will undergo quality check similar to that of litchi

De‐sapping • Mangoes will be placed on de‐sapping racks for removal of latex

Washing and Drying

• The fruit will then be washed and air dried.

Sorting and Grading

• Manual sorting and grading of mango is proposed in the hub due to easy availability of inexpensive labour in the region.

• Will be packed in CFB boxes for different capacities depending on the requirement in the destination markets, 6 to 24 mangoes per box. The boxes will then be palletized.

Pre‐cooling • Pre cooling will be done at 12oC at 90% RH by forced air method.

Cold Storage • Storage is done at 12‐15oC, 85‐90% RH for 2‐3 weeks.

Transport • For transportation of the produce, refrigerated vehicles will be used.

Where hot dip or vapour treatment is needed (recommended for mango) 52 ºC for 5 minutes, solar thermal panels with electric heaters as back-up, can be used.


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Mango Process Flow: Ambient

In season, about 35 MT of mango will be handled at ambient temperature in the pack house. For ambient handling, a separate space will be provided in the pack house. Upon receiving the produce from the field, it will be sorted, graded and packed in CFB boxes manually, and then dispatched to markets in normal trucks of 9-10 MT capacity.

The same ambient space will be used for vegetables as well in the non-litchi/mango season. Here, vegetables such as cauliflower, cabbage, cucurbits, brinjal etc. will be sorted, graded and packed as per market requirements.

Aggregation Mechanism

The pack house will have its own aggregation mechanism : trucks/pick-ups would be sent to aggregation points to collect produce from the farmers/pre-harvest contractors directly. Farmers’ cooperatives wherever they are functional, will be encouraged to manage/handle the aggregation points. Pack house owners may also invest in developing the points by creating/improving the infrastructure of the points such as platforms, sheds, etc. To strengthen the aggregation mechanism, focus on capacity building and other extension services in the catchment may be explored. Training of farmers on best farming practices and better post harvest handling practices of produce are proposed be conducted at regular intervals. Other initiatives such as best inputs and technology transfer may also be taken up.

Pack House Logistics

The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, etc. At peak of operations, about 13-15 incoming tucks/vehicles of an average of 4 M capacity will be coming to the pack houses. The outbound trucks would include about 6 normal trucks of 10/15 MT and 6 refrigerated trucks of 6 MT.

Small capacity field vehicles (load 800Kg to 1MT), have also been incorporated in the project, to serve as feeders from local farms to ensure backward integration.

5.3.2 Banana Ripening Facility

A banana ripening facility is proposed in the hub. There will be 5 ripening chambers of 10 MT capacities. Since banana takes 4 days to ripen, the daily output of ripened banana will be 10 MT. The other chamber may be used for ripening of other produce like papaya, mango, etc. depending on market demand. Ethylene is proposed to be used as catalyst in the ripening process(see Annexure for technical details).

5.3.3 Potato Cold Store

A modern potato cold store of 5000 MT capacity is proposed in the hub. There will be 16 chambers for storage and 8 anterooms which may be used for warming up of potato before taking it out of the cold store. The store will be a prefabricated structure with insulated puff panels. Ammonia type refrigeration will be used for the cooling (see Annexure for technical details).


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5.3.4 Dry Warehouse

A dry warehouse of 5000 MT capacity is proposed at the hub. It will used for storage of grain (rice, wheat, maize).

5.3.5 Ambient Onion Stores

Separate facilities for onion storage are proposed in the hub. There will be 10 onion stores of 50 MT capacities and they will segregated to prevent odour contamination of other areas.

5.3.6 Multi Fruit Processing Plant

A vacant plot will be earmarked in the hub for establishment of a multi-fruit processing plant. The plant may have pulping/juicing facilities for litchi, mango and other fruit. The processing plant will have supply linkages with other spokes, in particular Hajipur and Darbhanga which will supply litchi, mango and other fruit to the plant as per season.

5.4 OTHER FACILITIES

5.4.1 Business Centre

A Business Centre is proposed in the hub which will include an administrative block for the market. There will also be rooms/sections which may be rented out to selected NGOs, companies, grass-roots level organizations such as microfinance institutions, etc as office space.

5.4.2 Knowledge Centre

A Knowledge Centre is also proposed in the market. This space will be utilized for extension services provided to the farmers, traders, aggregators and others in the catchment area.

Rooms may be used for trainings, meetings and conferences and may also be rented out. There will be demonstration rooms displaying various modern technologies and best practices in agri-business. This facility could be utilized by the department of agriculture for various programs and extension services extended to stakeholders. The knowledge centre will also be instrumental in dissemination of information regarding demand-supply and price trends of the produce.

Apart from the new facilities proposed in the hub, there will be refurbishment/renovation of existing facilities like:

Trading Platforms Trading Shops Parking Area Guest House and Canteen Weigh Bridge Water Supply Facilities DG Rooms Solid Waste Management Area Other Amenities


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PROPOSED INTERVENTION TYPE OF INFRASTRUCTURE Pack House (with Cold Infrastructure) Pack House (Ambient) Pack House Logistics Banana Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Multi Fruit Processing Plant Trading Platforms & Shops

Agribusiness infrastructure

Knowledge Center Business Center

Add On / Commercial Infrastructure

Parking Area Guest House & Canteen Weigh Bridge DG Rooms Solid Waste Management system

Basic Mandatory Infrastructure

Approach Road Water Supply System Electricity

Link Infrastructure


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6 SPOKE: HAJIPUR

Hajipur is identified as one of the spokes for the Muzaffarpur Integrated Value Chain. This gains significance since the proposed spoke is located in Vaishali district which is among the top producers of fruit in the state - in particular, banana and litchi.

The erstwhile APMC market at Hajipur is located within the town, about 1 km from the Jharua junction and is spread over 6.5 Ha of land. The market yard is about 3 km from National Highway 19. Hajipur is well connected to Patna and the rest of South Bihar through Mahatma Gandhi Setu (the longest single river bridge in the world). It is also connected to the consumption centres like Patna, Muzaffarpur, etc by road and has good rail connectivity to distant consumption centres in Delhi, Uttar Pradesh, West Bengal and states in the North-East. Hajipur Junction is an important railhead in the Eastern Central Railways and a major halt for trains plying between UP, Jharkhand, Uttarakhand and West Bengal. With the improvement of railway perishable transport system in India, the road to the railhead from the market may be developed in the next phase by making it a two lane highway for speedy transport of produce to the destination markets.

Produce comes from almost all the major blocks of the district namely Bidupur, Goraul, Raghopur, Lalganj, Mahua ,Jandaha, Bhagwanpur, Desari, Chechar, Chakausal, etc. At present, the roads connecting Serai , Mahua to Hajipur are in poor condition while those connecting Lalgunj, Manhar,etc are in good condition. The consumption markets are Danapur (16 Km), Patna (8 Km), Ranchi (259 Km), Siliguri (330 Km), Aurangabad (133 Km), Gaya (105 Km), Jehanabad (63 Km), Kachi Durgah,etc for vegetables and banana. Most of the potato and onion is sold within Hajipur town and in nearby villages in Vaishali district.

The major commodities being traded in the market yard are potato, onion, banana, vegetables (During Nov- Feb) and mango (During May- July). The Daily arrival in case of vegetables is about 270-300 MT (Cauliflower -5000-8000 baskets, Gourds-20 MT. Other seasonal vegetables like radish, turnip, spring onion-about 6 to 8 MT). In case of banana the daily arrivals are anywhere between 150 MT during late March and October and about 50 MT from mid November to March. The daily arrivals are the highest at about 500-600 MT for about 10-15 days during mid October (Chhatt festival). About 40-50 MT of potato and 20 MT of onion arrive daily at the market. The market yard also has space for fish trading. However, this is not currently being utilized.

The other prominent sub-markets are ‘Jharua market’, ‘Station market’ and ‘Anjanpur chowk market’, which are the three major markets located within a 3 km radius of the market yard. These are prominent markets given their location and accessibility. The arrivals in each market are sizeable with about 4 truck loads (40 MT) of fruits traded daily from ‘Station market’ and about 4 to 5 MT of vegetable traded daily at Jharua market.


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Hajipur occupies a prominent place in the trade of fruits and vegetables. Most fruit and vegetable is traded in various markets in Hajipur. However, litchi, mango, banana and vegetables are the focus crops for this spoke. The selection of focus crops and estimation of throughputs for each is based on current production trends in the catchment area, existing infrastructure facilities, feasibility for interventions and feedback from various stake holders.

The estimated annual throughput of the pack house in MT is:

Spoke Litchi Banana Vegetables Mango

Hajipur 2500 5000 10000 4000



Litchi

Banana

Vegetables

Mango

Most facilities at the pack house will be utilized to an optimal capacity as reflected in the envisaged arrival pattern.


The existing infrastructure in this market yard is limited to basic infrastructure which is confined to about 30% of the land. The existing facilities at Hajipur are outlined below.

6.2.1 Traders’ Shops The Market yard has about 60 traders’ shops in various sections of the market. Viz. Fish, Potato/Onion and Banana trading sections. The trading modules mentioned above are permanent in nature with area of about 250 s.ft each.

The section earmarked for Fish trading is currently not operational. There are about 20 traders in Banana and 45 traders in Potato & Onion trading here. The traders’ shops are inadequate considering the number of traders operating from the market yard. The shops are in dilapidated state and there have been instances of roof collapsing in few traders’ shops.

Crop wise production clusters in the catchment of Hajipur Market

Banana is produced in Chehar, Madhurapur, Ramdauli, Sadulla, Jharua blocks of the district

Mango is produced majorly in Mahua, Jandaha, Bhagwanpur and Lalgunj blocks of the district

Banana is produced majorly in Raghopur blocks in Tarasiya, Saraipur, Chaukia, Sahpur villages majorly. Jarua, Karnpura, Sahdulapur, Vidupur, Amir, Chechar, Gadai Sarai are other major Banana producing places.

Vegetables are grown extensively in Khargualiya, Saddapur, Kishapura clusters in Bhagwanpur block and Shahjahanpur, Ghatora Tola, etc in Llalgunj.

Kanpur, Varanasi, Manimah are the main sourcing points of Potato by traders in this market

Nashik is the main sourcing point for Hybrid Onion; local varieties are sourced from Aara, Chechar, Fatuha, Mahanar, Vidhupur


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There are two covered and one open platform which are currently being used by traders as their modules. The platforms are broken and need repair. The covered platforms are being used by the Vegetable and Potato traders.

6.2.3 Godowns

The godowns are two in number with storage capacity of 800 MT and spread over an area of 3000 s.ft. These are leased in by various organizations like FCI, BSWCL, etc. The storage capacity is inadequate vis-à-vis the arrival volumes.


Other amenities like eateries (three in number and operated by vendors) and restroom are inadequate. The administrative building is operational but needs renovation. The market yard lacks facilities like Weigh Bridge, Water tank, Check Post, etc. The boundary wall is broken and allows multiple entry and exit points making security a cause of concern. The market yard shares boundary wall with primary school.

The existing facilities mentioned above need renovation/refurbishment


It is reported that the existing APMC market yard has almost 60% vacant land. The proposal for this location includes renovation of existing usable facilities in the market supplemented by the development of new facilities. The new facilities being proposed are as follows:

6.3.1 Pack House (with cold infrastructure)

The pack house will have cold chain infrastructure as well as space for ambient handling of produce. As the focus crops are litchi and mango, the cold infrastructure is designed to suit the varied handling and temperature parameters for these two. The planned capacity targets an introductory and viable volume for the two produce types. To maintain synergies with existing ambient supply chain practices, space is also provided to cater to other vegetables and the litchi and mango not entering the cold-chain.

Facility design is in compliance with EHS regulations and provides segregated working zones and amenities – by gender.

Cold Chain:

The peak arrival of litchi is estimated to be 40MT per day out of which 30% (i.e. 12 MT will pass through the cold chain. The remaining 28 MT will be handled in ambient areas and only sorting, grading, packing and fumigation for that amount will be carried out. The selected cold chain throughput has been optimized taking into account existing availability of cold chain transportation in the region. Greater volumes of cold handling may lead to a break in the cold chain due to non-availability of refrigerated trucks. It is proposed that this infrastructure (spoke) include at least two reefer vehicles or reefer containers for captive


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utility, thereby offsetting some of the dependence on 3rd party evacuation of packaged cold chain produce.

To allow capacity utilization and spread across seasons, the facility is intended for use of both mango and litchi, in their respective season. Additionally the facility design proposed, allows simultaneous handling of both produce types in overlapping periods, with peak capacity handling of each produce in its individual season.


Sorting and grading facilities – as suited for both product types o For mangos – complete mechanized line:

De-sapping racks Hot water dip/vapour treatment system Waxing and drying system Grading system

o For litchi – partial mechanized line: Sorting grading conveyor – manual sorting Additionally static S&G tables (for low volume handling) Fumigation room, incorporating SO2 evacuation system

Inspection and packaging area – tables- standard stainless steel type Weighing and unitization area – certified weighing machines and palletisation

equipment Buffer store (ante room) – holding area for 24 pallets pending cold application Pre-cooler – Forced Air Pre-coolers: capacity 5 MT, each running 3 batches in an 18

hour period. In peak season, more than 15 MT will be pre-cooled daily Cold Store - 25MT capacity (daily output plus 50% stock overrun to cater for

transport delays). The pre-coolers can also be used to supplement contingency storage

Both pre-cooler and cold store refrigeration will cater to 2 ºC to 12 ºC temperatures Staging area (ante room) – 24 pallets pending dispatch/transport Material handling equipment – pallet movers, trolleys Waste disposal systems Vehicle waiting areas Crate washing system

The process flow for litchi and mango is the same as that proposed at the Hub facility in Muzaffarpur and is shown here.

Litchi Process flow:


Description

Quality Check • The litchi that comes to the pack house after harvesting will be checked thoroughly and segregated for cold and ambient handling. The better lot in terms of size and maturity will be taken for cold handling and the rest would go for ambient handling

Sorting and Grading

• Manual sorting and grading is suggested in the pack house. Automation is not suggested due to the availability of inexpensive labour in the region. Sorting and grading tables are proposed.


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Fumigation • The litchi will be treated with sulphur fumes to prevent the peri‐carp from browning

Packing • Manual packing of litchi in Corrugated Fibre Board (CFB) boxes will be done. Tables are proposed for packing. Each box will hold about 2 Kg of litchi. The boxes will be arranged in pallets (one pallet holds 284 boxes).

Pre‐cooling and Storage

• Pre cooling will be done at 1.5 ‐ 2oC, 90‐95% RH by forced air method. The duration of one batch of pre‐cooling will be about 6 hrs

• Storage of litchi in CFB boxes will be done at 2‐7oC at 90‐95% RH until the time it is transported to the destination market. The maximum time of storage of litchi is 3‐4 weeks.

Transport • For export and distant domestic markets, Reefer containers (at 1 ‐ 2oC) will be used. They will transport the litchi in pallets as mentioned earlier.


An ambient handling yard with associated amenities is proposed in alignment with the existing supply chain. It is also estimated that produce not suitable as cold chain output will still find an appropriate revenue channel through the ambient route. The cold chain interface has been envisioned as a friendly facilitator, not as a selective acquirer and through this, greater farmer footfall is also ensured.

In the ambient handling yard, adjoining the cold chain facility, the following infrastructure is proposed:

Covered Pack shed (ambient, open to air) with landing area

Requisite weighing equipment and recording arrangements for transactions

Sorting and grading areas (with tables)

Packaging store and packing tables

Waste disposal systems

Vehicle parking areas

Mango Process Flow: Cold Chain

The process flow for mango handled through the cold chain in the pack house is depicted in the diagram:


Description

Quality Check • The mango that comes from the field will undergo a quality check similar to that of litchi

De‐sapping • Mangoes will be placed on de‐sapping racks for removal of latex

Washing and Drying

• The fruit will then be washed and air dried.

Sorting and Grading

• Manual sorting and grading of mango is proposed in the hub due to the easy availability of inexpensive labour in the region.

• The produce will be packed in CFB boxes of different capacities based on the requirement of the destination markets, 6 to 24 mangoes per box. The boxes will then be palletized.

Pre‐cooling • Pre cooling will be done at 12oC at 90% RH by forced air method.


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Cold Storage • Storage is done at 12‐15oC, 85‐90% RH for 2‐3 weeks.

Transport • Refrigerated vehicles will be used for transportation of the produce.


The pack house will have its own aggregation arrangements where trucks/pick-ups would be sent to the aggregation points to collect the produce from farmers/pre-harvest contractors directly. Farmers’ cooperatives where functional, will be encouraged to manage/handle the aggregation points. It appears that this would be feasible in Hajipur as there are already a few farmers’ clubs promoted by NABARD that are procuring inputs and marketing produce collectively.

Investments in developing the aggregation points may be made by creating/improving the infrastructure: platforms, sheds, etc. Capacity building and other extension services may be undertaken to strengthen the aggregation mechanism in the catchment. Trainings of farmers on best farming practices and better post harvest handling practices of produce are proposed to be conducted periodically. Other initiatives such as best inputs and technology transfers may also be undertaken.


The produce will come to the pack house from the aggregation points and farms in various modes of transport like trucks (4 MT), vans, etc. At the peak of operations, about 13-15 incoming tucks/vehicles of an average of 4 M capacity will come to the pack houses. The outbound trucks would include about 6 normal trucks of 10/15 MT and 6 refrigerated trucks of 6 MT.

Small capacity field vehicles (load 800Kg to 1MT), have been considered as feeders from local farms for backward integration.

6.3.2 Banana Ripening Facility A banana ripening facility is proposed in the market yard. There will be 5 ripening chambers of 10 MT capacity. Since banana takes 4 days to ripen, the daily output of ripened banana will be 10 MT. The other chamber may be used for ripening of other produce such as papaya, mango, etc. depending on market demand. Ethylene is proposed to be used as catalyst in the ripening process (see Annexure for technical details).

6.3.3 Dry Warehouse

A dry warehouse of 5000 MT capacity is proposed at Hajipur for storage of grain (rice, wheat and maize).


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Business Centre

A business centre is proposed at Hajipur which will house the administrative block for the market. There may also be rooms/sections that may be rented out to selected NGOs, companies, grass-roots level organizations such as microfinance institutions, etc as office space.

Knowledge Centre

A knowledge centre is also proposed in the market. This space will be utilized for extension services provided to the farmers, traders, aggregators and others in the catchment area. Rooms for trainings, meetings and conferences may be included which may be rented out. Demonstration rooms displaying various modern technologies and best practices in agri-business may also be included.

Apart from the new facilities proposed in the spoke, refurbishment/renovation of existing facilities is also proposed.:

The infrastructure suggested for Hajipur spoke could be classifies into broad categories as follows.

PROPOSED INFRASTRUCTURE INFRASTRUCTURE TYPE Pack House (with Cold chain & Ambient) Pack house logistics Banana Ripening Facility Dry Warehouse Traders Shops & Platforms

Agribusiness Infrastructure



Godowns Agribusiness Infrastructure Eateries & Guest Houses Water Supply System Internal Roads Waste Management System

Mandatory/ Basic Infrastructure


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7 SPOKE: DARBHANGA

The existing APMC market at Darbhanga has been identified as the spoke for the Muzaffarpur Integrated Value Chain because of its proximity to the fruit and vegetable producing clusters and established trade linkages with markets within as well as outside Bihar. The facilities at the spoke have been designed to introduce better handling practices and reduce quality deterioration of farm produce.

The APMC market caters to neighbouring districts like Muzaffarpur, Patna, Hajipur, Samastipur, Vaishali, Begusarai and other markets: Nepal, Siliguri, Delhi and Kolkata. Major crops cultivated in the catchment areas of the proposed spoke are mango, banana, vegetables etc. While major production clusters of vegetables are Jaughatta, Motipur, Jayanatipur, Milki etc; mangoes are cultivated in the clusters of Raje, Narayanpur, Sakri, Gangouli etc.

The APMC market is located within the town of Darbhanga. The condition of the approach road to the market yard is good however, internal roads are in a poor condition. The total area of the market yard is around 13 Ha. Of this, around 75% of the land is under use for trading/other infrastructure and around 10% is vacant. There are 11 covered platforms, 34 sundry shops inside the market yard, 26 shops outside the compound and 150 trading shops in the market yard. Some 200 grain traders and 10 potato/onion traders operate from the APMC market.

The market is well connected with all weather roads to the production clusters. Rail and road connections to major locations in the country are also good. NH 57 connects Darbhanga to the proposed hub at Muzaffarpur and NH 105 connects Darbhanga to Madhubani and Jaynagar. Darbhanga railway station is the nearest railhead. With the improvement of railway perishable transport system in India, the road to the railhead from the market may be developed in the next phase by making it a two-lane highway for speedy transport of produce to the destination markets.

Rice, pulses, makhana and wheat are the major commodities traded in the market. The daily arrival of rice at the Darbhanga market yard is about 2.5 -3 MT. Apart from this, about 300 quintals (10 quintal=1 MT) of wheat, 500 quintals of Makhana and 300 quintals of pulses arrive daily at the market. Other commodities such as sugar, onion, potato, spices, dates etc are also traded in the market.


The focus crops and estimated throughputs of the pack shed have been identified based on the present production in the catchment areas, potential for interventions and stakeholders’ consultations. The estimated annual throughput of the pack shed in MT shall be as follows:

Spoke Mango Banana Vegetables

Darbhanga 4000 3000 5000

The arrival pattern of the focus crops at the ambient pack shed shall be as follows:


Banana


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Vegetables

Mango

The arrival pattern shows that there will be round the year availability of produce for the pack shed, which would ensure its operational efficiency and thereby maximize capacity utilization.

Donar is a prominent aggregation point for vegetables grown in the catchment area. However, most of the fruits and vegetables are also aggregated on either side of the roads leading to the market. Supply is expected to come from these and neighbouring production clusters. While Mango is supplied to all over the state from this market Vegetables are mainly consumed in local markets like Bahera, Raje Chowk, Singhwara and Darbhanga.


The market yard in Darbhanga predominantly has grains, Potato/Onion, Makhana and spice trading currently. The vegetables and Fruits are traded from a local market nearby. The details of the existing facilities are given in the ensuing sections.

7.2.1 Traders’ Shops

The Market yard has about 220 traders’ shops in various sections of the market. Viz. Grain, Potato/Onion and Sundry trading sections. The trading modules mentioned above are permanent in nature with area of about 250 s.ft each.

The section earmarked for sundry trading is currently operational both inside and outside the premises. There are about 200 traders in grain trading and 10 traders in Potato & Onion trading here. The traders’ shops are inadequate considering the number of traders operating from the market yard. The shops are inadequate considering the volumes and number of traders present. Spice trade is also seen in the market.


There are eleven covered and three open platform which are currently being used by traders as their modules. The platforms are broken and need repair. The covered platforms are being used by the grain traders for storage and trading purposes.

7.2.3 Godowns

There are three godowns with approximate storage capacity of 1200 MT and spread over an area of 7000 s.ft. These are leased in by various organizations like FCI, BSFC, etc. The storage capacity is inadequate vis-à-vis the arrival volumes.


The other support infrastructure present in this market are Post Office, Administrative building and Bank Building which are all operational. Hnad pumps are the main source of water here. Other amenities like eateries (approx ten in number and operated by vendors) and restrooms are inadequate. The market yard lacks facilities like Weigh Bridge, Water tank, Check Post, etc. The boundary wall is broken and allows multiple entry and exit points making security a cause


53

of concern. The internal roads are far from being satisfactory and make the vehicular movement a constraint specially in monsoon.

The existing facilities mentioned above need renovation/refurbishment.


Given that the objective of the project in Bihar is the upgradation of existing APMC markets, refurbishing/renovating existing usable facilities in the market is included as also the focus on new facilities. The proposed new facilities are:

7.3.1 Ambient Pack Shed

An ambient pack shed is proposed to be set up for handling mango, banana and vegetables. The handling capacity of the pack shed shall be 50 TPD. As mentioned earlier, the pack shed would receive mangoes from May to August, bananas from Jan to March and vegetables almost through the year. The pack shed shall have the following facilities:

Sorting and grading facility Marshalling yard with de-handing and packing tables for onward domestic movement Packaging area


Description

Quality Check • Quality of the farm produce shall be assessed at the pack shed based on identified criteria Sorting and Grading

• Manual sorting and grading is suggested. • Sorting and grading tables are proposed in the pack shed.

Packing • Packaging tables would be provided for manual packing of mangoes/ banana hands in CFB boxes.

• Depending upon the requirements of the destination markets, packaging material would be used

Transport • Produce will be transported in trucks of 9‐10 MT capacity.

Pack Shed Logistics

The produce will come to the pack shed in various modes of transport such as auto rickshaw, vans, thelas and mini trucks etc. It is envisaged that around 15-17 vehicles will bring the produce daily from various aggregation points as well as from farms directly. During peak operation periods, the outbound logistics would involve 5 trucks of 10 MT capacities each for onward dispatch.


The pack shed shall receive material from various aggregation points as well as directly from farms. Primary sorting and grading will be done at the aggregation point and the produce will be brought in trucks to the pack shed. This is aimed at improving current handling practices of farm produce, to reduce quality deterioration and ensure assured supply to the pack shed.

7.3.2 Banana Ripening Facility

A banana ripening facility is proposed with a ripening chamber capacity of 10 MT per day. The ripening chamber may also be used for other fruit such as mango, if required. Ripening is


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proposed to be done using ethylene as catalyst (see Annexure for technical details). Ethylene generators would be utilised for appropriate dosing of the catalyst.

Where the ripening facility is located adjoining the pack shed (for local market), conveyor rollers are proposed to carry the crates directly to the ripening area.

A separate receiving and de-handing shed may be located adjacent to the banana ripening facility to aid locally sourced farm produce to be input for local ripening. A waste disposal area to cater to the ripening room is proposed.

A material handling pallet mover is provided for daily operations. A covered receiving shed is proposed for protection from direct sunlight and inclement weather. Though only one chamber will output daily, sufficient space is provided to cater for dispatch staging as well as marshalling of incoming produce.

It is envisaged that the produce will be loaded from the ripening facility, onto smaller vehicles for tertiary dispatch - a separate designated parking for these vehicles is proposed.

7.3.3 Other Facilities

Business Centre

A business centre is proposed to house the administrative block for the market. There will also be rooms/sections which may be rented out to reputed NGOs, companies, grass-root level organizations such as microfinance institutions, etc as office space.

Knowledge Centre

A knowledge centre is also proposed in the market for dissemination of information to farmers, traders etc. The facility may also be used for training of various stakeholders.

Apart from the new facilities proposed in the hub, there will be refurbishment/renovation of existing facilities. They would include:

Trading Platforms Trading Shops Parking Area Guest House and Canteen Weigh Bridge Water Supply Facilities DG Rooms Solid Waste Management Area

PROPOSED INFRASTRUCTURE INFRASTRUCTURE TYPE Pack House (Ambient) Pack house logistics Banana Ripening Facility Dry Warehouse Traders Shops & Platforms




Godowns Agribusiness Infrastructure Eateries & Guest Houses Water Supply System Internal Roads Waste Management System

Mandatory/ Basic Infrastructure


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8 SPOKE: DALSINGHSARAI

Dalsinghsarai APMC, a proposed spoke, is located at a distance of 3kms from the National Highway 28 and is linked to it with a good road. The surrounding area is fertile, producing a variety of fruits and vegetables; this is also the mango belt of Bihar and the envisaged catchment area includes clusters producing banana and vegetables.

The major arrivals in the Dalsinghsarai mandi, in season, are mango and litchi, among fruit and in vegetables: cucurbits, cauliflower, brinjal, tomato, potato, peas and okra. The significant villages in the catchment production clusters in roughly a radius of 20 km, include Basaria, Madhaipur, Mirjapur, Nargaon, Vajitpur and Malpur. These clusters will serve to supply this spoke all year round with mango, banana and various vegetables, as per season.

This present location of the APMC includes a market yard spread over about 8 Ha with 3 open auction platforms, 3 godowns and one administrative block. A pack house has been proposed here, a ripening facility for bananas, a dry warehouse for maize and a segregated onion store.

Details of the spoke facilities proposed for Dalsinghsarai, are discussed below.


Mango is the focus crop for this proposed spoke with an estimated throughput of 35 MT. The assessment is based on a combination of factors that include the present production in the catchment, capacities of existing similar infrastructures/facilities, potential for interventions, and has been vetted during consultations with local stakeholders In addition to mango, facilities for banana, vegetables and maize have also been included to ensure year round utilisation.

The estimated annual throughput of the pack house in MT is:

Spoke Mango Banana Vegetables

Dalsinghsarai 4000 3000 5000

The arrival pattern of the focus crops at the pack house is shown below:


Mango

Banana

Vegetables

Ensuring year-round utilisation of the facilities was an important design criterion as can be seen in the above table.

The catchment will include Janakpur,Wazidpur, Meyani and the surrounding villages that produce Cauliflower, Potato , Brinjal round the year and presently cater to Patna and other distant markets like Guwahati , Ranchi (when the local production is lean), Tatanagar, etc.


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The market yard in Dalsinghsarai is currently not operational. The vegetables and Fruits are traded from a local market nearby. The details of the existing facilities are given below.

8.2.1 Traders’ Shops The Market yard has about 20 traders’ shops which are permanent in nature with area of about 250 s.ft each. The shops are inadequate in case of fully operational market with sizeable arrivals on a daily basis.


There are five covered out of which three platforms are in good condition. Two platforms are broken and need repair.

8.2.3 Godowns

There are two godowns with approximate storage capacity of 500 MT.


The other support infrastructure present in this market are Toll Collection Building and Administrative building. Hand pumps are the main source of water here. The boundary wall is broken and allows multiple entry and exit points making security a cause of concern. The internal roads are satisfactory .

The existing facilities mentioned above need renovation/refurbishment. The availability of vacant land makes creation of new facilities and infrastructure possible.


8.3.1 Pack house (ambient)

The pack house is designed for handling a daily throughput of 35MT of mango/vegetables, bananas etc. It is estimated that mangoes would be received from May to August, bananas from Jan to March and vegetables would be available almost round the year


In the ambient handling yard, the following infrastructure will be provided:

Crop wise production clusters in the catchment of Dalsinghsarai Market


Banana which is traded in Purnea, Katihar and Naugachia which are the major production areas for this region. Major production areas within the district from where the produce reaches the market are Motipur, Sahebgunj, Bochahan, Muraul and Saraiya

Maize and Wheat are produced in Mahinwara, Siwaipatti, Gaighat Chatra, Aurai chatra and Madhepura


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Covered Pack shed (open to ambient) with landing area. Requisite weighing equipment and transaction recording arrangement. Sorting and grading areas (with tables). Packaging store and packing tables. Waste disposal systems. Vehicle parking areas.

Process flow for produce (ambient)

In season, about 35 MT of mango ill be handled in ambient temperature in the pack house. The produce will be sorted here after being brought from the field. It will be graded and packed in CFB boxes manually and dispatched to markets in normal trucks of 9-10 MT capacities. The illustration shows the process flow for mango and vegetables, envisaged at the pack house

The same ambient space will be used for vegetables as well in the non-mango season. Here, vegetables such as cauliflower, cabbage, cucurbits, brinjal etc. will be sorted, graded and packed as per market requirements.


The pack house will have its own aggregation mechanism where trucks/pick-ups would be sent to collect the produce from the farmers/pre-harvest contractors directly. The pack house will encourage farmers’ cooperatives to manage/handle the aggregation points wherever applicable. It may also invest in developing the points by creating/improving the infrastructure of the points such as platforms, sheds, etc. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment (some of these have been covered in the section on capacity building). Trainings of farmers on best farming practices and better post harvest handling practices of produce are proposed to be conducted periodically. Other initiatives such as appropriate inputs and technology transfer may also be taken up as per assessed need.

Pack house logistics

The produce is expected to reach the pack house from aggregation points and/or farms in various modes of transport such as trucks (4 MT), vans, etc. At peak of operations, about 40 incoming tucks/vehicles of an average of 4 M capacity will be coming to the pack house. The outbound trucks would include about 12 normal trucks of 10/15 MT

Small capacity field vehicles, load 800Kg to 1MT, are incorporated in the project to serve as feeders from local farms as backward integration. Transport logistics have been taken into consideration in the proposed design and layout for the Dalsinghsarai spoke.


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8.3.2 Banana Ripening Facility A banana ripening facility is proposed. Capacity of the ripening chamber will be 10 MT per day. The ripening chamber can also be used for other fruits such as mango, if required. Ripening would be done using ethylene as the catalyst (see Annexure for further technical details). Ethylene generators would be utilized for appropriate dosing of the catalyst.

Where ripening facility is located adjoining the pack house, conveyor rollers are optioned to carry the crates directly to ripening area.

The Banana ripening facility could adjoin a separate receiving and de-handing shed to allow for locally sourced direct farm produce to be input for local ripening requirements. A waste disposal area to cater to ripening room is specially designated.

Material handling pallet mover is provided for the daily operations. The receiving shed is covered to protect from direct sunlight and weather. Though only one chamber will output daily, sufficient space is provided to cater for dispatch staging as well as incoming marshalling of the produce.

The ripening facility is envisaged to output into smaller vehicles for tertiary dispatch and a separate designated parking lot for the same is designed.

A capacity of 1000lts of water is provided for end of process cleanup operations.

8.3.3 Dry Warehouse

A dry warehouse of 5000 MT capacity is proposed at the spoke with dehumidification facilities. It will used for storage of grains such as maize, rice, and wheat.

Adequate layout for vehicular movement and parking have been incorporated in the proposed layout.


Separate facilities for onion storage are proposed at this location. There will be 10 onion stores of 50 MT capacities and they will form a separate section of the spoke to prevent odour contamination of other areas.

These storehouses would be constructed as per existing guidelines for storage of dry onions, incorporating enclosures that allow ventilation while protecting from overhead inclement weather. The roof would be extended to protect from driving rain while protecting from direct sunlight, boundary walls of mesh material protecting the produce from rodents while allowing adequate ventilation. The base platform would be raised to truck bed height easing loading and unloading operations.


Trading platforms and Trading shops:

At Dalsinghsarai spoke, 5 trading platforms of 400sqm area have been proposed, to handle a daily through put of 125 MT. In addition, trading shops are also proposed to address a daily flow of 100MT.


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It is estimated that this Spoke will provide employment to over 200 persons directly, with the majority being employed at the trading shops. Additionally, in peak season, up to 300 persons are expected to find wage-labour within the Spoke.

Given the combination of facilities proposed and taking into account the needs of workers, farmers and traders at the location, the following facilities and amenities have also been included:

Parking Area Canteen Weigh Bridge Water Supply Facilities DG Rooms Solid Waste Management Area Other Amenities

Eventually, additional space may be utilized for extension services provided to farmers, traders, aggregators and others in the catchment area. Rooms may be rented out for trainings, meetings and conferences. Demonstration rooms displaying various modern technologies and best practices in agri-business may also be included at select locations, over the years.

PROPOSED INTERVENTION TYPE OF INFRASTRUCTURE Pack House (with Cold Infrastructure) Pack House (Ambient) Pack House Logistics Banana Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Multi Fruit Processing Plant Trading Platforms & Shops







Link Infrastructure


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9 SPOKE: BEGUSARAI

The APMC market yard for Begusarai, located near the railway station is not currently in use. This location is proposed as a spoke in the Muzaffarpur Integrated Value Chain. Presently, the produce brought to Begusarai in significant quantity, for onward movement and sale includes various locally grown vegetable, mango and maize.

The catchment clusters for vegetables include the villages of Larwara, Chilmill, Chapki, Rajaura, Sitarampur Chandpura, Kamruddinpur, Majhaul, and Saidpur, among others.

In addition to an ambient pack house, with mango as seasonal focus crop, it is proposed that the spoke at Begusarai include a ripening facility (primarily for bananas), a dry warehouse for grain, a segregated onion store and trading platforms, shops and also input shops. The facilities and their operations are discussed below.


The focus crop proposed for this spoke is Mango, with an estimated throughput of 35 MT. The assessment is based on a combination of factors that include the present production in the catchment, capacities of existing similar infrastructures/facilities, potential for interventions, and also takes into account consultations with local stakeholders In addition to mango, facilities for vegetables and maize have also been included to ensure year round utilisation.

The estimated annual throughput of the pack house in MT is as follows:

Spoke Mango Vegetables

Begusarai 1500 5000

The arrival pattern of produce at the pack house will be as follows:


Mango

Vegetables

The arrival pattern shows that there will be year-round arrival of produce to maximise capacity utilization of the facilities at the pack house

Cheria Bariarpur, Baliya, Matihani,Begusarai and Bhagwanpur are the major production clusters in the district.

Crop wise production clusters in the catchment of Begusarai Market


Maize and Wheat are produced in Mahinwara, Siwaipatti, Gaighat Chatra, Aurai chatra, Madhepura, Manjhaul, Pabra,Sripur, Khanjapur and Bikrampur villages in Cheriyabariyarpur block,Rahatpur,Meenapur in Bailya.

Potato is majorly produced in Nayagaon, Sonapur, Balahpur in Matihani block and Tegdha and Bhagwanpur blocks in the district.


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The market yard in Begusarai is currently not operational. The vegetables and Fruits are traded from three local markets nearby namely Ratanpur Chatti Vegetable market, Fruit Mraket and Subzi mandi. The details of the existing facilities in the market yard are given below.

9.2.1 Traders’ Shops The Market yard has about 40 traders’ shops which are permanent in nature. The shops are inadequate in case of fully operational market with sizeable arrivals on a daily basis.


There are three covered and one open platform out of which three platforms are in good condition. Two platforms are broken and need repair.

9.2.3 Godowns

There are four godowns with approximate storage capacity of 1200 MT.These are being currently utilized by FCI, SFC and private entities.


The other support infrastructure present in this market are Bank Building and Administrative building which are both operational. Hand pumps are the main source of water here despite Water tank being present. The boundary wall is broken and allows multiple entry and exit points making security a cause of concern. A check post / toll collection building is present in the market. The internal roads are satisfactory .

The existing facilities mentioned above need renovation/refurbishment. The availability of vacant land makes creation of new facilities and infrastructure possible.



The pack house is designed for handling a daily throughput of 35MT of mango/vegetables; mangoes will arrive between May and August, whereas vegetables will be received through the year.


In the ambient handling yard, the following infrastructure will be provided:

Covered Pack shed (open to ambient) with landing area. Requisite weighing equipment and transaction recording arrangement. Sorting and grading areas (with tables). Packaging store and packing tables. Waste disposal systems. Vehicle parking areas.


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Process flow for mango and vegetables (ambient)

In season, about 35 MT of mango will be handled in ambient temperature in the pack house. The produce will be sorted here after being brought from the field. It will be graded and packed in CFB boxes manually and dispatched to markets in normal trucks of 9-10 MT capacities.

The same ambient space is proposed to be used for vegetables as well in the non-mango season to ensure better utilisation of the facilities. Here, vegetables such as cauliflower, cabbage, cucurbits, brinjal etc. will be sorted, graded and packed as per market requirements.

The illustration shows the process flow for mango and vegetables, envisaged at the pack house.


The pack house will have its own aggregation mechanism where trucks/pick-ups would be sent to collect the produce from the farmers/pre-harvest contractors directly. The pack house will encourage farmers’ cooperatives to manage/handle the aggregation points wherever applicable. It may also invest in developing the points by creating/improving the infrastructure of the points such as platforms, sheds, etc. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment (some of these have been covered in the section on capacity building). Trainings of farmers on best farming practices and better post harvest handling practices of produce are proposed to be conducted periodically. Other initiatives such as appropriate inputs and technology transfer may also be taken up as per assessed need.

Pack house logistics

The produce is expected to reach the pack house from aggregation points and/or farms in various modes of transport such as trucks (4 MT), vans, etc. At peak of operations, about 40 incoming tucks/vehicles of an average of 4 M capacity will be coming to the pack house. The outbound trucks would include about 12 normal trucks of 10/15 MT

Small capacity field vehicles, load 800Kg to 1MT, are incorporated in the project to serve as feeders from local farms as backward integration. Transport logistics have been taken into consideration in the proposed design and layout for the Dalsinghsarai spoke.

9.3.2 Ripening Facility A ripening facility is proposed at the Begusarai Spoke with a daily capacity of 10 MT This facility may be used for ripening of produce such as banana, papaya, mango, etc. depending


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on the local market demand. The ripening would be done using ethylene as the catalyst (see Annexure for further technical details).

9.3.3 Dry Warehouse

A dry warehouse of 5000 MT capacity is proposed at the spoke with dehumidification facilities. It will primarily be used for storage maize; grains such as rice and wheat may also be stored.


Separate facilities for onion storage are proposed at this location. There will be 10 onion stores of 50 MT capacity each, located in a separate section of the spoke to prevent odour contamination of other areas.



Trading platforms and trading shops:

At Begusarai, 5 trading platforms of 400sqm area have been proposed, to handle a daily through put of 125 MT. In addition, trading shops are also proposed to handle a daily flow of 100MT. This Spoke is expected to provide direct employment to over 200 persons, with the majority being employed at the trading shops. In addition, in season the number of persons finding wage-labour here is expected to be around 300.

Given the combination of facilities proposed and taking into account the needs of employees, farmers and traders at the location, the following facilities and amenities have also been included:




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PROPOSED INTERVENTION TYPE OF INFRASTRUCTURE Pack House (Ambient) Pack House Logistics Banana Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Multi Fruit Processing Plant Trading Platforms & Shops







Link Infrastructure


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10 FINANCIAL ANALYSIS

This section contains details of project cost, funding mechanism, projected revenue, assumptions underlying project cost and revenue projections and analysis of financial viability of the projects. The project cost details are based on detailed value chain analysis and market assessment as given in the previous sections.

10.1 IVCS IN BIHAR

As indicated in the previous section, the proposed IVCs in Bihar are to be located at the existing APMC market yards. Thus, the project in Bihar would have a twofold objective: Setting up modern infrastructure along the value chain as well as renovation and modernization of the existing APMC markets.

The IVCs in Bihar would have a major component of agricultural marketing infrastructure considering the dual objective of the program in the state. Thus, while the proposed IVCs would have value added facilities like cold packhouses (with pre-cooling and cold store facilities), cold stores, ambient packhouses and ripening facilities, they would also consist of auction platforms, trading shops and dry warehouses in line with a modern agricultural wholesale market.

While most of these facilities would be leased out on monthly rental basis, for some other facilities it may be done on job work basis. The detailed cost estimates for the locations have been done based on detailed engineering surveys of the markets. The estimation takes into account costs for the existing and proposed facilities/infrastructure in these markets.

The details related to the IVC are given below:

.

10.2 MUZAFFARPUR IVC

10.2.1 Project Details The facilities/infrastructure proposed in hub and spokes for the IVC are summarized below:

Facilities Muzaffarpur Hajipur Darbhanga Dalsinghsarai Begusarai

Packhouse‐Cold Chain 15 MT/day (750 sq. m)

15 MT/day (750 sq. m)

‐ ‐ ‐

Fruit Pulping plant 2 MT/ Hr (900 sq. m)

‐ ‐ ‐ ‐

Fruit Packhouse‐ Ambient 35 MT/day (750 sq. m)

35 MT/day (750 sq. m)

35 MT/day (750 sq. m)

35 MT/day (750 sq. m)

35 MT/day (750 sq. m)

Trading Platforms 3490 sqm 1700 sqm 2465 sqm 1700 sqm 3350 sqm Warehouse‐5000 MT 2300 sqm 2300 sqm ‐ 2300 sqm 2300 sqm Potato Cold Store‐5000 MT

2700 sqm ‐ ‐ ‐ ‐

Onion store‐500 MT 540 sqm ‐ ‐ 540 sqm 540 sqm Ripening chamber 10 MT/day 10 MT/day 10 MT/day 10 MT/day 10 MT/day Traders Shops 9330 sqm 2000 sqm 3805 sqm 3300 sqm 3950 sqm

To support the operations of the above facilities, the hub and spokes will also have adequate basic infrastructure and other support infrastructure like power and water supply systems,


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ETP, solid waste disposal facility, administration block/business centre, canteen, parking space, etc. A list of these basic and support infrastructure facilities (hub and spoke wise) is given below:

Non technical Facilities

Units Muzaffarpur Hajipur Darbhanga Dalsinghsarai Begusarai

Guest House Sq. m 300 300 200 300 300 Business centre Sq. m 300 300 300 250 250 Knowledge centre Sq. m 400 300 300 300 300 Water Supply LPD 84250 31450 24950 25150 25150 Power Supply KVA 1200 250 175 200 175

10.2.2 Project Cost The cost estimates for IVCs mainly consist of two categories: the renovation/refurbishing of existing building and basic infrastructure and construction of new value added facilities. It has been attempted to use existing infrastructure to the extent possible and replacement of existing assets have been recommended only in cases of absence or unusable condition of these assets/facilities. The cost estimates of plant and machinery are based on the information obtained from equipment suppliers including quotations given by them for similar facilities. The civil work and basic infrastructure costs have been worked out by architects/engineers based on layout plans and as per the industry standards. The component wise costs of the project are given below:

Items Sr. No. Description Amount (Rs Mn) Amount (Mn $)

A 1 Land 0.00 0.00

2 Land Development 311.05 6.60

3 Buildings 513.96 10.91

4 Plant Machinery & Equipments 202.33 4.29

5 Utilities & other fixed assets 44.10 0.94

Sub Total (A) 1,071.45 22.74

B Preliminary and Pre‐Operative Expenses 53.57 1.14

C Contingencies 92.54 1.96

D Margin Money for Working Capital 6.72 0.14

Total Project Cost (A+B+C+D) 1,224.28 25.98

Land

The land cost has not been taken into consideration as the project would be using the land of existing APMC market yards.

Land Development

The land development cost has been calculated based on the detailed engineering surveys in selected APMC market yards. The calculation takes into account the land development cost for both the existing and proposed facilities/infrastructure in these markets. Based on these costs, for the other markets land development cost has been taken proportionately. The detailed costing for these markets will be incorporated in the final report. Cost of land development includes boundary wall, road, water drainage, parking etc. The average cost of development is coming at Rs 5.2 mn/Ha.


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Buildings

The estimated costs of construction for various buildings in the projects are given below: [Amount in Rs million]

Facility Muzaffarpur Hajipur Darbhanga Dalsinghsarai Begusarai IVC IVC

Existing buildings

Trading Platform 14.00 1.80 3.33 1.20 1.80 22.13 0.47

Trading Shops 133.00 4.55 8.42 2.63 3.94 152.53 3.24

Buildings (Admin. Building, canteen, Bank, Ware Houses, etc

47.25 3.85 7.12 2.80 4.20 65.22 1.38

Sub Total (A) 194.25 10.20 18.87 6.63 9.94 239.88 5.09

Proposed buildings

Pack house‐Cold Chain 6.00 6.00 0.00 0.00 0.00 12.00 0.25

Fruit Pulping plant (2 MT/ Hr) 5.85 0.00 0.00 0.00 0.00 5.85 0.12

Pack house‐ Ambient 4.50 4.50 4.50 4.50 4.50 22.50 0.48

Trading Platforms 0.00 4.80 4.80 8.40 12.00 30.00 0.64

Warehouse‐5000 MT 14.95 14.95 0.00 14.95 14.95 59.80 1.27

Potato Cold Store‐5000 MT 21.60 0.00 0.00 0.00 0.00 21.60 0.46

Onion store 3.51 0.00 0.00 3.51 3.51 10.53 0.22

Ripening chamber 2.76 2.76 2.76 2.76 2.76 13.80 0.29

Traders Shops 0.00 5.60 11.20 12.80 11.20 40.80 0.87

Guest House 2.70 2.70 1.80 2.70 2.70 12.60 0.27

Business centre 2.70 2.70 2.70 2.25 2.25 12.60 0.27

Knowledge centre 3.60 2.70 2.70 2.70 2.70 14.40 0.31

Utilities 0.00 6.00 3.60 4.00 4.00 17.60 0.37

Sub Total (B) 68.17 52.71 34.06 58.57 60.57 274.08 5.82

Total (A+B) 262.42 62.91 52.93 65.20 70.51 513.96 10.91

The building construction rate for fruit packhouse (cold chain) has been estimated to be Rs. 8000/sq. m whereas rate for ambient packhouse/trading platform for fruit and vegetable has been estimated to be Rs. 6000/sq. m. The construction rate for dry warehouse for grains and onion store has been assumed at Rs. 6500/sq. m. The lumpsum cost of pre-fabricated banana ripening chamber of 40 MT capacity (which is equivalent to 10 MT/day ripening capacity) having an area of 280 sq.m has been taken as Rs. 2.76 million. The construction cost of potato cold store with pre-fabricated insulated building is estimated at Rs. 8000/sq. m. The rates are in tune to the industry standards and have been verified against quotations received from different industry players.

In case of non technical infrastructure, the construction rate has been estimated at Rs. 9000 per sq. m for facilities such as administrative building/business centre, guest house, canteen etc.

Equipment

The details of the estimated costs of major machineries are provided below:

Table: Machinery Cost [Amount in Rs million]

Facility Muzaffarpur Hajipur Darbhanga Dalsinghsarai Begusarai IVC Refrigeration potato store 20.00 0.00 0.00 0.00 0.00 20.00 Precoolers‐5 MT 1.70 1.70 0.00 0.00 0.00 3.40


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Sorting grading line‐3 MT/hr 8.00 8.00 0.00 0.00 0.00 16.00 Pulping line 25.00 0.00 0.00 0.00 0.00 25.00 Ripening equipments 4.20 4.20 4.20 4.20 4.20 21.00 Electronics auction system 20.00 0.00 0.00 0.00 0.00 20.00 Pallets 1.08 1.08 0.00 0.00 0.00 2.16 Crates 2.25 2.25 2.25 2.25 1.69 10.69 Pallet Movers 0.06 0.06 0.00 0.00 0.00 0.13 Weighing scales‐500 kg 0.30 0.30 0.30 0.30 0.30 1.50 Sorting grading tables 0.18 0.18 0.00 0.00 0.00 0.36 De‐sapping tables 0.75 0.75 0.00 0.00 0.00 1.50 Refer vehicles‐7 MT 28.80 28.80 0.00 0.00 0.00 57.60 Normal Pickup vehicles 1.20 1.20 1.20 1.20 1.20 6.00 Normal trucks‐15 MT 2.40 2.40 2.40 2.40 2.40 12.00 Total Plant Machinery & Equipment

118.42 53.42 10.35 10.35 9.79 202.33

The cost wise major components of the project are refrigerated trucks (Rs. 57.60 mn), pulping line (Rs. 25 mn), refrigeration equipments for potato cold stores (Rs. 20 mn) and electronics auction system (Rs. 20 mn). The rates for plant, machinery and equipments are comparable to the industry standards and have been verified with the quotations from different suppliers.

Miscellaneous Fixed Assets / Utilities

The details of the estimated cost of the miscellaneous fixed assets and utilities are provided below: [Amount in Rs million]

Facility Muzaffarpur Hajipur Darbhanga Dalsinghsarai Begusarai IVC DG sets 3.60 2.00 1.00 1.20 1.20 9.00 Power supply system 22.0 2.50 2.50 2.00 3.00 32.00 IT system 1.0 0.20 0.20 0.20 0.20 1.80 Furniture 0.5 0.20 0.20 0.20 0.20 1.30 Total Misc Fixed Assets 27.10 4.90 3.90 3.60 4.60 44.10

The power load for the total project has been estimated to be 2000 KVA. DG sets have been taken for each spoke and hub and the capacities vary from 50 KVA to 1200 KVA depending on the requirement. The project would require 0.20 million LPD of water for the operations. The cost of water supply has been distributed among the locations in proportion to their water requirements.

Preliminary & Pre‐operative Expenses

The provision towards preliminary & pre-operative expenses includes expenditure towards preliminary expenses like salaries & administrative expenses, travel expenses, market development expenses, interest during construction period etc. It is also assumed that the majority of the project facilities will be commissioned over a period of one year. The interest during construction period is capitalized in the project cost. Pre-operative expenses other than interest during construction period are assumed to be 5% of cost of fixed assets.

Working Capital Requirement

As the project is meant to create facilities and offer them to various users on rental basis, the WC requirement is assumed to be operating costs like management, maintenance, insurance, power and water. As most of these expenses and the rent receipts are monthly in nature, so to cover these expenses the requirement of working capital is calculated by considering the fund requirement for 30 days.


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Contingencies

The amount is calculated as shown in table below:

Contingencies Physical Contingencies

Price Contingencies

Contingencies (Rs Mn.)

Contingencies (Mn. $)

Land 0.0% 0.0% 0.00 0.000 Land Development 5.0% 8.3% 27.11 0.575 Buildings 5.0% 8.3% 44.79 0.951 Plant Machinery & Equipments 0.0% 8.3% 16.79 0.356 Utilities & Other Assets 5.0% 8.3% 3.84 0.082 Total 92.54 1.964

The price contingencies are based on the Whole Sale Price Index during FY 2009.

10.2.3 Means of Finance

The suggested implementation framework mentions that the funding requirement for the project would be met by project grant from state government and equity by private developer. The minimum equity from the private developer is envisaged at 10% of cost of project in case of Bihar. The remaining funds would be contributed as project grant by State government including funds from ADB as detailed below:

Particulars Amount (Rs Mn) Amount (Mn $) Share Asian Development Bank 771.29 16.37 63.00% Government of Bihar 330.55 7.02 27.00% Equity‐Private Investor 122.43 2.60 10.00% Total 1224.28 25.98 100.00%

10.2.4 Key Operating Assumptions

The key operating assumptions underlying the project’s business plan are described below.

Operating Cost Assumptions:

While the marketing infrastructure like trading shops and platforms are likely to be operational for at least 330 days, the overall operation for all the facilities has been assumed at 300 days per annum.

Power & Fuel Costs:

The total connected load of the facilities for all locations is estimated at 2000 KVA. The power tariff has been assumed at the prevailing rate of Rs 4.25 per unit for agro based industry in Bihar. Average daily requirement of power would be about 7200 KWH. The details of power load assumptions for the facility are given below:

Facilities Assumption Trading Plateform/Ambient Packhouse 1 KVA/ 60 sqm Warehouse 1 KVA/ 92 sqm Cold Store 1 KVA/ 10 MT Ripening Chamber 50 KVA/ 40 MT Mango Packhouse‐Cold Chain 50 KVA/ 15 MT Mango Packhouse‐Ambient 1 KVA/ 40 sqm Business Centre & Misc facilities 1 KVA/ 30 sqm

The table below shows the location wise power requirement:

Locations Power Load (KVA)


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Muzaffarpur 1200 Hajipur 250 Darbhanga 175 Dalsinghsarai 200 Begusarai 175 Total 2000

Taking into account the current power supply scenario in the state it has been assumed that the facilities would run on DG sets for about 2 hrs/day. The average fuel cost for DG set is assumed Rs. 35/litre.

Water Cost

Daily requirement of water is estimated to be 0.20 million litres/day for all the locations combined. The charges are assumed to be Rs 20/KL.

Employee Cost

The employee cost has been estimated by considering the man power requirement for managing the facility. The project will be managed by the SPV, which will maintain and operate the facilities in the project. This includes management and 24 hour maintenance of the plant and machineries, management of the canteen, business centre, security, etc. So, a team of technical engineers, support staffs and security personals will be required. The details of manpower and their average costs are given in the following table:

Grade/ Employee Number Salary/month (Rs) Total (Rs) Managers 5 20000 100000 Technical Manager 7 20000 140000 Operators 16 10000 160000 Maintenance 18 6000 108000 Account 8 8000 64000 Security 19 4000 76000 Support Staff 21 3000 63000 Total Employee Cost (Per Month) 94 711000

*Increment in salary is assumed at 5% p.a for 1st five years of operations.

Cost of Maintenance

The cost of maintenance has been assumed as 1.0% of value of plant & machinery and miscellaneous fixed assets. The maintenance cost will increase by 2.5% every year due to aging of assets.

Cost of Insurance

The cost of insurance has been assumed as 1.0% of value of plant & machinery and miscellaneous fixed assets.

Admin & Marketing Overheads

The SPV will be largely responsible for only the management and maintenance of the facilities and users/traders would be doing necessary marketing arrangements for their operations. Initial tie ups are needed for better capacity utilization of the facilities. Most of the promotional/marketing expenses will be incurred up front with only small recurring expenses afterwards. Hence during operations, marketing and business development expenses will not be significant for the project. The major overheads for the project will be traveling costs, statutory (like audit etc.) costs and communication expenses etc. So, the admin & selling overhead costs have been assumed @ 2.0% of revenue in line with the industry norms for such facilities.


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Financial Assumptions

Taxes

Income Tax rate is assumed to be 33.99% flat (Prevailing Corporate Tax Rate). Income tax is calculated on PBT after adjusting for the difference between the depreciations calculated according to Companies Act, 1956 and Income Tax Act, 1961.

Depreciation Rates

Depreciation has been calculated by straight-line method, as per the Companies Act, 1956, for book purpose, whereas for tax purpose (As per Rule-5 of Income Tax Act, 1961), written down value method is employed. The rates of depreciation are in tune to the rates that are used in cold storage and warehousing industry. The depreciation rates used for different assets are given below:

Depreciation Rates Book Depr Tax Depr Plant & Machinery 10.34% 15.00% Miscellaneous Fixed Assets 10.34% 15.00% Buildings 3.34% 5.00%

The plant & machinery includes refrigeration and cooling systems used for operation of facility, sorting-grading equipments, crates, pallets etc. The noncore equipments like water supply system, transformers etc are included in miscellaneous fixed assets. Buildings include, building for ripening facility, ambient and cold pack-houses, dry warehouse storages, business center, canteen etc.

Revenue Assumptions

Rental assumptions

Based on the discussion with market players (service providers, food processors, users, traders and wholesalers) the rental charged for various facilities is tabulated below:

Facilities Charges/ Unit Unit of Charge Trading Platforms/ ambient packhouses 60 Rs/sqm/month Fruit Pulping plant 8000 Rs/MT Banana Ripening Facility 1400 Rs/MT Packhouse‐Cold Chain Sorting/Grading/Packaging charges 5000 Rs/MT Pre‐cooling charges 1000 Rs/MT Warehouse 100 Rs/sqm/month Business Centre 200 Rs/sqm/month Crates 7 Rs/cycle/crate Weighbridge 2 Rs/MT Logistics 10 Rs/Km Cold Store 250 Rs/MT/Month Onion Store 250 Rs/MT/Season

The rentals charged for these facilities are comparable to the prevailing market rates.

Capacity Utilization

The estimated capacity utilizations are shown in the table below.

Year Year 1 Year 2 Year 3 and Onwards

Capacity Utilization Agricultural Marketing Infrastructure 80% 90% 100% Value addition/ storage facilities 40% 60% 80% Basic/ Support Infrastructure 80% 90% 100%


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The capacity utilizations have been assumed conservatively for value addition infrastructure, starting at 40% in the first year.

10.2.5 Financial Performance

The estimated financial projections for the project are tabulated below:

Income Statement: (Rs Million)

Year 1 2 3 8 12 16 20 Capacity Utilization Agricultural Marketing Infrastructure 80% 90% 100% 100% 100% 100% 100% Value addition/ storage facilities 40% 60% 80% 80% 80% 80% 80% Basic/ Support Infrastructure 80% 90% 100% 100% 100% 100% 100% Revenue A. Agricultural Marketing Infrastructure Rental‐ Trading platforms 4.58 5.15 5.72 5.72 5.72 5.72 5.72 Rental‐ Traders shops and business centre 140.80 158.40 176.00 176.00 176.00 176.00 176.00 Sub Total (A) 145.37 163.54 181.71 181.71 181.71 181.71 181.71 B. Value addition/ storage facilities Rental‐ Pack House Cold Chain 2.27 3.40 4.54 4.54 4.54 4.54 4.54 Rental‐ Warehouse 2.21 3.31 4.42 4.42 4.42 4.42 4.42 Rental Potato Cold Store 5.00 7.50 10.00 10.00 10.00 10.00 10.00 Rental‐Onion Store 0.15 0.23 0.30 0.30 0.30 0.30 0.30 Rental‐Ripening Chambers 7.80 11.70 15.60 15.60 15.60 15.60 15.60 Rental‐Fruit Processing unit 6.14 9.22 12.29 12.29 12.29 12.29 12.29 Sub Total (B) 23.57 35.36 47.14 47.14 47.14 47.14 47.14 C. Basic/ Support Infrastructure Rental‐ Logistic 97.20 109.35 121.50 121.50 121.50 121.50 121.50 Rental‐ Crates 11.97 13.47 14.96 14.96 14.96 14.96 14.96 Weighbridge 0.16 0.18 0.20 0.20 0.20 0.20 0.20

Sub Total (C.) 109.33 123.00 136.66

136.66

136.66

136.66

136.66

Revenue 278.27 321.89 365.52 365.52 365.52 365.52 365.52

Expenses Power & Fuel 11.24 12.64 14.05 14.05 14.05 14.05 14.05 Employee Cost 8.53 8.96 9.41 10.89 10.89 10.89 10.89 Water cost 0.90 1.01 1.12 1.12 1.12 1.12 1.12 Maintenance cost 10.71 10.98 11.26 12.74 14.06 15.52 17.13 Insurance 7.34 6.24 5.31 2.35 1.23 0.64 0.33 Admin & Selling Overheads 5.57 6.44 7.31 7.31 7.31 7.31 7.31 Total Expenses 44.29 46.28 48.45 48.46 48.66 49.53 50.83

EBITDA 233.98 275.62 317.07 317.06

316.86 315.99

314.68

Interest Long Term Debt (LTD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Interest Working Capital borrowing 2.72 3.11 3.49 3.49 3.49 3.50 3.51 Depreciation 48.46 48.46 48.46 48.46 19.51 19.51 19.51

PBT 182.79 224.05 265.11 265.10

293.86

292.98

291.66

Tax 34.55 55.18 74.75 92.46 99.14 102.37 103.76

Net Profit (PAT) 148.24

168.87

190.36 172.64 194.72

190.61 187.91

Cash Flow to government 55.65 64.38 73.10 73.10 73.10 73.10 73.10


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Net Profit to Private Investor 92.59 104.49 117.25 99.54 121.61 117.51

114.80

In the above table, it is seen that in the first year of operations with mentioned capacity utilization, the revenue from the project is Rs. 148.24 millions which increases to Rs. 172.64 millions during eighth year. As the project would pay 20% of gross revenue to the government as royalty, the net profit to private developer would be Rs 92.59 million during 1st year of operation

Major Financial Performance Indicators:

Year 1 2 3 4 5 6 7 EBITDA Margin 84.08% 85.62% 86.74% 86.76% 86.73% 86.66% 86.71% PAT margin 53.27% 52.46% 52.08% 50.78% 49.65% 48.66% 47.90% Debt‐Equity Ratio 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Debt to EBITDA ratio 0.09 0.08 0.08 0.08 0.08 0.08 0.08 Interest Coverage Ratio 85.97 88.72 90.78 90.80 90.74 90.62 90.72 DSCR 85.97 88.72 90.78 90.80 90.74 90.62 90.72 Average DSCR 89.91 Project IRR 19.34%

The above table shows the operational and financial efficiencies of the project. The project is able to achieve an operating margin (EBITDA Margin) of about 84% from the first year of operations itself. From fourth year onwards, the project is able to convert about 50% of its revenue into net profit. The project IRR is coming around 19.34%, which seems attractive from investor point of view.

10.2.6 Sensitivity Analysis The sensitivity analysis has been attempted below to establish the need for capital grant support for the project. The various levels of equity contribution by private developers have been tested with minimum being 10% and the maximum being 30% of the project cost as mentioned in the implementation framework.

The sensitivity analysis of financial performance indicator (IRR) of the project with respect to equity contribution by private bidder is given below:

Equity (%) 10% 20% 30% IRR (%) 114.78% 58.64% 39.52%

Analysis of the above table shows that with 30% of the project cost as bidder/developer’s equity contribution (and 70% capital grant from state government), the private equity IRR comes to about 40% which means the project is highly attractive from bidder/developer’s perspective

The spoke wise project cost, means of finance and revenue statements are given in the Annex.to this section


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11 ECONOMIC ANALYSIS

The need for economic analysis of any project is to assess various intangible costs and benefits which are normally not captured in the financial analysis. Any decision on desirability or otherwise of a project would therefore require to take into consideration such costs and benefits and then arrive at a net impact of the project on the economy as a whole. This is more relevant for projects which have a bearing on large segments of the society such as farmers.

The IVCs have been proposed mainly to plug the gaps and deficiencies along the agricultural value chains and aim at enlarging the size of the value chains in terms of greater revenue and ensuring larger share to farmers. The major benefits therefore expected would be in terms of better price realization, wastage reduction and employment generation. The major costs considered are opportunity cost of factors of production viz. land, capital and labour.

The above costs and benefits have not been captured in the financial analysis as major assumptions there include all facilities being developed by private developers for leasing out to actual users. Thus, financial analysis has taken revenue in form of rentals only which do not truly reflect above gains. Also, as land for all facilities is to be provided by state governments on BOT model, financial analysis does not include cost of land even as these land parcels may have large opportunity cost to the economy as a whole.

11.1 METHODOLOGY AND ASSUMPTIONS

The economic analysis is aimed at calculating EIRR which has been done by identifying the benefits arising due to the proposed practices and infrastructure/facilities and are evaluated by comparing ‘With Project’ and ‘Without Project’ scenarios.

The major benefits considered for calculation of EIRR are those which are easily quantifiable and are as follows:

Better Price realization due to quality improvement of the agricultural produces

A major impact expected is significant improvement in produces through modern methods of handling, packaging, storage and transportation which would lead to better price realization.

Wastage Reduction

The interventions in technological infrastructure such as packaging, storage, temperature controlled transportation and better post harvest management practices will help in increasing the shelf life of the perishable commodities. The improved shelf life will lead to low wastage level even during transportation and marketing to distant places in the country.


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Employment Generation

Considering the high unemployment rate in India and the seasonal availability of work for agricultural labor the project will provide good opportunity to work throughout the year for the people of surrounding areas.

Large increase in revenue and tax realization

The project envisages large investments in agribusiness infrastructure which are likely to generate sufficient revenues and lead to incremental tax realization by the government.

Similarly, the major quantifiable costs considered for calculation of EIRR are given below. While opportunity cost of land has been treated as a capital cost for the purpose, opportunity cost of capital (project grant) and labour has been treated as recurring cost.

Opportunity cost of land

The land for the IVCs is to be provided by state governments on BOT model. Thus, the cost of land has been taken as the rates prevalent for industrial land in the surrounding areas. In case of Bihar, project sites are erstwhile APMC market yards. However, the cost of land has been taken based on the industrial land rates prevalent in the region as per Bihar Industrial Area Development Authority (BIADA).

Opportunity cost of capital/ project grant

The project provides for large amount of capital grant to private developers, which may range from 90% of project cost in Bihar to 70% of the project cost in Maharashtra. For the purpose of EIRR calculation, the opportunity cost of project grant amount has been considered which was not captured by the financial analysis. Opportunity cost of capital contributed as project grant is assumed at 10% per annum. The assumption is based on the fact that the money invested as grant can be invested elsewhere and a minimum return of 10% per annum has been assumed conservatively.

Opportunity cost of labour

The project assumes large employment generation for agricultural labourers and limited employment opportunities for management professionals. For the calculation of EIRR, the opportunity cost of agricultural labourers has been taken assuming that they had options to work on other projects such as National Rural Employment Guarantee Scheme (NREGS).

The detailed calculations for the above mentioned benefits and costs has been done at IVC level and are given below:

11.2 MUZAFFARPUR IVC

11.2.1 Quantification of Benefits

Quality improvement leads to premium Price of the commodities

The incremental price realization is calculated based on the price range available in the market for different grades (based on firmness, color, size etc.) of the produce. The table


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below compares the ‘Without Project’ and ‘With Project’ cases to estimate the incremental benefits due to improved quality of the produce.

Without Project With Project

Estimated Additional Price Realization (%)

Crops Price (Rs/MT)

Min Max Weighted Average

Price (Rs/MT)

Incremental Benefit (Rs/MT)

Quantity (MT)

Total Incremental Benefit (Mn Rs)

Vegetable 8000 10% 25% 13.0% 9040 1040 59500 61.88 Fruits 25000 20% 30% 22.0% 30500 5500 3000 16.50 Banana 16000 10% 15% 11.0% 17760 1760 15000 26.40 Grains 10000 5% 10% 6.0% 10600 600 105000 63.00 Onion 14000 10% 15% 11.0% 15540 1540 1500 2.31 Processed Fruits 25000 40% 50% 42.0% 35500 10500 7680 80.64 Total 191680 250.73

The incremental price realization by player in the value chain is estimated to be Rs 250.73 million at 100% capacity utilization.

Wastage Reduction


Wastage Reduction Range (%)

Crops Quantity Saved (MT)


Selling Price (Rs/MT)

Quantity Saved (MT)


Vegetable 0 10% 20% 12.0% 9040 7140 64.55 Fruits 0 15% 20% 16.0% 30500 480 14.64 Banana 0 10% 15% 11.0% 17760 1650 29.30 Grains 0 5% 10% 6.0% 10600 6300 66.78 Onion 0 10% 15% 11.0% 15540 165 2.56 Processed Fruits 0 30% 40% 32.0% 35500 Total 15735 177.83

The investment in IVC would help in saving of about 15000 MT of agricultural produce with estimated value of Rs 177.83 million.



Location No. of workers

Day/ Annum

Annual amount (Rs Mn)

No. of workers

Day/ Annum


Annual Incremental Benefit (Rs Mn)

Muzaffarpur 0 0 0.00 440 300 15.84 15.84 Hajipur 0 0 0.00 324 300 11.66 11.66 Darbhanga 0 0 0.00 264 300 9.50 9.50 Dalsinghsarai 0 0 0.00 222 300 7.99 7.99 Begusarai 0 0 0.00 222 300 7.99 7.99 Total 0 0.00 1472 52.99 52.99

The project is expected to generate additional income of about Rs 53 million for the agricultural labour.


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Large increase in revenue and tax realization

The investment in the IVC will help in better utilization of existing resources and will help in better price/rental realization for trader’s shops etc. as estimated below:

Without Project With Project Location Area

(Sqm) Rental/Sqm. Month (Rs)


Area (Sqm)

Rental/Sqm. Month (Rs)



Muzaffarpur 38000 100 45.60 39000 250 117.00 71.40 Hajipur 1300 100 1.56 2900 250 8.70 7.14 Darbhanga 2405 100 2.89 4605 250 13.82 10.93 Dalsinghsarai 750 100 0.90 3200 250 9.60 8.70 Begusarai 1125 100 1.35 3375 250 10.13 8.78 Total 43580 52.30 53080 159.24 106.94

11.3 QUANTIFICATION OF COSTS

Economic Cost of Project

Items Sr. No. Particulars Amount (Mn Rs)

Amount (Mn $)

A 1 Land 111.75 2.37 2 Land & Site Development 311.05 6.60 3 Buildings 513.96 10.91 4 Plant Machinery & Equipments 202.33 4.29 5 Utilities & other Assets 44.10 0.94 Sub Total (A) 1183.20 25.11 B Project Implementation Cost @10% of ADB Funds 77.13 1.64 C Pre‐op expenses 53.57 1.14 D Contingencies 92.54 1.96 E Capacity Building 14.82 0.31 Total Project Cost (A+B+C+D+E) 1421.25 30.17

All the capital expenses such as land &site development, buildings, plant machinery & equipments, utilities & other assets are incremental in nature and thus considered as various components of economic cost of the project. The opportunity cost of land is assumed to be paid upfront and is therefore treated as capital cost.

The project implementation cost (technical assistance etc.) is assumed as 10% of funds contributed by ADB. The pre-op expenses and contingencies related to project implementation are also taken as economic cost of the project. Further, the cost related to environmental impact has also been treated as one time expenditure in terms of equipments and facilities provided under the project. The environmental assessment for the project has not indicated any long term impact which would have significant cost implications. Finally, the social cost also would be mainly towards capacity building efforts and does not envisage any other cost like resettlement etc.

Based on the above assumptions the estimated economic cost of the project is Rs 1421.25 million or 30.17 million $. The exchange rate of 47.114998 Rs per Dollar is considered for calculation of cost of project in Dollar value.


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11.3.1 Recurring Costs

Opportunity cost of labour

Location No. of workers Days/Annum Annual amount (Rs Mn)

Muzaffarpur 440 100 5.50 Hajipur 324 100 4.05 Darbhanga 264 100 3.30 Dalsinghsarai 222 100 2.78 Begusarai 222 100 2.78 Total 1472 18.40

As mentioned earlier the estimates are based on NREGS. According to the scheme the government will provide minimum 100 days of employment to rural families with daily wage of Rs 125 per worker.

Opportunity cost of capital

Opportunity cost of capital contributed as project grant is assumed at 10% per annum. The assumption is based on the fact that the money invested as grant can be invested elsewhere and a minimum return of 10% per annum has been assumed conservatively

Opportunity cost of other factors

Opportunity cost of other factors such as power, water, fuel etc. is not incremental in nature as these factors are available already and will be used from existing sources.

11.4 COST‐BENEFIT STATEMENT Year 0 1 2 3 4 8 12 16 20 Capacity Utilization‐Value added Infra

Imp Period 40% 60% 80% 80% 80% 80% 80% 80%

Capacity Utilization‐Marketing Infra 80% 90% 100% 100% 100% 100% 100% 100% Capacity Utilization‐Support Infra 80% 90% 100% 100% 100% 100% 100% 100% A. Economic Benefits Quality Improvement 100.29 150.44 200.58 200.58 200.58 200.58 200.58 200.58 Wastage Loss 71.13 106.70 142.27 142.27 142.27 142.27 142.27 142.27 Incremental Labour 21.20 31.80 42.39 42.39 42.39 42.39 42.39 42.39 Incremental Income Tax 34.55 55.18 74.75 79.54 92.46 99.14 102.37 103.76 Incremental Revenue from existing infrastructure 85.56 96.25 106.94 106.94 106.94 106.94 106.94 106.94 Incremental revenue Support Infrastructure 109.33 123.00 136.66 136.66 136.66 136.66 136.66 136.66 Total Economic Benefits (A) 422.06 563.36 703.61 708.39 721.31 727.99 731.22 732.61 B. Economic Costs Opportunity cost of labour 7.36 11.04 14.72 14.72 14.72 14.72 14.72 14.72 Opportunity cost of Capital 110.18 110.18 110.18 110.18 110.18 110.18 110.18 110.18 Total Economic Cost (B) 117.54 121.22 124.90 124.90 124.90 124.90 124.90 124.90 Net Economic Benefits (A‐B) 304.51 442.13 578.70 583.49 596.40 603.09 606.31 607.70


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The table above shows the annual cost and benefits arising from the project.

11.5 CALCULATION OF ECONOMIC IRR (EIRR)

Economic IRR (EIRR)

Year Imp Period 1 2 3 4 8 12 16 20

Economic Investment 1421.25 Net Economic Benefits 0.00 304.51 442.13 578.70 583.49 596.40 603.09 606.31 607.70 Net Economic Cash Flow ‐1421.25 304.51 442.13 578.70 583.49 596.40 603.09 606.31 607.70 Economic IRR (EIRR) 34%

The economic IRR for the project is estimated to be 34% which may considered as good and indicates the economic viability of the project.

11.6 ECONOMIC APPRAISAL RESULTS

11.6.1 Major Economic Indicators:

The major economic indicators considered to assess the economic viability of the project are given in the table below:

NPV (Rs Mn.) 2,761.98 NPV (Million $) 58.62 Benefit‐Cost Ratio 5.64 NPVI 1.94

NPV:

The positive NPV for the project indicates the viability of the project. The NPV is calculated considering the economic life/ concession period of project as 20 years. The discounting rate for calculation of NPV is the Weighted Average Cost of Capital (WACC). The WACC is calculated by assuming the capital cost of 16% for the private investor and 10% for project grant. The calculation of WACC is shown in the below table:

Details Share Cost of Capital Project Grant 90.00% 10% Equity‐Private Investor 10.00% 16% WACC 10.60%

Benefit‐Cost Ratio (BCR):

The average BCR over the project life is estimated to be 5.64. The ration indicates that for every one $ of expense it will generate more than five times of expense over the life of project. Hence, the project is highly economic viable.

Net Present Value per $ of Investment (NPVI):

The NPVI of more than zero is always considered as a good indicator of the economic viability of the project. In this case, the estimated NPVI is 1.94 which is high.


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PATNA‐NALANDA INTEGRATED VALUE CHAIN

Patna‐Nalanda region, Bihar

Focus Crops

Potato Vegetables

DPR: Patna‐Nalanda Integrated Value Chain Project



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Patna‐Nalanda Region

The region and districts have been chosen in order to incorporate functional diversity into the model considering that this is the initial phase of the project. The region is irrigated with predominant production of Vegetables and Paddy. The region is comparatively more developed with higher per capita income levels with better connectivity between the districts.

The focus crops for the region are Potato and Vegetables. Potato is grown extensively in and around Patna, Nalanda while Vegetables are grown in Patna, Nalanda, Buxar, Gaya, Nokha and Arrah.

The map below shows the Patna-Nalanda region, identified for the Integrated Value Chain Project. This region includes Patna, Nalanda, Buxar, Sasaram, Gaya districts

In case of Patna- Nalanda region the hub is proposed in the town of Bihar Sharif (Nalanda district) while the spokes are proposed at Musallapur (Patna District), Gaya, Arrah, Buxar and Nokha.

Patna‐Nalanda


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12 FOCUS CROP: POTATO

India is the fifth largest producer of potato in the world after china, Russia, Poland and USA. Uttar Pradesh is the leading potato growing state in the country followed by West Bengal and Bihar. The area under cultivation of potato in Bihar is 315,460 Ha during the year 07-08 with a production of 6,019,650 MT. In 2006-07, the total production of potato in Bihar was 5,741,300 MT and it showed a growth of about 5% from 2006-07 to 2007-08. The productivity of potato in Bihar 19.1 MT/Ha which is almost same as the national average (19.3 MT/Ha). However, the productivity of potato in Bihar is lower than that of West Bengal (24.7 MT/Ha) and Uttar Pradesh (22.0 MT/Ha). The marketable surplus of potato in the region is about 90-92%. The following table gives district wise details of area and production under potato in the study region.

Within the region, Nalanda and Patna grow very high volumes of potato and Bihar Sharif is one of the largest markets dealing with potato. From this region, potato is sent to various places out of Bihar such as Jharkand, UP, West Bengal etc.

Potato is a temperate or cool season crop which needs low temperature, lower humidity and bright sunlight. Potato being a fast growing crop fits well in different multiple and inter-cropping systems. In the region,

potato season starts from February and peaks in March and April. Harvesting assumes considerable importance because the crop has to be harvested as early as possible as harvesting coincides with the onset of summer. Sometimes, harvesting time may also coincide with heavy rainfall or severe cyclone and floods. In view of these situations suitable technology is, therefore, necessary for reducing the harvesting time and safe storage at farm level.

12.1 VALUE CHAIN

ANALYSIS

The diagram explains the major channels of trade of potato in the study region:

The Supply chain depicted above could be broadly classified into two categories based on the point of sale.

Area & Production of Potato in the identified Region

Districts Area (Ha) Production(MT)

Patna 15934 315493

Nalanda 26918 554127

Rohtas 10523 191519

Gaya 11238 214646

Buxar 5074 97928

Bhojpur 8388 162727

Region Total 78075 1536440

Bihar 315460 6019650

Area/Production of the region as % to State

24.75% 25.52%

Source: Directorate of Horticulture, Govt. of Bihar. FY:07-08

Farmer

Cold Storage On Farm Trader

Wholesaler

Commission Agent

Consumer

Other State

Retailer


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1. At Farm Gate : This Accounts for 5-10%

2. At wholesale Mandis within production clusters : This is seen predominantly and accounts for 90-95% of the produce

The important operations carried out after harvesting of the crop are bagging, storage, sorting and processing (wherever applicable). The produce is stored in cold storages either by the farmers or by the commission agents/traders for sale at later date. The major players involved in the trade channels of potato are farmer, commission agent, cold storage owners and wholesalers. The roles played by each player in the value chains are given below:

Farmer

The average size of potato farm in the region is about 2 acres (1 Ha = 2.5 Acres). The cost of cultivation of potato is about Rs. 40,000 per Ha. The breakup of the cost is given below:

As mentioned earlier the average productivity of potato in the region is about 19 MT/Ha and the range varies from 12.5 MT/Ha to 23.5 MT/Ha. Based on the current year’s production scenario (where most of the crop is affected by Late Blight disease) the price received by farmer was approximately Rs 5/Kg. The produce is stored either by the farmer or is sold to the trader who then stores the produce in cold storage for sale at later date. The transport cost to the cold storage is borne by the farmer. Price fixation between the farmer and the trader is by negotiation. It is observed that the farmers avail credit facilities extended either by traders or cold

storage owners in few pockets of Nalanda. In such cases the farmer is obligated to sell his produce to the trader and the price realization may not be as per the prevailing market rates.

Commission Agent (CA)

CA facilitates the sale of farmer’s produce for which they charge a commission of 4 to 6% of the sale value from the farmers or from the wholesalers/buyers. They arrange facilities such as trading area and weighing facility. They provide financial support to farmers for cultivation of crops. They have linkages with the wholesalers in the mandis as well as cold storage owners. They play a vital link in the value chain as linkages with distant markets are made through them.

Traders

Traders are the major buyers of Potato in the markets. One of the predominant features of these players is that they buy the produce from framers and spread the sale throughout the year. They buy the potato during season and store it from February to October in the cold storages. The duration of storage may vary depending upon the price realization by the traders during off season.

Cold Storages

The produce typically arrives in the cold storages in the months of February and March. It is stored for four to six months depending upon the demand in the off season. The cold storage

Field Operations Cost (Rs.) per Ha Seed @ 600kg/ac 15000 Land preparation ploughing 1500 Land preparation planking 1250 Land preparation cultivator 1250 Land preparation ridging 1000 Sowing 4 labour per day/ac 1000 Irrigation (2 times) 3000 Fertilizer Urea 200kg 5000 Fertilizer DAP 100kg 2500 Fertilizer MOP 50kg 1250 Pesticide spray 2500 Potato uprooting 1500 Grading 500 Packing 500 Gunny bags @Rs 9/bag 2250 Total 40000


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charges are around Rs.120 to Rs 150 per Quintal for the entire season. Size wise sorting of the produce is carried out at the storage by engaging labour. There is about 11-12% loss of potato after the season’s storage at the cold store. The losses are due to moisture loss, rotting and wastages during sorting, grading and packaging of potato after it is taken out of the cold stores. At present most of the potato cold stores in Bihar operate in under capacities. They store potato for 7-8 months and rest of the year the stores are empty. Also, there is a power shortage in Bihar and the cold stores have to use diesel generators for power for a considerable time (typically electricity is there for about 8-12 hours a day in most places in Bihar) which increases the cost of operation of the cols stores to a large extent.

The storage facilities have controlled temperature and humidity conditions. However, the technology used in cold storages is conventional with less effective insulation and ventilation system. Ammonia is generally used as the coolant. Refrigeration equipments are out-dated with fans circulating the cold air from the evaporators vertically from the top of the store rather than horizontally (to enable a good distribution of cold air before it drops to the bottom of the store). Humidity and gas is controlled by opening windows to allow humid air to enter or a build up of gases from produce respiration to escape. This method is crude as far as control is concerned and inefficient due to the temperature rise in the store. Poor power supply was quoted as greatest hindrance in the proper functioning and development of cold storages in Bihar. Intermittent power supply forces the cold stores to use diesel generators for power supply which increases the operating cost substantially.

Concrete constructed cold store in Bihar Old fashioned evaporators with vertical fans

12.1.1 Value Chain Actors and Functions: Value Chain Actor

Physical Functions Financial Functions

Farmer 1. Cultivation 2. Harvesting 3. Farm level sorting and bagging

1. Selling of potato to on‐farm traders/wholesalers

On‐farm Traders

1. Loading and Transportation of the produce to the market

2. Payment to the farmer

1. Price communication to the farmer 2. Price risk between harvesting to sale in the

Mandi or distant consumption market 3. Transit losses

Commission Agent

1. Providing trading area 2. Weighing

1. Price discovery by auction/ negotiation 2. Cash Advances/credit to the farmers during

production Wholesaler/ Trader

1. Storing of potato in the cold stores 2. Sorting and grading of the produce

at the cold stores 3. Packaging 4. Loading and transportation to

consumption markets

1. Price risk in the distant market as there is a gap between buying and reselling

2. Sorting grading and moisture loss 3. Transit losses 4. Credit risk in the distant consumption

market


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Cold Stores 1. Providing cold storage space for potato

1. Charge rentals for storing 2. Cash Advances/credit to the farmers during

production 3. Risk of reduction in weight of potato during

storage more than the accepted reduction of 10%

A value chain indicating the various activities and cost build-up at every step has been mapped for 1 kg of potato. Some of the assumptions for the price build up are:

The most commonly observed trade channel has been selected for the price build up of potato, i.e. Farmer-Wholesaler-Retailer.


From the above diagram it is evident that the farmers pay for harvesting, initial packaging, labour charges towards bagging (in 50 Kg bags) and loading and sometimes transportation to the nearby Mandi or Cold storage as the case may be. Initial losses occur while harvesting the crop and also due to moisture loss. The farmer would also bear the storage charges in case he stores the produce for seed purpose or for sale at later stage or for his own consumption. The trader/wholesaler pays for the commission, sorting & also storage if the produce is stored in the cold storage by him. He would also bear the cost of bagging the produce, loading and transporting it to the nearby mandi. From the wholesalers, the retailers buy the products paying for transport to their retail outlets.


Rs/Kg Particular Farmer Trader/Wholesaler Retailer Cost of Production/ Purchase 1.85 5.00 10.00 Cost of Marketing incl. Commission Agent charges, wastages, Losses, etc. 1.50 3.00 0.10 Sale Price 5.00 10.00 15.00 Spread 1.65 2.00 4.90


There are 3 intermediaries between the farmer and the consumer in the lemon supply chain (including the commission agent).

Rs.0.50Rs.0.50

Rs. 0.5Rs. 0.5

Rs. 0.5Rs. 0.5

Rs.5.00Rs.5.00

Rs.0.2Rs.0.2

Rs.1.3Rs.1.3

Rs.0.3Rs.0.3

Rs.0.1Rs.0.1

Rs. 2.0Rs. 2.0

Harvesting

Losses

Local Transportationto Cold storage

Storage Charges

Commission

Sorting

Wholesaler’s Margin

Bagging & Loading

Farmer’s Price

Rs.0.2 Rs.0.2

Rs. 4‐6Rs. 4‐6

Bagging, Loading & Unloading

Transportation

Rs.0.70Rs.0.70

LossesRs.0.1 Rs.0.1

Rs.0.1 Rs.0.1

Transportation

Retailer Margin

Rs. 10.00 (Wholesaler’s Margin)

Rs. 15.00 (Retailer’s Margin)

Rs.0.50Rs.0.50

Rs. 0.5Rs. 0.5

Rs. 0.5Rs. 0.5

Rs.5.00Rs.5.00

Rs.0.2Rs.0.2

Rs.1.3Rs.1.3

Rs.0.3Rs.0.3

Rs.0.1Rs.0.1

Rs. 2.0Rs. 2.0

Harvesting

Losses

Local Transportationto Cold storage

Storage Charges

Commission

Sorting

Wholesaler’s Margin

Bagging & Loading

Farmer’s Price

Rs.0.2 Rs.0.2

Rs. 4‐6Rs. 4‐6

Bagging, Loading & Unloading

Transportation

Rs.0.70Rs.0.70

LossesRs.0.1 Rs.0.1

Rs.0.1 Rs.0.1

Transportation

Retailer Margin

Rs. 10.00 (Wholesaler’s Margin)

Rs. 15.00 (Retailer’s Margin)


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The price build up from farmer to consumer is around 3 times.

The farmer earns a margin of Rs. 1.65 which is about 11% of the consumer rupee which is low as compared to other crops

Trader/wholesaler incurs a cost of around Rs 3.00 per Kg in various activities such as labour, storing charges, packaging, transportation, wastages etc. The wholesaler earns a margin of Rs 2.00 per Kg that is around 13 paisa of a consumer rupee.

The commission paid by the farmer to the commission agent constitutes 2 paisa of a consumer rupee.

The cold store owners earns about Rs. 1.3 per Kg which is about 9% of the consumer rupee.

The total wastages along the chain is about Rs. 1.20 per Kg which is about 8% of the consumer rupee.

The share of consumers rupee by various actors in the value chain emerges as below (in % of consumer’s rupee) :

12.1.2 Post Harvest Infrastructure

Potatoes are graded and packed manually. The produce is bagged in 50 kg jute/ poly net bags. Usage of poly net bag is being encouraged by the traders due to its low cost and better aeration. There is no infrastructure for grading and packaging at farm level.

As mentioned earlier, the potatoes are stored in cold storages. As per the SHM Report 2008, the total cold store capacity in the region is 15.8 lakh MT and a gap of 44 lakh MT of cold store space exists in the region. Also, the existing cold storages are all conventional in nature with no proper insulation or ventilation system.

12.1.3 Institutional Arrangements

There is no farmers’ cooperative which is engaged in the marketing of potato in the region. However, there are some farmer’s club operating in the region. Farmers’ Clubs are grass root level informal forums. Such Clubs are organized by rural branches of banks with the support and financial assistance of NABARD. NABARD launched this program in 1982. The main activities taken up by the Farmer’s clubs are to coordinate with banks to ensure credit flow, act as an interface with subject matter specialists for technical know-how upgradation, liaison with input suppliers for bulk purchase of inputs, facilitate joint activities like collective farm produce marketing, processing, value addition and market rural produce.

There are no potato processing units in the region at present.

12.2 GAPS IN THE VALUE CHAIN

Some of the gaps identified in the value chain during the field surveys are listed below:


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After harvest, potato tubers are dried in the open and not in the shade resulting in quality loss. As mentioned,grading and packing is done manually which is labour intensive.

Potatoes are not pre-cooled before storage.

There is no accurate weighing mechanism either at the farm level or at the cold store. The produce is not weighed at the time of taking it out from cold stores. Thus weight loss during storage is not recorded.

The cold storages do not maintain the temperature consistently at one level due to poor availability of electricity. However, the fuel required to bring the facility to the required temperature is much higher than that required to maintain it constant throughout the day. For example, the cost of fuel to maintain temperature of the facility at 2 degree Celsius throughout the day is much lesser than that required to bring the temperature to 2 degrees Celsius from 10 degree Celsius.

Though potato can be cold stored at higher temperature levels, many of the cold stores of this region operate at 1 to 2 degree Celsius, which increases their overhead expenses.

As mentioned earlier, the technology used in cold storages is conventional with less effective insulation and ventilation system. Ammonia is generally used as the coolant. Refrigeration equipments are out-dated with fans circulating the cold air from the evaporators vertically from the top of the store rather than horizontally. Humidity and gas is controlled by opening windows to allow humid air to enter and to flush out carbon dioxide. This method is crude and inefficient.

All the cold stores are bunker-fin type with air being pushed from top to bottom. Because of this potatoes stored on the top floor get chilled resulting in higher starch accumulation. The concept of sun-side & shade-side of the cold store is not followed resulting in temperature difference of more than 5 °C between these two sides.

Potato in grown in many places in Bihar as an intercrop with Maize. This results in rapid spread of Late Blight, due to which around 40% of the crop was damaged this year.

Many of the farmers take advances from traders or cold storage owners towards expenses for the next crop. This pushes them into a debt trap and the farmer is forced to settle his/her produce against the loans taken from the traders / cold storage owners.

Information dissemination regarding price is not even at all the levels in the value chain.

Absence of processing units in Bihar discourages farmers to grow processing varieties.

12.3 PROPOSED INTERVENTIONS

Potential areas for intervention for potato in the region are:

Drying sheds may be set up at farm level for proper drying of potatoes.

There is a need to create energy efficient modern cold storage facilities for potatoes in the region.

Skill development and capacity building of cold store operators and technicians.

Setting up of processing unit in the region would accelerate cultivation of processing varieties and thus create better marketing avenues for the farmers.


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13 FOCUS CROP: VEGETABLES

A wide range of vegetables are grown throughout the year in Bihar, ensuring a regular year-round supply of summer/Kharif vegetables such as bottle gourd, sponge gourd, cucumber, brinjal, chilly, radish, onion and cowpea and winter/Rabi vegetables such as cabbage, cauliflower, potato & tomato. Vegetables are grown in open fields as a seasonal commercial crop, in newly established fruit orchards as an intercrop, or grown with sugarcane or maize as an intercrop.

The primary commercial vegetable crops representing more than 90% of the cultivated vegetable area in Bihar are crucifers (cauliflower, cabbage), solanaceous vegetables (eggplant, tomato and chilli), okra, cucurbits (gourds, cucumber and melons), root crops (radish, carrot, turnip) and pulses (peas, beans). Secondary vegetable crops, also of significant commercial importance include leafy vegetables (spinach and amaranth) and tubers (sweet potato, amorphophallus, colocasia, and yam-bean).

Both the area under cultivation and production of vegetables saw a constant increase over the last three years. The production of vegetables has gone up from 13,356,000 MT during 05-06 to 14,809,000 MT during 08-09. The trends for the same can be depicted with the help of the table given below.

Year Area (000 Ha) Production (000 MT)

2005‐06 804.7 13356.7

2006‐07 824.4 13612.8

2007‐08 823.7 14067.7

2008‐09 843.1 14809.0

Source: Annual Action Plan 09, Directorate of Horticulture, Govt. of Bihar

The productivity status of various vegetables and how they fair as against the national average is given in the table below. It is observed that in most of the vegetables the productivity in Bihar is marginally more than the national average. However, total yield potential of these crops has not been exploited yet.

Productivity Status of Vegetables in Bihar State (2008‐09)

Crop Av. Yield (MT/Ha)

Yield Potential (MT/Ha)

Yield gap (MT/Ha)

National average (MT/Ha)

Okra 12.50 15.00 2.50 10.30 Brinjal 21.50 25.00 3.50 16.90 Cauliflower 17.00 22.00 5.00 18.00 Onion 12.00 25.00 13.00 15.10 Tomato 20.00 30.00 10.00 17.90 Cabbage 17.00 25.00 8.00 22.20 Bottle Gourd 20.00 22.00 2.00 20.00 Sponge gourd 14.00 16.00 2.00 13.00 Bitter gourd 7.00 15.00 8.00 6.00 Pointed gourd 10.50 12.50 2.00 9.50 Cowpea 7.50 10.00 2.50 7.00 Peas 7.00 8.00 1.00 8.20

Source: Annual Action Plan 09, Directorate of Horticulture, Govt. of Bihar


89

For the purpose of the study, based on the production volume, cauliflower and brinjal are taken as representative vegetables for the region and have been studied in details. The area and production figures of brinjal and cauliflower for the study regions are given below.

Area & Production of Brinjal in the identified Region (2005‐06) Area (Ha) Production (MT) Patna 1798 35061 Nalanda 6429 128580 Rohtas 946 17896 Gaya 1604 30156 Bhojpur 1012 19228 Buxar 627 11913 Total 12416 242834

Area & Production of Cauliflower in the identified Region Area (Ha) Production (MT) Patna 3388 54508 Nalanda 2792 47692 Rohtas 1176 17640 Gaya 1752 27156 Bhojpur 927 14461 Buxar 502 7781 Total 28972 169238

13.1 VALUE CHAIN ANALYSIS

The supply chain in case of vegetables consists of farmers, local aggregators, commission agents, wholesalers/traders and retailers.

The trade channels are shown in the diagram below.

In case of vegetables, farmers typically sell the produce to a wholesaler/trader (through a local commission agent) who sells it directly to the retailer (Channel 1 through which 70% of the trade happens). Many times the local commission agents act as local aggregators who buys the produce from the farmers and sell it to wholesaler at the markets (through

Farmer

Local Aggregator/ Commission Agent

Commission Agent @ Market

Wholesaler/Trader Retailer

Customer

Retailer Trader

Customer

Channel 3

Channel 2

Channel 1


90

commission agents in the market) (Channel 2- about 5-10% of the produce). In some cases, the farmers (medium and large) have direct relationships with market commission agents and they directly sell their produce to the market wholesalers through commission agents in the markets (Channel 3- about 20-25% of the trade). The vegetables in the region are mostly consumed locally with some amount being sent markets in Jharkhand (about 10-20%). The roles played by different players in the supply chain are given below:

Farmers:

The average size of farms in the region is less than 1 Ha (about 0.8 Ha). The cost of cultivation of 1 Ha of brinjal and cauliflower is about Rs. 50,000 and Rs. 51,500 respectively per season. The breakups of the costs per Ha are given below.

Brinjal Cauliflower Cultivation practices Rs. Rs.

Field preparation 6000 6000 Nursery planting/sowing with seed cost & irrigation 7000 10000 Weeding 10000 10000 Plant Protection 10000 12000 Fertilizer 7000 8500 Wages 10000 5000 Total 50000 51500

The average per season productivity of brinjal and cauliflower in the region is 22-25 MT and 19 MT respectively. However, the trading unit of cauliflower is number of pieces instead of weight. The prices received by the farmers are Rs. 3-5 per Kg for both the produce.

Typically the produce is harvested by the farmers and packed in Cloth Bags, Sacks and Baskets by late evening. It is then transported to the nearest aggregation point during early hours of the next day either by carrying on heads, Cycles, Cycle carts, Tractors, and Auto Rikshaws. The choice of mode of transport depends upon the volume of produce being sold by each producer. In case of smaller volumes like one to two baskets (approx. 20 to 60 Kg) each farmer either carries the produce as a head load or carries it on Bicycle. In those cases where the volume to be sold by each farmer is between 4 – 8 baskets (80 to 200 Kgs) the produce is transported by cycle push carts / Thelas and Auto Rikshaws. Other modes of transport like tractors are used to transport larger volumes either by individual progressive farmers/by small farmers who pool their produce and utilize the facility. Except for tractors and auto rikshaws, the other modes of transport are often owned by the farmers and hence there is no additional cost incurred by them towards transportation of the produce. Other necessities like baskets, bags, weighing scales, etc are owned by the farmers. The weighing balance is carried by the producer along with the produce every day. In those cases where the farmer sells the produce directly in the markets he transports the produce to the market and is also responsible bears the cost of weighing. All the costs pertaining to the above mentioned activities are borne by the farmers. It is observed that in some markets the farmer’s also pay certain minimal amount (either 3% or in kind) towards the commission agents charges.

Local Aggregator/ Commission Agent

The village commission agents provide the link between the farmer and the market agents. They are mostly entrepreneurs, whose income depends on matching the supply of produce with the demand of the market. Their primary role is to deliver the farmer’s produce to the nearby semi-wholesale/retail market. At no time during this process is the title to the goods held by the agent who is only involved as a facilitator and hence does not suffer risks such as


91

losses, wastages etc. Additionally, all expenses incurred are charged to the farmer and buyer. They typically charge 3% to the farmer and 5% to the buyer. In most of the cases the agents extend credit to the farmers. As mentioned earlier, sometimes the local commission agents play the role of aggregators as well. He purchases the produce from small and marginal farmers and aggregates it at the village level. In this case, the aggregators bear the cost of transport, labour, weighing and commission at the market.

Aggregation of vegetables happens at the Village level Haats or Collection centres. Most of these aggregation points are located conveniently on the road side thereby easing the transportation of the produce. Each of the aggregation point serves villages which are within 10 Km radius. The average volume handled by each aggregation point is about 40-60 MT on a daily basis.

The existing aggregation points can be classified into three types based on the ownership and overall management of the collection centres. They are described in detail below.

Model 1: In this model the ownership and management of the land are with two different private entities. The private entity owning the land leases out the space to another individual who pays an annual compensation towards utilization of the area. The private entity who manages the day-to-day operations of the aggregation point in turn allows the farmers and traders to utilize the space and also facilitates the trading. He charges a commission either in cash (fixed percentage on transactions from traders) or in kind (this is observed in case of transactions with the farmers, wherein some produce brought for trading by the farmers is retained by the operator). Only wholesale trade is observed in this model.

Model 2: The ownership and the daily operation of the aggregation point are with one private entity. A small portion in an orchard or field with good access near the roadside is typically converted into an aggregation centre by an individual entity. Apart from providing space the operator also extends some basic facilities for weighing, slightly raised platforms for grading and sorting for the buyers. The facility being provided is basic but provides shelter and protection during rain and shine. The commission charged from traders is a fixed percentage of the entire transaction (The prevailing rate is Rs.4 to Rs.6 on every Rs.100 of transaction). Both wholesale and retail trade is observed here.

Model 3: Here also, the ownership and daily operation of the aggregation point are with one private entity. However, these are road side collection points where the operator actively facilitates the auctions and also sub leases space for small vendors to carry out some retail trade. The commission is charged on the volume of produce being transacted. The wholesale transactions are more organized here with one additional step where monitoring is done by the operator himself. The entire trading is a two step process in this model wherein in stage 1 the produce is brought to the aggregation point by the farmer and auctioned/ sold to a trader after price negotiation. In stage 2 the produce which is traded is then weighed by the operator to check for volumes upon which the commission will be charged from the buyers. The establishments are spacious and competitive to some extent. In a bid to attract more farmers and larger volumes, each facility is promoted to some extent with banners which communicate the advantages of the facility.

After the trade, the produce is weighed and repacked into gunny bags or baskets by the trader. Depending upon the volume, it is transported to the destination either by trucks or on Bus top. The operator collects his commission after every transaction before loading the produce for transport to destination.

Commission Agents:


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The role played by the commission agent in the market yards is more or less similar. The market commission agents facilitate the transactions at the yard either by auctions or by price negotiation when traders arrive at the market for purchase. The facilities provided by the agents are weighing scales, labour for loading/ unloading on chargeable basis and also provide contacts of transport service providers.

Wholesalers/Traders:

Wholesalers buy produce in bulk either from the markets or from village level aggregation points. They absorb the cost of storage, sorting, grading, transportation, quantity losses, etc. In case of buyers from distant markets like Ranchi and Dhanbad, a credit cycle of 2-3 days are observed. There are also some semi-wholesalers operating in the region. Semi-wholesalers are typically smaller wholesalers/large retailers who supply to the smaller retailers. They are small and independent operators in the value chain- a combination of squatters, pushcarts and stalls and small shops. In the case of vegetables, retailers buy produce from the wholesale market on a daily basis due to lack of storage facilities. Street vendors are present even in municipal markets in addition to being present in almost every locality in major consumption markets.

13.1.1 Price Build up in the value chain of Cauliflower

A value chain indicating the various activities and cost build-up at every step has been mapped for 100 pieces (approximately 60 Kg) of cauliflower. Some of the assumptions for the price build up are:

The most commonly observed trade channel (Channel 1) has been selected for the price build up of cauliflower, i.e. Farmer-Wholesaler-Retailer.


Packaging & Loading

Unloading, weighing

Transportation

Commission charges @ 3% from farmer

Farmer’s Price

Wastages

Harvesting

Loading

Transportation

Trader’s Margin

Rs 20.0Rs 20.0

Rs 30.0 Rs 30.0

Rs 10.00Rs 10.00

Rs 10.0Rs 10.0

Rs 5.00Rs 5.00

Rs 300.00Rs 300.00

Rs 15.00Rs 15.00

Rs 100.0Rs 100.0

Rs 5.00Rs 5.00

Rs 10.0Rs 10.0

Rs 50.0Rs 50.0

Rs 25.0Rs 25.0

Transportation Rs 150.0Rs 150.0

Retailer’s Margin

Rs. 480.00 (Trader’s Price)

Rs. 668.00 (Retailer’s Price)

Commission charges @ 5% from trader

Rs 13.0Rs 13.0

Wastages

Packaging & Loading

Unloading, weighing

Transportation


Farmer’s Price

Wastages

Harvesting

Loading

Transportation

Trader’s Margin

Rs 20.0Rs 20.0

Rs 30.0 Rs 30.0

Rs 10.00Rs 10.00

Rs 10.0Rs 10.0

Rs 5.00Rs 5.00

Rs 300.00Rs 300.00

Rs 15.00Rs 15.00

Rs 100.0Rs 100.0

Rs 5.00Rs 5.00

Rs 10.0Rs 10.0

Rs 50.0Rs 50.0

Rs 25.0Rs 25.0


Retailer’s Margin



Packaging & Loading

Unloading, weighing

Transportation


Farmer’s Price

Wastages

Harvesting

Loading

Transportation

Trader’s Margin

Rs 20.0Rs 20.0

Rs 30.0 Rs 30.0

Rs 10.00Rs 10.00

Rs 10.0Rs 10.0

Rs 5.00Rs 5.00

Rs 300.00Rs 300.00

Rs 15.00Rs 15.00

Rs 100.0Rs 100.0

Rs 5.00Rs 5.00

Rs 10.0Rs 10.0

Rs 50.0Rs 50.0

Rs 25.0Rs 25.0


Retailer’s Margin



Unloading, weighing

Transportation


Farmer’s Price

Wastages

Harvesting

Loading

Transportation

Trader’s Margin

Rs 20.0Rs 20.0

Rs 30.0 Rs 30.0

Rs 10.00Rs 10.00

Rs 10.0Rs 10.0

Rs 5.00Rs 5.00

Rs 300.00Rs 300.00

Rs 15.00Rs 15.00

Rs 100.0Rs 100.0

Rs 5.00Rs 5.00

Rs 10.0Rs 10.0

Rs 50.0Rs 50.0

Rs 25.0Rs 25.0


Retailer’s Margin

Unloading, weighing

Transportation


Farmer’s Price

Wastages

Harvesting

Loading

Transportation

Trader’s Margin

Rs 20.0Rs 20.0

Rs 30.0 Rs 30.0

Rs 10.00Rs 10.00

Rs 10.0Rs 10.0

Rs 5.00Rs 5.00

Rs 300.00Rs 300.00

Rs 15.00Rs 15.00

Rs 100.0Rs 100.0

Rs 5.00Rs 5.00

Rs 10.0Rs 10.0

Rs 50.0Rs 50.0

Rs 25.0Rs 25.0

Transportation

Unloading, weighing

Transportation


Farmer’s Price

Wastages

Harvesting

Loading

Transportation

Trader’s Margin

Rs 20.0Rs 20.0

Rs 30.0 Rs 30.0

Rs 10.00Rs 10.00

Rs 10.0Rs 10.0

Rs 5.00Rs 5.00

Rs 300.00Rs 300.00

Rs 15.00Rs 15.00

Rs 100.0Rs 100.0

Rs 5.00Rs 5.00

Rs 10.0Rs 10.0

Rs 50.0Rs 50.0

Rs 25.0Rs 25.0


Retailer’s Margin




Rs 13.0Rs 13.0

Wastages


93

The harvesting activity is generally carried by farmers themselves. However, if this activity were to be assessed in terms of cost incurred by the farmer it comes to Rs. 0.20 per piece of Cauliflower. Farmer’s incur cost of about Rs.30 per basket. The produce is packed in such a way that each basket holds exactly 100 pcs. This will also ease the following transactions. The produce is transported with the help of cycle push carts/ thelas and about 5 baskets are transported per trip which costs about Rs.50 for 10 Km distance. The unloading and other handling charges by labour which are prevalent in the market is about Rs.5 per basket. After paying a commission of about 3% to the commission agent the farmer gets anywhere between Rs.300 to Rs.800 per basket depending upon whether it is peak/non peak season. The trader too pays a commission of 5% to the agent in the market for facilitating the transaction. Loading charges are about Rs.5 per basket in most of the market yards. In case of distant markets (about 80 to 150 Km of distance) the transportation costs for a mini tempo is about Rs.1000 per trip and about 800 pcs are transported in each trip. The reported wastage at the trader’s end is about 5% and with a margin anywhere between Rs. 200 to Rs 400 per basket the consumer price of Cauliflower is about Rs.6.50 (Peak Season) to Rs.15 (Non Peak Season) per piece.


Rs/300 pieces Particular Farmer Trader Retailer Cost of Production/ Purchase 160 300 480 Cost of Marketing incl. Commission Agent charges, wastages, etc. 75 130 38 Sale Price 300 480 668 Spread 65 50 150


There are 3 intermediaries between the farmer and the consumer in the cauliflower supply chain (including the commission agent).

The price build up from farmer to consumer is around 2.2 times.

The farmer earns a margin of Rs. 65 which is about 10% of the consumer rupee which is low as compared to other crops

Trader/wholesaler incurs a cost of around Rs 130.0 per 100 pieces in various activities such as labour, storing charges, commission, packaging, transportation, wastages etc. The wholesaler earns a margin of Rs 50.00 per 100 pieces that is around 7 paisa of a consumer rupee.

The commission paid by the farmer and trader to the commission agent constitutes 4 paisa of a consumer rupee.

The retailer earns a margin of Rs. 150 which is 22% of the consumer rupee. This clearly shows that the retailers earns the highest profit and controls the trade to a large extent.



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13.1.2 Price Build up in the value Chain of Brinjal A value chain indicating the various activities and cost build-up at every step has been mapped for 1 Kg of brinjal. Some of the assumptions for the price build up are:

The most commonly observed trade channel (Channel 1) has been selected for the price build up of brinjal, i.e. Farmer-Wholesaler-Retailer.


In case of brinjal also the harvesting is done by own labour. About 4 Mann (1 Mann = 40 Kg) is harvested with the help of one woman labour at the cost of Rs.80-120 per day. The harvested produce is packed in gunny bags which contain about 40 Kg. Sometimes as much as 160 Kg is filled into big gunny bags which are supported with paper board material supporting the bags from within. The packaging cost comes to about Rs.0.25 per Kg. About 160 kg of brinjal can be transported in one trip by cycle push cart to the nearby market/ aggregation point which would cost about Rs.50 per trip. The charges for weighing and unloading are fixed in most of the markets at Rs.5 per Mann (40 Kg).The farmer’s price is Rs.5 per Kg and he would in turn pay Rs.0.15 ( About 3%) towards commission charges to the agent. The commission from the trader is 5% and the trader bears weighing and loading charges of Rs.0.2 per Kg. Further transportation to distant markets works out to be Rs.1.25 per Kg (About 20 Mann can be transported in mini trucks which would cost about Rs.1000 per trip). Wastage is about 2% at the wholesaler’s end and about 4% at the retailer’s end considering sorting and multiple handling by the customers. The margin retained by the semi wholesaler is about Rs.2 per Kg while that by the retailer is about Rs.4 per Kg.


Rs/Kg Particular Farmer Trader Retailer Cost of Production/ Purchase 1.95 5 9 Cost of Marketing incl. Commission Agent charges, wastages, etc. 1.05 2 1

Packaging & Loading

Unloading, weighing

Transportation


Farmer’s price

Wastages

Harvesting

Weighing & Loading

Transportation

Trader’s Margin

Rs 0.20Rs 0.20

Rs 0.25Rs 0.25

Rs 0.30Rs 0.30

Rs 0.15Rs 0.15

Rs 0.15Rs 0.15

Rs 5.00 Rs 5.00

Rs 0.25Rs 0.25

Rs 1.25Rs 1.25

Rs 0.20 Rs 0.20

Rs 0.25Rs 0.25

Rs 2.00Rs 2.00

Rs 0.50Rs 0.50


Retailer’s Margin




Rs 0.50Rs 0.50

Wastages

Packaging & Loading

Unloading, weighing

Transportation


Farmer’s price

Wastages

Harvesting

Weighing & Loading

Transportation

Trader’s Margin

Rs 0.20Rs 0.20

Rs 0.25Rs 0.25

Rs 0.30Rs 0.30

Rs 0.15Rs 0.15

Rs 0.15Rs 0.15

Rs 5.00 Rs 5.00

Rs 0.25Rs 0.25

Rs 1.25Rs 1.25

Rs 0.20 Rs 0.20

Rs 0.25Rs 0.25

Rs 2.00Rs 2.00

Rs 0.50Rs 0.50


Retailer’s Margin



Packaging & Loading

Unloading, weighing

Transportation


Farmer’s price

Wastages

Harvesting

Weighing & Loading

Transportation

Trader’s Margin

Rs 0.20Rs 0.20

Rs 0.25Rs 0.25

Rs 0.30Rs 0.30

Rs 0.15Rs 0.15

Rs 0.15Rs 0.15

Rs 5.00 Rs 5.00

Rs 0.25Rs 0.25

Rs 1.25Rs 1.25

Rs 0.20 Rs 0.20

Rs 0.25Rs 0.25

Rs 2.00Rs 2.00

Rs 0.50Rs 0.50


Retailer’s Margin



Unloading, weighing

Transportation


Farmer’s price

Wastages

Harvesting

Weighing & Loading

Transportation

Trader’s Margin

Rs 0.20Rs 0.20

Rs 0.25Rs 0.25

Rs 0.30Rs 0.30

Rs 0.15Rs 0.15

Rs 0.15Rs 0.15

Rs 5.00 Rs 5.00

Rs 0.25Rs 0.25

Rs 1.25Rs 1.25

Rs 0.20 Rs 0.20

Rs 0.25Rs 0.25

Rs 2.00Rs 2.00

Rs 0.50Rs 0.50


Retailer’s Margin

Unloading, weighing

Transportation


Farmer’s price

Wastages

Harvesting

Weighing & Loading

Transportation

Trader’s Margin

Rs 0.20Rs 0.20

Rs 0.25Rs 0.25

Rs 0.30Rs 0.30

Rs 0.15Rs 0.15

Rs 0.15Rs 0.15

Rs 5.00 Rs 5.00

Rs 0.25Rs 0.25

Rs 1.25Rs 1.25

Rs 0.20 Rs 0.20

Rs 0.25Rs 0.25

Rs 2.00Rs 2.00

Rs 0.50Rs 0.50

Transportation

Unloading, weighing

Transportation


Farmer’s price

Wastages

Harvesting

Weighing & Loading

Transportation

Trader’s Margin

Rs 0.20Rs 0.20

Rs 0.25Rs 0.25

Rs 0.30Rs 0.30

Rs 0.15Rs 0.15

Rs 0.15Rs 0.15

Rs 5.00 Rs 5.00

Rs 0.25Rs 0.25

Rs 1.25Rs 1.25

Rs 0.20 Rs 0.20

Rs 0.25Rs 0.25

Rs 2.00Rs 2.00

Rs 0.50Rs 0.50


Retailer’s Margin




Rs 0.50Rs 0.50

Wastages


95

Sale Price 5 9 14 Spread 2 2 4


There are 3 intermediaries between the farmer and the consumer in the cauliflower supply chain (including the commission agent).

The price build up from farmer to consumer is around 2.8 times.

The farmer earns a margin of Rs. 2 which is about 14% of the consumer rupee

Trader/wholesaler incurs a cost of around Rs 2/Kg pieces in various activities such as labour, storing charges, commission, packaging, transportation, wastages etc. The wholesaler earns a margin of Rs 2/Kg that is around 14% of consumer rupee.

The commission paid by the farmer and trader to the commission agent constitutes 3% of consumer rupee.

The retailer earns a margin of Rs. 4 which is 29% of the consumer rupee. Here again, the retailers earns the highest profit and is the mail driver of the value chain.


13.2 POST HARVEST/MARKETING

INFRASTRUCTURE

Most of the post harvest infrastructure between farmer and the aggregation point is very basic and owned by the farmers or aggregators. The packaging material (Baskets/ Gunny bags) are reused by the farmer’s who own the material. The choice of mode of transport depends upon the volume of produce being sold by each producer. In case of smaller volumes like one to two baskets (approx. 20 to 60 Kg) each farmer either carries the produce as a head load or carries it on bicycle. In those cases where the volume to be sold by each farmer is between 4 – 8 baskets (80 to 200 Kgs) the produce is transported by cycle push carts / Thelas and Auto Rikshaws. Other modes of transport like tractors are used to transport larger volumes either by individual progressive farmers/by small farmers who pool their produce and utilize the facility. As mentioned earlier, most of the aggregation points are located in private land which is leased out to one entity who operates this facility and charges commission from farmer’s and traders. They are located along the road side and are often inundated during monsoon. In case of market yards facilities like covered, raised platforms to unload the produce, weighing scales, labour for loading/ unloading are provided by the commission agent. The Infrastructure is very basic and far from being satisfactory.


96

13.3 GAPS IN THE VALUE CHAIN AND PROPOSED INTERVENTIONS

Absence of scientific grading, sorting or other quality checking mechanism: The quality of the produce is hardly determined while deciding the price. Even in those cases where quality is assessed it is determined manually and visually by traders

Inaccurate weighing is a common feature in this trade. Most of the markets do not have electronic weighing machines which leaves enough scope for weight manipulation.

Wastage remains one of the challenges in the entire value chain of the vegetables. Most of the wastages occur during transportation to the markets where the traders try to overload the trucks to gain in transportation costs. This leads to impact breaks and other damages. The factors responsible for the same are

o Improper harvesting, handling and packaging at the farmer’s end.

o Manual and multiple handling of the produce during grading and sorting further deteriorate the quality of the produce at the wholesaler’s end.

o Most of the damage at the semi wholesaler’s or retailers end happens due to impact breaks and lack of good storage facilities.

Poor Market Intelligence: While the traders are in touch with destination markets and get information regarding the prices and demand, farmers do not have access to these. Even in instances when farmers have taken their produce to neighbouring markets, the collusion between traders has made it difficult for them to get better realization. Also, as there is no formal recording mechanism of the arrivals of produce in any of the Haats/Markets the flow of information regarding demand supply is restricted to only certain players in the value chain. Price display mechanisms are not prevalent anywhere.

Pricing: Change in price during a particular day is also a variable of the quantum of purchase to be made by traders from that mandi on a particular day. In case the traders have purchased their predetermined quantum, the prices are then lowered arbitrarily by individual traders due to the simple fact that the farmers would prefer to sell the produce on the same day.

Potential areas of interventions for vegetables in the region are:

Development of basic infrastructure such as covered sheds and raised platforms at the aggregation points will help in reduction of wastages especially during the rains

Introduction of plastic crates for handling and transporting the produce will reduce wastages to large extent

Scientific sorting, grading and packaging facilities with electronic weighing options have huge potential in increasing the value realized in vegetables for farmers.

Ambient modern vegetable handling facilities are proposed at Bihar Sharif, Gaya, Patna, Arrah, Buxar and Nokha. The pack houses will have following facilities for vegetables:

Sorting

Grading

Packaging in plastic crates

Electronic weighing machines

These pack houses will cater to potato as well. The details of the facilities have been captured in the subsequent chapters.


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DPR: PATNA‐NALANDA INTEGRATED VALUE CHAIN

PROJECT


Spoke Patna- Musallahpur

Hub Nalanda- Biharsharif

Spoke Gaya

Spoke Arrah

Spoke Buxar

Spoke Nokha


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Patna‐Nalanda Integrated Value Chain Project

An effort has been made in the previous sections to detail out the value chains of both Potato and Vegetables with an assessment of the gaps. The in-depth study of Potato Value chain revealed specific gaps pertaining to the crop. It has been found that the Cold storage facilities which are required for better price realization by the farmers are inadequate. Creating energy efficient cold storage units is of utmost importance in this region. Certain gaps emerge as common gaps in case of both Potato and Vegetables. High dependence on intermediaries for credit/advance payments is predominant in the region. This reduces the bargaining power of the farmers. The on-farm activities at the time of harvesting and packing are found to be basic. Also weighing and packing is found to be basic and often inaccurate and inappropriate for the produce. Multiple handling deteriorates the quality of the produce. Connectivity with aggregation points remains a critical component in this value chain considering the nature of the produce in case of Vegetables.

As mentioned earlier all the proposed sites are well connected with each other and with production and consumption areas. Each of the proposed facility be it Hub or Spoke could be treated as a viable business proposition. The volume of arrivals are sizeable in each of the locations and linkages with both production and consumption clusters are strong. The two tier structure suggested will prove beneficial in bringing in the synergies between various proposed facilities especially because of strengthened market intelligence and logistics.

The agribusiness infrastructure suggested includes dry warehouses for grains like Paddy, Wheat and Maize and storage space for Potato & Onion. This has been included taking into account the production of major grains in the region. This is a critical intervention considering the state’s consumption pattern. Also, the total food grain warehousing capacity in Bihar is just about 12% of the total production in the state. This forms an important consideration in developing Agri business infrastructure for grains apart from that being proposed for Horticulture produce.

It is also found that the existing facilities in the proposed project are far from being satisfactory. Traders’ modules, platforms, internal roads, waste disposal mechanisms, etc need complete revamp and refurbishing. The existing as well as proposed facilities are classified into four types of infrastructure namely Basic, Agribusiness, Add-on/Commercial and Link infrastructure. Depending on the specific site conditions these infrastructure is included in the project as per the requirements


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14 SPOKE: MUSALLAHPUR

Musallahpur mandi located within the city of Patna is the biggest of all mandis in the state with respect to through-put. The market is spread over an area of 16Ha. Well-established commission agents with strong trade linkages both within and outside the state, operate in this market.

Local produce arrivals include cucurbits, okra, brinjal, tomato, chilly, radish, carrot, cabbage and cauliflower among vegetables and mango, litchi and banana among fruits. Being amongst the top producers of mango, litchi and banana, the mandi has established linkages with various other mandis like Aazadpur in Delhi, Ranchi and Jamshedpur in Jharkhand and even with southern state capitals like Hyderabad and Bangalore. The estimated daily arrival in this mandi is around 150-200 MT with the peak arrival crossing 400 MT during Mango and Litchi season.

The market, apart from arrivals from its catchment spread in a radius of 100 km, also witnesses trade in large quantities of fruit and vegetable from other parts of the country, which are not locally produced like orange, grape, pomegranate, papaya, apple among fruits, and onion, green peas, cucumber among vegetables.

In spite of its current significance in agri-produce trade spoke-level facilities have been proposed at Musallahpur. The current location has several issues pertaining to vehicular access, parking, overall spatial organisation and limited area for expansion, among others. The significant volumes and variety traded here has been taken into account while proposing infrastructure for the location.

An ambient temperature pack house has been proposed to address the common requirements of a variety of produce, a ripening facility, a cold store for potato, segregated storage for onion and a dry warehouse; trading platforms and other support facilities have also been proposed.


Whereas no specific focus crop has been considered for this location, vegetables and potato, as also grain has been included as the significant produce that will be routed through this Spoke, based on trends and current flows.


Spoke Potatoes Vegetables

Musallahpur 5,000 10,000



Potato 20% 40% 40%

Vegetables


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14.2 EXISTING FACILITIES As already discussed, the objective of the project in Bihar is the upgradation of existing APMC markets, hence the effort has been to refurbish/renovate the existing usable facilities in the market and also to propose new facilities as per the assessed requirement.

The existing facilities are outlined below:

14.2.1 Traders’ Shops The Market yard can be conveniently divided into various sections where trading of different produce takes place. There are about 240 traders’ shops in various sections of the market. Viz. Fish, Fruit, Potato/Onion and Banana trading sections. The trading modules mentioned above are permanent in nature with area varying anywhere between 150 s.ft to 300 s.ft. They have a display area and most of them are in dilapidated except for fish traders’ shops which have been built in the recent past. There is a shortage of modules in almost all the sections of the market and the existing structures are far from being satisfactory.


There are about 9 covered and two open platforms which are currently being used by traders as their modules. The platforms are broken and need repair. Apart from these the market has almost about 500 hawkers carrying out trade on a daily basis in the wee hours.

14.2.3 Godowns

The godowns are four in number with storage capacity of 1200 MT and spread over an area of 9000 s.ft. These are leased in by various organizations like FCI, BSWCL, etc. The storage capacity is inadequate vis-à-vis the arrival volumes.

14.2.4 Cold Storage The Cold storage is currently operational and has been leased out to private entity for a period of five years. The facility is being utilized for storage of fruits arriving from distant markets like Himachal, Kashmir, etc. There are six chambers out of which only four are operational while the other two chambers require repair.


Other amenities like eateries (six in number and operated by vendors) and restrooms(one facility and not operational) are inadequate considering the daily footfalls which is not less than 20000 every day. The Admin building and Post Office are not operational and need renovation. Other facilities like Weigh Bridge, Water tank, etc are non operational.



An ambient pack shed is proposed to be set up at the spoke for handling of a variety of vegetables. The handling capacity of the pack shed will be 35 TPD. In the ambient handling yard, the following infrastructure is proposed:


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Covered Pack shed (open to ambient) with landing area. Requisite weighing equipment and transaction recording arrangement. Sorting and grading areas (with tables). Packaging store and Packing tables. Waste disposal systems. Vehicle parking area.

Ambient Pack Shed Process flow:

The process flow of the produces handled in the pack shed is depicted below:

Facilities Description

Quality Check • Quality of vegetables to be assessed at the pack shed.

Sorting and Grading

• Manual sorting and grading is suggested, which is cost effective.

• Sorting and grading tables are proposed in the pack shed.

Packing • Packaging tables would be provided in the pack sheds for manual packing of vegetables in boxes/crates etc. depending on market requirement

• Appropriate packing material store for streamlined material flow.

Dispatch • The same area would be offloaded on a daily basis.

• The packaged produce would be staged on the raised platform.

• Produce is expected be transported in trucks of 10 ‐15 MT capacity.


The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, tractor trolleys, etc.


The pack house will have its own aggregation mechanism where trucks/pick-ups would be sent to the aggregation points to collect the produce from the farmers/pre-harvest contractors directly. The pack house will encourage farmers’ cooperatives to manage/handle the aggregation points wherever applicable. It may also invest in developing the points by creating/improving the infrastructure of the points such as platforms, sheds, etc. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment. Trainings of farmers on best farming practices and better post harvest handling practices of produce will be conducted on regular intervals. Other initiatives such as providing best inputs and technology transfers will also be taken up.


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14.3.2 Ripening Facility A ripening facility for banana and other fruit is proposed at Musallahpur aimed at the local consumption market of Patna. The facility is designed such that is can be used for ripening of other produce such as papaya, mango, etc. depending on demand. The ripening would use ethylene as the catalyst (see Annexure for further technical details).

14.3.3 Potato Cold Store A modern potato cold store of 5000 MT capacity is proposed at this Spoke. There will be 16 chambers for storage and 8 ante rooms which may be used for warming up of potato before taking it out of the cold store. The walls of the store will be a prefab structure with insulated PUF panels. Ammonia type refrigeration will be used for the cooling (see Annexure for further technical details).

Warm up chambers have been included in the potato store for thermally controlled extraction of potatoes per demand. These cold rooms can double-up as storage for other incoming pre-cooled agri-produce. The storage rooms will incorporate controlled ventilation for CO2 control (current practice is to leave doors open). Simple heat-exchangers to retrieve energy from vented cool air will be incorporated. A water storage of 5000 litres is planned for regular cleanup processes.

Existing potato stores can be upgraded using solar thermal vapour absorption refrigeration, which can reduce operating electrical costs by 50 to 80%. Individual stores would need specific insulation upgrades, appropriate sun shading on south facing walls, upgrading or repairs to existing refrigeration machinery to bring efficiency, control systems evaluated for possible improvements

Potato Cold Store Logistics

At peak of operations, about 20 incoming tucks/vehicles of an average of 4 M capacity will be coming to the cold store. The outbound vehicle flows would comprise about 7 normal trucks of 10/15 MT.

14.3.4 Dry Warehouse

A dry warehouse of 5000 MT capacity is proposed at the Spoke. It will used for storage of grains such as rice, wheat and maize.

Adequate facilities for vehicular movement and parking have been incorporated in the proposed layout.


Separate facilities for onion storage are proposed here. There will be 10 onion stores of 50 MT capacities and they will form a separate section of the Spoke to prevent odour contamination of other areas. Since onion is graded and packed at farm level, only storage facilities have been provided for onion.

These storehouses would be constructed in accordance with existing guidelines for storage of dry onions, incorporating enclosures that allow ventilation while protecting from overhead


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inclement weather. Roof extension is proposed to protect from rain as also from direct sunlight, boundary walls of mesh material are also incorporated in the design to protect the produce from rodents while allowing for adequate ventilation. The base platform would be raised to truck-bed height for easier loading and unloading operations.


Trading platforms

Four trading platforms of 400sqm area have been proposed, to handle a daily through put of 100 MT. It is estimated that trading related activities will provide wage-work to some 130 persons daily. Provisions for transport logistics for some 70 incoming vehicles per day and 30 outgoing, during peak season, have been made in the proposed layout.

Business Centre

A Business Centre is proposed at the location with an administrative block for the market. Rooms/sections may be rented out to reputed NGOs, companies, grass-roots level organizations such as microfinance institutions, etc as office space.

The centre will incorporate bank, post office and other office support services. A common testing lab can also be included in the business centre. Local district level government offices will also ensure utility, footfall and regular interaction at location. These could include local passport offices, tax centre, land records office, family planning centre, etc.

Knowledge Centre

A Knowledge Centre is also proposed and may be utilized for extension services provided to the farmers, traders, aggregators and others in the catchment area. There will also be rooms for trainings, meetings and conferences which may be rented out. There will be demonstration rooms displaying various modern technologies and best practices in agri-business.

Apart from the new facilities proposed at Musallahpur, there will be refurbishment/renovation of existing facilities. They would include:

Trading platforms Trading shops Parking area Guest house and canteen Weigh bridge Water supply facilities and drainage DG Rooms Solid waste management area Other amenities

The proposed facilities can be summarized and classified into broad categories of infrastructure as given in the table below.


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PROPOSED INTERVENTION TYPE OF INFRASTRUCTURE Pack House (Ambient) Pack House Logistics Banana Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Traders’ Shops Trading Platforms







Link Infrastructure


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15 HUB: BIHAR SHARIF

The existing APMC market at Bihar Sharif has been identified as hub given its location- being situated in the major potato, vegetable and grain production region of Bihar. It is also very well connected by road and rail networks to different cities within and outside the state. The headquarters of Nalanda district are at Bihar Sharif. It is about 80 km from Patna lying on the intersection of National Highways 31 and 82; it is well connected to consumption markets in Uttar Pradesh, West Bengal, Jharkhand and the North-east. Nalanda district and Bihar Sharif town are themselves big consumption centres with populations of 1.9 mn and 230 thousand, respectively.

The APMC market is located within the Bihar Sharif town limits, very close to the intersection of National Highway 31 and a main road of the town. The total area of the market yard is just under 14 Ha with a vacant space of about 4.5 Ha.

The major arrivals at the market are vegetables such as potato, cauliflower, brinjal, cabbage, onion, peas, okra, gourds and other vegetables. Daily arrival volumes of perishables range between 100 MT to 500 MT depending on the season.

Grains mainly, paddy, wheat and pulses are also traded in large volume in the market. On an average, about 300 MT of paddy, 100 MT of wheat, and about 150 MT of pulses are traded everyday at the market.

The major production clusters in the catchment of Bihar Sharif market are Devi Sarai, Maghada, Beamani, Soh, Choti Pahadi, Badi Pahadi, Aasanagar, Habipura, Kakda mandach, Meyyar, Rajgir, Silau, Mahalper, Bemani, Aasanagar, Dumarama, Deepnagar and Saidi for vegetables.


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Bihar Sharif region is an active trading centre of agricultural products especially vegetables and grains. The present APMC market caters to all kinds of agricultural produce grown in the region. Trade in produce not locally grown in the region such as fruits is also significant. The focus crops for the hub are potato and vegetables like cauliflower, brinjal, tomato, etc. The focus crops and estimated throughputs have been identified based on present production in the catchment area, potential for interventions, and stakeholders’ consultations (see value chain analysis). Vegetables like okra, cauliflower and gourds come from Devi Sarai, Maghada, Beamani, Soh, Choti Pahadi, Badi Pahadi, Aasanagar, Habipura, Kakda mandach, Meyyar and Saidi. The catchment for tomato includes: Kharuwara, Teegha, Chechdu, Harnaut, Nakatpura, Chamnahua,Musauhri, Noorsarai, Jhamaa. In addition, other prominent production clusters are around Rajgir, Silau,Mahalper and Deepnagar, and may be included as well.


Hub Potato Vegetables

Bihar Sharif 5000 10000



Vegetables

Potato

15.2 EXISTING FACILITIES Since up-gradation of the existing APMC Markets is one of the main objectives, enlisting the existing facilities which need refurbishing and renovation is critical. The existing facilities in Bihar Sharif are outlined below:

15.2.1 Traders’ Shops The Market yard can be conveniently divided into various sections where trading of different produce takes place. There are about 92 permanent traders’ shops in various sections of the market. Viz. Vegetable, Fruit, Grain, Potato/Onion and Banana trading sections. The trading modules mentioned above are permanent in nature with area varying anywhere between 150 s.ft to 300 s.ft. Apart from these, about 165 shops have been constructed along the boundary wall on self financing model. There is a shortage of modules in the grain and vegetable sections of the market and the existing structures are in relatively good consition.


There are about 8 covered and two open platforms which are currently being used by traders as their modules. The platforms are broken and need repair. Apart from these the market has almost about 500 hawkers carrying out vegetable trade on a daily basis in the wee hours.

15.2.3 Godowns

The godowns are seven in number with storage capacity of 1400 MT (for five)and 1000 MT (for two) and are spread over an area of 9000 s.ft. These are leased in by various


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organizations like FCI, BSWCL, Breweries, etc. The storage capacity is inadequate vis-à-vis the arrival volumes.


Other amenities like eateries (sixteen in number and operated by vendors) and restrooms(one facility and not operational) are inadequate considering the daily footfalls which is not less than 15000 every day. The Admin building, Bank and Post Office are not operational and need renovation. Other facilities like Weigh Bridge, Water tank, etc are non operational either.


The project objective in Bihar is towards upgradation existing APMC markets, to refurbish/renovate the existing usable facilities as also to propose new facilities as required. The proposed new facilities are outlined below.

15.3.1 Ambient Pack‐shed for vegetables

An ambient pack shed is proposed to be set up at the spoke for handling tomato and vegetables. The handling capacity of the pack shed will be 35 TPD. In the ambient handling yard, the following infrastructure will be provided:

Covered Pack shed (open to ambient) with landing area. Requisite weighing equipment and transaction recording arrangement. Sorting and grading areas (with tables). Packaging store and packing tables. Waste disposal systems. Vehicle parking area.


The process flow of the produces handled in the pack shed is shown below:


Quality Check • Quality of vegetables shall be assessed at the pack shed.

Sorting and Grading




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The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, tractor trolleys, etc. At peak of operations, about 8-10 incoming tucks/vehicles of an average of 4 M capacity will be coming to the pack houses. The outbound trucks would comprise of about 3-4 normal trucks of 10/15 MT.



15.3.2 Banana Ripening Facility A banana ripening facility is proposed. Capacity of the ripening chamber will be 10 MT per day. The ripening chamber can also be used for other fruits such as mango, if required. Ripening would be done using ethylene as the catalyst (see Annexure for further technical details). Ethylene generators would be utilized for appropriate dosing of the catalyst.

Where ripening facility is located adjoining the pack house, conveyor rollers are optioned to carry the crates directly to ripening area.

The Banana ripening facility could adjoin a separate receiving and de-handing shed to allow for locally sourced direct farm produce to be input for local ripening requirements. A waste disposal area to cater to ripening room is specially designated.

Material handling pallet mover is provided for the daily operations. The receiving shed is covered to protect from direct sunlight and weather. Though only one chamber will output daily, sufficient space is provided to cater for dispatch staging as well as incoming marshalling of the produce.

The ripening facility is envisaged to output into smaller vehicles for tertiary dispatch and a separate designated parking lot for the same is designed.


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15.3.3 Potato Cold Store A modern potato cold store of 5000 MT capacity is proposed in the hub. There will be 16 chambers for storage and 8 ante rooms which may be used for warming up of potato before taking it out of the cold store. The walls of the store will be a prefab structure with insulated puff panels. Ammonia type refrigeration will be used for the cooling (see Annexure for further technical details).

The Potato store additionally proposes warm up chambers for thermally controlled extraction of potatoes per demand. These cold rooms can also be doubled as storage for other incoming precooled agri-produce. The storage rooms will incorporate controlled ventilation for CO2 control (current practice is to leave doors open). Simple heat-exchangers to retrieve energy from vented cool air will be incorporated.

Existing potato stores can be upgraded using solar thermal vapour absorption refrigeration, which can reduce operating electrical costs by 50 to 80%. Individual stores would need specific insulation upgrades, appropriate sun shading on south facing walls, upgrading or repairs to existing refrigeration machinery to bring efficiency, control systems evaluated for possible improvements.


A dry warehouse of 5000 MT capacity is proposed at the hub. It will used for storage of grains such as rice, wheat and maize.

The warehouses would plan for sufficient parking and eased traffic flow layout along with waste disposal areas.


10 onion stores of 50 MT capacities each are proposed in the spoke. The onion storage structures would be a separate section of the spoke facility to check odour contamination. Since onion is graded and packed at farm level itself, only storage facility has been provided for onion.



Business Centre

A Business Centre is proposed in the hub which will host the administrative block for the market. There will also be rooms/sections which may be rented out to reputed NGOs,


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companies, grass-root level organizations such as microfinance institutions, etc as office space.

The centre will incorporate bank, post office and other office support services. A common testing lab can also be included in the business centre. Local district level government offices will also ensure utility, footfall and regular interaction at location. These could include local passport offices, tax centre, land records office, family planning centre, etc.

Knowledge Centre

A Knowledge Centre is also proposed in the market. This space will be utilized for extension services for farmers, traders, aggregators and others in the catchment area. Rooms are also proposed for trainings, meetings and conferences which may be rented out. There will be demonstration rooms displaying various modern technologies and best practices in agri-business.










Link Infrastructure


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16 SPOKE: GAYA

Gaya APMC market spread across about 23 Ha of land is situated at a distance of about 6 Km from the city was never used. It is located in Chandauti village on the Gaya-Tekari Road near Gaya Medical College and is connected to the town with a good all-weather road.

The surrounding clusters, in addition to paddy and potatoes, produce a variety of vegetables that are traded locally, like brinjal, cauliflower, okra, tomato etc. These clusters include the following important locations in the catchment: Khinjar Sarai, Manpur, Bodh Gaya, Gaya Nagar, Tekari.

Significant quantities of potato are traded there and there are several privately run cold stores in the area. This is also in the vegetable growing are and a variety of vegetables are traded at the local mandis.

All these factors have been taken into account in the planning of facilities for Gaya and the following are proposed to be part of the Spoke-level infrastructure:


A focus crop has not been considered for this location, vegetables, potato, and grain have been included as the significant produce that will be routed through this Spoke, based on trends and current flows.


Spoke Potato Vegetables

Gaya 2,000 4,000



Potato 20% 40% 40%

Vegetables

The following clusters are proposed to form the catchment for this spoke: Khinjar sarai (8km), Lodipur (3km), Saidpur (5km), Manpur (4km), Sekha Bigha (6km), Rati Bigha, Basari, Gaya nagar, Tekari ; these are the main vegetable producing villages which currently cater to Gaya, Patna and Bihar Sharif to some extent.

16.2 EXISTING FACILITIES The existing market yard is not operational and hence all the existing facilities are not utilized currently. The general condition of infrastructure is good and requires minimal renovation and refurbishing.


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16.2.1 Traders’ Shops There are about 60 traders’ shops and 10 sundry shops built in the market yard. These are being used by the government as storage space for election material at the time of survey.


There are about 4 covered and two open platforms which are partly broken and need repair.

16.2.3 Godowns

The godowns are three in number which are spread over an area of 10094 s.f, 6000 s.ft and 6300 s.ft . Two of the godowns are leased in by Bihar State Warehousing Corporation while one is rented out to private entity.


The Admin building, Bank and Post Office are not operational and need renovation. Other facilities like Weigh Bridge, Water tank, etc are non operational either. The market yard has a police station within the premises which is operational currently.



An ambient pack shed is proposed to be set up at the spoke for handling of a variety of vegetables. The handling capacity of the pack shed will be 35 TPD. Vegetables will be received through the year, as per season.

In the ambient handling yard, the following infrastructure is proposed:

Covered Pack shed (open to ambient) with landing area. Requisite weighing equipment and transaction recording arrangement. Sorting and grading areas (with tables). Packaging store and Packing tables. Waste disposal systems. Vehicle parking area.




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Quality Check • Quality of vegetables to be assessed at the pack shed.

Sorting and Grading









The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, tractor trolleys, etc.



16.3.2 Ripening Facility A ripening facility for banana and other fruit is proposed at Musallahpur aimed at the local consumption market of Patna. There will be 5 ripening chambers of 10 MT capacities. Since banana takes 4 days to ripen, the daily output of ripened banana will be 10 MT. The facility can also be used for ripening of other produce such as papaya, mango, etc. depending on demand. The ripening would use ethylene as the catalyst (see Annexure for further technical details).

16.3.3 Potato Cold Store A modern potato cold store of 2000 MT capacity is proposed at this Spoke. There will be chambers for storage and the ante rooms to be used for warming up of potato before taking it out of the cold store. The walls of the store will be a prefab structure with insulated PUF panels. Ammonia type refrigeration will be used for the cooling (see Annexure for technical details).

Warm up chambers have been included in the potato store for thermally controlled extraction of potatoes per demand. These cold rooms can double-up as storage for other incoming pre-


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cooled agri-produce. The storage rooms will incorporate controlled ventilation for CO2 control (current practice is to leave doors open). Simple heat-exchangers to retrieve energy from vented cool air will be incorporated. A water requirement of 5000 litres is provided for in the facility for periodic cleaning operations aside from refrigeration cooling tower requirements

Existing potato stores can be upgraded using solar thermal vapour absorption refrigeration, which can reduce operating electrical costs by 50 to 80%. Individual stores would need specific insulation upgrades, appropriate sun shading on south facing walls, upgrading or repairs to existing refrigeration machinery to bring efficiency, control systems evaluated for possible improvements

Potato Cold Store Logistics

At peak of operations, about 10 incoming tucks/vehicles of an average of 4 M capacity will be coming to the cold store. The outbound vehicle flows would comprise about 7 normal trucks of 10/15 MT.


A dry warehouse of 5000 MT capacity is proposed at the Spoke. It will used for storage of grains such as rice, wheat and maize.

Adequate facilities for vehicular movement and parking have been incorporated in the proposed layout.


Separate facilities for onion storage are proposed here. There will be 10 onion stores of 50 MT capacities and they will form a separate section of the Spoke to prevent odour contamination of other areas. Since onion is graded and packed at farm level, only storage facilities have been provided for onion.

These storehouses would be constructed in accordance with existing guidelines for storage of dry onions, incorporating enclosures that allow ventilation while protecting from overhead inclement weather. Roof extension is proposed to protect from rain as also from direct sunlight, boundary walls of mesh material are also incorporated in the design to protect the produce from rodents while allowing for adequate ventilation. The base platform would be raised to truck-bed height for easier loading and unloading operations.


Trading platforms and trading shops

Four trading platforms of 400sqm area have been proposed, to handle a daily through put of 100 MT. Trading shops have also been proposed to handle 100 MT daily.

It is estimated that trading related activities will provide wage-work to some 130 persons daily, in addition to providing employment to some 200 persons.


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Provisions for transport logistics for about 70 incoming vehicles per day and 30 outgoing, during peak season have been made in the proposed layout.

Given the combination of facilities proposed and taking into account the needs of workers, farmers and traders at the location, the following facilities and amenities have also been included:










Link Infrastructure


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17 SPOKE: ARRAH

The existing APMC market at Arrah has been identified as one of the spokes for the Nalanda Hub as part of the Integrated Value Chain region. The market is chosen as the spoke because of its proximity to the production clusters of potato and onion in the region. The market is well connected and can feed to consumption centres such as Patna in Bihar and cities in other states such as Uttar Pradesh, West Bengal and Northeast India.

The APMC market is located on the Arrah-Sasaram Road, 2 km from Arrah Railway Station. The approach road to the market is an all weather road. The area under the market is about 16 Ha. The market is well connected by road to the Barhampur, Barhara and Sahar blocks and the towns of Semeriya, Ghanpur, Kasap and Udawantnagar. The market is well connected by rail to Behea, Chatpokhri, Piro blocks and Keolwar, Agiaon and Ekwari block.

The daily arrivals of potato at the Arrah market yard is about 30 to 40 MT during normal season and which goes up to 50-60 MT during the peak season. The daily arrival of Onion is about 25 to 30 MT per day. The daily arrival of other vegetables is about 20-30 MT in the nearby markets. In addition the daily arrival of Banana is about 25 to 35 bunches per day during normal season and 45 to 55 bunches during the peak season.


The Arrah region has a very vibrant trade of various fruits and vegetables. The present APMC market caters to almost all kinds of produce grown in the region. However, the focus crops for the spoke are potato and onion. The focus crops and estimated throughputs have been identified based on present production in the catchment area; the present capacities of existing similar infrastructures/facilities, potential for interventions, and stakeholders’ consultations (see value chain analysis).


Spoke Potato Vegetables

Arha 2000 1000



Potato

Onion

The production clusters for potato in the catchment of Arrah market are Sariya, Chandi, Behrampur (in Kayamnagar) and Jagdishpur. Vegetable aggregation points at Koelwar market and some by the road side where produce is collected from the nearby farms will be included for liking with the spoke.

17.2 EXISTING FACILITIES The existing facilities are described below.


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17.2.1 Traders’ Shops There are about 60 traders’ shops out of which only 22 are currently operational. These are being used by traders carrying out trade in Potato/Onion, Banana and Fruits.Out of the total 22 traders’ shops ten are operated by Potato/ Onion traders, Eight by Banana Traders and Four by Fruit traders.


There are about two covered and two open platforms which are partly broken and need repair.

17.2.3 Godowns

The godowns are four in number out of which one has been rented to FCI, two to SFC. The other godown has been built and taken possession by BISCOMAN.


The Admin building is in dilapidated state and needs renovation. Other facilities like Weigh Bridge, Water tank, etc are non operational either. The hand pumps are the source of drinking water currently. Multiple entry/ exit makes the security a matter of concern at present.


As already discussed, the objective of the project in Bihar is mainly directed towards up gradation of existing APMC markets, hence the effort has been to refurbish/renovate the existing usable facilities in the market and also propose new facilities as required. The proposed new facilities are:

17.3.1 Pack House

Considering the existing ambient supply chain practices, infrastructure space is provided that will cater to Potato and other vegetables. To allow capacity utilization and spread across seasons, the facility is intended for use of both potato and onion when in season.


Covered Pack shed (open to ambient) with landing area. Requisite weighing equipment and transaction recording arrangement. Sorting and grading areas (with tables). Packaging store and Packing tables. Material handling equipment – pallet movers, trolleys. Waste disposal systems. Vehicle Parking areas.


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The process flow of the produces handled in the pack shed is shown


The pack house will have its own aggregation mechanism where trucks/pick-ups would be sent to the aggregation points to collect the produce from the farmers/pre-harvest contractors directly. The pack house will encourage farmers’ cooperatives to manage/handle the aggregation points wherever applicable. It may also invest in developing the points by creating/improving the infrastructure of the points such as platforms, sheds, etc. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment. Trainings of farmers on best farming practices and better post harvest handling practices of produce will be conducted on regular intervals. Other initiatives such as best inputs and technology transfers will also be taken up.


The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, etc. At peak of operations, about 10 incoming tucks/vehicles of an average of 4 MT capacities will be coming to the pack houses. The outbound trucks would include about 2 normal trucks of 10/15 MT and

Small capacity field vehicles, load 800Kg to 1MT, are incorporated in the project to serve as feeders from local farms as backward integration.

17.3.2 Potato Cold Store A modern potato cold store of 2000 MT capacity is proposed in the spoke. There will be 8 chambers for storage and 4 ante rooms which may be used for warming up of potato before taking it out of the cold store. The walls of the store will be a prefab structure with insulated puff panels. Ammonia type refrigeration will be used for the cooling (see Annexure for further technical details).


A dry warehouse of 5000 MT capacity is proposed at the spoke. It will used for storage of grains such as rice, wheat and maize.


Separate facilities for onion storage are proposed in the spoke. There will be 10 onion stores of 50 MT capacities and they will form a separate section of the market to prevent odour contamination of other areas.


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17.3.5 Other facilities

Business Centre

A Business Centre is proposed in the spoke which will host the administrative block for the market. There will also be rooms/sections which may be rented out to reputed NGOs, companies, grass-root level organizations such as microfinance institutions, etc as office space.

Knowledge Centre

A Knowledge Centre is also proposed in the market. This space will be utilized for extension services provided to the farmers, traders, aggregators and others in the catchment area. There will also be rooms for trainings, meetings and conferences which will be rented out. There will be demonstration rooms displaying various modern technologies and best practices in agri-business.

Apart from the new facilities proposed in the market yard, there will be refurbishment/renovation of existing facilities. They would include:









Link Infrastructure


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18 SPOKE: BUXAR

The APMC market at Buxar has been identified as one of the spokes as part of the Nalanda Integrated Value Chain region. The market shall prove to be an important spoke in the value chain considering its proximity to the production clusters of potato, tomato and onion in the region.

The APMC is located very close to the Buxar railway line (just 3 km away from the Delhi-Patna-Kolkata line). The area of the market is just under 30 Ha. Buxar is well connected by road to Barhampur, Rajpur, Itarhi, Nawanagar and Dumraon blocks. It is also well connected by road to towns like Kuran sarai , Murar , Raghunathpur in the District. In addition there is excellent rail connectivity with Baruna and Chausa.

In the erstwhile APMC market at Buxar, Rice, Wheat and Pulses were traded. The market also had a vegetable haat. However, after the repealing of APMC Act, only rice is being traded in this market. There are about 40 odd wholesalers, who are using their shops-cum-godown for storing as well as trading. The daily volume of trade is estimated to be 1350 MT during the Paddy season and about 300 MT during off season. This market has good catchment area of Paddy production. However, following the scrapping of APMC Act the wholesale trading has got scattered having a direct bearing on the trading here.

Gorakhpur and Varanansi are major markets for Tomatoes from Dumrao and Simri. Bihta, Buxar, Arah and Patna are other markets. Smaller markets are Dumrao, Simri, Darhara, Itari and Rajpur.


The focus crops for the spoke are potato, onion and tomato. Based on the feedback during various stakeholder discussions and secondary data on production in the cluster the focus crops and estimated throughputs have been identified.


Spoke Vegetables Potato

Buxar 1000 2000



Potato

Vegetables

Crop wise production clusters in the catchment of Buxar Market

Majhwari, Dhananjaypur, Saihar, Padari are important production clusters in Simri block while Dharahara, Sarwara, Arakah in Dumraon block produce Tomato and other vegetables.

Potato is cultivated in vast stretches in Simri, Dumraon, Rajpur and Nawanagar

Paddy is produced extensively in Etadi and Rajpur blocks of the district.


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Most of the aggregation for Buxar market is seen along the Arah-Buxar road. Other major points of aggregation are located in Krishnabelpur, Brahmpur, old Bhojpur and some around Dumraon, Simari. Majhwari, Dhananjaypur,Padari,Nagwan villages in Simri produce tomatoes. In Dumraon block Dharahara, Chekil, Sarwara and Arakah, major producers of vegetables, are envisaged as part of the spoke’s catchment.


18.2.1 Traders’ Shops There are about 71 traders’ shops. These are being used by Sundry and grain traders .Out of the total 71 traders’ shops 40 are operated by Potato/ Onion traders while the rest are owned by sundry. The facilities are being used for storage purposes and trading is minimal from these shops currently.


There are five covered and One open platforms which are partly broken and need repair. One of the platforms is utilized by Bihar Police currently.

18.2.3 Godowns

The godowns are Nine in number out of which one has been rented to FCI, two to SFC, one to Bihar State Seed Corporation Ltd, three to BISCOMAN. Two twin chamber warehouses are leased to Central Warehousing Corporation.


The general amenities present in the market are

Admin building which is in dilapidated state and needs renovation.

Other facilities like Weigh Bridge, Water tank, etc are non operational either.

Check Post with Check post building which is currently used by Bihar Police

Three cattle sheds out of which two are occupied by Home gaurds and one by Forestry Department

Hand pumps are the source of water

Canteen area spread in two different sections of the market

TV Tower: Prasar Bharati’s low power transmitter station ispresent in the market yard

Residential building for workers.


The prime focus in most of the spokes in Bihar is to utilize the existing usable facilities by refurbishing/renovating them and adding new facilities wherever required as per the requirements of the identified focus crops, distance of the market from production and consumption centres. The proposed new facilities are:


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18.3.1 Ambient Pack House

Considering the existing ambient supply chain practices, infrastructure space is provided that will cater to Potato and other vegetables. To allow capacity utilization and spread across seasons, the facility is intended for use of both potato and onion when in season.






The pack house will have its own aggregation mechanism where trucks/pick-ups would be sent to the aggregation points to collect the produce from the farmers/aggregators directly. The pack house will encourage farmers’ cooperatives to manage/handle the aggregation points wherever applicable. It may also invest in developing the points by creating/improving the infrastructure of the points such as platforms, sheds, etc. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment. Trainings of farmers on best farming practices and better post harvest handling practices of produce will be conducted on regular intervals. Other initiatives such as best inputs and technology transfers will also be taken up.


The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, etc. At peak of operations, about 12 incoming tucks/vehicles of an average of 4 MT capacities will be coming to the pack houses. The outbound trucks would include about 4 to 5 normal trucks of 10/15 MT



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18.3.2 Potato Cold Store A modern potato cold store of 2000 MT capacity is proposed in the hub. There will be 8 chambers for storage and 4 ante rooms which may be used for warming up of potato before taking it out of the cold store. The walls of the store will be a prefab structure with insulated puff panels. Ammonia type refrigeration will be used for the cooling (see Annexure for further technical details).


A dry warehouse of 5000 MT capacity is proposed at the hub. It will used for storage of grains such as rice, wheat and maize.

18.3.4 Onion Store

Separate facilities for onion storage are proposed in the spoke. There will be 10 onion stores of 50 MT capacities and they will form a separate section of the spoke to prevent odour contamination of other areas.


Business Centre

A business centre is proposed in the hub which will host the administrative block for the market. There will also be rooms/sections which may be rented out to reputed NGOs, companies, grass-root level organizations such as microfinance institutions, etc as office space.

Knowledge Centre

A knowledge centre is also proposed in the market. This space will be utilized for extension services provided to the farmers, traders, aggregators and others in the catchment area. There will also be rooms for trainings, meetings and conferences which will be rented out. There will be demonstration rooms displaying various modern technologies and best practices in agri-business.




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19 SPOKE: NOKHA

The existing APMC market at Nokha has been identified as one of the spokes as part of the Nalanda Integrated Value Chain region. The market shall be an important spoke considering its proximity to the production clusters of potato and other vegetables in the region.

The APMC is located in Nokha off the main Sasaram (District Headquarter) - Bikramganj road (Bikramganj is on National Highway 30). The area of the market is nearly 17 Ha with almost 40% of area being vacant. The approach road to the market is in good condition though the internal roads are not well developed. Nokha is well connected by road to Karakat, Nasriganj, Rajpur, Dawath and Dinara blocks in the district. It is also well connected by road to towns like Sasaram, Bikramganj, Sajhauli, Ghusiya, and Karwandiya in the District. In addition Nokha is also on the Sasaram -Bikramganj rail line as well. Main consumption markets for Nokha market yard currently are Patna, Sasaram and other major towns within the district.

Currently the erstwhile APMC market is not operational. This is despite having rich catchment area of Paddy production as there are a lot of rice mills in the vicinity of the market, which have become trading centres. Farmers prefer selling Paddy directly to the Rice Millers as they get instant cash and also they save on double transportation. If they had to bring the produce for sale in this market, they had to first get the Paddy converted to rice in the rice mill and then market it to the wholesaler. This meant not only double transportation cost but also lot of time.


The focus crops for the spoke are potato and other vegetables. The focus crops and estimated throughputs have been arrived at considering the production statistics, feedback from various stake holders.


Spoke Vegetables Potato

Nokha 1000 2000



Potato

Vegetables


19.2.1 Traders’ Shops There are about 30 traders’ shops. These are not operational currently and are far from being satisfactory


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There are three covered platforms which are partly broken and need repair.

19.2.3 Godowns

The godowns are three in number out of which one is dilapidated and not in use. One of the godowns is being used by private traders for drying Produce while the other is used as storage space by FCI to store Food grains like Paddy and Wheat meant for Public Distribution System.


The general amenities present in the market are

Admin building, Bank and Post Office are in dilapidated state and need renovation.

Water tank is present but not operational. The hand pumps are source of water currently.

Check Post, Watch Tower and Guard Quarters are not present

Staff quarters for electricians and Plumbers exist. They are in dilapidated state.

An area has been earmarked for Canteen. This needs refurbishing.


Considering that there is sizeable vacant land in the existing market yard, efforts could be focused on not just renovating the existing usable facilities in the market but also on developing relevant new facilities as required

19.3.1 Pack Shed Considering the existing ambient supply chain practices, infrastructure space are provided that will cater to Potato and other vegetables. To allow capacity utilization and spread across seasons, the facility is intended for use of both potato and onion when in season.





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Quality Check • Quality of Potato and other vegetables shall be assessed at the pack shed.

Sorting and Grading



Packing • Packaging tables would be provided in the pack sheds for manual packing of vegetables in boxes/crates etc.






The pack house will have its own aggregation mechanism where trucks/pick-ups would be sent to the aggregation points to collect the produce from the farmers/aggregators directly. The pack house will encourage farmers’ cooperatives to manage/handle the aggregation points wherever applicable. It may also invest in developing the points by creating/improving the infrastructure of the points such as platforms, sheds, etc. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment. Trainings of farmers on best farming practices and better post harvest handling practices of produce will be conducted on regular intervals. Other initiatives such as best inputs and technology transfers will also be taken up.


The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, etc. At peak of operations, about 20 incoming tucks/vehicles of an average of 4 MT capacities will be coming to the pack houses. The outbound trucks would include about 6 normal trucks of 10/15 MT.


19.3.2 Potato Cold Store A modern potato cold store of 2000 MT capacity is proposed in the spoke. There will be 8 chambers for storage and 4 ante rooms which may be used for warming up of potato before taking it out of the cold store. The walls of the store will be a prefab structure with insulated


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puff panels. Ammonia type refrigeration will be used for the cooling (see Annexure for further technical details).


A dry warehouse of 5000 MT capacity is proposed at the market yard. It will used for storage of grains such as rice, wheat and maize.

19.3.4 Onion Store

Separate facilities for onion storage are proposed in the spoke. There will be 10 onion stores of 50 MT capacities and they will form a separate section of the spoke to prevent odour contamination of other areas.

19.3.5 Other facilities

Business Centre

A Business Centre is proposed in the market yard which will host the administrative block for the market. There will also be rooms/sections which may be rented out to reputed NGOs, companies, grass-root level organizations such as microfinance institutions, etc as office space.

Knowledge Centre

A Knowledge Centre is also proposed in the market. This space will be utilized for extension services provided to the farmers, traders, aggregators and others in the catchment area. There will also be rooms for trainings, meetings and conferences which will be rented out. There will be demonstration rooms displaying various modern technologies and best practices in agri-business.

Apart from the new facilities proposed in the spoke, there will be refurbishment/renovation of existing facilities. They would include:


The proposed facilities can be categorized into four broad categories of Infrastructure as given below

PROPOSED INTERVENTION TYPE OF INFRASTRUCTURE Pack House (Ambient) Agribusiness infrastructure


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Pack House Logistics Banana Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Traders’ Shops Trading Platforms Knowledge Center Business Center





Link Infrastructure


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20 FINANCIAL ANALYSIS

The background and introduction to this analysis is found in an earlier section on the Muzaffarpur IVC (Section 10) and apply to this value chain as well.

This section outlines the financial analysis for the Patna-Nalanda Value Chain.

20.1 PATNA‐NALANDA IVC

20.1.1 Project Details The facilities/infrastructure proposed in hub and spokes for the IVC are summarized below:

Facilities Bihar Sharif Patna Gaya Arrah Buxar Nokha Vegetable Packsheds‐ Ambient

35 MT/day (750 sq. m)

35 MT/day (750 sq. m)

35 MT/day (750 sq. m)

35 MT/day (750 sq. m)

35 MT/day (750 sq. m)

35 MT/day (750 sq. m)

Trading Platforms 4400 sqm 5267 sqm 3951 sqm 3433 sqm 4590 sqm 3525 sqm Warehouse‐5000 MT

2300 sqm 2300 sqm 2300 sqm 2300 sqm 2300 sqm 2300 sqm

Potato Cold Store 2700 sqm (5000 MT)

2700 sqm (5000 MT)

2000 MT (1080 sqm)

2000 MT (1080 sqm)

2000 MT (1080 sqm)

2000 MT (1080 sqm)

Onion store‐500 MT

540 sqm 540 sqm 540 sqm 540 sqm 540 sqm 540 sqm

Ripening chamber 10 MT/day 10 MT/day ‐ ‐ ‐ ‐ Traders Shops 8000 sqm 6956 sqm 4963 sqm 4178 sqm 4567 sqm 4317 sqm

To support the operations of above facilities, the hub and spokes will also have adequate basic infrastructure and other support infrastructure like power and water supply systems, ETP, solid waste disposal facility, administration block/business centre, canteen, parking space, etc. A list of these basic and support infrastructure facilities (hub and spoke wise) is given below:

Non technical Facilities Units Bihar Sharif Patna Gaya Arrah Buxar Nokha Guest House Sq. m 300 300 200 300 300 300 Business centre Sq. m 300 300 300 300 300 300 Knowledge centre Sq. m 400 400 300 400 400 400 Water Supply LPD 36250 36250 28200 35250 35250 35250 Power Supply KVA 800 800 400 400 400 400

20.1.2 Project Cost The cost estimates for IVCs mainly consist of two categories: the renovation/refurbishing of existing building and basic infrastructure and construction of new value added facilities. It has been attempted to use existing infrastructure to the extent possible and replacement of existing assets have been recommended only in cases of absence or unusable condition of these assets/facilities. The cost estimates of plant and machinery are based on the information obtained from equipment suppliers including quotations given by them for similar facilities. The civil work and basic infrastructure costs have been worked out by architects/engineers based on layout plans and as per the industry standards. The component wise costs of the project are given below:


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Items Sr. No. Description Amount (Rs Mn) Amount (Mn $) A 1 Land 0.00 0.00 2 Land Development 370.06 7.85 3 Buildings 761.92 16.17 4 Plant Machinery & Equipments 160.43 3.40 5 Utilities & other fixed assets 53.00 1.12 Sub Total (A) 1,345.40 28.56 B Preliminary and Pre‐Operative Expenses 67.27 1.43 C Contingencies 116.59 2.47 D Margin Money for Working Capital 8.60 0.18 Total Project Cost (A+B+C+D) 1,537.86 32.64

Land

The land cost has not been taken into consideration as the project would be using the land of existing APMC market yards.

Land Development

The land development cost has been calculated based on the detailed engineering surveys in selected APMC market yards. The calculation takes into account the land development cost for both the existing and proposed facilities/infrastructure in these markets. Based on these costs, for the other markets land development cost has been taken proportionately. The detailed costing for these markets will be incorporated in the final report. Cost of land development includes boundary wall, road, water drainage, parking etc. The average cost of development is coming at Rs 3.38 mn/Ha.

Buildings

The estimated costs of construction for various buildings in the projects are given below: Amount in Rs millions

Facility Patna Bihar Sharif Gaya Nokha Buxar Arrah IVC

IVC Mn $

A. Existing buildings Trading Platform 10.40 6.60 4.70 3.85 3.50 3.67 32.72 0.69 Trading Shops 60.20 17.50 12.47 10.21 15.05 9.72 125.15 2.66 Buildings ( Admin. Building, Bank, Ware Houses, etc) 50.75 36.75 26.18 21.44 33.67 20.42 189.21 4.02 Sub Total (A) 121.35 60.85 43.36 35.50 52.22 33.81 347.08 7.37 B. Proposed buildings Packhouse‐ Ambient 4.50 4.50 4.50 4.50 4.50 4.50 27.00 0.57 Trading Platforms 0.00 6.60 9.60 9.60 11.40 9.60 46.80 0.99 Warehouse‐5000 MT 14.95 14.95 14.95 14.95 14.95 14.95 89.70 1.90 Potato Cold Store‐5000 MT 21.60 21.60 8.64 8.64 8.64 8.64 77.76 1.65 Onion store 3.51 3.51 3.51 3.51 3.51 3.51 21.06 0.45 Ripening chamber 2.76 2.76 0.00 0.00 0.00 0.00 5.52 0.12 Traders Shops 0.00 24.00 11.20 11.20 16.00 11.20 73.60 1.56 Guest House 2.70 2.70 1.80 2.70 2.70 2.70 15.30 0.32 Business centre 2.70 2.70 2.70 2.70 2.70 2.70 16.20 0.34 Knowledge centre 3.60 3.60 2.70 3.60 3.60 3.60 20.70 0.44 Utilities 0.00 4.40 3.60 4.40 4.40 4.40 21.20 0.45 Sub Total (B) 56.32 91.32 63.20 65.80 72.40 65.80 414.84 8.80 Total (A+B) 177.67 152.17 106.56 101.30 124.62 99.61 761.92 16.17

The building construction rate for ambient packshed/trading platform for fruit and vegetable has been estimated to be Rs. 6000/sq. m. The construction rate for dry warehouse for grains and onion store have been assumed at Rs. 6500/sq. m. The lump sum cost of pre-fabricated banana ripening chamber of 40 MT capacity (which is equivalent to 10 MT/day ripening


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capacity) having an area of 280 sq.m has been taken as Rs. 2.76 million. The construction cost of potato cold store with pre-fabricated insulated building is estimated at Rs. 8000/sq. m. The rates are in tune to the industry standards and have been verified against quotations received from different industry players.

In case of non technical infrastructure, the construction rate has been estimated at Rs. 9000 per sq. m for facilities such as administrative building/business centre, guest house, canteen etc.

Equipment

The details of the estimated costs of major machineries are provided below:

Table: Machinery Cost Amount in Rs millions

Facility Bihar Sharif Patna Gaya Arrah Buxar Nokha IVC Refrigeration potato store 20.00 20.00 10.00 10.00 10.00 10.00 80.00 Ripening equipments 4.20 4.20 0.00 0.00 0.00 0 8.40 Electronics auction system 20.00 20.00 0.00 0.00 0.00 0 40.00 Crates 1.69 1.69 1.31 1.31 1.31 1.31 8.63 Weighing scales‐500 kg 0.30 0.30 0.30 0.30 0.30 0.30 1.80 Normal Pickup vehicles 1.20 1.20 1.20 1.20 1.20 1.20 7.20 Normal trucks‐15 MT 2.40 2.40 2.40 2.40 2.40 2.40 14.40 Total Plant Machinery & Equipments

49.79 49.79 15.21 15.21 15.21 15.21 160.43

The cost wise major components of the project are refrigeration for potato stores (Rs. 80.00 mn), and electronics auction system (Rs. 40 mn). The rates for plant, machinery and equipments are comparable to the industry standards and have been verified with the quotations from different suppliers.


The details of the estimated cost of the miscellaneous fixed assets and utilities are provided below: Amounts in Rs millions

Facility Bihar Sharif Patna Gaya Arrah Buxar Nokha IVC DG sets 3.60 3.60 2.00 2.00 2.00 2.00 15.20 Power supply system 8.00 8.00 4.00 4.00 4.00 4.00 32.00 IT system 1.00 1.00 0.50 0.50 0.50 0.50 4.00 Furniture 0.50 0.50 0.20 0.20 0.20 0.20 1.80 Total Misc Fixed Assets 13.10 13.10 6.70 6.70 6.70 6.70 53.00

The power load for the total project has been estimated to be 3200 KVA. DG sets have been taken for each spoke and hub and the capacities vary from 400 KVA to 750 KVA depending on the requirement. The project would require 0.20 million LPD of water for the operations. The cost of water supply has been distributed among the locations in proportion to their water requirements.

Preliminary & Pre‐operative Expenses

The provision towards preliminary & pre-operative expenses includes expenditure towards preliminary expenses like salaries & administrative expenses, travel expenses, market development expenses, interest during construction period etc. It is also assumed that the project will be commissioned over a period of one year. The interest during construction period is capitalized in the project cost. Pre-operative expenses other than interest during construction period are assumed to be 5% of cost of fixed assets.


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Working Capital Requirement

As the project is meant to create facilities and offer them to various users on rental basis, the WC requirement is assumed to be operating costs like management, maintenance, insurance, power and water. As most of these expenses and the rent receipts are monthly in nature, so to cover these expenses the requirement of working capital is calculated by considering the fund requirement for 30 days.

Contingencies

The amount is calculated as shown in the table below:

Contingencies Physical Contingencies

Price Contingencies

Contingencies (Rs Mn)

Contingencies (Mn $)

Land 0.0% 0.0% 0.00 0.000 Land Development 5.0% 8.3% 32.25 0.685 Buildings 5.0% 8.3% 66.40 1.409 Plant Machinery & Equipments 0.0% 8.3% 13.32 0.283 Utilities & Other Assets 5.0% 8.3% 4.62 0.098 Total 116.59 2.474

The price contingencies are based on the Whole Sale Price Index during FY 2009.

20.1.3 Means of Finance

The suggested implementation framework mentions that the funding requirement for the project would be met by project grant from state government and equity by private developer. The minimum equity from the private developer is envisaged at 10% of cost of project in case of Bihar. The remaining funds would be contributed as project grant by State government including funds from ADB as detailed below:

Particulars Amount (Rs Mn) Amount (Mn $) Share Asian Development Bank 968.85 20.56 63.00% Equity‐Government of Bihar 415.22 8.81 27.00% Equity‐Private Investor 153.79 3.26 10.00% Total 1537.86 32.64 1.00

20.1.4 Key Operating Assumptions

The key operating assumptions underlying the project’s business plan are described below.

Operating Cost Assumptions:

While the marketing infrastructure like trading shops and platforms are likely to be operational for at least 330 days, the overall operation for all the facilities has been assumed at 300 days per annum.

Power & Fuel Costs

The total connected load of the facilities for all locations is estimated at 3200 KVA. The power tariff has been assumed at the prevailing rate of Rs 4.25 per unit for agro based industry in Bihar. Average daily requirement of power would be about 11520 KWH. The details of power load assumptions for the facility are given below:

Facilities Assumption Trading Plateform/Ambient Packhouse 1 KVA/ 60 sqm


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Warehouse 1 KVA/ 92 sqm Cold Store 1 KVA/ 10 MT Ripening Chamber 50 KVA/ 40 MT Business Centre & Misc facilities 1 KVA/ 30 sqm

The table below shows the location wise power requirement:

Taking into account the current power supply scenario in the state it has been assumed that the facilities would run on DG sets for about 2 hrs/day. The average fuel cost for DG set is assumed Rs. 35/litre.

Water Cost

Daily requirement of water is estimated to be 0.20 million litres/day for all the locations combined. The charges are assumed to be Rs 20/KL.

Employee Cost

The employee cost has been estimated by considering the man power requirement for managing the facility. The project will be managed by the SPV, who will maintain and operate the facilities in the project. This includes management and 24 hour maintenance of the plant and machineries, management of the canteen, business centre, security, etc. So, a team of technical engineers, support staffs and security personals will be required. The details of manpower and their average costs are given in the following table:

Grade/ Employee Number Salary/Month (RS) Total (Rs) Managers 6 20000 120000 Technical Manager 6 20000 120000 Operators 18 10000 180000 Maintenance 18 6000 108000 Account 8 8000 64000 Security 20 4000 80000 Support Staff 24 3000 72000 Total Employee Cost (Per Month) 100 744000

*Increment in salary is assumed at 5% p.a for 1st five years of operations.

Cost of Maintenance

The cost of maintenance has been assumed as 1.0% of value of plant & machinery and miscellaneous fixed assets. The maintenance cost will increase by 2.5% every year due to aging of assets.

Cost of Insurance

The cost of insurance has been assumed as 1.0% of value of plant & machinery and miscellaneous fixed assets.

Admin & Marketing Overheads

The SPV will be largely responsible for only the management and maintenance of the facilities and users/traders would be doing necessary marketing arrangements for their operations. Initial tie ups are needed for better capacity utilization of the facilities. Most of the promotional/marketing expenses will be incurred up front with only small recurring expenses afterwards. Hence during operations, marketing and business development expenses will not be significant for the project. The major overheads for the project will be traveling costs, statutory (like audit etc.) costs and communication expenses etc. So, the admin &

Locations Power Load (KVA) Bihar Sharif 800 Patna 800 Gaya 400 Arrah 400 Buxar 400 Nokha 400 Total 3200


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selling overhead costs have been assumed @ 2.0% of revenue in line with the industry norms for such facilities.

Financial Assumptions

Taxes

Income Tax rate is assumed to be 33.99% flat (Prevailing Corporate Tax Rate). Income tax is calculated on PBT after adjusting for the difference between the depreciations calculated according to Companies Act, 1956 and Income Tax Act, 1961.

Depreciation Rates

Depreciation has been calculated by straight-line method, as per the Companies Act, 1956, for book purpose, whereas for tax purpose (As per Rule-5 of Income Tax Act, 1961), written down value method is employed. The rates of depreciation are in tune to the rates that are used in cold storage and warehousing industry. The depreciation rates used for different assets are given below:

Depreciation Rates Book Depr Tax Depr Plant & Machinery 10.34% 15.00% Miscellaneous Fixed Assets 10.34% 15.00% Buildings 3.34% 5.00%

The plant & machinery includes refrigeration and cooling systems used for operation of facility, sorting-grading equipments, crates, pallets etc. The noncore equipments like water supply system, transformers etc are included in miscellaneous fixed assets. Buildings include, building for ripening facility, ambient and cold pack-houses, dry warehouse storages, business center, canteen etc.

Revenue Assumptions

Rental assumptions

Based on the discussion with market players (service providers, food processors, users, traders and wholesalers) the rental charged for various facilities is tabulated below:

Facilities Charges/ Unit Unit of Charge Trading Platforms/ ambient packhouses 60 Rs/sqm/month Banana Ripening Facility 1400 Rs/MT Warehouse 100 Rs/sqm/month Business Centre 200 Rs/sqm/month Crates 7 Rs/cycle/crate Weighbridge 2 Rs/MT Logistics 10 Rs/Km Cold Store 250 Rs/MT/Month Onion Store 250 Rs/MT/Season

The rentals charged for these facilities are comparable to the prevailing market rates.

Capacity Utilization

The estimated capacity utilizations are shown in the table below.

Year Year 1 Year 2 Year 3 and Onwards Capacity Utilization Agricultural Marketing Infrastructure 80% 90% 100% Value addition/ storage facilities 40% 60% 80% Basic/ Support Infrastructure 80% 90% 100%


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The capacity utilizations have been assumed conservatively for value addition infrastructure, starting at 40% in the first year

20.1.5 Financial Performance

The estimated financial projections for the project are tabulated below:

Income Statement: (Rs Million)

Year 1 2 3 8 12 16 20 Capacity Utilization Agricultural Marketing Infrastructure 80% 90% 100% 100% 100% 100% 100% Value addition/ storage facilities 40% 60% 80% 80% 80% 80% 80% Basic/ Support Infrastructure 80% 90% 100% 100% 100% 100% 100% Revenue A. Agricultural Marketing Infrastructure Rental‐ Trading platforms 6.88 7.74 8.60 8.60 8.60 8.60 8.60 Rental‐ Trader Shops and Business Centre 251.56 283.00 314.45 314.45 314.45 314.45 314.45 Sub Total (A) 258.44 290.74 323.05 323.05 323.05 323.05 323.05 B. Value addition/ storage facilities Rental‐ Warehouse 3.31 4.97 6.62 6.62 6.62 6.62 6.62 Rental Potato Cold Store 18.00 27.00 36.00 36.00 36.00 36.00 36.00 Rental‐Onion Store 0.30 0.45 0.60 0.60 0.60 0.60 0.60 Rental‐Ripening Chambers 3.12 4.68 6.24 6.24 6.24 6.24 6.24 Sub Total (B) 21.61 32.42 43.22 43.22 43.22 43.22 43.22 C. Basic/ Support Infrastructure Rental‐ Logistic 64.80 72.90 81.00 81.00 81.00 81.00 81.00 Rental‐ Crates 9.66 10.87 12.08 12.08 12.08 12.08 12.08 Weighbridge 0.19 0.22 0.24 0.24 0.24 0.24 0.24 Sub Total (C.) 74.65 83.98 93.32 93.32 93.32 93.32 93.32 Revenue 354.70 407.14 459.59 459.59 459.59 459.59 459.59 Expenses Power & Fuel 18.24 20.53 22.81 22.81 22.81 22.81 22.81 Employee Cost 8.93 9.37 9.84 11.39 11.39 11.39 11.39 Water cost 0.99 1.11 1.24 1.24 1.24 1.24 1.24 Maintenance cost 13.45 13.79 14.14 15.99 17.65 19.49 21.51 Insurance 9.42 8.01 6.81 3.02 1.58 0.82 0.43 Admin & Selling Overheads 7.09 8.14 9.19 9.19 9.19 9.19 9.19 Total Expenses 58.14 60.96 64.02 63.64 63.86 64.94 66.57 EBITDA 296.57 346.19 395.56 395.94 395.73 394.65 393.02 Interest Long Term Debt (LTD) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Interest Working Capital borrowing 3.48 3.95 4.42 4.41 4.42 4.43 4.44 Depreciation 54.01 54.01 54.01 54.01 28.93 28.93 28.93 PBT 239.07 288.23 337.14 337.52 362.38 361.30 359.65 Tax 43.10 68.28 92.11 114.96 123.55 127.70 129.50 Net Profit (PAT) 195.98 219.95 245.02 222.56 238.84 233.60 230.15 Cash flow to Government 70.94 81.43 91.92 91.92 91.92 91.92 91.92 Net Profit to Private Developer 125.04 138.52 153.11 130.64 146.92 141.68 138.23

In the above table, during 1st year of operation the net profit from the project is Rs. 195.98 millions which increases to Rs. 245.02 millions at maximum capacity utilization.


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Major Financial Performance Indicators:

Year 1 2 3 4 5 6 7 EBITDA Margin 83.61% 85.03% 86.07% 86.11% 86.11% 86.07% 86.12% PAT margin 55.25% 54.02% 53.31% 52.01% 50.87% 49.88% 49.10% Debt‐Equity Ratio 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Debt to EBITDA ratio 0.09 0.08 0.08 0.08 0.08 0.08 0.08 Interest Coverage Ratio 85.14 87.65 89.54 89.61 89.60 89.53 89.63 DSCR 85.14 87.65 89.54 89.61 89.60 89.53 89.63 Average DSCR 88.80 Project IRR 19.33%

The above table shows the operational and financial efficiencies of the project. The project is able to achieve an operating margin (EBITDA Margin) of about 85% and net profit margin of about 50% from the first year of operations itself. The project IRR is at around 19.00%, which seems attractive from the investor’s perspective.

20.1.6 Sensitivity Analysis The sensitivity analysis has been given below to establish the need for capital grant support for the project. The various levels of equity contribution by private developers have been tested with minimum being 10% and the maximum being 30% of the project cost as mentioned in implementation framework

The sensitivity analysis of financial performance indicator (IRR) of the project with respect to equity contribution by private bidder is given below:

Equity 10% 20% 30% IRR 115.27% 58.72% 39.51%

Analysis of the above table shows that with 30% of the project cost as bidder/developer’s equity contribution (and 70% capital grant from state government), the private equity IRR comes to about 40% which means the project is highly attractive from bidder/developer’s perspective.

The spoke wise project cost, means of finance and revenue statements are given in the Annex to this section


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21 ECONOMIC ANALYSIS

21.1 PATNA‐NALANDA IVC

The background and methodology of the economic analysis have been described earlier in the report, in Section 11.

21.2 QUANTIFICATION OF BENEFITS

Quality improvement leads to premium Price of the commodities

The incremental price realization is calculated based on the price range available in the market for different grades (based on firmness, colour, size etc.) of the produce. The table below compares the ‘Without Project’ and ‘With Project’ cases to estimate the incremental benefits due to improved quality of the produce.


Estimated Additional Price Realization (%)

Crops Price (Rs/MT)


Price (Rs/MT)

Incremental Benefit (Rs/MT)

Quantity (MT)


Vegetables 8000 10% 25% 13.0% 9040 1040 88200 91.73 Fruits 25000 20% 30% 22.0% 30500 5500 10800 59.40 Banana 16000 10% 15% 11.0% 17760 1760 6000 10.56 Grains 10000 5% 10% 6.0% 10600 600 135000 81.00 Onion 14000 10% 15% 11.0% 15540 1540 3000 4.62 Total 243000 247.31

The incremental benefit due to quality improvement is estimated to be Rs 247.31 million per annum at 100% capacity utilization.

Wastage Reduction

Without Project With Project Wastage Reduction Range (%)

Crops Quantity Saved (MT) Min Max

Weighted Average

Selling Price (Rs/MT)

Quantity Saved (MT)


Vegetables 8000 10% 20% 12.0% 9040 10584 95.68 Fruits 25000 15% 20% 16.0% 30500 1728 52.70 Banana 16000 10% 15% 11.0% 17760 660 11.72 Grains 10000 5% 10% 6.0% 10600 8100 85.86 Onion 14000 10% 15% 11.0% 15540 330 5.13 Total 21402 251.09

The interventions in the IVC would help in reduction in wastage of about Rs 251.09 million per annum with annual saving of about 21402 MT of fruits, vegetables, grains, pulses etc. at 100% capacity utilization.


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Location No. of workers

Day/ Annum


No. of workers

Days/ Annum



Patna 0 0 0.00 342 300 12.83 12.83 Bihar Sharif 0 0 0.00 342 300 12.83 12.83 Gaya 0 0 0.00 320 300 12.00 12.00 Nokha 0 0 0.00 340 300 12.75 12.75 Buxar 0 0 0.00 340 300 12.75 12.75 Arrah 0 0 0.00 330 300 12.38 12.38 Total 0 0.00 2014 75.53 75.53

The estimated income from incremental employment will be about Rs 75.53 million.

Incremental Revenue from Marketing Infrastructure

The investment in the IVC will help in better utilization of existing resources and will help in better price/rental realization for trader’s shops etc. as estimated below:


Location Area (Sqm)



Area (Sqm)




Patna 17200 100 20.64 18200 250 54.60 33.96 Bihar Sharif 5000 100 6.00 9000 250 27.00 21.00 Gaya 3563 100 4.28 5763 250 17.29 13.01 Nokha 2917 100 3.50 5317 250 15.95 12.45 Buxar 4300 100 5.16 7300 250 21.90 16.74 Arrah 2778 100 3.33 5178 250 15.53 12.20 Total 35757 42.91 50757 152.27 109.36

21.3 QUANTIFICATION OF COSTS

Economic Cost of Project

Items Sr. No.

Particulars Amount (Mn Rs)

Amount (Mn $)

A 1 Land 181.50 3.85 2 Land & Site Development 370.06 7.85 3 Buildings 761.92 16.17 4 Plant Machinery & Equipments 160.43 3.40 5 Utilities & other Assets 53.00 1.12 Sub Total (A) 1526.90 32.41 B Project Implementation Cost @10% of ADB Funds 96.89 2.06 C Pre‐op expenses 67.27 1.43 D Contingencies 116.59 2.47 E Capacity Building 17.78 0.38 Total Project Cost (A+B+C+D+E) 1825.42 38.74

Based on the earlier mentioned assumptions the estimated economic cost of the project is Rs 1825.42 million or 38.74 million $. The exchange rate of 47.114998 Rs per Dollar is considered for calculation of cost of project in Dollar value.


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21.3.1 Recurring Costs

Opportunity cost of labor

Location No. of workers Days/Annum Annual amount (Rs Mn)

Patna 342 100 4.28 Bihar Sharif 342 100 4.28 Gaya 320 100 4.00 Nokha 340 100 4.25 Buxar 340 100 4.25 Arrah 330 100 4.13 Total 2014 25.18

The incremental annual income for agricultural labourers is estimated at Rs 25.18 million.

Opportunity cost of capital

Opportunity cost of capital contributed as project grant is assumed at 10% per annum. The assumption is based on the fact that the money invested as grant can be invested elsewhere and a minimum return of 10% per annum has been assumed conservatively.

21.4 COST‐BENEFIT STATEMENT

The table below shows the cost benefit statement over the life of the project.

Year 0 1 2 3 4 8 12 16 20 Capacity Utilization‐Value added Infra

Imp Period 40% 60% 80% 80% 80% 80% 80% 80%

Capacity Utilization‐Marketing Infra 80% 90% 100% 100% 100% 100% 100% 100% Capacity Utilization‐Support Infra 80% 90% 100% 100% 100% 100% 100% 100% A. Economic Benefits Quality Improvement 98.92 148.38 197.85 197.85 197.85 197.85 197.85 197.85 Wastage Loss 100.44 150.66 200.87 200.87 200.87 200.87 200.87 200.87 Incremental Labour 30.21 45.32 60.42 60.42 60.42 60.42 60.42 60.42 Incremental Income Tax 43.10 68.28 92.11 98.30 114.96 123.55 127.70 129.50 Incremental Revenue from existing infrastructure 87.49 98.43 109.36 109.36 109.36 109.36 109.36 109.36 Incremental revenue Support Infrastructure 74.65 83.98 93.32 93.32 93.32 93.32 93.32 93.32 Total Economic Benefits 434.81 595.05 753.93 760.12 776.78 785.37 789.52 791.32 B. Economic Costs Opportunity cost of labour 10.07 15.11 20.14 20.14 20.14 20.14 20.14 20.14 Opportunity cost of Capital 138.41 138.41 138.41 138.41 138.41 138.41 138.41 138.41 Total Economic Cost 148.48 153.51 158.55 158.55 158.55 158.55 158.55 158.55 Net Economic Benefits (A‐B) 286.33 441.53 595.38 601.57 618.23 626.82 630.97 632.77

21.5 CALCULATION OF ECONOMIC IRR (EIRR) AND NPV

Economic IRR (EIRR)


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Year Imp Period 1 2 3 4 8 12 16 20

Economic Investment 1825.42

Net Economic Benefits 0.00 286.33

441.53

595.38

601.57

618.23

626.82

630.97

632.77

Net Economic Cash Flow ‐1825.42

286.33

441.53

595.38

601.57

618.23

626.82

630.97

632.77

Economic IRR (EIRR) 28%

The economic IRR for the IVC is estimated to be 28%. The considerably good IRR of 28% is clear indication of the economic viability of the project.

21.6 ECONOMIC APPRAISAL RESULTS

21.6.1 Major Economic Indicators:

The major economic indicators considered to assess the economic viability of the project are given in the table below:

NPV (Rs Mn.) 2,505.86 NPV (Million $) 53.19 Benefit‐Cost Ratio 4.78 NPVI 1.37

NPV:

The positive NPV for the project indicates the viability of the project. The NPV is calculated considering the economic life/ concession period of project as 20 years. The discounting rate for calculation of NPV is the Weighted Average Cost of Capital (WACC). The WACC is calculated by assuming the capital cost of 16% for the private investor and 10% for project grant. The calculation of WACC is shown in the table below:

Details Share Cost of Capital Project Grant 90.00% 10% Equity‐Private Investor 10.00% 16% WACC 10.60%

Benefit‐Cost Ratio (BCR):

The average BCR over the project life is estimated to be 4.78. The ration indicates that for every one $ of expense it will generate more than four times of expense over the life of project. Hence, the project is highly economic viable.

Net Present Value per $ of Investment (NPVI):

The NPVI of more than zero is always considered as a good indicator of the economic viability of the project. In this case, the estimated NPVI is 1.37 which is high.


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BIHAR: INTEGRATED VALUE CHAINS

Muzaffarpur Integrated Value Chain

and

Nalanda‐Patna Integrated Value Chain

Conceptual plans of facilities Stakeholder consultation Market Assessment Impact Assessment Capacity building support Policy and regulatory aspects

Implementation framework Project Implementation Structure


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22 CONCEPTUAL PLANS FOR FACILITIES

22.1 CONCEPTUAL PLANS FOR FACILITIES AT SELECTED LOCATIONS OF THE IVCS

The planning for the proposed facilities for different locations of the IVCs in Bihar has been evolved based on the sizes and numbers of the proposed facilities as well as essential support infrastructure such as business centre, canteen and parking etc. In Bihar, renovation/refurbishment of existing facilities is also planned and hence existing facilities in the APMC market yards have also been considered in the planning.

Effort has been made to integrate the new proposals with the existing facilities. At places the existing facilities have been augmented or expanded to cater the proposed higher capacities. Also the existing locations of the various infrastructure installations and facilities have been left unchanged and integrated with the new planning for a cost effective solution for the enhanced capacity.

Adequate provision of basic infrastructure such as access roads, water supply facilities for domestic industrial and fire fighting, effluents carriage and treatment, solid waste management, internal electrical distribution and communication lines has been kept in mind at the proposed facilities. Concepts of proper green areas for aesthetics and a pleasant ambience have been used besides adequate and efficient vehicular traffic access and parking to create a modern facility in eco-friendly manner

Broad planning concepts for the master planning and main components design are as follows:

22.1.1 Planning Concept The concept of the proposed Facilities is derived based on the requirements of the

functions with self contained facilities. The proposed facilities shall be environment friendly facility comprising of physical and common infrastructure components interwoven with green spaces.

The concept is guided by the applicable development guidelines of the Site Planning, Spatial Planning norms and principals. The design philosophy revolves around prioritizing various aspects viz., circulation, land suitability, environmental sustainability.

The master plan is based on modern planning concepts of providing good and efficient internal movement, efficient layout of services with supporting infrastructure and facilities in an aesthetic environment.

The existing facilities in Bihar have been surveyed and majorities have been found to be in abysmal conditions. Leave apart conducting business even mere access to the different facilities is impossible. Concepts like health and hygiene have been found to be completely absent. With no maintenance mechanism in place most have been just conducting business just because of absence of any alternate.

In such conditions it has been considered to transform the existing complexes into modern, eco-friendly places of conducting business replete with all necessary infrastructure facilities that provide a sanitized and encouraging ambience


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22.1.2 Master Plan

The guiding principle of the master plans is to incorporate the principles of an eco-industrial facility by maximizing green space and open spaces, and provision of green belts. The design envisages functional and accessible work places by incorporating prudent and scientific planning principles and includes the following:

1. Provision of Basic Infrastructure to the proposed facility adequate for the proposed usage with anticipated vehicular traffic and other service requirements

2. Location of process and non-process activities

3. Location of process activities with requirement of mechanical services

4. Providing efficient access to the main road from all buildings

5. A central common facility center interwoven with green spaces

6. Provision of services area with ease of connecting with main service lines.

22.1.3 Buildings

1. Shed building are planned with dimensions optimized for economic structure.

2. Building are placed at the longer axis to provide long loading / unloading dock

3. All building are provided with proper parking and circulation area for heavy vehicles

4. Building which require mechanical services cold storage are clustered together

5. The structural design shall cater to the usage for the proposed life with wind and earthquake resistance

22.1.4 Services

1. Adequate space has been provided to cater to the proposed usage of the facilities such as water supply, sewerage/effluent carriage and treatment, power and telecom distribution

2. Water supply and Electrical Room are provided near the main road to provide easy access to operation and maintenance also provides provision connect with main external infrastructure

3. Sewerage, Storm water drainage are planned considering the outlet towards the entrance to facilitate easy connection with external storm water drainage system.

22.1.5 Road & Parking

1. The proposed internal roads are of sufficient width and adequate parking as per requirements along with pedestrian paved path

2. The proper signage system is adopted to make sure the smooth traffic movement inside the market complex

3. The main access to the facility center is taken from at least 15mt wide road.

4. The proposed access to the facility shall connect with the existing access roads with a well-defined access to the development

5. No road shall be less than 6 meters in width of paved top

6. The secondary roads within the markets, where the movement of HMV is not


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required and the transportation can be done by LMV only, the proposed road widths are 4.5 M.

7. The pedestrian walkway 2.0 m wide is also provided from Main entrance to different blocks of markets.

8. Adequate parking spaces are provided for weigh-bridge, covered Platform, shops, Godown etc.

9. A centralized parking is proposed along with driver’s rest room, toilets and canteen

10. Every Building is proposed with an apron of paved area where the vehicle can park away from main road and loading/unloading can be done

11. Signage systems are proposed to clearly indicate Vehicular and pedestrian movement along with buildings, parking space and other utilities

22.1.6 Green Area

1. The green areas planned as centralized open space to provide access from all around which provide visual relief.

2. The extent of open space shall not be less than 10 percent of the total area of the facility

3. Conceptual Master Plans along with sectional drawings for 2 market complexes, one in each zone, have been provided based on the facilities proposed as per the specific requirements.

22.2 LINK INFRASTRUCTURE

The proposals for the various locations have been framed considering the requirements of the specific location. The basic support infrastructure like roads, power, telecom, water supply, sewerage system, storm water drainage, solid waste management has been provisioned considering the planning norms and the specific business requirements. But the proposed market complexes with modern infrastructure facilities cannot function in isolation. Efforts have been made and possibility has been explored to propose self contained facilities where possible such as solid waste management and water supply and waste water disposal. With regards to the large quantum of agricultural waste expected to be generated composting centers have been proposed which may function even without the corresponding external solid waste collection and disposal arrangements. Irrespective of the standalone facilities planned the internal infrastructure has to be matched with adequate infrastructure outside the proposed complexes and linked by suitable means for smooth functioning as planned.

22.2.1 Approach and Accessibility

1. Approach and accessibility to APMC markets, play a vital role in proper functioning of the Bazaar.

2. There are a significant number of HMV and LMV traffic coming and going out to the markets along with pedestrian movement.

3. The Approach roads to the APMC markets are required be of sufficient width along with proper signage.

4. The main Approach road should be of minimum 9m Width with proper turning radius


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to the Complex along with some buffer space between main road and Entrance Gate so that if required one or two HMV could wait for some time.

5. The Approach roads at all locations proposed were found to be of insufficient width, and lacking in proper signage system.

6. The Approach roads need to be widened and at some places a ‘slip road’ has to be proposed so that entry/exit to and from the markets do not lead to congestion of general traffic, as would be the case in the present condition.

7. In the proposals, where ever possible, slip roads are considered and entry or exits are provided to lead on to these roads. In some cases, where the space is not available for the slip road, the main entry/exits are located after providing the buffer space so that general traffic would not be affected with the movement of HMV/LMV to and from these markets.

8. Proper Signage are proposed and recommended regarding the Entry/Exits of Markets along with the approach lane to follow

22.2.2 Linkages for Power, Water, Storm Water etc.

A detailed study of the available infrastructure outside the proposed marketing complexes has not been undertaken in the scope of work of the present study. However, generally there is a need to augment the external infrastructure in all fields such as roads, water and waste water, storm water drainage, power and telecom etc

22.2.3 General Design Considerations The proposals has been drafted considering the prudent engineering practices in provision of the various infrastructure as well building facilities. The proposals for 6 locations in Bihar have been formed in detail considering the requirements and survey of existing facilities. The master plans have been drawn and the cost estimates have been prepared accordingly. The cost estimates of the remaining 5 facilities in Bihar have been prepared according to the requirements and prevalent costing norms with help from the similar proposals. The major technical considerations are as follows

Electricals

Electrical services are one of the most important services of any complex. Various Electrical facilities for the building have been envisaged considering the usage of area, patterns of electrical load and relevant Indian Standards / Codes.

Power supply for the complex shall be catered at 11 KV from the Bihar State Electricity Board and stepped down to 415 V using distribution transformers for further distribution. This report gives the brief design criterion proposed to be adopted on the various facilities of the Electrical System. The design shall be based on Indian Standards, IE rules, NBC and NEC, CPWD Specifications and all the statutory requirements shall be complied with.

Power Supply And Sub‐Station :

D.G. SETS:

1. Considering the chronic power shortage in the country and increasing power cuts by Bihar State Electricity Board it is essential to have alternative power source to meet


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electrical requirements under power failure / break down conditions. DG Sets of adequate capacity shall be provided to meet all the requirements of the building in non-availability of power grid

2. Considering 80% loading on DG Sets, 90% load of Cold storage various sizes of DG Sets with AMF facilities are proposed as an emergency power supply for the complex.

3. The Transformers and DG Sets shall be connected in parallel so that operational flexibility shall be available in case of break down in Transformer or DG Sets.

L.T. Panels: The LT Panels shall be provided with sufficient number of ACBs/ MCCBs, through which required number of feeders shall be catered for various purposes. The panel shall be in compartmentalized design and it shall be totally enclosed floor standing and cubical type, accessible from front preferably with cable entry from top/as per site condition. The bus bar of the panel shall be made of High Electrolytic Conductivity Aluminum strips. The transformer and the panel shall be connected through adequate sized 415 V, 3 phase, 4 wire cables.

Power Correction System:

1. As per the condition of supply of Electricity Board, consumers are advised to improve and maintain the power factor of their installation 0.9 or above because of various advantages. Improvement in the power factor would affect savings in the energy bill. Also the life of individual apparatus can be increased considerably by high power factor. For the improvement of power factor, suitable size of capacitor panel banks shall be provided. The Capacitor Banks shall be a part of LT Panel.

2. Automatic power factor correction relay of reputed make shall be provided to sense the power factor of the system and switch on the capacitors depending on the system requirements. The power factor shall be maintained around 0.95 to 0.98 through this system.

Lighting:

1. Lighting shall be designed according to the required illumination levels as per Indian Standard / NBC Code. Generally, energy efficient CFL light fixtures matching with the internal layout have been proposed for the each building. Special emphasis shall be given on low energy consumption light fittings especially in the Corridors and in Walk-ways where suitable make light fitting with compact fluorescent 26/18/14W lamps are proposed to be provided. Light fixtures shall be used with electronic ballast for energy savings.

2. Similarly, energy efficient CFL Lamps fitting shall be provided for External Lighting. All the light fittings shall be provided with energy saving devices. The final selection of the light fittings shall be made in consultation with Architect / Client/ Consultant.

3. The number of light points and socket shall be based on the accepted norms usually followed for this type of Building. The Illumination levels or Lux levels of different areas have been based on the NBC Code and are as follows:

S.No. Description Lux Level


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1. Common Areas 250 – 350 lux

2. Office Areas 350 – 400 lux

3. Pump Rooms / Sub Station 200 lux

4. Parking Areas 70 – 100 lux

5. Lobbies / Corridors 200 lux

6. Staircase Landings 200 lux

7. Cold Storage 350 – 400 lux

8. Covered platform in Mandi Area 200 lux

Cabling: All MV Power Cables provided for power distribution shall be armoured PVC sheathed and XLPE insulated Aluminium Conductor, 1.1 KV grade, conforming to IS:1554. Appropriate Screened Copper cables / wires shall be used for all special purposed and Communication Systems.

Earthing System: Considering the hazardous nature of electrical energy, safety measures in using this energy is of paramount importance. Earthing System is one of such safety systems. It is proposed to provide effective Earthing System conforming to IS : 3043 – 1987. All non current carrying metal parts forming the Electrical System shall be connected to the Earthing System as per the requirements of Indian Electricity Rules and local Statutory requirements. The Earthing System shall be so designed that the resistance of the Earthing Network shall be less than 1.0 ohm at any point of the system.

The Earthing System is proposed as follows:

Sub - Station Equipments:

a. Transformer Neutral Earthing Copper (600x 600 x 3.15mm) Plate Earthing

b. Transformer Body Earthing G.I. (600 x 600 x 6mm) Plate Earthing

c. H.T. Switch-Gear Earthing Copper (600 x 600 x 3.15mm) Plate Earthing

d. D. G. Set Neutral Earthing Copper (600 x 600 x 3.15mm) Plate Earthing

e, D.G. Set Body Earthing G.I. (600 x 600 x 6mm) Plate Earthing

Panel Earthing:

a. L.T. Panels Earthing G.I. Plate Earthing

b. Distribution Boards Earthing PVC Insulated Copper wire with sub mains.

c. Equipment Earthing G.I. Plate Earthing

d. Lighting / Power Point Circuits 1.5/2/4.0/6.0 Sq mm PVC insulated Single Core Green Wire

e. Laboratory Equipment/UPS/ Copper Plate Earthing

f Server/EPABX Earthing

22.2.4 Sanitary Installation, Water Supply and Fire Fighting Systems

The objective of the design is to achieve the most efficient and high quality system to meet the required standards. It is therefore essential to spell out and understand the basic


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objectives of design of all the services. This would assist in the detailed engineering and preparation of final working drawings for execution.

The sanitary engineering services covered in this project for which detailed engineering handled are :

Plumbing

• Sanitary fixtures, chromium plated fixtures and accessories.

• Soil, waste and vent pipe systems.

• Cold water supply.

• Rainwater pipes and disposal ,Rain water harvesting.

• External sewerage disposal including connection up to existing manhole.

• Municipal water connection, storage tanks and overhead tanks.

• Construction of tubewell, pumps and accessories.

• Garden irrigation system.

• Sewage treatment plant

Fire Protection System

1. External Fire hydrant system.

2. Under ground and overhead fire reserves.

3. Fire pumps and ancillaries. In the planning of all the above services following objectives have been kept in view.

1. Effective and efficient disposal of all wastes from the building quickly.

2. Prevention of back flow of waste waters from external sewer or other sources and minimizing the possibility of encroachment of rats, insects from main sewers or manholes by adequate trapping of all fixtures.

3. Easy access to all services for proper maintenance with adequate number of cleanouts, door bends and access points.

4. Protection of pipe lines from corrosion and accidental damage.

5. Prevention of pollution of surrounding environment.

6. Supply of water in adequate quantity and pressures in all areas on 24 hour basis.

7. Selection of materials and equipment of best indigenous makes requiring minimum maintenance and repairs.

8. Piping system to be so designed as to prevent, as far as possible and practical, any obstruction to normal movement of men and materials and be generally aesthetically pleasing.

9. Statutory requirements of all the services

10. All sanitary services shall be designed as per Indian Standard code of practice relevant to the service and the services are modified to suit local conditions, architectural and structural considerations of this particular project.


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Soil, Waste And Vent Pipe Systems

The system shall be designed on “TWO PIPE SYSTEM” as recommended in code of practice for soil and waste pipes above ground (IS: 5329 -1969).

External Sewerage

Sewerage from the building will be collected by means of underground sewerage system and connected to the Sewage Treatment plant. Manholes would be provided at all junctions and turning points and generally not exceeding 30 mt. in distance.

Material

a. All soil, waste and vent pipes shall be CI spun Iron pipes with drip seal/lead joints.

b. The waste pipes used for wash basins and sinks shall be GI /uPVC of designated class.

c. Pipes used for external sewerage system shall be CILA pipe due to uneven and rocky soil.

Disposal

All the rain water from the building roof and area around the building shall be connected separately taken up to open surface drain with grating and gully grating chambers and covered peripheral drains. These drains shall be further connected to rain water re-charge pits and the overflow shall be connected to the municipal storm water disposal system/Nallah.

Material

1. Pipes used for rain water inside the building shall be uPVC 6kg/cm2 pipes with drip seal joints.

2. Pipes used for storm water drainage shall be RCC.

Water Supply System

a. Owing to shortage of Municipal water supply, it would be necessary to augment the same by providing tubewells within the site.

b. Untreated tubewell water shall be utilized for garden supply.

c. The estimated total population, requirement of water supply and the proposed storage capacity for the project is given in separate Annexures.

Potable Water (Non‐Flushing):

a. The water supply from City Water Supply (Municipal Main), Borewells & Truck fill point shall be brought to underground fire storage tank and overflow from fire storage tank shall be taken to raw water storage tank in order to replenish the fire storage water.

b. The water from Raw Water Storage Tank shall be pumped through dual media pressure sand filter, activated carbon filter Softener Cum brine tank & taken into underground Treated water storage tank (Soft).


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Flushing Water System (Recycled from STP):

Recycled water from Flushing cum Irrigation Water Storage Tank located at Sewage Treatment Plant (STP) shall be pumped through battery of two pumps (One working & one Standby) to over head Flushing Water Storage Tank.

Distribution System

Water from the tubewell and Municipal supply are connected to a fire reserve. The overflow is collected in to raw water tank. Water from this raw water will then be passed through filter and polishing softener as required and stored in domestic treated water tank. The entire site is divided into two wings for easy running and maintenance.

Irrigation System

The premises comprises of irrigable area such as planter, lawns etc, hydrant system is proposed as per Landscape/ plantation design.

Source of Water: The irrigation water shall be made available from treated effluent of sewage treatment plant (STP).

Sewerage:

Drainage system for soil & waste is based on the most efficient, functional design, minimum maintenance after installation and available side topography to minimize the excavation work in laying the pipes; two pipe system (soil and waste) is proposed to carry soil and waste separately from the building under gravity.

Waste pipes are connected to manhole through gully trap and soil pipes are to be directly connected to the manhole.

The main drainage is carried through a battery of manholes and finally discharged into Sewage Treatment Plant (STP).

Sewage Treatment Plant:

Sewage Treatment Plant of capacity shall be provided in the final requirement of 80% domestic water. The Waste Water Treatment System will be treated using an extended aeration activated sludge type system consisting of following system:-

Component – I [Pre Treatment]:

• Screen Chambers

• Collection cum Equalization Tank

• Solids handling sewage transfer pumps.

• Bypass pump from equalization tank to municipal sewe

• Component – II [Secondary / Biological Treatment] :

• Aeration Tank

• Clarifier Tank (Secondary settling tank)

• Chlorine Contact Tank\

• Chlorine Dosing System

• Aerobic Sludge Digester cum Thickener Tank


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• Sludge Disposal Pump

• Sludge Recirculation Pump

• Component – III [Tertiary Treatment] :

• Filter Feed/Backwash Pumps

• Pressure Sand Filter

• Activated Carbon Filter

• Softener cum brine tank

• Soft Water Storage Tank

• Soft Water Transfer Pumps

• Irrigation cum Flushing Tank

• Irrigation Water Transfer pump

• Flushing Water Transfer Pump.

Storm Water Drainage System :

Storm water drainage systems will be designed based on a rainfall intensity of 70 mm per hour. Rainwater harvesting pit of size 3m dia x 3.5m effective depth shall be provided. Storm water drainage system will be provided for the building roof drainage and the site drainage. The Storm water will be collected by gravity through catch basin, storm water manhole and RCC pipe and finally discharge to the Rainwater Harvesting Pit. Overflow of rainwater harvesting pit shall be discharged to city storm water drain/storm water sump.

22.2.5 Solid Waste Management

Solid waste management is an important aspect of wholesale fruits and vegetable markets. On the one hand, the large amounts of organic-vegetable wastes emanating fro these markets are a valuable resource, while on the other, mismanagement of this resource, lead to much scenic blight, filth and pollution, contributing to an overall poor level of environment in these markets.

In the proposal for the Bazaar Samiti markets in Bihar, Solid-waste management, has been planned and integrated in a systematic way, so as to achieve resource recovery in a natural, organic and sustainable manner.

In each market, provision for solid waste management is provided as following: Local level organic waste collection chambers are proposed in close vicinity of (i) shops, (ii) open and covered platforms, (iii) stores, and (iv) godowns, in relation to anticipated waste generation per day.

These wastes from the local waste collection chambers would be transferred to one centralized location within each bazaar, where there would be a facility for vermi -composting /composting, for organic recycling of waste.

After recycling of these wastes into manure, the compost would be sold back to farmers for application in their fields.


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The surplus/ excess organic wastes [which cannot be treated within the site due to space constraints] are proposed to be transferred to a nearby location for composting/ vermi-composting.

The compost would then be brought back to the bazaar and sold to farmers.

The proposed method for organic-vegetable solid-waste management is consistent with natural ecological principles and environmental good practices.

Flow Chart showing the solid waste management process

22.2.6 Fire Protection Measures

1 Type Of Risk

1.1. Since the project is mainly used as Mandi, the type of risk can be categorized as under NBC / TAC.

2. Proposals

2.1 It is proposed to have a total protection system best suited for this Project and also as per the directives of NBC/ TAC Fire Service. These shall include the following.

a. External Fire Hydrant system

b. Automatic pumping set for the systems.

c. 2,00,000 ltrs underground fire reserve in one compartment accessible for hydrant systems.

d. Fire fighting hand appliances of various categories to be located throughout the Campus.

3. Fire Reserve

3.1 It is proposed to have an underground storage tank of 2,00,000 ltrs, in one

Shops Platforms Godowns Stores

Primary Collection h b




Centralized Organic Vegetable Waste Collector

To Composting/ Vermi-composting on site

Organic Manure

Other Suitable Nearby Location for Composting / Vermi‐

Composting

For Sale to the Farmers through Bazaar Samiti

Organic Vegetable Waste Organic Vegetable Waste


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compartment exclusively for firefighting purposes. The tank is located in such a way that it is readily accessible to fire appliances. Necessary manholes shall be provided in this tank to enable the fire brigade to draw water from the tank in case of necessity. A three way fire service inlet shall be provided for the underground storage tank.

4. Source Of Water Supply

a. For underground tank: From Municipal mains with additional supply from tubewells at site.

5. External Hydrant System

5.1 It is proposed to have External hydrant system throughout the Campus. Yard fire hydrant shall be provided on the main fire line The minimum outlet pressure at the top most hydrant would be 6.5 kg/sqcm.

5.2 The system would be permanently connected to the fire pump outlets by a common header of 200 mm dia.

5.3 External hydrants connected to the fire line have been proposed in the proposed complex.

22.3 TECHNICAL PROPOSALS FOR UP GRADATION OF APMC MARKET COMPLEX

Survey has been carried out to map existing facilities and infrastructure of 6 locations. Information has also been gathered from other sources to map the existing facilities at the proposed locations. Based on inputs from value chain analysis new facilities have been proposed to cater to enhanced requirements as well as to fill up crucial gaps along the value chain. Master Plans for these 6 locations with specific proposals for basic infrastructure facilities have been worked out and presented herewith. The surveyed locations are Muzaffarpur, Hajipur and Dalsinghsarai in Muzaffarpur region and Patna (Musallapur), Bihar Sharif and Buxar in Nalanda region. The locations considered are a representative sample of the proposed facilities in both the IVCs and cover all the aspects of development of Integrated Value Chains. The proposals for the other locations have been prepared based on similar considerations.

Based on the assumptions and specifications mentioned above, the estimates of power and water requirement for all the identified hub and spoke locations in Bihar have been calculated. The calculations of the requirements of power and water in Muzaffarpur hub have been given below, as an illustration. Similar calculations have been done for the other hub and spokes in Bihar.

The calculation for electric load required for Muzaffarpur Hub is given below:

Lighting Load @ 1 W/Sq. Feet Power Load @ 1.5 W/Sq. Feet Sr. No.

Facilties Area in Sq. Feet.

Total Load in KW D.F.

Maximum Demand

Total Load in KW D.F.

Maximum Demand

A) ELECTRICAL LOAD

1 Covered Platfrom 91234.00 91.20 0.50 45.60 136.85 0.20 27.37

2 Open Platfrom 12180.30 12.20 0.50 6.10 18.27 0.20 3.65

3 Whole Sale Traders Shop 300117.90 300.10 0.50 150.05 450.18 0.20 90.04


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4 Retail Shop 20110.40 20.10 0.50 10.05 30.17 0.20 6.03

5 Traders Shop 108685.40 108.70 0.50 54.35 163.03 0.20 32.61

6

Admin./ Buisiess/ Knowledge Center 19066.70 19.10 0.50 17.20 28.60 0.20 5.72

7 Bank Extention Counter 7445.90 7.40 0.50 6.70 11.17 0.20 2.23

8 Multi Processing Unit 9684.00 9.70 0.50 8.70 200.00 0.90 180.00

9 Godown 15505.10 15.50 0.50 14.00 31.00 0.30 9.30

10 Stores (Onion) 2582.40 2.60 0.50 2.30 5.20 0.30 1.50

11 Pack House Cold 16140.00 16.10 0.50 14.50 60.00 0.80 48.00

12 Parking 16086.20 16.10 0.50 14.50 32.20 0.30 9.70

13 Waste Yard 20293.30 20.30 0.50 18.30 40.60 0.30 12.20

14 Weigh Bridge 462.60 0.50 0.50 0.40 0.90 0.30 0.30

15 Canteen 1614.00 1.60 0.50 1.50 3.20 0.30 1.00

16 Potato Cold Storage 8608.00 8.60 0.50 7.70 400.00 0.80 320.00

17 Ripening Facility 5380.00 5.40 0.50 4.80 50.00 0.80 40.00

Total of Electrical Load (A) 376.75 789.65

B) COMMON AREA LOAD

1 Plumbing Pump Load 30 0.5 15

2 Fire Fighting Load 30 ‐ 10

3 External Lighting Load 30 0.5 15

Total Load of Common Area (B) 40

Total Maximum Demand (A+B) 1206.40

Rounded off 1200

The calculation for water requirement for Muzaffarpur Hub is given below:

Sr. No.

Facilities Estimated No. of Daily Users

Water requirement Litre Per Person/Day

Total Water Requirement (Litres/Day)

1 Open Platfrom 100 15 1500

2 Whole Sale Traders Shop 1500 15 22500

3 Retail Shop 150 15 2250 4 Traders Shop 800 15 12000

5 Admin./ Business/ Knowledge Center 150 40 6000

6 Toilets 25 40 1000

8 Bank Extention Counter 60 15 900

9 Multi Processing Unit ‐ Ls 12000 10 Godown 100 15 1500 11 Pack House Cold 150 40 6000 12 Parking 150 15 2250 14 Canteen 15 40 600 15 Potato Cold Storage 80 40 3200 16 Drivers Rest Area 40 40 1600

17 Rest / Guest House (Extra) 25 130 3250

18 Misc 10% 7655

Total Water Requirement 84205


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22.4 COST ESTIMATES FOR IVCS IN BIHAR

22.4.1 Muzaffarpur IVC

The engineering cost estimates of Muzaffarpur IVC, based on the specifications given earlier, are given below:

Land Development: In Rupees Mn

Facility Muzaffarpur

Hajipur

Darbhanga

Dalsinghsarai

Begusarai

IVC

IVC (Mn $)

Existing Road 10.50 1.73 3.20 6.75 10.13 32.30 0.69

Proposed Road 19.00 16.00 20.72 9.00 13.50 78.22 1.66

Paving 9.25 5.00 6.48 3.00 4.50 28.23 0.60

Water Supply 11.76 5.60 10.36 5.60 8.40 41.72 0.89

Sewerage Line , Waste(Solid/Water) Treatment, and Recycling

16.80 8.00 14.80 8.00 12.00 59.60 1.26

Street Lighting 2.40 1.20 2.22 1.44 2.16 9.42 0.20

Storm water drain and RWH pits

13.50 9.00 11.66 7.50 11.25 52.91 1.12

Boundary wall ( Repair) 2.63 1.20 1.55 1.31 1.97 8.66 0.18

Total Land Development 85.84 47.73 70.98 42.60 63.90 311.0

5 6.60

The above costs have been calculated based on the master plan and drawings prepared by engineering, industrial infrastructure and cold chain experts. The total construction areas required for various existing/proposed facilities in each spoke of the IVC and rates of construction are given below:

Number of Units Facilities Unit Muzaffarp

ur Hajipur

Darbhanga

Dalsinghsarai

Begusarai

Cost/Unit (Rs)

Existing Road Sqm 7000 1152 2131 4500 6750 1500

Proposed Road Sqm 9500 8000 10360 4500 6750 2000

Paving Sqm 18500 10000 12950 6000 9000 500

Water Supply Ha 17 8 15 8 12 700000

SewerageLine , Waste(Solid/Water) Treatment, and Recycling

Ha 17 8 15 8 12 1000000

Street Lighting Nos 200 100 185 120 180 12000

Storm water drain and RWH pits

RM 4500 3000 3885 2500 3750 3000

Boundary wall ( Repair)

RM 1750 800 1036 875 1313 1500

Buildings:

The cost of existing/proposed buildings of Hub and all spokes in Muzaffarpur IVC is given below: In Rupees Mn

Facility Muzaffarpur

Hajipur

Darbhanga

Dalsinghsarai

Begusarai IVC

IVC Mn $

Existing buildings Trading Platform 14.00 1.80 3.33 1.20 1.80 22.13 0.47 Trading Shops 133.00 4.55 8.42 2.63 3.94 152.53 3.24


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Buildings ( Admin. Building, Toilets, canteen, Pump House, Check Post, Bank, Ware Houses, etc

47.25 3.85 7.12 2.80 4.20 65.22 1.38

Sub Total (A) 194.25 10.20 18.87 6.63 9.94 239.88

5.09

Proposed buildings Packhouse‐Cold Chain 6.00 6.00 0.00 0.00 0.00 12.00 0.25 Fruit Pulping plant (2 MT/ Hr)

5.85 0.00 0.00 0.00 0.00 5.85 0.12

Packhouse‐ Ambient 4.50 4.50 4.50 4.50 4.50 22.50 0.48 Trading Platforms 0.00 4.80 4.80 8.40 12.00 30.00 0.64 Warehouse‐5000 MT 14.95 14.95 0.00 14.95 14.95 59.80 1.27 Potato Cold Store‐5000 MT

21.60 0.00 0.00 0.00 0.00 21.60 0.46

Onion store 3.51 0.00 0.00 3.51 3.51 10.53 0.22 Ripening chamber 2.76 2.76 2.76 2.76 2.76 13.80 0.29 Traders Shops 0.00 5.60 11.20 12.80 11.20 40.80 0.87 Guest House 2.70 2.70 1.80 2.70 2.70 12.60 0.27 Business centre 2.70 2.70 2.70 2.25 2.25 12.60 0.27 Knowledge centre 3.60 2.70 2.70 2.70 2.70 14.40 0.31 Utilities 0.00 6.00 3.60 4.00 4.00 17.60 0.37

Sub Total (B) 68.17 52.71 34.06 58.57 60.57 274.0

8 5.82

Total (A+B) 262.42 62.91 52.93 65.20 70.51 513.9

6 10.91

The total construction areas required for various existing/proposed facilities in each spoke of the IVC and rates of construction are given below:

Buildings Rate/Sq. m. (Rs)

Muzaffarpur

Hajipur

Darbhanga

Dalsinghsarai

Begusarai

A. Existing buildings in Sq. m.

Trading Platform 2000 7000 900 1665 600 900

Trading Shops 3500 38000 1300 2405 750 1125

Buildings ( Admin. Building, Toilets, canteen, Pump House, Check Post, Bank, Ware Houses, etc

3500 13500 1100 2035 800 1200

Sub Total (A) 58500 3300 6105 2150 3225

B. Proposed buildings

Packhouse‐Cold Chain 8000 750 750 0 0 0

Fruit Pulping plant (2 MT/ Hr)

6500 900 0 0 0 0

Packhouse‐ Ambient 6000 750 750 750 750 750

Trading Platforms 6000 0 800 800 1400 2000

Warehouse‐5000 MT 6500 2300 2300 0 2300 2300

Potato Cold Store‐5000 MT

8000 2700 0 0 0 0

Onion store 6500 540 0 0 540 540

Ripening chamber LS 550 550 550 550 550

Traders Shops 8000 0 700 1400 1600 1400

Guest House 9000 300 300 200 300 300

Business centre 9000 300 300 300 250 250

Knowledge centre 9000 400 300 300 300 300

Utilities 8000 0 750 450 500 500

Sub Total (B) 9490 7500 4750 8490 8890

Sub Total (A+B) 67990 10800 10855 10640 12115


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The requirements of power and water have been estimated based on industry norms. The estimates have been prepared based on market rates and similar projects costing norms. The break-up of the estimated cost of the miscellaneous fixed assets and utilities at each spoke is provided below:

In Rupees Mn

Facility Muzaffarpur Hajipur Darbhanga Dalsinghsarai Begusarai IVC IVC (Mn $)

DG sets 3.60 2.00 1.00 1.20 1.20 9.00 0.19 Power supply system 22.00 2.50 2.50 2.00 3.00 32.00 0.68 IT system 1.00 0.20 0.20 0.20 0.20 1.80 0.04 Furniture 0.50 0.20 0.20 0.20 0.20 1.30 0.03 Sub Total (5) 27.10 4.90 3.90 3.60 4.60 44.10 0.94

22.4.2 Patna‐Nalanda IVC

The engineering cost estimates of Nalanda IVC, based on the specifications given earlier, are given below:

Land Development:

In Rupees Mn

Facility Patna

Bihar Sharif

Gaya

Nokha

Buxar

Arrah

IVC (Rs Mn)

IVC (Mn $)

Existing Road 5.25 6.30 3.49 3.31 7.20 3.50 29.05 0.62

Proposed Road 24.00

21.00 11.64

11.03 23.00 11.67 102.33 2.17

Paving 7.45 4.50 2.49 2.36 7.25 2.50 26.56 0.56

Water Supply 9.80 10.08 5.59 5.88 8.96 5.60 45.91 0.97 SewerageLine , Waste(Solid/Water) Treatment, and Recycling

14.00 14.40 7.98 8.40 12.80 8.00 65.58

1.39

Street Lighting 2.40 2.10 1.16 1.10 2.40 1.17 10.33 0.22 Storm water drain and RWH pits

16.80 14.40 7.98 7.56 22.50

8.00 77.24 1.64

Boundary wall ( Repair) 2.70 2.63 1.45 1.38 3.45 1.46 13.07 0.28

Total Land Development 82.40

75.41 41.79

41.02 87.56

41.89

370.06 7.85

The above costs have been calculated based on the master plan and drawings prepared by engineering, industrial infrastructure and cold chain experts. The total construction areas required for various existing/proposed facilities in each spoke of the IVC and rates of construction are given below:

Patna Bihar Sharif Gaya Nokha Buxar Arrah Land Development Unit

in Sq. m.

Rate/ Unit (Rs)

Existing Road Sqm 3,500 4,200 2,328 2,205 4,800 2,333 1,500 Proposed Road Sqm 12,000 10,500 5,819 5,513 11,500 5,833 2,000 Paving Sqm 14,900 9,000 4,988 4,725 14,500 5,000 500 Water Supply Ha 14 14 8 8 13 8 700,000 SewerageLine , Waste(Solid/Water) Treatment, and Recycling

Ha 14 14 8 8 13 8 1,000,000


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Street Lighting Nos 200 175 97 92 200 97 12,000 Storm water drain and RWH pits

RM 5,600 4,800 2,660 2,520 7,500 2,667 3,000

Boundary wall ( Repair) RM 1,800 1,750 970 919 2,300 972 1,500

Buildings:

The cost of existing/proposed buildings of Hub and all spokes in Nalanda IVC is given below: In Rupees Mn

Facility Patna Bihar Sharif Gaya Nokha Buxar Arrah IVC IVC Mn $

A. Existing buildings Trading Platform 10.40 6.60 4.70 3.85 3.50 3.67 32.72 0.69 Trading Shops 60.20 17.50 12.47 10.21 15.05 9.72 125.15 2.66 Buildings ( Admin. Building, Bank, Ware Houses, etc 50.75 36.75 26.18 21.44 33.67 20.42 189.21 4.02 Sub Total (A) 121.35 60.85 43.36 35.50 52.22 33.81 347.08 7.37 B. Proposed buildings Packhouse‐ Ambient 4.50 4.50 4.50 4.50 4.50 4.50 27.00 0.57 Trading Platforms 0.00 6.60 9.60 9.60 11.40 9.60 46.80 0.99 Warehouse‐5000 MT 14.95 14.95 14.95 14.95 14.95 14.95 89.70 1.90 Potato Cold Store‐5000 MT 21.60 21.60 8.64 8.64 8.64 8.64 77.76 1.65 Onion store 3.51 3.51 3.51 3.51 3.51 3.51 21.06 0.45 Ripening chamber 2.76 2.76 0.00 0.00 0.00 0.00 5.52 0.12 Traders Shops 0.00 24.00 11.20 11.20 16.00 11.20 73.60 1.56 Guest House 2.70 2.70 1.80 2.70 2.70 2.70 15.30 0.32 Business centre 2.70 2.70 2.70 2.70 2.70 2.70 16.20 0.34 Knowledge centre 3.60 3.60 2.70 3.60 3.60 3.60 20.70 0.44 Utilities 0.00 4.40 3.60 4.40 4.40 4.40 21.20 0.45 Sub Total (B) 56.32 91.32 63.20 65.80 72.40 65.80 414.84 8.80 Total (A+B) 177.67 152.17 106.56 101.30 124.62 99.61 761.92 16.17

The total construction areas required for various existing/proposed buildings/facilities in each spoke of the IVC and rates of construction are given below:

Facility Unit Patna Bihar Sharif Gaya Nokha Buxar Arrah

A. Existing buildings in Sq. m.

Rate/ Unit (Rs)

Trading Platform Sqm. 5200 3300 2351 1925 1750 1833 2000 Trading Shops Sqm. 17200 5000 3563 2917 4300 2778 3500 Buildings ( Admin. Building, Bank, Ware Houses, etc Sqm. 14500 10500 7481 6125 9620 5833 3500 Sub Total (A) 36900 18800 13395 10967 15670 10444 B. Proposed buildings Packhouse‐ Ambient sqm 750 750 750 750 750 750 6000 Trading Platforms sqm 0 1100 1600 1600 1900 1600 6000 Warehouse‐5000 MT sqm 2300 2300 2300 2300 2300 2300 6500 Potato Cold Store‐5000 MT sqm 2700 2700 1080 1080 1080 1080 8000 Onion store sqm 540 540 540 540 540 540 6500 Ripening chamber LS 550 550 0 0 0 0 2760000 Traders Shops sqm 0 3000 1400 1400 2000 1400 8000 Guest House sqm 300 300 200 300 300 300 9000 Business centre sqm 300 300 300 300 300 300 9000 Knowledge centre sqm 400 400 300 400 400 400 9000 Utilities sqm 0 550 450 550 550 550 8000 Sub Total (B) 7840 12490 8920 9220 10120 9220 Total (A+B) 44740 31290 22315 20187 25790 19664


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The requirements of power and water have been estimated based on industry norms. The estimates have been prepared based on market rates and similar projects costing norms.

The breakup of the estimated cost of the miscellaneous fixed assets and utilities at each spoke is provided below: In Rupees Mn

Facility Patna Bihar Sharif Gaya Nokha Buxar Arrah IVC IVC (Mn $)

DG sets 3.60 3.60 2.00 2.00 2.00 2.00 15.20 0.32 Power supply system 8.00 8.00 4.00 4.00 4.00 4.00 32.00 0.68 IT system 1.00 1.00 0.50 0.50 0.50 0.50 4.00 0.08 Furniture 0.50 0.50 0.20 0.20 0.20 0.20 1.80 0.04 Total 13.10 13.10 6.70 6.70 6.70 6.70 53.00 1.12

22.5 MASTER PLANS AND BASIC INFRASTRUCTURE PROPOSALS FOR THE SIX REPRESENTATIVE LOCATION

Muzaffarpur

Musallahpur

Hajipur

Bihar Sharif

Buxar

Dalsingsarai


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23 STAKEHOLDER CONSULTATIONS

During the course of the preparation of the Detailed Project Reports, various stakeholder consultations were carried out in both the states of Maharashtra and Bihar. Consultations with various stakeholders were conducted mainly during the phases II (during detailed field surveys and analysis and consultations were held mainly with farmers, traders, cold store/warehouse/packhouse owners and other intermediaries in the value chains) and III (which mainly consisted of stakeholders’ consultations with food processors, organized retailers, exporters, and others) of the study.

During the field surveys, in-depth interviews and Focus Group Discussions (FGDs) with farmers, traders/wholesalers, cold store/warehouse/packhouse owners etc were held in most of the important locations of the value chains. The stakeholders were asked about the details of the value/supply chains of the identified crops in the regions, trade practices, constraints faced by them as crucial members of the chains, gaps and market dynamics. Through such meetings and discussions, validation of data was also done at all major locations along with identifications of major clusters in the regions.

In case of the consultations with food processing and agri-business industries, exporters, organized retail chains, potential investors, government representatives, etc, interviews, group meetings and brain storming sessions were held in Delhi, Mumbai, Patna and some other major cities in the states of Maharashtra and Bihar.

23.1 IVCS IN BIHAR

As discussed earlier, the focus of the project in the context of Bihar will be modernization/upgradation of erstwhile APMC markets. Many of these markets are still operational with traders/wholesalers, etc operating markets with very wide network of backward linkages with farmers, Post Harvest Contractors (PHCs) etc. who are vital to the functioning of the present value chains. Keeping these in view, the present traders/wholesalers (and even retailers as well) in these markets, traders’ organizations, etc have been given due importance during stakeholders consultations in Bihar and their views, concerns and feedback about the project and its implications have been noted and considered during the designing the implementation framework for the project in Bihar. Apart of that, other stakeholders such as farmers, local processors, cold chain and packhouse owners and industry players have also been consulted for their valuable inputs in the course of the study.

The summary of the stakeholder consultations (per major stakeholder groups) in Bihar are given below:

23.1.1 Farmers

During the detailed field surveys, several interviews and FGDs with farmers were organized with the objective of gathering information on the farming practices, trading practices, constraints, gaps and other details of the value chains of the identified crops for both the regions. Availability and status of post harvest and marketing infrastructure were also assessed through the consultations. Both orchard owners/cultivators and farm


197

owners/cultivators were consulted for understanding the dynamics of fruit, vegetable and grain value chains in the identified regions.

During the consultations, extensive farm and orchard visits were also conducted. The farming technologies used in the state are out-dated and there is a lack of knowledge of modern technologies and their benefits in agriculture. It was learnt from the farmers that agricultural loans are not easily received for the financial institutions and in most of the cases the famers depend on the traders/wholesaler of PHCs for informal credit. Moreover, farm proximate infrastructures are almost negligible and hence there is high wastages and low storage capacities in the state.

The Post Harvest Contractors (PHCs) were also consulted at different stages of the study with the objective of understanding their role in the value chain along with their modes of operations. Their relationship with the farmers and traders were also studied.

The major concerns which came out of the consultations with farmers and PHCs are as follows:

Lack of quality inputs such as seeds, fertilizers, pesticides, equipments, etc affects the productivity and the quality of the produce.

Absence/negligible presence of farm farm-proximate/post harvest and proper storage infrastructure which leads to higher wastages and distress sales

Lack of access to formal credit leads to dependency on traders/wholesalers/cold store owners which reduces the profit margin of the farmers in many cases due to high interest rates (many times which are hidden as lower than market rates offered to farmers, etc.)

Asymmetry in market intelligence about price and demand of produce in the markets which does not allow the farmers/PHCs to gain on temporal/locational arbitrage.

23.1.2 Traders/Wholesalers/Local processors/Cold Chain Owners

Several FGDs (mostly with traders/wholesalers) and interviews with traders/wholesalers/local processors/cold chain owners were conducted in different markets in the identified districts of Bihar. The consultations were helpful in capturing the details of their role, trade practices and other aspects of the value chains. As mentioned, the present traders/wholesalers operating out of the erstwhile APMC market yards are a very important group of stakeholders and hence the AIDP project was explained to them in details to get their views, feedback and concerns regarding the same. One of the main issues which came out of the discussions is their concern about the continuation of their rights of operations and shop ownerships in the markets after the development under the project. The potential role of the traders/wholesalers in SPV formation was also discussed. Other major concerns of this group of stakeholders include lack of scientific storage facilities for perishables which reduces the holding period and hence the traders/wholesalers are unable to capitalize on the time arbitrage of the produces. Moreover, although they are willing to invest in modern post-harvest infrastructure with the support of government however, the knowledge of modern technologies available for the same is absent. The traders/wholesalers are also concerned about the common services and maintenance (such as garbage removal, etc.) of the market yards in Bihar as after the repeal of APMC Act in Bihar, such services have not been provided by the APMC/state government. The other issues flagged by the traders/wholesalers are security concerns and difficulty in truck


198

movement to the market yards due to congestion in the city roads (most of the erstwhile APMC markets are situated within the city limits).

The cold store owners have very limited knowledge of the modern cold technologies. The cold store operations/technologies are also not efficient which increases the cost significantly. The details have been discussed in the value chain chapters. Capacity building measures are required in this regard.

23.1.3 Industry Players Several food processing and agri-business industry players, exporters and organized retail chains were interviewed in the course of the project. Their perceptions about business opportunities and experiences of doing business in Bihar were discussed in details. The project concept was placed with them and their feedbacks were noted. The major feedback received from the industry players are as follows:

The market infrastructure should be developed in the PPP mode for better efficiency

The land transfer issue should be carefully considered as it is sensitive in nature

Since the local traders may lack technical expertise in the managing the market professionally, role of a technical partner should be considered

Time bound subsidy and grant announcement is desirable for private sector.

Clarity on the disbursement of loan with state government guarantee is desirable

23.1.4 Some Major Stakeholder Consultations in Bihar:

Stakeholder’s Consultation Meet at Patna

A stakeholder consultation meet for AIDP was organized by IL&FS Clusters on 22nd December, 2009 at Patna. The participants of the meet included the following:

Director, Horticulture, Department of Agriculture, Government of Bihar

Director, Bihar Agriculture Management & Training Institute (BAMETI)

IL&FS Clusters representatives

Representatives of Traders Association from APMC markets

Food Processors

President, The Confederation of Indian Industry (CII)

Farmers groups

The meet started with an introduction of the project by Director, Horticulture and he presented the background of the stakeholders’ meeting as an important step in moving forward in modernization of the APMC markets. He also explained the three probable models of implementation of the project:

1) Design Build Operate and Transfer (DBOT) Model where a large private developer enters into a contract with the state government by which the mandi is transferred to it for an mutually agreed period of 25-30 years. The facilities would be built and operated by the private developer and it would transfer it back to the government after the contract period.


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2) A company would be formed by state government with traders/wholesalers as equity partners for developing the market as well as its operation and management

3) Government would develop the markets by making the capital investments. However, the O&M would be taken care of by the traders’ associations present in the markets.

The pros and cons of each model were discussed and feedbacks were received from each of the stakeholder groups. During the course of the discussion several concerns and views came up. Continuation of the rights of the traders/wholesalers to operate from the market was discussed. Ownership issues of their shops were also discussed. Traders/Wholesalers were also concerned about the modalities of formation of the SPV, their capacity to invest, fate of temporary traders, etc. The feedback from the industry partners were mainly about careful handling of land transfer issues, need of technical partners, etc.

Stakeholder’s Meeting at Musallahpur, Patna

A stakeholder consultation was conducted at Musallahpur APMC Market, Patna on 21st January, 2010 for AIDP. The participants of the meet included the following:

Representatives of Asian Development Bank (ADB)

Representatives of the State Government

Farmers

Traders from different Markets

Representatives of Traders’ Associations from APMC markets

IL&FS Clusters representatives

AIDP was discussed with the participants with a focus on the following:

The existing APMC markets would be the locations for the Integrated Value Chains (IVCs)

There will be a mother SPV at state level and SPV for each IVC.

State-promoted SPV will be responsible for the renovation, upgrading and construction works of the marketing and support infrastructure along the value chain.

GoB will retain 51% of the SPV shares and 49% will be bid out to private sector players which would include the existing traders as partners. This would be one of the bidding parameters. The share of GoB will be diluted over a period of time

The above points were well received by the stakeholders and a positive response was witnessed.

23.2 BIHAR: PERSONS CONTACTED

The potential investors who have been contacted/ consulted during the AIDP study are given below:

• Mr. Bhadri Narayan, General Secretary, Fruit Merchant Association, Musallapur Market, Patna

• President, Potato Traders Association, Mussllahpur Market, Patna

• Sri. S Balaji, Managing Director


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GreenPort Corporation Pvt. Ltd.

• Mr. Munna Khan, Fruit Merchant Association, Hajipur Market

• Mr. Sanjay Nandrajog, Chief Executive FieldFresh Foods Pvt. Ltd.

• Mr. Mayank Jalan, Managing Director Keventer Agro Ltd.

• Mr. Vinit Kumar, Chairman and Mr. Shyam Mahale Temptation Foods Ltd.

• Director Bengal Salarpuria Eden Infrastructure Development Company (P) Limited

• Mr. Sunil Kumar Pandey, Rice Miller, Sasaram

• Mr. A. Kumar Rice Miller, Sasaram

• Mr. Manish Kumar Rice Miller, Sasaram

Other Contacts

Apart from the above list, the organizations with whom IL&FS Clusters have been in touch for other projects such as Modern Terminal Market, Mega Food Park, etc and who may also considered as potential investors for the AIDP projects in both the states are:

• Mr. A. Srinivasa Ramanujam, AVP - Operations Adani Agrifresh Ltd.

• Mr. B.B. Pattanaik, Chairman & Managing Director Central Warehousing Corporation

• Mr. M C Goyal, Chief Executive Officer Deepak Fertilisers & Petrochemicals Corp. Ltd.

• Mr. Kishore Biyani, Chairman Future Group

• Mr. Mayank Jalan, Managing Director Keventer Agro Ltd.

• Sri Arvind Jhamb, CEO Ruchi Infrastructure Ltd

• Mr. Vinit Kumar, Chairman Temptation Foods Ltd.

• Mr. Arun Uppal, Head – New Businesses Hariyali Kisaan Bazaar

• Mr. Mike Cockrell, Chief Merchandising Officer Bharti Wal-Mart Pvt. Ltd.

• Mr. Thomas Varghese, CEO Aditya Birla Centre

• Mr. R. Sreeram, Vice President-Manufacturing Dabur India Ltd.

• Mr. Shrijeet Mishra, Hindustan Unilever Ltd.


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Hindustan Unilever House • Mr. S Sivakumar, Chief Executive-Agri Businesses

ITC Limited • Mr. Sumantra Banerjee, President

Spencer’s Retail Ltd • Mr. Anil K Choudhary, Managing Director & CEO

National Bulk Handling Corporation • Mr. Sanjeev Asthana, President & CE, Agri Business & Food Supply Chain

Reliance Industries Limited • Dr. J. S. Yadav

Premium Farm Fresh Produce Ltd. • Sri S K Jain

LMJ International Limited • Mr. Vimal Mody, General Manager

Usha Breco Realty Pvt. Ltd.

• Sri Sushil Kumar Agarwal, Director Haldiram’s Mega Food Parks Private Limited

• Sri Raja Mehta Indiabulls Real Estate Limited

• Mr. Vipin Jain, Vice President (Finance) Negolice India Ltd

• Mr. Makarand Khanolkar, Vice President Unity Infra Projects Limited

• Mr. Avinash Rangnekar, Ace Agro Industries Private Limited

• Mr. Malamma B Bidari, Chairman & Managing Director FOREMMS Industries Limited

• Director Bengal Salarpuria Eden Infrastructure Development Company (P) Limited

• Pantaloon Retail (India) Limited

• Ruchi Soya Industries Limited


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24 ASSESSMENT OF MARKET DEMAND

India is the world 4th largest economy on purchasing power parity basis. India is also the second fastest growing major economy in the world, with a GDP growth rate of 6.7 percent in 2008-09. India’s economic growth has accelerated significantly over the past two decades. Real average household disposable income has almost doubled since 1985. With rising income levels, household consumption has increased manifold with the emergence of a re-defined middle class. The country is on the brink of becoming an economic powerhouse and it is gaining huge attention from global players as an excellent investment destination.

Indians with an ability to spend over US$ 30, 000 per annum on PPP basis account for around 3 percent of the country’s total population. With a population base of 1.07 billion, this segment amounts to 20 million people. High economic growth has led to increased disposable income for the booming Indian middle class, which is estimated to reach a size of 582 million from its current size of 50 million by 20151. Accordingly, the disposable incomes are set to rise at an average rate of 8.5 percent by 2015.2

Maharashtra is the largest economy in the country with a high per capita income of US $ 6213. It is also among the most industrialized states, which is coupled with availability of skilled manpower, enabling infrastructure and a strong institutional framework. Maharashtra is the second most populous state in the country with a population of 96.9 million4. It is also the second most urbanized state in the country, with 42 per cent of the people living in urban areas.

Bihar, on the other hand, has a per capita income of US $ 1395, which is much below the national average of US $512. The total population of Bihar is 82.88 million. Unregistered units dominate the industrial sector of the state and the major industries are Tea and dairy.

24.1 ASSESSMENT OF FOOD MARKET IN INDIA

The size of the Global Food Industry is estimated at around US $3.6 trillion and India accounts for less than 1.5 percent of the international food trade. India currently produces about 50 million MT of fruits, which is about 9 percent of the world’s total production of fruits and 90 million MT of vegetables, which accounts for 11 percent of the world’s total vegetable production. Despite its large size, only 6 percent of the processed foods are traded across India’s borders as compared to 16 percent of major bulk commodities. Hence there is huge scope for export of value added food products in the international market.

1 NACER Research 2 Ernst & Young Research, 2008 3 Data: 2004‐05 4 2001 census 5 IBEF


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The Indian food market in 2007 has been estimated at around US$ 200 billion6 and is slated to reach US$ 310 billion7 in 2015. Food products are the single largest component of household consumption expenditure. Food and beverages (including tobacco) accounts for one third of the household expenditure. A survey done by NCAER reveals that food and beverages accounts for 35 percent and 32 percent of household expenditure in mega cities and boomtowns. It is estimated that by 2025, food and beverages segment will still be the biggest category in terms of consumer spends, though its share would drop from existing 35-40% to 25%. Food and Grocery contributes to around 41 percent of private consumption expenditure and about 74 percent of total retail revenue. Broad category-wise expenditure for each category of cities is shown in the table below.

It is evident from above that more than one third of the monthly household expenditure is on Food and beverages segment. There is also an increasing shift from price consideration to quality, branded and hygienic products. The number of working women, as a percentage of the total female population, has risen from 15 percent in 1991 to close to 25 percent in 2005. This has resulted in growing disposable income, which in turn, leads to increasing spend on convenience food, value added food products and grocery items.

24.2 GROWTH DRIVERS OF VALUE ADDED FOOD PRODUCTS

India possesses the advantage of having a large young population. It is estimated that around 35 percent of India’s population is under 14 years of age and more than 50 percent of the population is estimated to constitute the working age group. The large population of working age group forms a wide consumer base. Rapidly changing demographic profiles and increased disposable income are changing the face of Indian consumers. The swelling middle class is redefining the consuming pattern with a shift towards branded and value added food products. With the country’s income pyramid changing rapidly, a definite shift is observed from saving to spending attitude. Discretionary spending has seen 16 percent rise for the urban upper and middle classes and the number of high income households has grown by 20 percent year-on-

6 Food Processing: Market and opportunities by KPMG 7 McKinsey & Company

Source: NCAER Research, 2008


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year since 1995-96.8 The self employed segment of the population has also grown significantly.

Growth drivers for emerging markets of value added food products are summarized below:

Food and grocery dominates total retail spend: While rural consumers spend around 53%9 of their total consumption expenditure on food, urban India spends 40% of their retail spend on food items thus offering huge opportunity for value added food products.

Higher disposable income: High economic growth has led to increased disposable income for the Indian middle class, which is switching over to healthy and value added food products. It is estimated that disposable income is set to rise at an average rate of 8.5 % by 201510. Also, the middle class is estimated to reach a size of 582 million from its current size of 50 million by 201511.

Shift in demographic profile: The median age of Indian population is 24 years and approximately 65% of Indian population is below 35 years of age. The large population of working age group forms a wider consumer base for food products.

Emergence of organized food retail: It is estimated that the total food and grocery retail space will grow at a CAGR of 6% over 2006-2011, with the organized share likely to increase from less than 1% currently to 6-6.5%12. This will translate into more business opportunity for value added food products.

24.3 ASSESSMENT OF FOOD RETAIL INDUSTRY

Traditionally, the Indian retail sector has been dominated by large number of small and medium sized retailers, who account for more than 95 percent of the total retail business. In categories like food & grocery, fresh fruits and vegetables, their share is as high as 98 percent. Over twelve million small and medium retail outlets exist in India, the highest across the world. More than eighty percent of them are run as family owned businesses and the exemplary mom-and-pop retail outlets constitute a major part of country’s retail store formats. Modern retailing in India is evolving rapidly, with consumer spending growing by unprecedented rates and with increasing number of domestic and global companies investing in this sector.

8 Ernst & Young Research, 2008 9 NSS 62nd round 10 E&Y Research, 2008 11 NCAER Research 12 Retail Edelweiss report, 2008


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The size of Indian retail Industry was estimated at US$ 385 billion13 in 2007–08. In 2006-07, the retail market size was US$ 337.3 billion. In 2007, organized retail stood at US$ 16.5 billion, implying a share of 4% of the total retail revenue. Organized retail revenues are expected to increase from US$ 12.9 billion in 2005-06 to more than US$ 43.8 billion by 2010-11. Today, top eight cities (four metros, Pune, Ahmedabad, Bangalore and Hyderabad) together account for almost 80 percent of the total organized retail.

Food retail, dominated by around 5 million retail outlets in India, is currently estimated at US$ 160 billion. Within this, organized food retail grew from US$ 391 million in 2002 to US$ 1624 million in 2007 with a CAGR of about 33 percent.

India tops the AT Kearney's annual Global Retail Development Index (GRDI) for the third consecutive year, maintaining its position as the most attractive market for retail investment. Furthermore, a report by Price Waterhouse Coopers foresees India and China to continue as the top sourcing hubs in retail and consumer sector in the coming years.

Driven by the huge potential in the sector a number of large corporations, both domestic and global, have forayed in to the market recently. It includes Reliance, AV Birla, RPG, Bharti-Walmart, Future Group, Big Apple, Godrej, Heritage and Wadhan Group (Spinach) to name a few. A few more global players like TESCO, Carrefour and Landmark are also expected to enter in the market.

The growth in organized retail sector has been spearheaded by the food & beverages segment and they are also likely to see a higher growth rate in future. The figure below depicts the responses of retailers about the fastest growing retail segments in India. This clearly shows that food and grocery is by far the

13 IBEF

311.7

337.3

460.6

12.9

16.5

43.8

0 50 100 150 200 250 300 350 400 450 500

2005-06

2006-07

2010-11

Org. RetailTotal Retail

Source: Data Monitor, 2007, Sales in US $ Billion, Exchange Rate: US $ 1: INR 41

Source: KPMG


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Source: NSSO 5th round, KPMG and Cygnus Research

fastest growing segment in the Indian retail sector.

India has one of the largest numbers of retail outlets in the world.

Of the 12 million retail outlets, nearly 5 million sell food and related products. Nearly two third of the food retail outlets in India are located in rural areas, which is also being reflected in the graph below:

Figure: Category wise Distribution of Retail Outlets

The retail sector in India is primarily characterized by different SKUs rather than different retail formats in operation. It is envisaged that modern retail will adapt and absorb some of the traditional retail formats in subsequent years. Also, with the rural retail constituting the largest share of total retail revenues, the existing players are now looking at rural markets to tap the opportunity. A few players like ITC Limited, Godrej and DSCL have already started the venture under the brand name of Choupal Sagaar, Aadhaar and Hariyali Kisaan Bazaar respectively.

24.4 MAJOR PLAYERS IN ORGANIZED FOOD AND GROCERY SEGMENT

Major players in organized food and grocery segment are Pantaloon Retail, Reliance Retail, RPG, Aditya Birla Retail etc. None of the organized retailers have presence in Bihar. However, Maharashtra is one of the leading states in terms of growth of retail space. Besides Mumbai, organized retailers are also present in tier I and tier II cities of Maharashtra.

The table below shows the food and grocery sales (2008) as well as no of stores of major players in organized retail segment:

Sl No. Name of retailer Food and grocery sales ($ million) No of stores 1. Pantaloon Retail 1593 456 2. Reliance Retail 432 688 3. RPG 427 420 4. Aditya Birla Retail 251 645 5. Dairy Farm 100 67

Source: IGD, excludes cash and carry formats

A brief profile of the major retailers is given below:

• Pantaloon Retail (India) Limited: Pantaloon has established strong presence across multiple consumption categories in a bid to capture maximum consumer wallet share. It has widened its format offerings from a single format to over 15 formats, which captures almost 75% of the consumption basket. Food Bazar, Big Bazar and KB’s Fairprice are the various banners under which Pantaloon Retail operates in the food and grocery segment. Out of these three, Food Bazar mainly caters to fruit and vegetable, staples, dairy


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products etc. Pantaloon often combines its Food Bazaar (food supermarket) and Big Bazaar (Grocery and other items) formats to create a hypermarket format.

Name of retailer Area in sqm No of stores Food Bazar 102,752 152 Big Bazar 380,695 149 KB’s Fairprice 17,980 155 Source: IGD

• Reliance Retail: Reliance Retail is part of Reliance Industries Limited, which is one of the India’s largest conglomerates. It ventured into organized retailing in November 2006. Reliance Fresh (Supermarket) and Reliance Mart (Hypermarket) are the two banners under which reliance operates in retailing business. The company invested heavily to build a nationwide network of procurement centers, cold storages and distribution hubs to improve supply chain efficiency of perishables. In 2008, 678 stores of Reliance Fresh and 10 stores of Reliance Mart were operating in the country.

• RPG: Spencer’s (Supermarket) and Spencer’s Hyper (Hypermarket) are the two formats of RPG group involved into food and grocery retailing. Around 60% items in a RPG store comprises of fresh and dry groceries. Around 370 stores of Spencer’s and 50 stores of Spencer’s Hyper are functional in the country.

• Aditya Birla retail: It is part of Aditya Birla group. The company forayed into retailing business in 2006 via the acquisition of Trinethra Super Retail. more. for you and more. MEGASTORES are the two banners. more. for you is a superstore format and the other one is hypermarket format. Both of them together account for presence of around 645 stores in the country. Out of this, 639 stores are in superstore format. The company focuses on private labels with presence of around 350 labels in food and non-food category.

24.5 ASSESSMENT OF MAJOR CONSUMPTION MARKETS

As mentioned earlier, the major consumption markets for fruits and vegetables grown in Bihar are Patna, neighbouring states of Jharkhand, Orissa and West Bengal. For certain fruit crops such as Litchi and Mango, the state has established linkages with major metros like New Delhi, Mumbai, Hyderabad, Bangalore, Lucknow and Nagpur.

In case of Maharashtra, Mumbai itself is a huge consumption market for fresh fruits and vegetables. The table below shows the crop wise major consumption markets of fruits and vegetables grown in Maharashtra:

Sl No Fruits/Vegetables Major consumption markets 1. Pomegranate Delhi, Kolkata, Jaipur 2. Grapes Delhi, Kolkata, Hyderabad 3. Banana Delhi, Chandigarh, Amritsar, Lucknow 4. Tomato Delhi, Kolkata, Surat, Ahmedabad 5. Sweet lime Delhi, Jaipur 6 Kesar mango Delhi Orange Delhi, Kolkata, Bangalore Lemon Delhi


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As evident from table above, Delhi, Kolkata and Mumbai are the major consumption markets for fresh fruit and vegetables grown in Maharashtra; however, in case of Bihar, Delhi, Kolkata and Patna are the major consumption markets.

Azadpur APMC, which is located in Delhi, is one of the largest fresh produce wholesale markets in South East Asia Region. It is also an important distribution hub for various markets of North India such as Chandigarh, Jaipur and Jalandhar etc. It witnesses huge arrivals from various parts of country on a daily basis. Azadpur Mandi is spread over in an area of around 40 hectares, which includes both fruit and vegetable market yards.

A detailed analysis of the above mentioned cities (Delhi, Kolkata, Mumbai and Patna) have been undertaken to assess the consumer demand. Various parameters such as demography, income and expenditure pattern, penetration of organized retail, economic indices of respective cities have been taken into account to understand the market demand of food products.

24.5.1 Delhi With a population base of 19.73 million and median age of 22.8 years, Delhi has a young population with a high propensity to consume. Around 15% of the female population is working, which means a higher number of double income families, which have higher income and propensity to spend.

Demography ‐ Delhi Population 19.73 million Median age 22.8 years Per cent of working women 14.7 %

Per capita income of Delhi has been estimated to be Rs 43,155. Around 54% of the households generate income from monthly salaries and the average HH income is Rs 183,000, which is higher than any other metros except Mumbai.

Distribution of Income in Delhi Per Capita Income Rs 43155 Per cent of salaried household (HH) 53.8 % Average HH income from salary in Rs ‘000 per annum 183 Per cent of business and professional HH 32.3 % Average HH income from business in Rs ‘000 per annum 299 Source: How India Earns, Spends and Saves, The Max New York Life‐ NCAER India Financial Protection Survey, 2007 (Estimated data for 2004‐05)

As there is no detailed data on the market size (especially of the food and beverages segment) of different cities, hence market size has been estimated using data from different sources. In terms of growth of organized retail, Delhi has an estimated retail space of 6.5 million sq ft which shows that retail boom has come up in big way in Delhi among all the Indian cities.

The average monthly per capita expenditure (MPCE) in Delhi is Rs 1803.8614. Out of this, Rs 673.73 is spent on food items i.e. around 37% of the consumer spending is on food products and around 6% is spent on perishables.

Estimation of Market size of food products in Delhi Estimated retail space in million Sq ft15 6.5 million sq ft

14 NSS report (2006‐07)


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Unit retail space (Sq Ft/HH) 4 Annual expenditure on food in Rs billion Rs 159.5 billion Monthly per capita expenditure on food in Rs Rs 673.73

The table below shows the distribution of MPCE on broad category of food items.

Per cent distribution of MPCE on Food items in Urban Delhi Cereals 7% Milk & milk products 10% Vegetables 5% Fresh fruits 1% Other food items 14% Total 37% Source: NSS report (2006‐07)

For the purpose of estimating the market size of food in Delhi, estimation of the total annual expenditure on food items was done using data on per capita expenditures on food items. It was found that NCR16’s annual expenditure on food is about Rs. 159.5 billion. As 6 % of monthly per capita consumption expenditure (MPCE) is spent on fruits and vegetables, the estimated annual expenditure on fruits and vegetables in Delhi comes out to Rs 9.6 billion. This clearly shows that Delhi is a large consumer market of food products.

24.5.2 Mumbai

The total population of Mumbai is 19.23 million and the median age of population is 25.7 years, which clearly shows that city has a relatively young population that falls in the working age group.

Demography ‐ Mumbai Population 19.23 million Median age 25.7 years Per cent of working women 10.9 %

Per capita income of Mumbai is Rs 40,768 and the monthly per capita consumption expenditure of urban Maharashtra is Rs 1673.48. Out of this, Rs 587.95 is spent on food items, which constitutes 35% of MPCE.

Distribution of Income in Mumbai Per Capita Income Rs 40,768 Per cent of salaried household (HH) 57.8% Average HH income from salary in Rs ‘000 per annum 205 Per cent of business and professional HH 31.7% Average HH income from business in Rs ‘000 / annum 204 Source: How India Earns, Spends and Saves, The Max New York Life‐ NCAER India Financial Protection Survey, 2007 (Estimated data for 2004‐05)

Mumbai is leading the retail revolution in the country with an estimated retail space of 6.6 million sq ft. All the major food and grocery retailers of the country such as Pantaloon, Reliance and AV Birla are present in the city. The annual expenditure on food is around Rs 135.6 billion.

15 Images retail 2005 16 NCR means Delhi, Noida, Gaziabad, Gurgaon and Faridabad


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Estimation of Market size of food products in Mumbai Estimated retail space in million Sq ft 6.6 million sq ft Unit retail space (Sq Ft/HH) 1.4 Annual expenditure on food in Rs billion Rs 135.6 billion Monthly per capita expenditure on food in urban Maharashtra Rs 587.95 Source: DES, Govt of Maharashtra

Out of 35% of MPCE spent on food products, cereals and milk products constitute 13% of the total consumer spending. Fresh fruits and vegetables constitute around 6% of MPCE, which is almost similar to Delhi.

Per cent distribution of MPCE on Food items in Urban Maharashtra Cereals 7% Milk & milk products 6% Vegetables 4% Fresh fruits 2% Other items 16.% Total 35%

The estimated annual expenditure on fresh fruits and vegetables in Mumbai comes to around Rs 8.1 billion. In comparison to Delhi, Mumbai is a smaller market for perishables.

24.5.3 Kolkata Kolkata is a major market of eastern India and a large market for fruits and vegetables of Bihar. The total population of the city is 13.1 million. Around 10.6% of the female population is working and hence contribute in household income.

Demography ‐ Kolkata Population 13.1million Per cent of working women 10.6 %

Per capita income of urban west Bengal has been estimated to be Rs 27,868 and the monthly per capita consumption expenditure of urban West Bengal is Rs 1371.26. Out of this, Rs 551.40 is spent on food items, which constitutes 40% of MPCE.

Distribution of Income in Kolkata Per Capita Income Rs 27,868 Per cent of salaried household (HH) 37.7 % Average HH income from salary in Rs ‘000 per annum 135 Per cent of business and professional HH 41.6 % Average HH income from business in Rs ‘000 / annum 146

As per images retail report, Kolkata has an estimated retail space of 0.7 million sq ft. It is much less in comparison to Delhi and Mumbai.

Estimation of Market size of food products in Kolkata Estimated retail space in million Sq ft 0.7 million sq ft Unit retail space (Sq Ft/HH) 0.4 Annual expenditure on food in Rs billion Rs 86.6 billion Monthly per capita expenditure on food in Rs Rs 551.40

Fresh fruits and vegetables constitute around 7% of MPCE.

Per cent distribution of MPCE on Food items in Urban West Bengal Cereals 10% Milk & milk products 4% Vegetables 6% Fresh fruits 1% Other items 19% Total 40%


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The annual expenditure on food in Kolkata is around Rs 86.6 billion. Hence the annual expenditure on fresh fruits and vegetables in Kolkata comes to around Rs 6 billion. Though the market size is relatively less in comparison to Mumbai and Delhi markets, still if offers huge scope for fruits and vegetables grown in Bihar and Maharashtra.

24.5.4 Patna Patna is the largest town and capital of Bihar. Total population of the district is 47.18 Lakh as per 2001 census with an urban population of approximately 30 lakhs. Patna, being the capital of the state and the largest town, offers a big market for fresh vegetable and fruits. Per capita income of Patna is Rs 6958, which is highest in the state. As per NSS report 2006-07, monthly per capita expenditure of urban areas in Bihar is Rs 864.96, which is lowest in the country. Out of this, Rs 435.56 is spent on food items, which constitutes 50% of the total consumer spending. The share of vegetables and fruits in total consumer expenditure of urban consumers of Bihar is around 7.8%.

On the basis of above facts and figures, the estimated annual market size for fresh fruits and vegetables in Patna (urban) is estimated to be 2.5 Lakh MT.

It can be assumed based on the overall assessment here that the market size of fruits and vegetables, as also milk, milk products and cereals, in the metro cities, is a growing one and has scope for greater absobtion from organised supply centres. Other large metros and tier two metro cities are also markets ripe for tapping, given the needed organisation at the supply side.


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25.3 OTHER IMPACT ASSESSMENTS

The following impact assessment reports are annexed:

Environmental assessment and review framework

Social and poverty assessment and mitigation

Poverty and Social Assessment

Public consultation and participation framework

Resettlement framework with entitlement matrix


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26 CAPACITY BUILDING

Capacity building inputs are envisaged to be an integral part of the implementation strategy for the Agri-business Infrastructure Development Investment Program in Bihar. As mentioned in the approach, an assessment of the need for building capacity and raising awareness levels regarding the issues involved were woven into the analysis stage at the grassroots and implementation levels. As a result, the details regarding these aspects emerge from this assessment and have been developed to the appropriate scale, keeping in mind their viability and appropriateness to the local context.

26.1 CAPACITY BUILDING: NEEDS ASSESSMENT

26.2 FARM/PRODUCTION CLUSTER LEVEL

The need for building existing capacities at farm level, was brought out in the early stages of the value chain analysis of focus crops in the identified regions: Muzaffarpur region and Patna-Nalanda region.

The weaknesses in the system included lack of proper aggregation, absence of efficient and scientific systems of farming. Small holding sizes, traditional farming practises and lack of field level organisation were among the reasons identified for the weaknesses.

In addition, several issues pertaining to lack of awareness at the level of the farm and production cluster, lack of farmer-organisation, no interventions to build soft/technical skills, limited or no exposure to new and efficient techniques and systems and other good practices etc.. The social assessment has flagged the problems faced by women farmers in particular.

Given the interventions envisaged under AIDP, these gaps are required to be addressed for the successful implementation of the projects.

The focus of this level of capacity building will address the following aspects:

Farmer organisation: This is the first step towards facilitating extension services at farm level; this may be undertaken by strengthening existing channels and putting into place alternate services. Capacity building of farmers will be the necessary first step for these and further interventions. Formation of farmer groups as Self Help Groups (including micro-finance activities) with special women’s groups is proposed. These groups will be further linked to various institutions and systems for further development and support activities. Group Leaders will be provided special trainings to become Trainers themselves, to ensure continuity and scaling up the activities, over the years. Farmer Groups may, over the years, become federated along the value chain to form producer companies.

Awareness building: Once the organisation is in place at the farmer level, awareness building activities will be undertaken to address all involved groups: farmers, functionaries from concerned government departments (state agriculture department) and institutions, traders, elected representatives (at PRI/ULB level). This will include


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subjects like understanding the Integrated Value Chain approach, good farm-level practises, the Agri-infrastructure Development Project, institutional linkages and available schemes, aspects pertaining to environment, economics, and social issues including gender sensitisation. Exposure visits to good examples by selected groups and further dissemination of learnings will also be undertaken.

Resource strengthening: Identification of relevant resources for each production cluster and linking them is also included

These proposed interventions are detailed in the following sub-section.

Further to the ones proposed, other interventions may also be included as the project progresses:

Input and farm-machinery modernisation

Scientific management of resources (inputs)

Farm mechanisation as a process to link to the value chain to ensure improved productivity and value realisation. This will lead to increased farm-level incomes and also help farmers become more responsive to market needs

26.2.1 Capacity Building at Farm/Production cluster‐level

It is envisaged that this initiative, in its 4-5 years of running, will cover about 18,000 farmers (including focusing on women farmers as well), through the formation and support of Self Help Groups to spread awareness, build capacity and disseminate information.

The number of farmers to be covered is based on an estimation that takes into account the following:

Average land holding size in the project districts

Reported productivity per unit of land (also, based on focus crops)

Designed capacity for the Integrated value chains and the associated hub and spokes

Taking these into account, it was assessed that during the project implementation period (4-5 yrs) , about 18,000 farmers would be targeted to be covered for capacity building inputs.

Based on this assessment, workable/viable sizes of SHGs and farmer groups have been estimated. It is also envisaged that in time and with experience, some of these groups would become more professional and may transform into producer companies or cooperatives.

The train-the-trainer approach has also been included with the trainer being selected from within the farmer groups to ensure greater outreach, local inclusion and the training exercise being embedded in the area for continuity beyond the project implementation period

The outline is described below, along with envisaged costs.

Training Input Focus Group Details Costs Rs '000

Farmers, organised into farmer groups (SHGs)

1o spokes and 2 Hubs: 12 x 15 groups x 100 persons per grp = 18000 farmers

4800 1 Formation of Farmer Groups

[Including Spl Women SHGs]

180 groups in 6 months across both value chains

2 Farmer Group Training

Group Leaders: 2 leaders/group

2leaders x 180 groups= 360 persons 20 persons per session= 18 tr sessions Rs2000/day x 5 dys x 360 persons

3600


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One more refresher training of 2 days 1800

3 Training of Trainers Key persons from NGOs/Govt)

10 persons for 2 wks at NIRD/IRMA 1000

Awareness Program for dissemination of information regarding the project and good practises (across 3 yrs)

Use of multimedia awareness in first 6 months

‐ About Project objectives ‐Value chain approach ‐ Agri‐bus supply chains ‐Env issues

‐ Social/gender sensitisation

4

‐ Inst linkages, govt schemes, MFIs

5o officers chosen from project areas only, across the state (from PRIs, ULBs, dist offices state agri dept) Representatives from Farmer associations, NGOs, cooperatives Traders awareness

[Coordinate with dissemination of information from exposure visits‐ see next point]

1000

5 Exposure visits by identified stakeholder groups

Selected farmers and officers from applicable cluster

30 farmers +10 officers 4 locations overseas over 3 yrs

7000

6 Resource strengthening through trading of experts/practitioners

Across clusters, as applicable

As req

TOTAL (in Rs mn) 19.2

26.3 CAPACITY BUILDING AT HUB‐SPOKE LEVEL

Even as the proposed capacity building initiative seeks to address farm level capacity building, it also includes another essential facet: technical training at the level of the proposed facilities. Indeed, without the appropriate capacity building inputs the program will not be able to realise its objectives.

26.3.1 Capacity Building at hub and spoke‐level Thorough training support, of a more technical nature, is envisaged at the facility level to handle the produce passing through and adhere to the strict quality standards demanded by the process, according to each produce type.

The facility level training will start with preparation of training modules specific to each product type. The training will cater to different target groups, focussing more on skills development and exposure to working with new technologies, including material handling systems. It is envisaged that workers at the facilities will not only be trained once but will require to be trained periodically to keep up quality standards, update technologies, remain current and efficient.

This applies more specifically to all players along the cold chain as it has highly specialised needs and standards, to maintain and deliver quality. Variations by product type will b addressed through the specialised and different training modules proposed.

The following table captures the details of the training support by product category, over a 3-4yr period. It is assumed that the facilities will become functional in the second year.


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All Focus Crops No of Days of Training

For one std spoke (daily) No of facilities No of days

Frequency of training (3 yr period) Costs (based on 2k per person per day per

training*)

Days of training

Litchi 50 workers, 4 supervisors, 1 manager per facility

2 One full training followed by annual refresher/on demand

1

5 55 550 3

3300000

30 Mango 30 workers, 4 supervisors, 1 manager per

facility 5 One full training followed by annual

refresher/on demand 2

5 35 875 3

5250000

75 Banana 10 workers, 2 supervisors, 1 manager per

facility 4 One full training followed by annual

refresher 3

7 13 364 3

2184000

84 Potato 3 persons, 1 supervisor, 1 manager 1 One full training 4

3 5 15 1

30000

3 Onion 3 persons, 1 supervisor, 1 manager Aggregation pt 4

per spoke, 3 spokes= 12

One full training 5

2 5 120 1

240000

6 Training days 396000 198 Module prep 2000000

TOTAL (in Rs mn) 13.40


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26.4 CAPACITY BUILDING COVERAGE

Through the formed farmer groups and facilities set up, the following aspects are envisaged to be covered, in terms of issues over the project period, across the entire integrated value chain.

Capacity Building Input Focus Group

1 Product aggregation and pre‐sorting Farmer, unskilled worker

2 Product loading –unloading, transfer to facility Farmer, unskilled worker, (at farm and aggregation level)

3 Receipt, sorting, grading (QA/QC) Facility level‐ Unskilled labour, skilled labour, supervisor, manager

4 Packaging Facility level‐ skilled labour‐‐(packaging team), supervisor, manager

5 Cold Chain Operations: operations, resource optimisation‐energy management, decision‐making on product flow, demand‐side link,

Facility level‐ skilled labour‐‐(packaging team), supervisor, manager

6 Compliances‐ HACCP, EHS, other regulatory compliances

Facility and logistics teams‐ all levels, as applicable

7 Logistics (transport, ventilation) Supply chain management‐ tracking, optimisation

Transport team Managers/owners

8 Warehouse‐ compliances and std operation, stacking stowage and ventilation systems, material management

Supervisor, manager

9 Traceability issues along value chain‐eg. EuroGAP, All along value chain

26.5 IMPLEMENTATION ARRANGEMENTS

The proposed capacity building initiative is proposed to be undertaken at the State level in Bihar to cover both Integrated Value Chains: Muzaffarpur and Patna-Nalanda, by the State Level SPV. The State Level SPV may:

outsource this aspect, based on competitive selection of a qualified entity, with relevant experience and expertise-- this may be an institute or NGO

identify and appoint internally, through the relevant government department, a cell to undertake the tasks.

26.6 SUMMARY FINANCIALS FOR BIHAR BIHAR Training Coverage Cost (Rs mn) Soft Skills and awareness training

Farmers, officers, NGOs, Cooperatives and Farmer organisations

19.20

Product Specific (at spoke and hub level)

Employees, supervisors and managers at Spokes and Hubs (at Aggregation pt level for Onion)

Training Module Preparation and Trainer fee

Lump sum Rs2mn for module prep. Training days 198@Rs 2000 per day

13.40

TOTAL (In Rs mn) 32.60


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27 POLICY AND REGULATORY ASPECTS

27.1 ISSUES RELATING TO POLICY‐ AGRI‐BUSINESS INFRASTRUCTURE

Investments in agri-business marketing infrastructure in the country continue to be public sector driven, and have resulted in a large network of markets created across the country. New developments have not kept pace with the rate of growth in production of agricultural commodities, especially perishables like horticulture and floricultural commodities.

As a result, most of these markets do not have adequate infrastructure provision, capacities and capabilities to handle perishables. The lack of appropriate post-harvest management facilities including storage and effective evacuation mechanism- well developed and organized distribution systems; this has negated the advantages gained in production resulting in high wastage of fresh produce in India. Wastage is estimated to be around 35-40 per cent of the production equivalent to Rs 350-400 billion in value terms.

The lack of private investment in agribusiness infrastructure and post harvest handling infrastructure are due to several reasons, but significant among these is existing policies and regulatory frameworks for agricultural marketing. This is long standing legacy is set to change slowly as in recent years, the government has noted these drawbacks and taken steps to bring about positive changes. These are discussed later in this section.

27.1.1 Regulatory Issues In addition to the overarching policy, specific regulatory issues affecting the development of agri-business and post harvest infrastructure in the country are outlined below:

Low Level of Government Financial Assistance for Development of Agribusiness Infrastructure

Multiple schemes exist under various departments and ministries which support the development of agribusiness infrastructure in the country (Details in Annexure). The Ministry of Agriculture provides for financial assistance in the form of back-ended credit linked subsidy for establishment if packhouses, cold storages, Controlled Atmosphere Storage, refrigerated vans, mobile processing units, wholesale markets, rural markets, functional infrastructure for collection and grading etc., through the schemes of the NHM, NHB, DMI and APEDA for export related infrastructure. However, the levels of assistance and calculation of project cost needs thorough revamping.

The Working Group of the Planning Commission (agricultural marketing infrastructure for the XI Plan) has observed “that though the various schemes differ in-terms of scale of subsidy, mode of administration, and channel of fund flow, most of the schemes are back

The Task Force on Cold Chain development in India notes that “high wastages occur due to a multi‐layered marketing channel, lack of infrastructure, absence of suitable cold stores and associated logistics as well as the lack of an organized distribution system. These are further aggravated by the poor road connectivity and lack of proper storage, handling and transportation between production areas and consumption centres located far‐off from each other”.


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ended subsidy schemes and are credit linked with 25 percent grant”. The Working Group further mentions that agriculture being a disadvantaged area for private investment, (as has been observed in practice), for promoting infrastructure in this sector, the scale of grant/incentives has to be much more attractive. Business in agriculture is risky due to small holdings, resource-poor farmers, technological backwardness, weather dependence, and the dispersed nature of raw-material sourcing. To provide adequate protection for meeting these risk factors, the incentives for investment have to be much more attractive in this sector. The present level of subsidy of 25 percent covers primarily the interest cost and hardly subsidizes the capital cost of the project, even though the incentive is called “capital subsidy”. If an enterprise has set up a project of Rs 1 million, he is eligible for Rs 0.25 million back-ended subsidy which exactly equals the interest cost. There is virtually no capital subsidy.”

Multiplicity of taxes

Indirect Taxes

Multiple taxes affect all aspects of marketing – starting from the levy of VAT (which even today varies among states) on even basic agriculture produce or elements of minimal value addition like rudimentary milling etc, Central Sales Tax, entry tax, octroi, purchase tax, excise tax etc. if further value addition including processing is undertaken. It is also ironic that in most of the states, while there is exemption or no VAT levied on liquor, large number of food items continue to be taxed at varying categories of rates of 1%, 4% and 12.5% (mainly on processed and packaged food products).

With the recent rulings of the many high courts that entry tax levied by states are not constitutional, it still continues to be in effect in many states thereby reducing the competitiveness of the industry.

Direct Taxes

Unlike other infrastructure sectors, investments in agribusiness/post harvest infrastructure are not considered as “Infrastructure” and hence no incentives are provided under the Income Tax Act.

Essential Commodities Act, Stock Order etc.

The Essential Commodities Act (ECA) 1955 was put in place after India’s Independence to control production, supply and distribution of essential agricultural commodities and to ensure availability of food products. In the current context of liberalizations, controlling the movement of products by licensing of dealers, limits on stocks and control on movements only hamper the growth of the agricultural sector and curtails promotion of food processing industries.

Fragmentation and Licensing

The vast Indian market is broken up into smaller local /regional markets resulting in high costs involved in transporting agricultural commodities and processed food from one part of the country to another. Secondly, even within the states, a trader /operator has to take multiple licenses for operating in more than one APMC regulated markets, which is a deterrent and in many cases acts like a trade/entry barrier.


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Convergence of Operations and Schemes:

A World Bank study has found that multiple government agencies are involved in the agricultural marketing system. Functions and schemes overlap significantly. To quote the study “at least 39 central government agencies promote agricultural marketing development, either broadly or with respect to specific commodities. Most of these agencies offer investment grants to the private sector, but weak coordination o f these efforts prevents greater synergies in development impact and in some instances leads to duplication. For example, three government ministries offer grants to invest in cold storage facilities; each grant scheme has different terms and conditions. Clearly, these schemes should be rationalized. Greater coordination should be fostered among the agencies that implement them to promote greater consistency, minimize duplication, more effectively track the level of support, and document the impact of these investments.

Administered Prices

The country has administered prices for the major food grains including cereals, oilseeds, cotton and sugarcane. These at times severely limit the private investors.

Apart from these, the National Horticulture Mission has provision for buy back intervention for the state governments which can put the private players at a disadvantage.

27.1.2 Credit While Agriculture has been classified by the Government as priority sector for lending, investments in agribusiness remain a grey area. Given the intensive capital nature of some of the investments particularly in cold chain infrastructure, availability of credit, particularly for greenfield projects or for first generation investors become a stumbling block many a times. Secondly availability of venture capital funds in the country for agriculture and agribusiness investments is almost non-existent.

27.1.3 Technology Induction While some efforts have been made by the APMC markets to induct mechanised equipments for sorting, grading etc, the technology in use needs a revisit. Similar is the case with storages – both ambient and controlled environment. A Study by Directorate of Marketing & Inspection (DMI), GoI mentions that only two percent of the cold storages had PUF insulation and about 18 percent of the cold storages offered deep freeze facilities. Very few cold stores (about 9 percent) had some mechanized handling systems. About 54 per cent of cold storages offered manual grading facilities.

Negligible cold storages had advanced facilities like humidity control or controlled atmosphere. Only a few cold store units in the consumption centres with capacities in the range of 2,000 to 4,000 MT have installed modified and controlled atmosphere systems

The structure of the presently applicable schemes to such infrastructure have promoted traditional technologies and not the modern technologies that are better suited to the needs and cover connected functions and operations.


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27.1.4 Capacity Building At the current levels of operations itself, there is shortage of skilled manpower at various levels right from the farm to processing. A survey by FICCI on estimating the skill shortage in Indian Industry, estimates that shortage of refrigeration mechanics, electricians and fitters exists to the tune of 65%. In addition, shortage of agricultural scientists exists to the tune of 60% and shortage of food safety professionals exists to the tune of 70%17. There are no specialized institutes for R&D and for imparting specialized skills in bakery and confectionery. Besides CFTRI, there are very few institutions, which provide qualified manpower for food processing sector.

Similar is the case at the farm level. There is pressing need to undertake precision farming and train farmers in harvest and post harvest management of crops, especially perishable. The extension delivery mechanism is traditional and fully driven by the government. Considering the large number of small and marginal farmers in the production chain, attention paid to human resource development including development of grass root level institutions with a view to mainstreaming these farmers has received less attention. The public extension delivery system was never market oriented allowing private sector to play any significant role.

Govt policies/schemes do not provide adequate assistance to support this essential aspect to operationalise new technology use through private initiatives. Private investors are also reluctant to invest in capacity building on their own.

27.2 RECENT POLICY INITIATIVES TAKEN BY THE GOVERNMENT

Policymakers in India have taken cognizance of the changing requirement of agricultural business infrastructure as well as the importance of well-functioning markets to agricultural growth, food security, and broad-based rural development. In this regard, the Prime Minister of India, Dr. Manmohan Singh, noted during the Agriculture Summit 2005 in New Delhi that “an important commitment of the government is to integrate the domestic market to all goods and services. The time has come for us to consider the entire country as a common or single market for agricultural products. We have to systematically remove all controls and restrictions.”18

Recognising the need, there have been several policy changes that have taken place in the country, even though much needs to be still done. The Government has developed a model APMC Act 2003 and is vigorously promoting it. The modifications allow the direct marketing, establishment of private markets, single license for operating in the entire state, contract farming etc. even though there are still limitations that will need to be overcome. However, it is understood that these are the first steps and will evolve with time and experience gained from implementation.

Some additional initiatives that have been taken up are:

17 Source: FICCI Industry Survey 18 India: Taking Agriculture to the Market – World Bank


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Removal of restrictions on investments in bulk handling and storage by domestic and foreign investors (up to 100%).

Repeal of the Cold Storage Order, 1980 (promulgated under Section 3 of the Essential Commodity Act 1995) with a view to remove administrative control in licensing, rent control and requisitioning cold store space. However, the Government of West Bengal has not yet amended it and the Government of Uttar Pradesh has partially amended the same.

In 2002, GoI lifted licensing requirements, stocking limits and movement restrictions for wheat, paddy/ rice, coarse grains, edible oilseeds, edible oils and removed restrictions on access to credit under the selective credit control policy.

Enactment of plant variety protection legislation protecting intellectual property rights with respect to crop research and development

Removal of ban on future trading of 54 commodities in 2003.

Liberalised norms for Foreign Direct Investment (FDI) through automatic route by including agriculture and allied activities like horticulture, and setting up infrastructure such as cold storage and warehousing facilities

27.2.1 State Level APMC

Agriculture marketing, till recently was governed by the Agriculture Produce Marketing Committee (Act), 1963 enacted by different states. There are 2,170 Agricultural Produce Marketing Committees (APMCs) at present in the country with about 7,500 markets being regulated under the respective State APMC Acts. This was enacted to facilitate the establishment of an efficient system of buying and selling of agricultural commodities as well as regulate trade practices detrimental to farmers’ interest. The basic objective of setting up of network of physical markets was to ensure farmers obtaining fair and reasonable price for their produce by creating environment in markets for fair play of supply and demand forces, regulate market practices and attain transparency in transactions.

Under this Act, a state was divided in various marketing zones and declared as a market area wherein the markets are managed by the Market Committees constituted by the State Governments. Under the Act, once a particular area is declared a market area and falls under the jurisdiction of a Market Committee, no person or agency is allowed freely to carry on wholesale marketing activities. However, due to the State monopoly, no private markets and large scale supply chains could come up in the past and these regulated markets typically suffered from inadequate infrastructure and trade practices inimical to farmers’ interest. The monopoly of Government regulated wholesale markets has prevented development of a competitive marketing system in the country, providing no help to farmers in direct marketing, organizing retailing, a smooth raw material supply to agro-processing industries and adoption of innovative marketing system and technologies.

The state of Bihar has repealed the APMC Act in 2006 and is in the process of considering options for new regulations in the sector.


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27.3 INITIATIVES TAKEN TO PROMOTE AGRIBUSINESS INVESTMENT IN BIHAR

The following are some initiatives taken up by Bihar in the agri-business area:

The state provides an incentive of 35% with a maximum limit of Rs 5 crore to set up agro processing, food processing and agribusiness infrastructure such as cold storages, Rural Agri Business Centers, storage for agricultural commodities

Incentive Grant for capital investment on Captive Power Generation/ Diesel Generating Set - 50% (Fifty percent) of the amount Spent on plant and machinery in the establishment of Captive Power Generation/Diesel Generating set will be granted to the industry. No upper limit for this amount has been fixed. This facility will be made available after the unit comes into production.

Stamp duty and Registration fee - Tiny, small, medium and large scale industries which are to be established in the industrial area / shed and outside the area of the Authority will enjoy the full (100%) exemption in stamp duty and registration fee in lease / sale / transfer.

New industrial units will be granted relief from payment of electricity duty under the Bihar Electricity Duty Act, 1948 for the generation and for own consumption of electricity from D.G. Set and Captive Power Units.

100% exemption for seven years in luxury tax for seven years

100% exemption in electricity duty for seven years.

100% exemption in conversion charge.

Only 1% CST will be payable on the items produced by the registered small and medium units in Bihar.

Incentive on quality certification - 75% of cost incurred in obtaining certificate of I.S.O. standard (or equivalent) from reputed national/ international level organizations, would be reimbursed by the State Government.

27.4 EXISTING SCHEMES PERTAINING TO AGRI‐BUSINESS INFRASTRUCTURE

27.4.1 Impact of Schemes on Development of Agribusiness Infrastructure

Nearly all the currently operational schemes do not promote convergence. Firstly, this has resulted in investors or infrastructure developers not being able to take advantage of dovetailing/convergence of scheme funds and provisions.

Second, the quantum of assistance and the level of assistance (in terms of percentage and project cost) do not reflect the current prices and need. For example, the project cost of cold stores taken by all the schemes of the Ministry of Agriculture are based on the cost of the projects around 1999 or 2001 and for the creation of RCC infrastructure with glass wool insulation and the like, not in accordance with more recent developments like PUF panels thereby restricting the induction/adoption of advancements in technology.

Third, the administered prices or the provision for market intervention within the state’s ambit of functioning further restricts actual players and promotes intermediation.

Fourth, the schemes actually support the fragmentation of the value chain as they support one or the other individual components and not the complete chain.


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Fifth, most of the Schemes do not promote creation of backward linkages in terms of development of grassroots institution framework by private investors as also don not support the investor undertaking market driven farming.

The level of assistance (in terms of % of project cost) has been captured well by the Working Group of the Planning Commission (agricultural marketing infrastructure for the XI Plan). However, nearly two thirds of the eleventh plan period has already passed and no developments have taken place (Except 1-2 schemes of the Ministry of Food Processing Industries)

27.5 POLICY INITIATIVES CRITICAL TO SUCCESSFUL IMPLEMENTATION OF AIDP

27.5.1 Applying the Integrated Value Chain approach The limited and inadequate facilities of existing markets are major constraints to efficient operations in terms of agri-business infrastructure and services.

However, fragmented and component wise development (as observed from past experiences) are not going to be effective. Efforts over the longer term, however, have to be framed within a holistic agricultural market development strategy integrating all components and elements.

The current initiative promotes the Integrated Value Chain approach for Agri-business infrastructure and services. This approach is envisaged to address the discussed infirmities and create awareness along the chain on the value erosion due to different actions taken at different points of supply chain. It is also expected that the support to be provided under the proposed project, will address the presently low level of assistance available and attract larger investments. This will allow improving the operations and facilities and address the criticality of ensuring that more resources are used to improve agribusiness infrastructure development and link farm to the market effectively.

27.5.2 Suggested Policy Interventions In the context of Integrated value chains and the existing issues in this area, the following set of suggestions are presented for consideration and coordinated action towards the operational climate for the project:

Single uniform license to enable procurement in any district or market without hindrance or , single unified license for buying, procuring, selling of inputs, storage, and processing of all agriculture commodities for the State as whole be introduced.

Abolition of mandi market fees charged by APMCs on private market developers and investors19

Relaxation of restriction on storage

19 This should be taken into account in any new policies on agri-marketing that may be formulated in Bihar


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Including agri infrastructure eligible for viability gap funding

Investment in agri infrastructure to be considered for tax exemptions – Investment in agri business infrastructure to be accorded 100% depreciation in first year similar to that for cold storages to be carried forward for at least three years of operations


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28 IMPLEMENTATION FRAME WORK

28.1 PROPOSED MODELS UNDER PUBLIC‐PRIVATE PARTNERSHIP

28.1.1 Approach to Public–Private Partnership (PPP) in India “The approach to PPPs must remain firmly grounded in principles which ensure that PPPs are formulated and executed in public interest with a view to achieving additional capacity and delivery of public services at reasonable cost. These partnerships must ensure the supplementing of scarce public resources for investment in infrastructure sectors, while improving efficiencies and reducing costs. As noted in the Approach to the Eleventh Plan, PPPs must aim at bringing private resources into public projects, not public resources into private projects.”

‐11th Five Year Plan (2007‐12), Volume I, Planning Commission, Government of India

After the unprecedented success of the 10th Five Year Plan, which achieved average annual growth rate of 7.7 per cent, the growth target for 11th Five Year Plan has been further enhanced to 9 per cent with acceleration projected to reach 10 per cent by the end of the Plan. To achieve these growth targets, it is believed that India needs to step up its infrastructure investments from the present level of around 5 per cent to about 8 per cent of GDP which may amount to almost USD 400 billion of investments.

While acknowledging the dominant role of the public sector in building infrastructure, the 11th Plan also appreciates limitations of the public sector in mobilizing the total requisite resources. The share of the private sector in infrastructure investment is, therefore, projected to rise substantially from about 20% estimated in the Tenth Plan to around 30% in the Eleventh Plan. It has, therefore, suggested attracting private investment through “appropriate forms” of public private partnerships to meet the overall investment requirements.

28.1.2 Experience of PPP in India PPP approach in India, as elsewhere in the world, has been guided by the belief that it not only brings much needed financial resources from private sector but also ensures greater efficiency in provision of public services. The database of PPP in India, prepared by Department of Economic Affairs, Ministry of Finance, reveals that as on November 15, 2009, there have been around 450 PPP projects in focus sectors where a contract has been awarded and projects are under implementation/near implementation. The total project cost is estimated to be about Rs. 225,000 Crore or USD 48 billion.

The road sector clearly dominates PPP experience in India and accounts for about 60 per cent of total number of PPP projects so far. Other significant sectors, in terms of numbers, are urban development (16 per cent), ports (10 per cent), tourism (6 per cent) and energy (5 per cent).

Roads61%Urban Dev

16%

Por ts1 0%

T ourism6%

Energy5%

Others2%

Number of PPP Projects in India – Sector‐ wise distribution


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In terms of value, though, while road remains leading sector, accounting for 45 per cent of total value of projects, port and airport sectors are next accounting for 30 per cent and 9 per cent of total value of PPP projects in the country so far.

Further, Karnataka, Andhra Pradesh and Rajasthan are leading states and National Highway Authority of India is the leading central agency involved in PPP projects in the country. Finally, in terms of main types of PPP contracts, almost all contracts have been of the BOT/BOOT type (either toll or annuity payment models) or close variants.

A study of World Bank regarding experience of developing countries reveals that Telecom (54 per cent) and Electricity (23 per cent) together account for more than 75 per cent of investment commitments to infrastructure projects with private participation. Also, cumulative investment in PPP projects near/under implementation in India at around USD 48 billion accounts for merely 5 % of investment commitments in such projects in developing countries during 2000-2008. Of course, it may not be entirely fair to compare investment “commitments” to projects near/under implementation where contract has already been awarded. More so, as PPP projects have truly gained momentum in India only during last 4-5 years.

This is also corroborated by another set of data which has put India at 2nd position behind Brazil amongst top 10 countries by investment commitments in infrastructure with private sector participation. In fact, India accounted for as much as USD 110.2 billion (13.1 per cent) of such investment commitments, marginally behind Brazil which attracted USD 111.9 billion.

28.1.3 PPP in Agribusiness Infrastructure: AIDP has envisaged PPP model for implementation of proposed integrated value chains. The key rationale for introduction of PPP model in infrastructure projects has been a combination of private sector efficiency and public budget constraint. It is being argued similarly here that scale of investment needs for agribusiness infrastructure are too huge to be adequately met by public sector alone. Moreover, it is agreed that most of the projects in agribusiness suffer from large inefficiencies and a PPP structure may therefore bring in much needed efficiency in both construction and operation ofproposed agribusiness infrastructure.

However, the proposed financial structure for AIDP would be one of the first such efforts in the country to create Agribusiness infrastructure under PPP model. As can be seen from sector-wise distribution of PPP projects in the country, Agribusiness has not yet been covered as a sector under PPP projects under/near implementation. To be sure, this would be true of PPP experience worldwide too as this model has been preferred mostly for creation of public

Total investment commitments to infrastructure projects with private participation in developing countries, by subsector, 2000–2008 : USD 843.3 billion (2008 USD)

Roads45%

Urban Dev7%

Ports29%

Airpo rts9%

Energy8%

Others2%

Value of PPP Projects in India – Sector‐ wise distribution

Electricity23%

Natural gas3%

Telecoms54%

Airports3%

Railways2%

Roads8%

Seaports4%

Water treatment plants

1%

Water utilities2%

Combined water and electricity

utilities0%


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utilities and basic infrastructure, specially for projects which involve large scale upfront investments even as natural ownership of assets may lie with the Government.

28.1.4 Viability Gap Funding Scheme (VGF)

It was earlier envisaged to provide funding to proposed projects for integrated value chains under Viability Gap Funding Scheme. The financial assistance available under VGF of Ministry of Finance, Government of India is normally in the form of a capital grant at the stage of project construction. The financial assistance is equivalent to the lowest bid for capital subsidy, but subject to a maximum of 20 per cent of the total project cost. In addition, the sponsoring Ministry/ State Government/ statutory entity may propose to provide assistance up to a further 20 per cent of the total project cost.

To be eligible for consideration under VGF, a project needs to be a PPP project and should meet the following criteria:

1. The PPP project has to be implemented, i.e. developed, financed, constructed, maintained and operated for the project term by a private sector company to be selected by the Government or a statutory entity through a transparent and open competitive bidding process.

2. The criterion for bidding shall be the amount of viability gap funding required by the private sector company for implementing the project where all other parameters are comparable.

3. The PPP project should be from one of the following sectors: Roads and bridges, railways, seaports, airports, inland waterways, power, urban transport, water supply, sewerage, solid waste management and other physical infrastructure in urban areas, infrastructure projects in Special Economic Zones, international convention centers and other tourism infrastructure projects. However, it has been provided that the Empowered Committee may, with approval of the Finance Minister, add or delete sectors/sub-sectors from the aforesaid list.

4. The project should provide a service against payment of a pre-determined tariff or user charge.

5. The concerned sponsoring entity has to certify with reasons the following: The tariff /user charge cannot be increased to eliminate or reduce the viability gap of the PPP project. The project term cannot be increased for reducing the viability gap. The capital costs are reasonable and are based on standards and specifications normally applicable to such projects where the capital cost cannot be further restricted for reducing the viability gap.

6. Finally, the Scheme will apply only if the contract/concession is awarded in favour of a private sector company in which 51 percent or more of the subscribed and paid up equity is owned and controlled by a private entity.


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28.2 CHALLENGES OF VGF MODEL FOR AGRIBUSINESS INFRASTRUCTURE UNDER AIDP

28.2.1 Under VGF, ownership of project assets has to remain with the Government

To satisfy this core condition of VGF, land would need to be arranged by the concerned state governments. In case of AIDP, this would require a relatively large parcel of land (say, around 25-30 acres) to be provided for building Hubs and smaller parcels of land (say, around 5-10 acres) to be provided for setting up various Spokes of each Integrated Value Chain. Also, such land need to be at locations suitable for setting up such facilities in terms of basic infrastructure and market connectivity.

The detailed field surveys done in Maharashtra for proposed value chains have brought out difficulties in this regard. There are no such land parcels available with the Government of Maharashtra which can be offered for proposed value chains. The State Government representatives have also expressed their inability to provide land for setting up these value chains and have clearly advised their preference for a model which allows private entrepreneurs to bring in their own land for the projects. However, such an arrangement may not then quality the projects for positioning under VGF.

28.2.2 Private sector is given a contract/concession for the project term to recover its investments

It may be appreciated here that typically PPP projects like roads, ports, airports etc. provide certain captive market to interested developers and therefore may not require large efforts at market development. In fact, many PPP facilities evolve as monopolies which ensure certain traffic (market) to private sector bidder selected for building and operating these facilities. In case of roads and bridges under PPP, most of these projects have little competition and get assured traffic. In case of modernisation of airports under PPP in India, no new or existing airport is permitted by Government of India to be developed as, or improved or upgraded into, an International/Domestic Airport within an aerial distance of 150 kilometers of the Airport before the twenty-fifth anniversary of the airport opening date. Thus, the project operators in all these cases are assured a captive market and “market risk” to a large extent is taken care of under PPP model. The only market risk in such cases is accuracy of traffic projections.

This may though not be applicable to proposed integrated value chains under AIDP. The facilities created under these projects, though need based, would require to compete with similar existing and future facilities both in the public and private sector. Considering the effort/investment required in building forward and backward linkages for proposed projects, the condition of transferring ownership of the projects back to the government/sponsoring entity may discourage promoters/private enterprises from bidding for these projects under VGF.


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28.2.3 User charges need to be determined before implementation of the project

This would be another challenge for integrated value chain projects. User charges need to be determined in advance for projecting “viability gap” for these projects, which may be a difficult exercise in agribusiness projects. This is due to greater market uncertainties in this sector. While user-charges at the level of Hubs (large storage, trading and value added facilities) may be possible to be determined, this may not be practical at the level of Spokes (Agri-business centres) considering the range and scale of services. Moreover, any private enterprise operating in dynamic market conditions needs to have flexibility in pricing its services. The absence of such flexibility may come in the way of success of these projects.

Thus, the above requirements of VGF viz. state ownership of land, transfer of assets, pre-determination of tariff may come in the way of smooth implementation of the integrated value chain projects. These requirements would be mostly alien to agribusiness entrepreneurs in the country and may not therefore attract sufficient interest from private investors. Moreover, as mentioned above, even in case of investor interest, it would be extremely difficult to ensure compliance of the IVC projects with eligibility conditions of VGF.

28.2.4 Need for a flexible PPP structure for AIDP

The above challenges, however, may be met by providing the required flexibility in project structure. It needs to be appreciated that the PPP offers a range of options and is much more than a BOT model. The PPP options range from concessions and joint ventures to service contracts and O&M contracts. In fact, service contracts and O&M contracts are considered to be first steps in involving private sector as these may be implemented quickly. In a sector like Agribusiness, where PPP models have not been tried earlier, flexibility in choosing an appropriate model may be essential to success of the program.

28.2.5 BOT vs BOT –Annuity models

BOT model has got two main approaches to handle traffic/market risk. Under the toll-based Build-Operate-Transfer (BOT) projects, traffic/market risk is borne by the private operators. Under this model, capital subsidy may be provided to selected bidder for meeting the projected “viability gap” during construction phase. An important variant of this approach is “shadow tolling”, wherein private partners do not collect tolls from the road users but are exposed totraffic risks, as they are paid on the basis of the volume of actual traffic. This model has been found attractive due to provision of subsidy during construction phase. In fact, as mentioned earlier, VGF which is the main scheme providing government support to PPP projects has provision for providing capital subsidy normally during construction phase. On the other hand, the private bidder remains exposed to traffic/market risk under this model which may make it unattractive for projects which are seen to have large market risks.

Under BOT- Annuity Model though, the sponsoring entity (government or its agency) absorbs the traffic risk and the private operator is paid for making the specified level of road service available regardless of the extent of traffic, these are also known as “availability-based” projects. This model has thus been found acceptable for NHAI projects for highways which assures private operators regular “annuity” payments over project period. Of course, in this case, private operators may need to arrange for large capital funds for completing the project which has its own cost implications.


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28.2.6 SPV Model

Large sized and complex PPP projects are often developed through an SPV route, wherein a project SPV is incorporated and it takes the responsibilities of acquiring land and other statutory and environmental clearances. The SPV – along with the project – is then bid out through a transparent process.

There are other variants possible of this model which may though vary from traditional PPP approach. For example, it may be envisaged to invite private operators for participation in the equity structure of the SPV along with the government agency. The equity being offered to private operator may be either majority share (51 % or more) or minority share (49 % or less), depending on the nature of the project and decision of the concerned government agency in this regard. The selected private operator shall also be given responsibility of O&M of the project under this model.

28.3 PREFERRED OPERATIONAL MODEL FOR AIDP

It may be noted here that the draft Detailed Project Report had given three operational models as options for project implementation. It would be useful to mention suggested options once again.

Option 1 assumed entire value chain to be funded under existing guidelines of Viability Gap Funding Scheme which therefore assumed a BOT model with maximum 40 % of project cost as grant support, as mentioned above.

Option 2 suggested unbundling of value chain components in such a manner that some components (in particular “Hubs” ) may be eligible for funding by VGF even as rest of the components would be required to be funded by other grant support schemes like NHM, RKVY etc.

Finally, Option 3 provided for a separate scheme to be launched by state governments (particularly by Government of Maharashtra) which would provide for maximum 40 % of the project cost as grant support to private entrepreneurs setting up value chain projects.

The provision of alternative options revolved around a major concern: Whether State ownership of assets and thus provision of land by the government should be a pre-requisite for PPP approach as suggested by BOT Model It also emanated from the uncertainty surrounding the willingness and ability for state governments to provide suitable land for the value chain projects.

All the above models were discussed in detail and it was finally decided to recommend an operational model which would adhere to the essentials of PPP approach in terms of public ownership of proposed agribusiness infrastructure so as to ensure benefits to all stakeholders in a transparent manner. The model selected for implementation of AIDP is based on a series of discussions with representatives of Asian Development Bank, Department of Economic Affairs, Government of India and State Governments of Bihar and Maharashtra.

The recommended model requires the concerned state governments to provide land for Hub and Spokes so that project meets the requirement of ownership by a government or statutory entity. Thus, a large land parcel close to a large market centre which is owned by government needs to be identified for creating the Hub (Distribution Centre). Further, smaller land


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parcels, close to producing areas, which are owned by government, may need to be identified for setting up various spokes (Agri Business Centres etc.) for the Hub. Based on availability of land, proposals would be invited from investors for creating infrastructure along the value chain at these project sites on Build--Operate-Transfer model. The recommended concession period under this model is 20 years.

While the essential operational structure of the model remain same for both Bihar and Maharashtra, it has been recommended that project grant support available may be different in case of these two states. Thus, minimum equity contribution required from a private operator, as percentage of project cost, may be 30 % in case of Maharashtra compared to 10 % in case of Bihar. This has been recommended based largely on two counts. First, as argued earlier, too, Maharashtra and Bihar are at different stages of development process at present and therefore it is believed that in Maharashtra, potential bidders may be willing to put in larger equity contributions considering larger market size. Second, while projects in Bihar would require renovation of erstwhile market yards and rather limited value chain infrastructure, those in Maharashtra would be entirely value add infrastructure providing greater revenue options for a private operator.

However, as the private operators would be selected through a bidding process, actual project grant required may depend on the response of the potential bidders.

The salient points of the selected operational model are as follows:

1. A state promoted mother Special Purpose Vehicle (SPV) would be the main implementing agency for the project which would facilitate core infrastructure convergence and provisioning for the IVC. The mother SPV will be 100% owned by the state government and will channel the funds for the IVC investments to the private sector developer and for the link infrastructure to the government departments as needed.

2. This government-led mother SPV would act as the concessioning authority and will invite bids from private developers to design, construct, operate and maintain (O&M) the IVCs and will contract them on Build-Operate-Transfer [BOT] basis at value chain level.

3. AIDP will be designed as a State level scheme. ADB funds can be used for the development of link infrastructure deemed necessary for the success of the IVC project, for meeting the need for public funding as capital expenditure through the private sector for the IVC project and also for the grant component to be disbursed as viability gap funding (which is not to be treated as subsidy in view of the fact that it is a grant to the project to build infrastructure that will be transferred back to the government after the concession period is over, as per the BOT model).

4. The IVC will include mandatory infrastructure, i.e. the basic (such as internal roads, power and water supply system, waste management etc.) and Agribusiness (such as trading platforms and shops, CA chambers, warehouses etc. ) infrastructure within the project sites as suggested in Detailed Project Reports (DPRs). On top of the mandatory infrastructure, the private developer can also invest in more commercial/add on infrastructure using its own funds as applicable on a case by case, subject to approval by the state government. The link infrastructure, also part of the program, would include linking public services such as bulk water, power and connecting external roads from the existing supply points to the market yards, as needed.


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5. The works for link infrastructure would though not be a precondition for the IVC investments to start but they could be run in parallel.

6. The private developer will invest at least 10% of the total project cost of the mandatory components of the IVC in Bihar which would be 30% in case of Maharashtra.

7. The grant for the IVC mandatory infrastructure will be released to the private developer into installments based on the achievement of predefined milestones. The grant will be the bidding parameter, while the technical parameters will be the eligibility parameters.

8. The concession period could be increased up to 20 years to make it more attractive to the private developer.

9. The service charges for the market yards infrastructure will be capped and indexed to inflation to be determined by a committee .appointed by the state governments and subject to regular revision.

10. For the infrastructure, standards incorporating both the quality and the quantity of outcomes will be fixed. Also for the O&M, service level standards will be fixed and private developer will have to meet them throughout the concession period. There would be provision for the oversight and periodic certification by an independent engineer throughout the concession period.

11. The revenue collection will be done by the private operator and shall be shared with the mother SPV as per contract conditions given in the Model Concession Agreement. (See Annex).

A diagram of the model is shown below:

12. Finally, in the case of Maharashtra, it is recommended to allow additional flexibility in view of foreseen difficulties in providing land for projects by the state government. As the state government may not be in a position to provide land for the entire IVC and the private sector is willing to bring its own land for some components, such

Gov-led SPV

Pvt. SPV

Commercial/other

facilities(business centers,

cantines, etc)

On site and Marketing facilities

(warehouse, cold chain, waste management, etc)

GOB / GOI / ADB

Services to users

• Overall management of IVC components• Provide funds for the IVC components• Aggregate the unbundled IVC components• Bid out to private developers for design, construct, O&M• Manage capacity development activities

•Provide funds for the link infrastructure to Gov Depts

User charges(capped)

grants/GOB budget

design, finance, construct, and O&M

Leverage of private sector funds

design, construct and O&M

VGFVGF, Other

schemes

Link Infrastructuregrants/GOB budget

User charges (market based)


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components of IVC may be owned and operated by private sector with the support of existing schemes and government funding.

13. Further, a Project Management Unit (PMU) or a state level SPV could be authorized to purchase the land for the IVC's hubs/spokes for other IVCs if government land is not available. Once the land is owned by the government, the above mentioned model can be applied in Maharashtra as well.

28.3.1 Proposed Project Grant, O&M Framework and Recovery of Charges

1. The private developer and operator, selected through a bidding process, would be responsible for detailed design, engineering, building and O &M of the project assets including the common infrastructure and facilities.

2. The mother SPV (the Concessioning Authority) would, as consideration for design, building and managing the project assets and facilities, pay to the private developer and operator (the Concessionaire) project grant as specified in the bid documents submitted by the successful bidder. Such Project Grant amount shall be paid by the Concessioning Authority based on milestones on progress of the Project as per following schedule:

a. 20 % of the Project Grant after completion of 25 % of Project Construction as per the project requirements and so certified by the Independent Engineer

b. 20 % of the Project Grant after completion of 50 % of Project Construction as per the project requirements and so certified by the Independent Engineer

c. 20 % of the Project Grant after completion of 75 % of Project Construction as per the project requirements and so certified by the Independent Engineer

d. 20 % of the Project Grant after issue of Completion Certificate by the Independent Engineer as per the project agreement

e. Balance 20 % of the Project Grant after satisfactory operation of Project Services and Facilities for one year as to be decided by the Concessioning Authority

3. Further, the private developer and operator, after commencement of operations, may be required to pay the Concessioning Authority Royalty per Month equivalent to 30 per cent of the Gross Revenue chargeable by the Concessionaire .

4. Private developer and operator may recover the O & M charges from the traders and other entrepreneurs by way of following monthly charges:

a. Charge I - Monthly Fixed Lease Charges apportioned to all traders on the basis of allocable area (shops) to each of them

b. Charge II - Monthly Variable Utility Charges will be based on monthly consumption of utilities such as power, water, effluent treatment and other O & M cost apportioned on the basis of allocable area to each of the traders

c. Charge III - User Fee would be charged for use of warehouses, sorting/grading lines, CA chambers and other value added facilities which may be aligned with existing market rates


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5. Private developer may enter into a Lease Agreement with the traders. The Lease Agreement shall provide rights to the traders for carrying out trading operations and also using common facilities in the Market yards. The Lease Agreement shall also contractually bind the traders to pay all such charges as may be levied by SPV for the allotment, development and maintenance of infrastructure assets and provide recourse by way of right to replace traders who have defaulted in respect of payments to the private operator SPV or follow practices which inhibit project operations.


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29 PROJECT IMPLEMENTATION STRUCTURE

As the value chain projects are expected to roll out over next one year or so, it may be advisable to constitute an Empowered Committee initially which would be responsible for overall project implementation. This may be called Empowered Committee on Agricultural Marketing (ECAM) which may be chaired by the Principal Secretary (Agriculture) and comprise of the following members:

Principal Secretary (Agriculture) - Chairperson

Director (Agricultural)

Director (Horticulture)

Representatives of Department of Industries, Department of Co-operatives, Department of Planning and Department of Finance

Additional representatives and experts may be invited to join the consultations as required.

The Empowered Committee may be responsible for taking decision on all matters related to projects being set up under AIDP. Once the projects are under implementation stage, ECAM may be responsible for regular monitoring and evaluation of the projects. Further, the final decision on project matters like tariff, service standards, amount of royalty etc would also be taken by this Committee.

In addition, a Project Management Unit (PMU) would be required to be set up in the Department of Horticulture which may be headed by Director (Horticulture) and have 2-3 officers from the state government. The PMU would work under the supervision of the Empowered Committee and oversee the process of incorporation of mother SPV, transfer of selected project sites (along with assets) to this SPV and ensuring overall preparedness for the project. The PMU shall not be required once mother SPV gets incorporated.

The successful implementation of these projects is likely to throw up some serious challenges. In particular, it would be critical to get existing traders in erstwhile APMC market yards to agree to the proposed implementation plan through a process of capacity and trust building efforts. Also, the projects are to be structured with care (components bundled/unbundled suitably) so that there is sufficient private sector interest in bidding process. It would be desirable therefore for the mother SPV at the state level to appoint a Project Management Agency (PMA) which may assist it in getting requisite project approvals, managing bid process and supervision and implementation of the Project

The mother Special Purpose Vehicle (SPV) would be key to successful implementation of the project. It is, therefore, recommended that SPV should be incorporated under the Companies Act, 1956 which would allow it to have required financial autonomy and flexibility in decision making. The SPV may be headed by a Chief Executive Officer/Managing Director with at least level of Director in the state government. The SPV may additionally hire 4-5 experts from various fields like Agriculture extension, Agriculture marketing, Agribusiness Infrastructure Development, Legal documentation and Financial management. While CEO/MD along with some support staff may be deputed from the state government, other experts may be hired from market on need based contracts through a transparent process.


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It is envisaged that the SPV would be using a PMA for effective marketing of the projects and selection of private developers and operators through transparent bidding process. Further, PMA should be able to assist mother SPV in effective monitoring of the projects during construction and operation of the projects. Finally, PMA may assist SPV on “soft” issues i.e. farmers’ group formation, strengthening of existing PACs and other farmers’ associations, providing training and quality inputs, forge marketing linkages etc aimed at providing requisite institutional linkages along the value chains.

The diagram presents the recommended implementation structure for AIDP in Bihar

29.1 ROLE AND RESPONSIBILITIES OF PROJECT IMPLEMENTING AGENCY

(MOTHER SPV)

Mother SPV in case of Bihar is required to be sufficiently empowered to undertake implementation of AIDP. Responsibilities of Implementing Agency will include:

• Implementation of AIDP as approved by DEA/ADB in consultation with the State Government

• Mobilising requisite state government contribution (30 %) and receiving Project Funds from ADB as required for the programme

• Reporting progress regularly to the State Level Committee/Board

• Make and ensure approval of all follow-up plans required as part of the programme roll out and implement them

• Co-ordinate with other departments of state government for getting requisite clearances (power and water connections, access roads etc.) and ensuring link infrastructure development including social infrastructure

The suggested organisational structure of the Implementing Agency is shown in the diagram.

MD/CEO

Agri Extension Services

Program manager (assisted by 2 support staff)

Agri Marketing


Legal & Financial Management

need based Domain Experts

PMA

PMA

Link Infrastructure (Access roads, power and water linkages, waste disposal etc)

Bid Process Management Monitoring

and Evaluation

Capacity Bldg Interventions

‐Consortium/federations ‐Training ‐Technology Inputs ‐Exposure visits ‐Market linkages

100% State Govt owned

Prog Implementation through SPV

Prog Management

Empowered Committee on Agricultural Marketing Headed by Principal Secy (Agriculture)

Mother SPV

Design, Build & Operate Core & Agribusiness Infrastructure

(Renovation/refurbishment of shops, Value added Infrastructure)

Prvt Developer/Operator

PMU (Transitional structure)

operationalising the agribusiness infrastructure development investment program … ·...

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