performance of karnataka state

PERFORMANCE OF KARNATAKA STATE

AGRICULTURAL PRODUCE PROCESSING AND

EXPORT CORPORATION, LIMITED – AN

ECONOMIC ANALYSIS

Thesis submitted to the

University of Agricultural sciences, Dharwad

In partial fulfillment of the requirements for the

Degree of

MASTER OF SCIENCE (AGRICULTURE)

in

AGRICULTURAL ECONOMICS

By

DEEPA KALLAPPA TALLIKERI

DEPARTMENT OF AGRICULTURAL ECONOMICS

COLLEGE OF AGRICULTURE, DHARWAD

UNIVERSITY OF AGRICULTURAL SCIENCES,

DHARWAD – 580 005

JULY, 2008 ADVISORY COMMITTEE

DHARWAD (S. B. HOSAMANI)

JULY, 2008 MAJOR ADVISOR

Approved by:

Chairman: _______________________

(S.B. HOSAMANI)

Members: 1._______________________

(L.B. KUNNAL)

2. ______________________

(N.R. MAMLE DESAI)

3. _______________________

(VILAS KULKARNI)

4. _______________________

(K.V. ASHALATHA) C O N T E N T S

Sl.

No.

Chapter Particulars

Certificate

Acknowledgement

List of Tables

List of Figures

1 INTRODUCTION

2 REVIEW OF LITERATURE

2.1 Performance evaluation of Institution

2.2 Growth rate of the institution

2.3 Documentation

2.4 Constraints of the institution.

3 METHODOLOGY

3.1 The Study Region

3.2 Organization and Working of Export Promoting Industry in

Karnataka

3.3 Functions of KAPPEC

3.4 The Karnataka State Agricultural Produce Processing and Export

Corporation Limited (KAPPEC)

3.5 Nature and Sources of Data

3.6 Analytical Technique Employed

3.7 Compound Growth Rates

3.8 Principal Component Analysis

3.9 Index method

4 RESULTS

4.1 Basic information of KAPPEC

4.2 Financial analysis of KAPPEC

4.3 Compound growth rate

4.4 Projection of value

4.5 Principal component analysis

4.6 Documentation

4.7 Constraints of KAPPEC Sl.

No.

Chapter Particulars

5 DISCUSSION






5.6 Documentation

5.7 Constraints of KAPPEC

6 SUMMARY AND POLICY IMPLICATIONS

7 REFERENCES

APPENDICES LIST OF TABLES

Table

No.

Title

3.1 Karnataka at a glance

4.1 Financial Indicators of KAPPEC

4.2 Growth Rates of Financial Indicators

4.3 Test of Solvency

4.4 Liquidity ratio of KAPPEC

4.5 Test of Profitability

4.6 Test of Efficiency

4.7 Tests of Strength

4.8 Growth trend of important commodities handled by KAPPEC

4.9 Growth Trend of KAPPEC Markets

4.10 Projection for Financial Indicators

4.11 Projection for Export Marketing


4.13 Role Players in the Process of Documentation

4.14 Documentation Process for Export

4.15 Constraints of KAPPEC through index method LIST OF FIGURES

Figure

No.

Title

1. Location map of the study area

2. Organisational Structure

3. Test of Solvency

4. Liquidity ratio of KAPPEC

5. Test of Profitability

6. Test of Efficiency

7. Tests of Strength

8. The flow chart of documentation process

1. INTRODUCTION

Agriculture is the major driving force of Indian economy. It accounts for the largest

chunk of employment and gross domestic product, a source of raw material for industry and a

major source of foreign exchange earner at present and potentially even more in the decades

ahead. Domestic agriculture can substantially contribute to the balance of overseas payments

either by augmenting countries export earnings or by expanding the production of agricultural

import substitutes this is termed as foreign exchange contribution of agriculture. In countries

with a lagging agriculture sector and unmanageable food import bill, it would make better

economic sense to expand food production. But once domestic agriculture is able to meet the

basic requirements of domestic market; it may be a sound policy to exchange agricultural

exports either of food or other agricultural products to increase the rate of development

through sectoral diversification.

Trade in agricultural goods can play an important role in promoting economic

development especially in the less developed countries. The export of agricultural goods can

pay for imports of capital goods, technologies, manufactured products and other essential

commodities for the sustained growth of developing countries. Many developing countries

have a comparative advantage in the production of agricultural goods and export of these

goods is the main source of foreign exchange earnings. In an export led growth model of

trade it would be to the advantage of the developing countries, to specialize in production of

those goods where they have comparative advantage and to exploit the surplus production to

earn the valuable foreign exchange. Such a policy will lead to the use trade as an engine of

growth, as well as in ensuring rational allocation of resources.

In, India ever since the planning has been used as a tool for rapid economic growth,

the development of agriculture is given due importance. The importance of agriculture is felt

not only in feeding additional mouths but also to earn foreign exchange through exports.

Strength and resilience are the hall mark of India’s agriculture. Scarcity situation in many

commodities are over; and new challenges are emerging from surplus.

India has a strong comparative advantage because of its very diverse agro-climatic

conditions ranging from arid to heavy rainfall areas. Most of the areas have well distributed

rainfall, sunshine and temperature conductive to the growth of a very wide range of tropical,

subtropical, and temperate fruits, vegetables and flowers. There are long uninterrupted

Himalayan hilly region suitable for temperate and nut crops like Apples, Pears, Peaches and

Walnuts. It then gradually descends forming sub-mountain regions and plains. There are also

vast fertile plains and savannas suitable for a wide variety of crops.

Further India’s geographical situation gives it the unique advantage of being at the

center of most of the prosperous economies of the eastern world i.e, middle east in the west

and far east in east including countries like Iran, Iraq, Japan, Singapore, Thailand Malaysia,

Korea etc.This gives India the comparative edge for linking these markets as the third country

export center. With its agricultural predominance, India occupies a special position in the

developing world and should take a leading role in creating a favorable atmosphere for putting

across the points of negotiation in favour of developing countries at the WTO negotiation.

India exports more of horticultural crops, compare to agricultural commodities.

Horticulture crops includes fruits, vegetable, root and tuber crops, mushroom, floriculture,

medical and aromatic, nuts etc. This sector has established its importance in improving land

use, promoting crop diversification, generating employment and above all providing nutritional

security to the people.

India has made fairly good progress on the horticulture sector of the world with a total

annual production of fruits and vegetables of over 114 lakh metric tonnes during 2006-07,

which was only 167 thousand metric tonnes during 2005-06.The total gross annual income

from horticulture is Rs.7152 crores which is 40.00 per cent of the gross annual income from

combined agricultural sector. India is the second largest producer of horticultural crops. The

major crops in the case of fruits are Mango, Banana, Citrus and Apple and in the case of

vegetables Potato, Onion, Tomato and other seasonal vegetables. Urgency was felt to

formulate new strategies with the back up of attractive scheme which would give boost to

each and every segments of horticulture industry, all over the country. Global Exports

The present total global exports are well over US$ 5000 billion. The share of

agricultural commodities accounts for US$300 billions (6.00 per cent). In recent years, the

share of agri-commodities has increased considerably, mainly because the developing

countries have realised the importance of export to the development of their economy. There

has been a great deal of interest among the countries of the world to earn foreign exchange

through export of agricultural commodities. Agricultural and horticultural products have a

high-income elasticity. This situation makes developed countries to turn to the developing

countries to meet their demand. Therefore, developing countries are accounting for a large

share of the world trade in these commodities. The important developing countries viz.,

Argentina, Mexico, Morocco, China, Philippines, Taiwan, Turkey, Brazil, Costa Rica, Thailand,

Egypt and India account for two-thirds of the total horticultural exports. Other countries are

also improving their export competitiveness.

Fruits comprise 61.00 per cent of the horticultural exports of the World and 70.00 per

cent of it comes from the developing countries. There are as many as 80 different fruits and

65-70 types of vegetables traded in the world market.

India’s Export

Indian agriculture has a distinct position in the World agricultural production. It is the

second largest producer of Rice, Wheat, fruits and vegetables and the largest producer of

Milk. Still, in the world agricultural trade, its share is very less. The share of Indian agriculture

in the world export is less than one. Export of agricultural products is an important component

of the countries agrarian scene. Its present position in the Indian economy is quite significant

as export contribute a great deal to the development of an economy through the foreign

exchange earnings. Agricultural exports comprised about 30 percent of the total exports from

India during 1980-81 and the share dropped to 19 percent in 1990-91. Agricultural exports in

1995-96 constitute 19.87 percent in the total exports from India and this share has been

decreased to 15.08 per cent in 1999-2000. In 2000-01 agricultural export constituted 14.10

percent in the total exports and this share has been decreased to 10.4 percent in 2006-

07.Though the proportionate share of agricultural products in total exports declined, the value

of agricultural exports increased during this period.

Export Policy

Majority of the agricultural exports are unrestricted except some items, which are

regarded as essential and sensitive. For example, export of pulses and sugar (excluding

sugar that are subjected to a tariff rate quota in the United States and the EC) were

prohibited, to maintain domestic supplies of these products in order to keep the price at a

reasonable level. In order to boost the agriculture exports government has set up Agri Export

Zones. These zones receive assistance from Central and State Governments to improve

efficiencies in supply chains of the identified products. Currently, there are over 60 Agri Export

Zones sanctioned by the Central Government and monitored by Agriculture and Processed

Food Products Export Development Authority (APEDA).However, of the total investment of

Rs.17.18 billion envisaged over 2002-07, just around 50 percent has been realized.

Moreover, exports from these zones during 2005-06, were around 43 percent of expected

exports, in 2004, Vishesh Krishi Upaj Yojana (special vegetable products scheme) was

introduced to promote exports of fruits, vegetables, flowers, minor forest produce, dairy,

poultry and their value added products.

Scenario of Karnataka

Karnataka state is predominantly an agriculture State. About 33.00 percent of total

gross domestic product is derived from agriculture and 66.00 per cent of the workforce

dependent on agriculture further 70.00 per cent of state population is still living in rural areas

and are completely depending on agriculture for their livelihood. As such if the state has to

prosper and progress economically, it is possible only through the development of the

agriculture sector. In the state, agro-products are grown in an area of 107.90 ha and annual

production is 92 lakh metric tonnes. The area under horticulture crops is increasing year by

year and now the horticultural crops are grown in an area of about 14.72 lakh hectares and

annual production is 114.90 lakh metric tones. The total gross annual income from horticulture sector is Rs 1752 crores and this account for about 40.00 per cent the gross

annual income derived from combined agriculture sector.

Karnataka occupies a unique position with its natural resources and could

contribute significantly in the development of the State and the Nation. Karnataka has been

recording a reasonable performance in export. The total export value of Karnataka is Rs

105850.50 crore during 2006-07. It is expected that Karnataka would emerge as one of the

major participating states in India’s agricultural trade. Nevertheless, it is essential to

periodically balance between the domestic demands, exportable surplus, and imports keeping

in view specially the interest of the domestic consumers and traders.

The export performances in the case of Coffee, Cashew, Pepper etc. are indeed

outstanding. But the same could not be observed for other horticultural commodities, where a

miniscule share of the production is exported. This is primarily because this sector has not

been developed to serve as an export oriented activity. Agencies like Coffee Board, Spices

Board etc, have been promoted for the export of specific commodities.

The Karnataka’s export value is increasing over the years. In 1993-94, the export

value was only Rs 496.86 crores and it was increased to Rs 1528.23 crore by 1997-98 and by

2001-02 the value increased to Rs 2346.88 crore. In 2006-07 export value of Karnataka

increased to Rs 4341.35 crore. These increased export values shows that Karnataka is doing

good progress in exporting of agricultural and horticultural commodities. This is an indication

that there is ample scope for the development and increase of agriculture exports from the

State.

To promote the exports and provide an inadequate post-harvest infrastructure

facilities like procurement centers, grading washing, waxing, packing units, cold storages etc.,

in the state and by as per the recommendations of the agriculture policy of the State. The

Government has established Karnataka State Agricultural Produce Processing and Export

Corporation Limited (KAPPEC) on the 22

nd

of April, 1996.The authorized share capital of the

corporation is Rs 500 lakh. So far the State Government has released Rs 75 lakh out of which

Rs 50 lakh was utilized as share capital and Rs. 25 lakh as grant. In addition to this the

Government has also released an amount of Rs.10 crore in the budget for the creation of post

harvest infrastructure facilities in the state based on the potential in a phased manner in order

to boost the export of agricultural and horticultural commodities from the state.

Since inception till 31-01-2008, KAPPEC has handled about 3, 07,029 metric tonnes

of agricultural and horticultural commodities valued at Rs 48,739 Lakh. In addition to grapes,

KAPPEC has also exported Mangoes, Pomegranates, Drumstick, Watermelon, Red split

lentils, Niger seeds, Menthe seeds, Coconuts, Onions, Potato, Chilies, Garlic, Coriander, and

Turmeric to USA, U.K., Singapore, Srilanka, Malaysia, Middleeast, Turkey, Australia,

Netherland, Mexico, and Brazil etc.

KAPPEC has opened a cold chain facility in Bijapur mainly to harness the vast export

potential available for fresh Grapes, Pomegranate, Lime, Mango, Sapota, Banana, and other

horticulture crops grown in and around Bijapur district. It has created the required

infrastructure facilities like grading and pack house, pre-cooling chamber, cold storage units

under one roof equipped with refrigerated van and a laboratory. It organises training and

study tour for farmers and also arranges for publicity and propaganda programmes to boost

the export of Grapes and other fruits. The total cost of the project is Rs.301.23 lakh.The

facility has already been commissioned and the export of fresh Grapes and Pomegranates

has started. At the end of 31

st

May 2007, about 86.400 Mts.of fresh Grapes and 167.871

Mts.of Pomegranates were exported by leading exporters like M/s.Seven Star Fruits Pvt. Ltd.,

and M/s.Field Fresh. KAPPEC has recently constructed an integrated cold chain facility with a

total cost of about Rs 600 lakh at Kustagi. It is being implemented with the financial

assistance from APEDA.

Agricultural and Processed Food Products Export Development Authority (APEDA),

Ministry of commerce, Government of India has established an Agri Export Zone for Gherkins

in the state. Government of Karnataka has appointed KAPPEC as the nodal agency for the

implementation of AEZ for Gherkins in Karnataka. The concept of Agri Export Zone is to take a comprehensive look at a particular

product located in a contiguous area for the purpose of leading to final exports. To start an

Agri Export Zone first they identify the export potential products and identify the contiguous

areas where they are grown. After that they adopt an end to end approach of integrating the

entire process right from the stage of identifying or enlisting difficulties or problems

encountered at each stage. Lastly, they develop a package to suggest solutions to the above

listed problems and the agency or agencies identified to implement these in a given time

frame.

The Agri Export Zone for Gherkins is being implemented in Bangalore (Urban &

Rural), Kolar, Hassan, Tumkur, Chitradurga, Dharwad and Bagalkot districts. Out of 26

Gherkin processing units in India, there are 24 units in Karnataka, exporting about 70,000

Mts.of Gherkins every year and the turnover is around Rs.313 crores.Under this Agri Export

Zone around 41600 small and marginal farmers are being benefited under the contract

farming system. Various key activities like research on Integrated Pest Management and

Rural Credit to farmers have been successfully undertaken by KAPPEC in the capacity as a

facilitating nodal agency.

Bangalore rose onion is mainly grown for export purpose. About 16 active exporters

are engaged in exporting of these commodities. In 2006-07 about 32,652 Mts at value of

about Rs 74 crores was Exported from Karnataka. Bangalore rose onion are grown only in

Bangalore (Urban and Rural) and Kolar, and KAPPEC has been supplying good quality Rose

onion seeds to farmers every year.

During July 1999 Government of India had canalized the export of Bangalore rose

onion through KAPPEC. Accordingly, KAPPEC has successfully made necessary

arrangements for exports. By looking into the performance of KAPPEC Government of India

made KAPPEC as the canalising agency of Bangalore rose onion.

By considering the excellent performance of Karnataka State Agricultural Produce

Processing and Exporting Corporation Limited (KAPPEC).The Government of India, Ministry

of Commerce has awarded it the status of an “EXPORT HOUSE.”

An attempt has been made to study the role of Karnataka State Agricultural Produce

Processing and Exporting Corporation Limited (KAPPEC).In export promotion till now no

comprehensive study has been conducted on the performance evaluation of Karnataka State

Agricultural Produce Processing and Exporting Corporation Limited (KAPPEC).Hence, it was

felt appropriate to study the performance of KAPPEC and its impact on exporting of

agriculture and horticulture commodities in the State with a view to know the strong and weak

points in its operations.

The study may help the planners, policy makers and administrators in taking future

course of action. The results of the study will also help in identifying the constraints if any, in

the working of KAPPEC, which may serve as guideline for the administrators and suggest

appropriate package of policy measures, which will help the planers, policy makers etc., for

developing effective programe implementation.

The Specific Objectives of the Study are as Follows

1. To analyse financial indicators of Karnataka State Agricultural Produce Processing

and Export Corporation Limited (KAPPEC).

2. To analyse the trend of agricultural and horticultural commodities Exported by the

KAPPEC.

3. To document the agricultural and horticulture Commodities export procedure.

4. To identify the constraints in the functioning of KAPPEC and suggest appropriate

policy measures.

Hypotheses

1. The performance of KAPPEC is satisfactory.

2. There is an increasing trend in agricultural and horticultural commodities exported by

the KAPPEC. 3. There are some constraints in functioning of KAPPEC.

Presentation of the Study

The entire study has been presented in six chapters. Chapter – 1, deals with the

significance of the problem, the issues involved and the specific objectives of the study.

Chapter – 2 includes Review of earlier studies connected with the present investigation.

Chapter – 3 is devoted to the description of the study area. The nature and sources of data.

The tools and techniques of analysis adopted for evaluating the objectives. The next chapter

sumarises the results under appropriate heads, consistent with the objectives of the study.

While chapter – 5 provides explanation for the causal relationships between certain variables

and the outcome which they produced. It also tries to provide a frame or references for

drawing policy measures. The last chapter summaries the overall results and brings out the

major policies to improve the performance of the KAPPEC.

Limitations of the study

1) It is a case study.

2) No comparison is made among different corporations.

3) It was not possible to compare KAPPEC with any private owned export company

because of time and resource constraints. 2. REVIEW OF LITERATURE

With a view to evaluate the objectives of the study. It was considered desirable to

have idea of the findings of some of the earlier research studies and the method adopted

therein. Such review of literature connected with the working and performance of Karnataka

State Agriculture Produce Processing and Export Corporation Limited (KAPPEC) in

Karnataka. It was hoped would provide a basis either for confirming the earlier findings for

contradicting them and there by suggest points of departure for further studies.

Consistant with the objectives of the study, the review of literature is presented under

the following heads.


2.2 Growth rate of the institution

2.3 Documentation

2.4 Constraints of the institution.


Natarajan et al. (1980) analysed the working of consumers co-operative in Andhra

Pradesh, and observed that the current ratio of 2:1, quick ratio of 1:1, inventory ratio, net

profit margin, return on assets and return on share capital were the best standards of

evaluation. The results of their analysis showed that the liquidity position was not satisfactory.

Financing in excess of equity, poor inventory turnover, heavy establishment and contingent

expenses in proportion to sales, huge stocks of inventory and ineffective utilization of funds

were the major causes for the poor performance of consumers Cooperative in Andhra

Pradesh.

Ananth (1984) evaluated the performance of the grape grower’s marketing and

processing co-operative society in Bangalore by employing the ratios such as structural,

liquidity ratio, profitability ratio, turnover ratio, total sales to fixed assets ratios and total sales

to owned funds ratio in order to study the financial position at the various stages of the growth

of the society.

Rama (1984) evaluated the performance of a farmers service co-operative society

(FSCS) in Karnataka, using the solvency ratios, such as total liability to owned funds and

fixed assets to owned funds; the liquidity ratios like liquid assts to total assets, current assets

to current liabilities and acid test ratio; the profitability ratios such as net profits to total assets,

net profits to working capital, net profits to owned funds and net profits to fixed assets; and

the turnover ratios like efficiency of capital, inventory turnover ratio, working capital turnover

gross ratio percentage and operating ratio.

Acharya (1985) employed principal component analysis technique to identify the most

important price and nonprice factors influencing pulse production in Rajasthan state and its

important pulse growing districts. The variables included in the analysis varied from crop to

crop and district to district. Among the various variables, the important ones identified were

lagged area, price, yield, sowing time. Of the results, he selected only first three components

which accounted for major variation (60.70%) in the explanatory variables.

Rayadu (1985) studied the working of industrial co-operative from 1977-78 to 1981-

82 using various financial ratios. It was found that all the industrial co-operatives had more

solvency than liability but was less than the established standard of 2:1 .It was also revealed

that they were not in a position to meet all current obligation immediately, since the

aggregated acid test ratio worked out 0.46:1.

Bhalerao (1985) analysed the business performance of “the central arecanut

marketing and processing co-operation limited”, using the financial statement analysis

technique. Solvency, liquidity, profitability and other performance variables were used to

measure the overall performance. To measure solvency of the society, ratios of total liabilities

to owned funds were used. To measure liquidity, ratios of liquid assets, to total assets, current

assets to current liabilities and total assets to total liabilities were used. To measure profitability, ratios of net profits to total assets, net profits to total working capital, net profits to

owned funds, net profits to sales, and net profits to net worth were used.

Shankaramurthy (1986) studied the performance of the Karnataka State co-operative

marketing federation limited and its impact on farm market. He used various financial ratios

like solvency, liquidity, profitability and turnover ratio for the analysis of the performance. He

also used compound growth rate analysis for the selected financial and physical indicators.

He analysed the response from three different groups of respondents by employing cluster

analysis technique.

Thanulingam (1987) analysed the financial performance of thirty hand loom cooperative societies in Paramakudi town, Tamilnadu for the period 1980-84 using liquidity,

profitability and turnover ratios. The study revealed that financial performance of the societies

was poor due to factors like accumulation of heavy stocks, very low gross profit margin and

large quantity of debtors created high current ratio resulting in inability of handloom sectors to

meet short term obligations.

Bishnupriya (1990) studied the working capital management in Orissa state cooperative milk producer’s federation (OMFED) limited. He has used various concepts like

gross working capital, net working capital in the analysis.

Mattigati (1990) while conducting a study on the performance of milk producers Cooperative societies in Dharwad district, made use of different financial ratios to asses the

financial position of the societies. He found that, 1) increasing trend of gross ratio was due to

the increase in the business turnover,2)net worth in the case of below average societies was

lower but positive and net capital ratio was more than unity. He inferred that the lower net

worth did not affect the strength of the below average societies.

Patil (1991) studied the financial position of Karnataka state milk producer’s

Cooperative Federation using different ratios such as, solvency, liquidity, profitability,

turnover, efficiency, and strength. He drew the following conclusions decreasing trend in the

liquidity ratio was due to accumulation of more fixed assets, higher liabilities represented by

increasing trend of solvency ratio was due to higher sales turnover and this will not affect the

solvency position of the organization and higher inventory turnover ratio represented the

higher existing stock rate and chances of inventory carrying or unsalable were limited.

Padmini et al. (1992) studied the financial performance of Shree Narayana power

loom industrial co-operative Society by employing various financial ratios such as turnover

ratio, liquidity ratio, sales ratio, etc. The analysis revealed that the liquidity position of the

society was very poor, thus financial performance of the society is not up to the level.

Dash (1996) analysed the financial performance of the District co-operative Banks of

Maharastra through composite index. To study the financial performance following ratios were

used they were Owned funds to working capital, deposits to working capital, borrowing to

working capital, credit deposit ratio, yield on assets, cost of funds, cost of management, net

margin, recovery percentage. He concluded that DCCS banks need great attention from

NABARD, apart from supervision and monitoring.

Singh et al. (1999) analysed the performance of agricultural co-operative service

societies in Punjab. The study was conduced in four districts namely Ludiana, Patiala,

Nawanshahar, and Amrithsar district of Punjab State. Twenty co-operative agricultural service

societies were chosen randomly for data collection from the selected districts. The data were

collected personally with the help of well-structured schedule. Data was put to tabular

analysis. He concluded that efficient management, freedom to work and integrity of attached

staff, particularly chairman were found to be the major attributes of success of any cooperative venture.

Ayenew et al. (2000) studied the performance of primary agricultural co-operative

credit societies in Haryana.They used the secondary data collected from various published

sources for the period 1997-1999.The data with regard to different components of cooperative

credit structure of the society were collected. He noticed that about more than six -fold

increase in the amount of deposits, yet the amount of deposits mobilized by PACS as

compared to loans advanced was found unsatisfactory during the period under study and the

magnitude of deposit mobilized per society had increased by more than four times. Devaraja (2000) studied the performance of HOPCOMS, Karnataka. He collected

data relating to physical and financial indicators of the society from balance sheet, annual

reports, records and audit reports of the society for a period of 38 years. For financial ratio

analysis he used structural ratio, liquidity ratios, profitability ratios, turnover ratios. He

concluded that there were substantial increase both in the physical indicators and the

financial indicators of the society over the operational period of study.i.e.growth in

membership, rental outlets, share capital, owned funds, total assets, long-term investments

etc.

Nag (2001) analysed the performance of trajectory of public sector banks in India

using self-organizing maps. They used the SOM algorithm for construction of profitability map

of public sector bank in India and stratified them based on their overall level of performance.

Three major clusters emerged out of the analysis. The larger cluster contains most of the

State Bank of India and associated bank’s points mainly Characterized by highest level of

commission income to total income and lowest level of the ratio of interest income to total

income. The second cluster contains banks with very high levels of staff expenses to total

expenses ratio and intermediation cost to total assets ratio. The third cluster is the smallest

block of homogenous banks, typically characterized by a combination of the level of

commission income to total income and provision and contingencies to total assets ratio.

Soundara et al. (2001) analysed the performance of coir co-operatives in Tamil

Nadu.Secondary data were used foe the study were collected from the directorate of

industries and commerce Chennai for 2000-01. The study covers a period of 10 years. From

the study he concluded that the various facts and findings relating to the working of the coir

co-operatives in TamilNadu clearly indicated that the position of the units was not satisfactory.

Smitha et al. (2003) evaluated the business performance of fishery cooperative

societies in Vasai taluk of Thane district, Maharastra.The study was conducted among eight

fishery cooperatives of 11 existing primary cooperative societies in Vasai taluk. A financial

ratio technique was used to study financial performance of fishery cooperatives. Vasai zone

with a production of 32,643 tons had contributed to the tune of about 32 percent of the total

marine fish landing of thane district in 1995-96, which has comedown to about 9,943 tons by

the year 2002-03.This decline was due to over exploitation of fish and loss of fish stock due to

increasing population level in the area.

Bardhan (2004) evaluated India’s trade performance in livestock and livestock

products. The study is based on the time series data pertaining to the period 1980-2004.The

data were collected from FAOSTAT data base. To examine the changes in exports and

imports compound growth rates were estimated. The growth rates were calculated for two

periods like pre-WTO(1980-94) and post-WTO periods (1995-2000)separately to assess the

implication of WTO on livestock trade. They noticed that the share of livestock to total

agricultural export-although small has shown increasing trend in the recent past, which

implies better growth in export earnings from livestock products than those from other

agricultural commodities. Livestock sector’s share in agricultural imports has gone down

drastically in the last two decades, pointing towards India’s potential in achieving selfsufficiency in meeting domestic demand.

Anjani (2006) evaluated the Livestock sector trade of India : Surging momentum in the

new liberalized regime. The data on export and imports of livestock products, agricultural

exports and imports and total merchandise exports and imports were compiled from monthly

statistics of foreign trade published by DGCIS, ministry of commerce, government of India. All

the values of exports and imports were converted into US dollars to net out the effect of

fluctuations in the exchange rates. To analyse the performance of exports and imports of

various livestock products, the triennium averages (TF) were computed to minimize the wide

fluctuations.

Murugesan (2006) evaluated the performance indicators of primary agriculture credit

societies (PACS).By the available literature, eight broad categories of indicators have been

developed namely organizational, functional, self reliance, profitability, cost, democratic,

participation and social efficiency .He concluded that any attempt to analyse the performance

of co-operative we should be comprehensive to include the economic and social dimension. 2.2 Growth rate of the institution

Krishnaji (1980) examined the methodological issues in measuring the growth.

According to him, though R

2

is not a very reliable guide to choose the correct functional form

yet the common procedure is to choose the form of regression that has the highest value of

R

2

from among a set of trend functions.

Bhalerao et al. (1981) studied the growth of arecanut marketing societies in India for

the period 1967 to 1977. The year wise analysis of growth considered variables such as

number of societies, membership, share capital, working capital, reserve funds, deposits and

per member average of all these indicators. The study indicated that the growth was not

consistent and there were annual fluctuations in the variables considered.

Chandrakanth (1983) commenting on the suitability of different functional forms of

growth, basis of selection of a model and method of measurement of growth rates opined that

in any time series study R

2

value alone would not determine the goodness of fit. The

computation of Durbin –Watson statistic (DW) suggested to know the extent of auto

correlation so that some corrections can be made in raw data so as to reduce the same.

Rao (1985) analysed the growth rate of certain variables like share capital,

membership, total assets in his study on business performance of the Central Arecanut

Marketing and Processing Cooperative Ltd., Mangalore, Karnataka from 1973-74 to 1980-

81.The growth functions of both exponential and modified exponential form as given below

were fitted to a certain performance variables.

Y= ab

t

exponential function.

He observed that annual rates of increase of different performance variables were not

uniform. The growth of paid-up share capital, membership, total assets, working capital and

purchases increased steadily, while in the case of sales, the growth rate was high in the initial

years and declined in later years (from 1977-78).

Winfred (1985) analysed the operational growth of land development banks by

measuring the rate of growth of operations like membership resources, Government support,

floating of debentures, investments, loan operations, overdues, cost of management, profit

and the extent of credit disbursed weaker sections for a period of ten years from 1969-70 to

1978-79.The compound growth rate was calculated by using formula

Y

t

= Y o (1+ r / 100)

t

Where,

Y o = Base year value;

Yt

= t

th

year value;

t = number of years and

r = compound growth rate.

He found that banks with limited loan transactions, non-diversification of their lending

programmes and mounting overdue could not make any marked impact in the field of

agricultural credit.

Shankarmurthy (1986) used compound growth rate analysis of exponential form while

studying the performance of Karnataka state co-operative marketing federation Ltd. The

important physical indicators considered were membership, branches/depots, total number of

employees, direct recruits and deputations. The indicators related to share –capital, owned

funds, fixed assets, total liabilities, inventory, total sales, sale of fertilizers, sale of other

commodities and establishment expenses. In the case of financial indicators, constant price

was followed for the sub-periods and for the aggregate period to account for the inflationary

trend in the economy in order to get real picture of the situation.

Jitendrakumar (1990) in his study of performance of dairy co-operative on milk

production, income and employment in Chitoor District, Andhra Pradesh, used the compound

growth rate analysis for various physical and financial indicators of the selected milk producer’s co-operative societies. The exponential function of the following type was

employed to estimate the growth rates.

Y= ab

t

Where,

Y=Indicator

a = constant

b = Regression coefficient

t = Time (Years)

He also used the financial ratio analysis to evaluate the performance of a business

organisation.

Pradeep (1993) used growth rate to analyse the growth in physical and financial

performance indicators of horticultural producer’s co-operative marketing society limited,

Bangalore. The indicators considered were membership, share capital, owned funds, sales,

inventories, fixed assets, current assets, total assets, current liabilities and total liabilities.

Ayenew et al. (2000) studied the performance of primary agricultural co-operative

credit societies in Haryana.They used the secondary data collected from various published

sources for the period 1997-1999.The data with regard to different components of cooperative

credit structure of the society were collected and compound growth rates were worked out by

using the least square method of fitting the following exponential function by assuming that

the variables are moving geometrically.

Y = ab

x

Where, Y = variable

a = Constant

b = (1+r), r being the growth rate

x = the time period in years.

He found that the membership, paid up share capital, owned funds, deposits,

borrowings, working capital, loans advanced, loans outstanding, over dues and cost of

management registered annual compound growth rates of about 5, 14, 16, 27, 16, 16, 23, 17,

11 and 19 per cent respectively.

Soundara et al. (2001) Analysed the performance of coir co-operatives in Tamil

Nadu.Secondary data were used for the study were collected from the Directorate of

Industries and Commerce, Chennai for 2000-01.For analyzing the changes in the variables

such as production, sales, employment, capital and profitability compound growth rate was

used. To fit the compound growth rate, a simple regression model was used as indicated

below.

Y = a b

t

Where, Y = Variables

a ,b = Parameters to be estimated

t = time period.

He concluded that the various facts and findings relating to the working of the coir cooperatives in TamilNadu clearly indicated that the position of the units was not satisfactory.

Anjani (2006) evaluated the Livestock sector trade of India : Surging momentum in

the new liberalized Regime. In their study compound annual growth rates (CAGR) were

estimated to examine the growth trends in exports and imports of various livestock products.

The study explicitly demonstrated that the livestock exports have registered a commendable

rise and liberalization policies seem to have further augmented their growth. The imports of

most of the livestock products have been insignificant. India has the potential to significantly

increase and expand the export of livestock products. 2.3 Documentation

Perez et al. (1995) studied the Short-term impacts of irrigation management transfer

in the Hakra 4R Distributary canal in Pakistan's Southern Punjab. This technical report looks

into the printing, issuing and use of the official documentation for the transport of forest

products and the importance of the adequate handling of these documents for the operational

process of forestry in Michoacan, Mexico. To this end, sites authorized for the exploitation of

resin and wood were inspected, and visits were made to industrial plant and to the offices of

the SARH and the Unidade de Conservacion and Desarrollo Forestal which issue

documentation for the transport of forest products. Moreover, a survey was carried out with

the owners of exploitation sites, industrial plants and contractors. The problems related with

each of the stages of the process of documentation are defined, and how these problems

coincide to the detriment of forest resources are indicated. Some alternative solutions are

suggested for each particular case, all with the objective of reducing the possibility of

'legalizing' shipments of wood and resin from clandestine operations.

Mitra, (2000) Studied the Lack of control in documentation for transport of forest

products: Mexico. Joint forest management (JFM) in a real sense began in Maharastra

(India) in 1996-97. Financial assistance is provided by the state government in a phased

manner for its various components. The micro-plans are prepared in consultation with the

villagers. The progress is monitored at circle and state levels. Process documentation is being

carried out as it is likely to motivate the people. Finally he noticed benefits in the quality of

forest management, moisture regime and better quality of grasses, and some employment to

the villagers.

Rukmini (2001) Studied improving organ donation in Central Saudi Arabia. This

chapter examines the experiences of Seva Mandir, a voluntary organization working in rural

development in Rajasthan, India, in the context of social learning theory. She identified six

avenues for organizational learning and adaptation: feedback from field-level workers;

process documentation; research studies; training programmes; internal conflict and debate;

and interactions with the government. I then examine cases of each learning mode to

illustrate the processes that led to crucial modifications in organizational perceptions,

structure and strategy. Seva Mandir's experience suggests that some redundancies and

apparent inefficiencies in organizational structure and function can actually enhance learning

opportunities and, ultimately, the effectiveness of development interventions.

Bodmer (2004) Wrote paper on Ethnopharm acological studies of antimicrobial

remedies in the south of Brazil. This paper deals with the usage of imitated and falsified drugs

for animal treatment, which may cause risks for consumers as well as monetary and

confidential losses for the producers of branded drugs. First, the current process of medical

treatment and documentation of these treatments is described. Problems that might arise

within this process are shown. A proposal is then developed on how the current process of

documentation of the medical treatment of animals that are meant for human consumption

can be improved. This proposal is used to develop an adequate ER-model designed to cover

the needs of plausibility checks.

Souza et al. (2004) Studied Facilitating process for community-based tourism

management: Mong Community Houy Namrin Village and Chiang Daow Village, Chiang Mai

Province. The study reports the antimicrobial evaluation of the species most commonly used

in Rio Grande do Sul (RS), the southernmost state of Brazil, for treating conditions likely to be

associated with microorganisms. A four-stage process of documentation and evaluation was

conducted: (a) review of RS ethnobotanical studies; (b) analysis of traditional uses; (c)

literature survey on phytochemical and pharmacological data; (d) microbiological screening of

selected plants. From the 149 species initially identified, 49 were cited as being used for

microbial associated conditions in at least two other regions in RS, and 18 were further

selected for screening. The crude methanol extract of these 18 plants were evaluated against

seven microorganisms using the diffusion agar test. Extracts from Chaptalia nutans, Cordia

monosperma, Echinodorus grandiflorus, Eugenia uniflora, Leonurus sibiricus, Luehea

divaricata, Malva sylvestris, Ocotea odorifera, Parapiptadenia rigida, Pluchea sagittalis,

Psidium cattleyanum and Senna neglecta were active against at least one microorganism.

Although preliminary, these results are useful for rationalizing the use of medicinal plants in

established systems of traditional medicine in primary health care. 2.4 Constraints of the institution

Muniramappa (1982) made an exhaustive analysis of the mechanism of linking of

credit with marketing in Karnataka for a period of 12 years (ending 1973-74).The conclusion

was that all was not well with the working of the co-operative marketing structure. Though

certain suggestions were made to improve further, ultimately it was the government that could

play a vital role in this sphere. Further, enlightened co-operators, innumerable agriculturists

and others involved have to put the marketing co-operatives on the right track so that they

could become important instruments of rural upliftment and institutions of financial viability in

assisting the farmers.

Ramaiah et al. (1983) in assessing the performance of 58 farmer’s service cooperative societies (FSCS) in Andhra Pradesh concluded that out of the total volume of non

credit services, input supply constituted 91.36 percent , consumer goods accounted for 5.18

percent and customer service formed 2.4 percent and the marketing services 0.04 per cent.

This indicated that the non - credit services were mainly confined to supply of agricultural

inputs and the marketing of agricultural produce was completely neglected by all the FSCS

except one.

Ramesh and Nagabhushanam (1983) in their study on the evaluation of the impact

of Mulkanoor co-operative rural bank in Andhra Pradesh have concluded that resource

utilization on the farms of members was more than that on the farms of non - members. The

benefit –cost ratio of the beneficiary farms was 1:1.17 while it was 1:1.06 on the non

beneficiary farms. The resource efficiency was also found to be high on the member farms.

The impact was being felt by way of higher yields and higher returns on the member farms

and this indirectly increased its own business activities. The co-operative bank was

responsible for the overall development of the area of its jurisdiction and it had left an indelible

impression on the members as well as non-members.

Singh (1984) in a study on co-operative marketing societies in India opined that

during the decade 1969-78, the co-operatives made a commendable progress quantitatively

but lacked qualitative improvement. The marketing societies accounted for less than ten per

cent of the marketed surplus of agricultural produce in the country. Further, the study

indicated considerable inter – state inequality.

Vithal (1986) studied the working of the co-operative milk societies in Ananthapur

district Andhra Pradesh with the help of field observations and formal discussion with a score

of members of the selected societies apart from the secondary data collected at various

levels. He suggested that-

1. Honesty and integrity should be taken into consideration while appointing the

secretary.

2. The dairy should arrange proper transport facilities to boost up milk procurement.

3. Dairy should ensure proper support price to milk producers by taking into account the

cost of milk production.

4. Different schemes should be backed up with support facilities to make them

successful.

Ram (1988) made an attempt to analyse the organization and working of Jaipur

district milk producer’s co-operative union limited, Jaipur. The study was conducted through

personal interview with the members of management and other employees of the union. It

was found that the organizational structure and functions performed such as –

1. milk collection

2. supply of technical inputs

3. farmers induction programmes and

4. Supervision was analysed.

After analyzing the above variables, some drawbacks were found out and appropriate

suggestions were made. Mattigatti (1990) conducted the interview of 100 farmers-members and 36 policy

makers and officials to elicit the opinion on the performance of dairy cooperative in Dharwad

district of Karnataka state. He considered the indicators like supply of inputs, veterinary

service, better prices, regularity of payments, linking of credit with membership, regularity of

meeting, working of the board, participation of directors, working of officials, transport facility

and price received etc.He observed that for most of the indicators, the majority of the

respondents were satisfied about the performance. In most of the cases the unsatisfactory

opinions were negligible(less than 5 per cent) except in the case like supply of inputs, price

received, credit linking facility and transport facility. In these cases, the unsatisfactory score

was more than 25 percent. The author suggested to the society to provide better input

services along with the better prices.

Singh et al. (1999) analysed the performance of agricultural co-operative service societies

in Punjab. They identified some constrains of cooperative and suggested some points for

improving functioning of the society. They were

1) The agricultural cooperative societies should be emancipated from numerous

unnecessary restrictions pertaining to purchase of fertilizer and other materials including

conusumarable goods from the government.

2) As most of the societies expressed their dissatisfaction with the supply of material made

by MARKED, there was a need to reconsider about the linking of these institutions with

the PACS.

3) Rampant corruption in cooperative sector should be tackled firmly.

Populist policy followed by the government like loan waiving should not be allowed.

Vinod et al (2004) conducted a study with reference to 120 respondents scattered in

six villages of two blocks in rewari district of Haryana to analyze the nature of markets and

role of cooperatives in marketing of milk. It was observed that on medium and large category

of farms the milk sold through cooperative society was found to be higher than the disposal

through milk vendors and directly to the consumers mainly due to more marketable surplus.

While on small farms the disposal was found to be almost equal, i.e., 35 per cent though milk

vendors and directly to the consumers, and the disposal of milk through cooperatives society

was less due to lower marketable surplus owing to smaller heard size. 3. METHODOLOGY

This chapter deals with the description of the study area, organization functions,

organizational structure, achievements, nature and source of data, analytical tools and

techniques used in the study.

3.1 The Study Region

Karnataka is the eighth largest state in India with an area of 1, 91, 791 sq km. It is

situated between 11.5° and 19.0° North latitude and between 74° and 78° East longitude in

the southern plateau. Table 3.1 indicates general and demographic features of Karnataka.

According to 2001 census, Karnataka has a total population of 52.81 million comprising of

26.86 million males and 25.95 million females, with an overall literacy rate of 67.04 percent.

Rural population is about 3.48 million and urban population accounts for 17.92 million. The

population density of the state is 275.5 per sq km. The average annual rainfall of the state is

about 1139 mm from both South-West and North-East monsoons. The mean temperature

ranges from 10°C to 44°C. The state is bounded by Maharastra and Goa on the North,

Andhra Pradesh on the East and Tamil Nadu and Kerala on the south. On the west, it opens

to the Arabian Sea.

Climate in most parts of the state is moderate due to its relatively high altitude. Being

situated relatively close to the sea, this region has a small range of temperature variation

during the year. The mean temperature of the hottest month (April) is 27.30°C and the mean

temperature of the coldest month (December) is 20.5°C.The average annual rainfall is about

1200 mm.The major food crops grown in the state are Rice, Ragi, Jower, Bajra, Wheat,

Pulses, etc., and non-food crops grown are Cotton, Groundnut, Sugarcane, Arecanut, Chilli,

Tobacco, Cardamum, etc., The South West Manson sets in the first week of June and

continues its downpour for four months.

The economy of Karnataka is predominately agrarian with about 66 per cent of its

work force dependent on agriculture for their livelihood. Agriculture Sector has been receiving

active support from the Government. The State with its salubrious and moderate climate

accounts for large areas under horticulture crops. As per estimates about 1.59 million ha was

under fruits, vegetables, flowers, spices, condiments and plantation crops representing over

13.00 per cent of the cultivated area with a production of 10.64 million tonnes of variety of

horticultural products. Area under fruits is 2.99 lakhs ha, vegetables 2.43 lakhs ha, plantation

and spices 10.19 lakhs ha and flowers 0.20 lakhs ha. Mango, banana, grapes,

pomegranates, onion, potato, tomato and chilies occupy larger areas while cashew, coconut,

coffee and tea are the major plantation crops grown in the State. Concentration of single

crops like banana, grapes, mango, pomegranate, potato, cashewnuts, coconuts, arecanuts is

observed in specific areas.

The average annual growth in respect of all horticulture crops is estimated at 4.40 per

cent while the production is growing at 5.20 per cent annually indicating productivity

improvements due to the production of high yielding varieties and use of improved

technology. The State has one of the best production tracts for Chillies, Onion, Tamarind,

and Coriander and Betel vine. During the last 10 years area under flowers has doubled. Fig 1: Location map of the study area Table 3.1. Karnataka at a glance

Sl no Particulars Unit Number

General features

1 Total area Sq. kms 191791

2 Number of districts no's 29

3 Number of sub districts no's 176

4 Number of towns no's 270

5 Number of villages no's 29406

6 Number of households no's 10401918

Demographic features

1 Population no's 52850562

a. Males no's 26898918

b. Females no's 25951644

2 Decadal growth rate Percent 17.51

3 Sex ratio no's 965

4 Literacy rate (total) Percent 66.6

a. Males Percent 76.1

b. Females Percent 56.9

Source: Directorate of Economics and Statistics (2006-07) 3.2 Organization and Working of Export Promoting Industry in

Karnataka

The state of Karnataka has been one of the pioneer states in exporting agriculture

and horticulture commodities in the country. A number of export promotion boards are

working in Karnataka for the promotion of agriculture and horticulture produce. Some of them

are Visveshvaraya Industrial Trade Center (VITC), a registered society functioning under the

Directorate of Industries and Commerce, is at present, the Nodal Agency for promotion of

exports of all products from the State. VITC is regularly conducting seminars, workshops and

training programmes related to exports, organizing or participating in Trade Fairs or

Exhibitions both at the National and International levels, sponsoring Trade Delegations

abroad, counseling exporters resolving grievances of exporters etc., and is working in close

co-operation with Export Promotion Councils or Commodity Boards, Customs and other

related Central and State Government Departments or Organizations to promote exports

from the State. It is proposed to restructure VITC as Export Promotion Board of Karnataka

which shall be the Nodal Agency to guide and provide assistance to exporters as well

as facilitate in obtaining clearances from regulatory departments and resolving operational

problems of exporters in Karnataka. In addition to all these committees Karnataka State had

brought out an agricultural policy in 1995. Several recommendations were made for the

allround development of agricultural sector which includes horticulture and floriculture. One of

the recommendations was to establish an organisation for promoting exports. Accordingly

Karnataka State Agricultural Produce Processing and Export Corporation Limited (KAPPEC)

was established on 22nd April 1996.

3.3 Functions of KAPPEC

1. Encouraging budding entrepreneurs to take up exports by guiding them the procedures,

formalities, market information like demand and supply position for export of potential

commodities.

2. Conducting seminars or symposium in the growing areas to create awareness among the

farming community about the need to grow export quality produce steps to be taken on

pre and post harvest techniques and publication of literatures in this regard.

3. Supply of good quality inputs.

4. Participating in international exhibitions to promote the export of Karnataka products.

5. Encouraging research activities on the export potential crops to enhance the quality,

productivity and production as per international standards.

6. Conducting periodical meetings with the exporters in order to address their greivances.

Also interaction with all the concerned stakeholders like exporters processors, bankers,

Government agencies, customs authorities, growers, research agencies etc., to

understand their difficulties and try to address them in the best interest of the industry and

growers in particular and State as a whole.

7. Getting the Agri Export Zone (AEZ) sanctioned for the export potential crops in order to

give special emphasis to boost the export of such crops. Example Bangalore rose onion,

Gherkins, flowers etc.

8. Encouraging joint venture equity participation for the development of infrastructure for

exports.

3.4 The Karnataka State Agricultural Produce Processing and

Export Corporation Limited (KAPPEC)

As per the recommendations of the Agriculture Policy of the state to develop and

promote the production, processing and export of agriculture, horticulture and floriculture

products, government has established Karnataka State Agricultural Produce Processing and

Export Corporation Limited (KAPPEC) on 22

nd

April 1996.The main aim of the KAPPEC is to

develop and promote the export of agricultural, horticultural and floricultural products. Since inception till 31-01-2008, KAPPEC has handled about 3, 07,029 metric tonnes of agricultural

and horticultural commodities valued at Rs 48,739 lakhs. In addition to grapes, KAPPEC has

also exported Mangoes, Pomegranates, Drumstick, Watermelon, Red split lentils, Niger

seeds, Menthe seeds, Coconuts, Onions, Potato, Chillies, Garlic, Coriander, and Turmeric to

USA, U.K., Singapore, Srilanka, Malaysia, Middle-East, Turkey, Australia, Netherlands,

Mexico, Brazil etc.

3.4.1 Investment

The authorised share capital of the Corporation is Rs 500 lakhs. So far the state

government has released Rs 75 lakhs out of which Rs 50 lakhs as share capital and Rs 25

lakhs as grant. In addition to this the Government has released an amount of Rs 10 crore in

the budget for the creation of post harvest infrastructure facilities in the state based on the

potential in a phased manner in order to boost the export of agriculture and horticulture

commodities from the State. The Government of Karnataka and Government of India are

eligible for investment.

3.4.2 The Structure of the Board

The Board of Karnataka State Agricultural Produce Processing and Export

Corporation Limited has three directors, representative of the Government of Karnataka. The

Board is headed by Chairman, Honourable Minister of Agriculture.

3.4.3 Organisational Structure

3.4.3.1 Managing Director: Managing Director being the Chief Executive of the company, has

the overall authority/powers to run the day to day affairs of the organization subject to the

superintendence and control by the board.

3.4.3.2 General Manager: The general manager is the second line officer supporting the

Managing Director in decision making process besides co-ordinating various activities of the

corporation.

3.4.3.3 Assistant Finance Manager: Assistant Finance Manager duties generally cover book

keeping and finalization of accounts and general administration matters of the corporation.

3.4.3.4 Field Officer: To look after the field level activities of procurement, grading, packing

and export of agri and horticulture commodities.

The supporting staff assists the top level management in smooth carrying out of the

business.

3.4.4 Objectives of KAPPEC

1) To develop and promote the production, processing and export of agriculture, horticulture

and floriculture products.

2) To identify the modern technology for increasing the productivity, production, processing

and storage of these commodities and to implement the same in the state.

3) To create post-harvest infrastructure facilities for the development and export of

agricultural products (including horticulture and floriculture) and also to promote the

private participation in this sector.

4) To establish processing units by KAPPEC or with joint venture participation with private

entrepreneurs.

5) To supply agricultural inputs or technology required by farming community.

6) To undertake market research about the export quality products and disseminate the

information to both the exporters and growers.

7) To conduct seminars, meetings involving farmers, scientists, bankers and other related

parties to create awareness among them and also to educate them about the potentiality

of agri exports. Fig 2: Organizational structure of KAPPEC 8) To organise exhibitions, buyer seller meets, participate in domestic as well as overseas

exhibitions, study tours abroad involving farmers to create awareness in them about the

technologies adopted by their counterparts to increase both production and productivity.

To undertake market research about the export quality products and disseminate the

information to both the exporters and the growers.

3.4.5 Achievements

1) KAPPEC has been designated as the “One Star export House” of the Govt.of India for

export performance in agriculture or horticulture commodities.

2) KAPPEC has been appointed as one of the canalizing agency for export of all varieties of

Onions from the country.

3) KAPPEC is the nodal agency for the implementation of AEZ’s in Karnataka.

4) KAPPEC has been awarded with the “Silver Trophy” and a “Citation” for the best

performing AEZ in the country by Govt.of India and “Silver Trophy” and a “Citation” for the

overall export performance during the years 1996-2000 from Government of Karnataka.

5) KAPPEC provided all the necessary facilities and support for the activities of WTO CELL

established by the Govt.of Karnataka. This cell has studied the impact of WTO regime on

Karnataka’s agriculture and horticulture and submitted its report to the Honorable Chief

Minister of Karnataka. Karnataka was the first State in the country to establish an

exclusive cell on WTO and prepared a report on Impact of WTO Regime. This report of

the WTO cell was circulated to all the Honorable Members of both houses of Parliament,

Govt.of India and Honorable Members of the State Legislative Assembly and Council.

This report became a guide to Government of India for further discussions and

negotiations with WTO in various forums.

6) KAPPEC has signed an MOU with the University of Agricultural Sciences, Bangalore for

development of high yielding lustrous and bold seeded varieties with high oil content in

Niger seed. The financial implication of this research project is Rupees seven lakhs.

KAPPEC has sanctioned funds for this project from its own resources.

7) KAPPEC is purchasing good quality variety of Bangalore Rose Onion seeds from the

National Horticultural Research and Development Foundation, Nasik and distributing to

farmers of the state directly and also through the Department of Horticulture.

8) KAPPEC is helping budding export entrepreneurs by providing them proper guidelines

and advice in order to increase exports of agriculture and horticulture commodities from

the state.

9) In order to encourage the floriculture industry, KAPPEC has participated in the equity in

International Flower Auction center Bangalore Ltd., promoted by Karnataka Agro

Industries Corporation Ltd., Bangalore.

10) KAPPEC has successfully exported Thompson seedless Grapes, Sharada seedless

Grapes and Pomegranates to Europe and Russia from Bijapur and paved the way for

boosting export of agriculture and horticulture commodities from the area.

11) In order to give a boost for horticulture exports from Bijapur and surrounding areas,

KAPPEC has advanced an interest free refundable soft loan of Rs 11.90 lakhs to the

Bijapur District Grape Growers Processing and Marketing Co-operation Society Ltd.,

Bijapur for modernizing their existing pre-cooling and cold storage facility and also to

create additional pre-cooling unit to facilitate exports.

3.5 Nature and Sources of Data

Secondary data was used to evaluate the objevitves of the study. The data on several

aspects of KAPPEC were collected from different sources. The data relating to the financial

aspects of the KAPPEC were abstracted from the balance sheet, profit and loss account,

receipts and payment were abstracted from the annual reports and records of the KAPPEC

for the periods of ten years i.e. from 1997-98 to 2006-07. Further the opinion of managing

directors and general manager were also sought to identity the constraints in the working of

KAPPEC. Though KAPPEC started in 1996-97 and did benefits and had some values for selected indicators, they were negligible compared to later year’s values. Hence, the value for

selected indicators for the first years was not considered for analysis.

3.6 Analytical Technique Employed

The data collected from the secondary sources were analysed in multiple stages. The

data were subjected to statistical analysis through the following techniques.

1) Tabular analysis

2) Ratio analysis

3) Growth rate analysis

4) Principle component analysis

5) Index method.

3.6.1 Tabular Analysis

Tabular presentation was employed to study the performance of the KAPPEC in

terms of its financial indicators and different activities. This method of presentation has also

been used in analyzing the constraints the KAPPEC. Simple statistical measures or tools like

average, percentage and ratios have been used in the study.

3.6.2 Ratio Analysis

Financial ratio analysis was used in the study to evaluate the business performance

of KAPPEC.

The purpose of ratio analysis was to optimize performance and to facilitate

comparison over time of an industry. In this study the following groups of ratio were

employed:

1. Structural or Solvency ratio,

2. Liquidity ratio,

3. Profitability ratio,

4. Test of strength

5. Test of efficiency

3.6.2.1 Solvency or Structural Ratio

The medium term and long term solvency position of the institution was assessed by

these ratios. These ratios indicate owner’s involvement in the total resources and provides

basis for measuring leverage ratio. The various ratios employed were as follows.

3.6.2.1.1 Total liability to owned funds

This ratio was obtained as given below,

Total liabilities

Total liability to owned funds = ------------------

Owned funds

The total liability includes paid up share capital, reserves and surplus, deferred tax,

liabilities, trade dues and other current liabilities. And then item such as funds, net profit,

reserves and surplus were included under owned funds of the corporation. The inclusion of

these items was in conformity with the suggestions made by the all Indian Rural Credit

Review Committee (1969).

This ratio gives us an estimate of the amount of money the corporation owned to its

creditors in relations to the amount of money invested in the corporation every year. 3.6.2.1.2 Fixed assets to owned funds

This ratio is computed using the equations given below.

Fixed assets

Fixed assets to owned funds = ----------------

Owned funds

Fixed assets include land, buildings, plant and machinery, computer and peripherals,

furniture and fixture, office equipment and vehicle- cars. These fixed assets of the corporation

were fairly permanent and of atmost importance to a growing business entity. The owned

funds of the corporation include the item as explained earlier.

3.6.2.1.3 Debt-Equity Ratio

This ratio compares the owner’s stake in the business with outside term liabilities. This

ratio is also called as leverage. Lower value of the ratio indicates that the leverage effect will

be restricted to the minor role of debt and the major capital being equity, the institution is

supposed to be trading on thick equity and when the ratio is high, it signifies dominant

leverage effect and the major capital being the borrowed capital. The equity capital plays

minor role indicating thin equity on which the institution is functioning.

Long term liabilities

Debt equity ratio = --------------------------

Net worth

In the above ratio the debt represents only long term liabilities which include paid up

share capital, reserves and surplus , while equity refers to the net worth after deducting

intangible assets.Net worth include statutory reserves, revenue and other reserves.

3.6.2.2 Liquidity Ratio

Liquidity provides a measure of the institution’s ability to meet its current obligations.

Since liquidity is basic to continuous operation, it was found necessary to examine the degree

of liquidity of the organization and to ascertain its ability in meeting the current financial

obligations.

3.6.2.2.1 Current Ratio

This ratio measures the degree of liquidity of the company in the short term .It

indicates whether the current assets are sufficient to repay the current liabilities.

Current assets

Current ratio = --------------------

Current liabilities

The current assets included in this study are interest accrued on deposits,

inventories, Sundry debtors, cash and bank balances, loan and advances, deposits, other

liabilities.

Current liabilities includes dues to SSI undertaking, other liabilities, and other

provision and liabilities.

A very high current ratio is not desirable as it would mean less efficient use of funds.

Similarly a low current ratio would mean too much of strain on working capital resources. It is

generally believed that a good current ratio should be between 1.5:1 and 2:1.Generally higher

the value of this ratio, better would be the margin and financial solvency of the company. 3.6.2.2.2 Liquid Assets to Total Assets:

This ratio was computed by dividing liquid assets with the total assets.

Liquid assets

Liquid assets to total assets = -------------------

Total assets

The liquid assets consist of current assets like cash on hand and current bank

accounts which can be readily withdrawn. The total assets include bank balances,

investments, advances and fixed assets like land, building, machinery and equipment,

vehicles, etc.

3.6.2.2.3 Acid Test Ratio

This ratio is called quick ratio or near money ratio. This represents the ratio between

quick assets (current assets less inventory) and the quick liabilities.

Quick assets

Acid test ratio = ------------------

Quick liabilities

Quick assets include cash in hand; cash at bank. Quick liabilities include interest

accrued, other provision and interest paid.

The ratio indicates the extent to which the capital is financing the current assets

which carries a low degree of liquidity.

3.6.2.3 Profitability Ratios

These ratios can be used to asses the financial status and overall efficiency of the

institution. These ratios were used to compare the returns over the investments. The following

were the important ratios.

3.6.2.3.1 Net Profit to Total Assets Ratio

This ratio indicates the ratio of profit on the total assets of the institution and their

employment. The ratio was computed as follows.

Net profits

Net Profit to Total Assets Ratio = --------------------

Total assets

An increasing trend over the years indicates the overall efficiency of the institution.

3.6.2.3.2 Net Profit to Net worth Ratio

Net worth means present value of assets minus all liabilities. The ratio of net profit to

net worth shows whether profitability is being maintained.

Net profit

Net profit to Net worth ratio = --------------

Net worth

A decline in the ratio should be a cause of inquiry. 3.6.2.3.3 Net Profit to Fixed Assets

The ratio indicates whether the fixed assets are being used properly. A decline in the

ratio shows either the assets are being kept idle or that business conditions are bad.

Net profits

Net profit to fixed assets = ----------------

Fixed assets

The lower ratio indicate that the adequate depreciation was not written off so that the

assets were not worth what they are stated to be. Further, it may mean that the assets were

such that they may exist for a short period. The fixed assets consisted of land, building,

furniture and fixtures and depreciation on assets.

3.6.2.4 Tests of Strength

The following measures were used to measure the real worth of KAPPEC.

3.6.2.4.1 Net Worth

It indicates what the business owes to the owners of business. It measures the

excess of assets over liabilities. A positive difference of higher magnitude indicates the

soundness of the institution.

Net Worth = Total assets – Total liabilities

3.6.2.4.2 Net Capital Ratio

This ratio indicates the degree of liquidity of the business in the longrun. It measures

the degree of availability of assets to pay off the long term liabilities.

Total assets

Net capital ratio = -----------------

Total liabilities

Higher the net capital ratio, greater would be the margin of safety against decline in

the prices of major assets of the institution. This ratio would throw light on the real financial

strength of the institution.

3.6.2.5 Efficiency Ratio

Following two ratios were adapted to asses the efficiency of the institution and they

were.

3.6.2.5.1 Gross Ratio

This ratio helps to ascertain how efficiently the gross income of the institution was

utilized and the ratio was computed as follows.

Total expanses

Gross ratio = --------------------- X 100

Gross income

The total expanses include both the interest expenses and non-interest expenses. In

the same manner, the Gross income of the organization comprises of both interest income

and non-interest income. 3.6.2.5.2 Operating Ratio

This ratio indicates the proportion of gross income being used for the proportion of

Gross income being used for meeting the operating expenses.

Operating expenses

Operating ratio = --------------------------- X 100

Gross Income

The operating expanses include cost of sale, cold stroge expanses, selling and

distribution expanses, pre-operating expanses. An increase in the ratio indicates a decline in

the efficiency of the institution.

3.7 Compound Growth Rates

The compound growth rate was estimated for the various financial indicators of the

corporation which were considered for the performance study. Also the growth trend of

important commodities handled by KAPPEC and its different markets were analyzed.

An exponential function of the following type was employed to estimate the growth

rates.

Y = ab

t

Where,

Y= Indicator or variable

a = constant

b = Regression coefficient = (1- r / 100)

(Rate of change in Y per unit of time)

t = Years (time)

The financial indicators were Total liabilities, Total assets, Current assets, Liquid

assets, Net profit, Expenses, Operating expenses, Gross income , Net worth and export value

of commodities and growth trend was calculated for important commodities handled by

KAPPEC and markets like Domestic market, Export market, Import market in terms of vale

and quantity.


Principal components are a set of new variables which are mutually uncorrelated and

exhibit maximum variance, which are the linear combinations of X’s.

P1=a11X1+a12X2+…………. + a1k Xk

P2=a21X1+a22X2+…………. + a2k Xk

…………………………………….

PK=aK1X1+aK2X2+…………. + aKk Xk

The method of principal components has wide applications in the social and biological

sciences. In econometrics it is appropriate in two cases

1. When the number of explanatory variables to be included in the model is very large

relative to sample size. 2. When K is greater than n, the function cannot be estimated. Even with large sample if

K is greater, the computation becomes difficult and degrees of freedom to check the

reliability would be low. This method is suggested as a solution to the problem of

multicollinearity.

The method is also being used in the field of index numbers in order to assess the

reliability of such indexes.

The method of principal components is a special case of the more general method of

Factor Analysis. The aim of principal component is the construction out of a set of variables

Xj’s [j=1……k of new variables (Pi)] called principle components which are the linear

combinations of X’s.

P1=a11X1+a12X2+…………. + a1k Xk

P2=a21X1+a22X2+…………. + a2k Xk

------------------------------------------------------------------

PK=aK1X1+aK2X2+…………. + aKk Xk

Principal component can be carried by using,

1. Original value of Xj’s.

2. Their deviations from means. xj=Xj-Xj

3. Standard variables, Zj= (Xj-Xj)/ SXj

In the study, the variables which had factor loadings more than 0.7 were selected and

those with less than 0.7 were deleted.

3.9 Index method

The data on different constraints faced by KAPPEC was collected by interviewing

officials of KAPPEC, and was analysed using a three point scoring method as given below.

Details Score given

Common 3

Moderate 2

Least common 1

Mean score are calculated by using the formula,

(N1*3+ N2 *2 + N3 *1 )/N.

where,

N = N1 + N2 +N3

N1 = Number of respondents who said the constraints was common.

N2 = Number of respondents who said the constraints was moderate.

N3 = Number of respondents who said the constraints was least common.

The opinion index was calculated based on the scores by using the formula.

Obtained scores of respondents

------------------------------------------------ X 100

Maximum obtainable score 4. RESULTS

This chapter is devoted to the presentation of the detailed results obtained in the

present study. The results of this study are presented under the following heads.






4.6 Documentation


4.1 Basic Information of KAPPEC

The Karnataka Agricultural Produce Processing and Export Corporation Limited., was

established in the year 1996-97.It started handling agricultural and horticultural produce from

initial year i.e. in 1996-97,but it started exporting of the produce from 1997-98.The details of

the financial parameters of the KAPPEC are presented in the Table 4.1.

Over the years amount of share capital remained constant. The total liability of the

KAPPEC has been increasing over the years. In 1997-98 it was Rs 181.63 lakhs and

increased to Rs 1921.56 lakhs in 2006-07.The profit of the KAPPEC have substantially

increased over the years baring some years in between, registering peak of Rs 205.00 lakh in

2001-02.

KAPPEC has made an equally good progress in terms of increasing its assets both

total assets and current assets. The total assets and current assets have increased from Rs

180.36 lakhs and Rs 173.91 lakhs during 1997-98 to Rs 1984.76 lakhs and Rs1709.70 lakhs

in 2006-07 respectively. Many of the variables exhibited the similar trend.

4.1.1 Growth Rate of Financial Indicators

The compound growth achieved with respect to financial attributes were calculated

and are presented in the Table 4.2.

The growth in operating expenses, total expenses, quick assets and gross income

were found to be negative. However, the total expenses and gross income indicators were

found to be non-significant. Further, the variables like export value of commodities, liabilities,

assets, current assets, net worth and profit were found to be positive.

4.1.2 Projection for Selected Financial Indicators

Projections of selected financial indicators of KAPPEC are given in the Table 4.10.

The total liability would be around Rs 1974.07 lakhs in 2012 it may increase to Rs 2630.61

lakhs by 2017. The total assets and current assets would be Rs 2034.20 lakhs and Rs

1814.36 lakhs in 2012 by 2017 it may increased to Rs 2710.90 lakhs and 2402.16 lakhs.

The liquid assets would be Rs 4.03 lakhs in 2012 by 2017 they may decreased to Rs

0.95 lakhs.

The projection of total expanses of the KAPPEC would be Rs 249.71 lakhs in 2012

and may decrease to Rs 52.83 lakhs by 2017. Table 4.1: Financial indicators of KAPPEC

(In lakhs)

Year

Export Value

of

commodities)

Share

Capital

Operating

Expenses

Total

Expenses

Total

Liabilities

Total Assets Profit

Gross

Income

Current

Assets

Liquid

Assets

1997-98 45.86 50.00 163.10 181.58 181.63 180.36 0.38 193.91 173.91 77.62

1998-99 1953.74 50.00 2123.82 2339.68 342.48 347.05 83.86 2423.91 339.62 36.24

1999-00 4123.99 50.00 2191.59 2586.69 486.26 502.89 122.22 2770.35 491.64 34.24

2000-01 578.57 50.00 1572.46 1625.20 467.46 490.22 92.00 1717.49 471.12 35.32

2001-02 5820.04 50.00 1364.28 1419.21 663.27 697.87 205.00 1624.44 668.95 16.24

2002-03 4868.89 50.00 727.68 785.09 840.70 860.38 106.00 891.15 830.38 25.49

2003-04 6350.09 50.00 520.97 581.85 709.05 728.39 27.00 608.88 693.23 5.32

2004-05 3168.89 50.00 245.38 289.59 822.79 845.72 21.00 312.46 798.11 21.29

2005-06 4215.06 50.00 624.18 669.05 831.28 847.09 28.00 697.03 798.90 42.80

2006-07 4731.63 50.00 1309.35 1370.68 1921.56 1984.76 46.30 1416.98 1709.70 6.46 4.2 Financial Analysis of KAPPEC

The financial ratio represents the relationship between two accounting figures

expressed mathematically. In financial analysis, a ratio is used as an index or yardstick for

evaluating the financial performance or status of institution against certain standards. Ratio

analysis technique is popular in the accounting system of enterprises in general and helps in

spotting trends towards better or poor performance. It is helpful in finding significant

deviations from an average or pre-determined standard. The financial ratios were relevant to

KAPPEC are grouped under different categories namely Solvency ratio, Liquidity ratios, Tests

of strength, Profitability ratios and Efficiency ratios.

4.2.1 Test of Solvency

Solvency of a business refers to the ability of the institution to meet its obligations as

and when they fall due Thus, it is a measure of financial strength of the organization. The

solvency of the organization was assessed by using the ratios of total liabilities to owned

funds, fixed assets to owned funds and debt equity ratio. These ratios were presented in

Table 4.3.

4.2.1.1 Total liability to owned funds

This ratio is fluctuating over the years. In the initial year i.e. in 1997-98 it was 0.87

and increased to 0.91 in 2006-07 .The average ratio for the period of study was 0.70.

4.2.1.2 Fixed assets to owned fund

This ratio was increasing over the years except some years in between. In 1997-98

the ratio was 0.03 and remained same in 2004-05 and 2005-06. In 2006-07 the ratio was

0.10.The average ratio for the period of study was 0.04

4.2.1.3 Debt equity ratio

This ratio compares the owner’s stake in the business with outside term liabilities.

This ratio was fluctuated over the years. In the initial year i.e. in 1997-98 it was 0.65. In 1999-

2000 it was 0.11 and increased to 0.65 in 2005-06. But in 2006-07 the ratio decreased to

0.35.This shows that the KAPPEC was slowly building up equity in relation to its long term

obligations. Overall, the ratio was 0.34.

4.2.2 Liquidity Ratio

This ratio was used to measure the ability of the KAPPEC to meet its current

obligations, since liquidity is basic to continuous operation. The liquidity of the corporation

was assessed by using the ratios of liquid assets to total assets, current ratio, acid test ratio

or quick ratio. These ratios were presented in Table 4.4.

4.2.2.1 Current ratio

The ratio of current assets to current liabilities is termed as current ratio. In the initial

year (1997-98) current ratio was 3.20 and in latter years it was fluctuated. In 2003-04 the ratio

was the highest of 4.83.In 2006-07 it became 1.50.The average for the study period was 3.21.

4.2.2.2 Liquid assets to total assets

The ratio of liquid assets to total assets shows the proportion of liquid assets in total

assets. The ratio was 0.42 in 1997-98.Next year it was decreased to 0.10. Since then it

deceased gradually barring a few years in between. In 2006-07 it was 0.003. The average for

the study period was 0.80.

4.2.2.3 Acid test ratio

Acid test ratio or quick ratio provides a better measure of liquidity than the current

ratio. In 1997-98 this ratio was 1.33.In later years this has shown a fluctuating trend, reaching

a peak during 1998-99 with a value of 3.39. In 2006-07 the ratio was 0.08.The average for the

study period was 0.70. Table 4.2. Growth Rates of Financial Indicators

** Significant at 5 per cent level of significance

* Significant at 10 per cent level of significance

SI

No

Financial Indicator Compound

Growth Rate

(%)

R

2

value t - value

1 Export value of commodities 37.71* 0.36 2.12

3 Operating expenses -16.47 0.06 -0.76

4 Total expenses -3.09 0.13 -1.09

5 Liabilities 21.07** 0.69 4.31

6 Total assets 21.27** 0.68 4.27

7 Current assets 20.19** 0.73 4.66

8 Quick assets -16.02* 0.41 -2.39

9 Gross income -6.50 0.16 -1.25

10 Net worth 3.74 0.03 -0.49

11 Profit 14.54 0.05 -0.67 Table 4.10: Projection for Financial Indicators

SI No

Financial Indicator

Projection value for

2012

(Rs. in lakhs

Projection value for

2017

(Rs. in lakhs)

1 Export value of commodities 7592.32 9701.08

2 Share capital 50.00 50.00

3 Operating expenses 295.30 46.15

4 Total expenses 249.71 52.83

5 Liabilities 1974.07 2630.61

6 Total assets 2034.20 2710.90

7 Current assets 1814.36 2402.16

8[ Profit 28.39 4.82

9 Gross income 262.16 50.90

11 Liquid assets 4.03 0.95 Table 4.3: Test of Solvency

RATIOS

Years

Total liability to

owned funds

Fixed assets to

owned funds

Debt equity ratio

1997-98 0.87 0.03 0.65

1998-99 0.96 0.02 0.08

1999-00 0.73 0.01 0.11

2000-01 0.69 0.02 0.17

2001-02 0.67 0.02 0.22

2002-03 0.74 0.02 0.38

2003-04 0.69 0.03 0.48

2004-05 0.71 0.04 0.65

2005-06 0.80 0.04 0.65

2006-07 0.91 0.10 0.35

Average 0.70 0.04 0.34 0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Ratios

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Years

Total liability to owned funds Fixed assets to owned funds Debt equity ratio

Fig.3: Test of Solvency

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Ratios

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Years

Current ratio Liquid assets Acid test ratio

Fig. 4: Liquidity ratio of KAPPEC 4.2.3 Tests of Profitability

The profitability of the corporation was assessed by using ratios like net profit to total

assets, net profits to net worth and net profits to fixed assets and were presented in the table

4.5.

4.2.3.1 Net profit to total assets

The ratio of net profit to total assets was 0.002 in 1997-98. In the later years this has

shown a fluctuating trend, reaching a peak during 2001-02 with a value of 0.29,then declined

to 0.12 in 2002-03.This indicates that profits over the assets increased from 1997-98 to 2001-

02 and declined later on. The rate of return on assets was 0.02 in 2007, indicate a poor profit

ratio. Average for the study period was 0.12.

4.2.3.2 Net profit to net worth

The ratio of net profit to networth was -0.30 in 1997-98.In later year this has shown a

fluctuating trend. It was high in 2002-03 with a value of 5.38.The profit over net worth

fluctuated over the years. In 2006-07 the ratio was 0.73.Average for the study period was

4.61.

4.2.3.3 Net profit to fixed assets

The ratio of net profit to fixed assets shows the average rate of return on fixed assets

over the years. The value was 0.06 in 1997-98.It has increased to 11.28 in 1998-99 and

showed fluctuations upto 2005-06. In 2006-07 the ratio was 0.17.Average for the study period

was 3.96.

4.2.4 Efficiency Ratio

The efficiency of the corporation was assessed by using the ratios like gross ratio and

operating ratio were presented in the table 4.6.

4.2.4.1 Gross ratio

This ratio was highly fluctuating over the years. In the initial year i.e., 1997-98 it was

94 percent and in later year’s it was fluctuated. In 2006-07 it was 97. The average ratio for

whole period was 94

4.2.4.2 Operating ratio

This ratio was highly fluctuated over the years. In 1997-98 it was 94 percent. Later

years it showed fluctuating trend. In 2006-07 ratio was 92 percent. The average ratio for the

study period was 72.

4.2.5 Tests of Strength

Strength of the corporation was assessed by using the ratios like net worth ratio and

net capital ratio were presented in the Table 4.7.

4.2.5.1 Net worth

The networth of the corporation increased considerably over the years. In 1997-98 it

was Rs -1.26 lakh. It increased to Rs 63.20 lakh in 2006-07.The average for whole study was

Rs 21.83 lakh.

4.2.5.2 Net capital ratio

This ratio was more than one in all the years except 1997-98. The ratio was the

higher of 1.05 in 2001-02.The average for whole period was 1.02.


Growth rates of important commodities handled by KAPPEC in terms of quantity and

market like domestic, export, import markets of KAPPEC in terms of quantity and value were

computed to know the growth trend of KAPPEC over the years and were presented in the

Table 4.8 and 4.9. Table 4.5. Test of Profitability

RATIOS

Years

Net profit to total

assets

Net profit to net

worth

Net profit to fixed

assets

1997-98 0.002 -0.30 0.06

1998-99 0.24 18.32 11.28

1999-00 0.24 7.34 10.86

2000-01 0.18 4.04 4.82

2001-02 0.29 5.29 7.09

2002-03 0.12 5.38 3.53

2003-04 0.03 1.39 0.77

2004-05 0.02 0.91 0.44

2005-06 0.03 1.77 0.58

2006-07 0.02 0.73 0.17

Average 0.12 4.61 3.96

-2

0

2

4

6

8

10

12

14

16

18

20

Ratios

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Years

Net profit to total assets Net profit to net worth Net profit to fixed assets

Fig. 5.Test of Profitability Table 4.6. Test of Efficiency

RATIOS

Years

Gross ratio Operating ratio

1997-98 94 94

1998-99 97 87

1999-00 93 56

2000-01 95 78

2001-02 87 44

2002-03 88 60

2003-04 96 40

2004-05 93 78

2005-06 96 89

2006-07 97 92

Average 94 72

0

10

20

30

40

50

60

70

80

90

100

Ratios

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Years

Gross ratio Operating ratio

Fig. 6.Test of Efficiency Table 4.7. Tests of Strength

-10

0

10

20

30

40

50

60

70

Ratios

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Years

Net worth (Rs. lakhs) Net capital ratio

Fig. 7.Tests of Strength

RATIOS

Years

Net worth (Rs. lakhs) Net capital ratio

1997-98 -1.26 0.99

1998-99 4.57 1.01

1999-00 16.63 1.03

2000-01 22.76 1.04

2001-02 34.60 1.05

2002-03 19.68 1.02

2003-04 1.93 1.02

2004-05 22.93 1.02

2005-06 15.81 1.01

2006-07 63.20 1.03

Average 21.83 1.02 4.3.1 Growth trend of important commodities handled by KAPPEC

Growth rate of Mango in both domestic and export markets were negative i.e. -13.40

per cent and -4.39 per cent respectively. Export of Onion growth rate was 69.40 per cent,

Pomegranate growth rate was 71.56 per cent and export of Niger seeds rate was negative i.e.

-66.08. The import growth rate of cloves was -35.03 per cent.

4.3.2 Growth Trend of KAPPEC Markets

Growth rate of KAPPEC in domestic market in terms of quantity showing decreasing

trend i.e. of – 61.09 percent and growth rate in value was also decreasing over the years i.e.

of -45.58 percent. Growth rate of export market in terms of quantity was 31.18 percent and

growth in value was 32.06 per cent. This indicates that KAPPEC export market was

increasing over the years. Import market trend showing negative growth for both quantity and

value i.e. of about – 58.88 percent and -55.43 percent respectively. This shows that import

market of KAPPEC in terms of quantity and value has been decreasing over the years.

However, growth in value of domestic market and export quantity were found to be significant.

4.3.3 Projection for KAPPEC export Market

Projections of KAPPEC export market are given in the table 4.11. The export market

in terms of quantity and value would be 52459.37 metric tonnes and Rs 7213.94 lakhs in

2012 and 66530.25 metric tones and Rs 8849.46 lakhs respectively by 2017.

4.4 Principal Component Analysis : Identification of Indicators

Influencing the Performance of KAPPEC

Principal component analysis technique was used to identify the financial indicators

closely associated with the performance of the KAPPEC. The analysis was done on export

value of commodities, operating expenses, expenses, liabilities, total assets, profit, gross

income, net worth, current assets, and liquid assets. Two principal components were selected

for detailed analysis.

It was apparent from the Table 4.12, that seven variables were assumed to have had

their influence on the performance of the KAPPEC. The first two components accounted for

79.75 percent. Of the total variation 43.45 percent was explained by the first component itself,

36.49 percent by the second component. The variables extracted by the first component were

liabilities, total assets, current assets, liquid assets. The variable extracted by the second

component was expenses, gross income and net worth.

4.5 Documentation

Exporting activity not only includes only shipment of materials, but also includes

several commercial and regulatory procedures. These procedures involve considerable

documentation which was refered to be the most important tedious job for a fresher to export

process. Export documentation work constitutes a heavy change on our export activity. It is

complex and cumbersome. This is partly due to the nature of export trade which includes a

number of intermediary organizations and authorities at different stages of export activity

between the seller and buyer. All these in turn generate a lot of paper work and procedure

formation.

4.5.1 Importance of Document

The method of operation of document was susceptible to errors and discrepancies

which even though minor, causes delays at different stages in the processing of documents,

costly hold up of consignment at check points and terminals, and ultimately in the realization

of export proceeds. Thus the process of documentation needs to be carefully handled.

4.5.2 Role Players

It could be seen from Table 4.13 shows the role players in the process of

documentation are many. KAPPEC plays the role of the exporter and CWE acts as an

importer. Trupthi international is the supplier for the exporter and Indus bank act as the bank

for exporter and Bank of Ceylon acts as the bank for importers. Government of India port

health organization issues the health certificate for the goods. Table 4.8. Growth trend of important commodities handled by KAPPEC

** Significant at 1 per cent

* Significant at 10 per cent

SI No

Commodities

Compound

growth rate

R

2

value t – value

1) Domestic market

a Mango -13.40* 0.37 -2.18

b Potato -41.01** 0.64 -3.83

2) Export market

a Mango -4.39 0.005 -0.21

b. Potato -12.70 0.24 -1.61

c. Onion 69.40** 0.71 4.47

d. Pomegranate 71.56 0.08 0.85

e. Niger seeds -66.08 0.28 -1.78

3) Import market

a. Cloves -35.03* 0.35 -2.08 Table 4.9. Growth Trend of KAPPEC Markets

* Significant at 10 per cent level of significance

Table 4.11. Projection for Export Marketing

SI No Markets

Compound

growth rate

R

2

value t – value

1) Domestic Market

a Quantity -61.09 0.13 -1.11

b Value -45.58* 0.32 -1.93

2) Export

a Quantity 31.18* 0.51 2.88

b Value 32.06 0.26 1.68

3) Import

a Quantity -58.88 0.13 -1.08

b Value -55.43 0.21 -1.44

SI No Export market

Projection value

for 2012

Projection value

for 2017

1

Quantity (in metric tonnes)

52459.37 66530.25

2

Value ( Rs in lakhs)

7213.94 8849.46 Table 4.12. Principal Component Analysis

Components

Attributes

1 2

Export value of commodities 0.770 0.146

Operating expenses -0.669 0.337

Expanses -0.140 0.967

Liabilities 0.913 -0.005

Total assets 0.914 0.002

Profit 0.050 0.747

Gross income -0.139 0.981

Net worth 0.100 0.984

Current assets 0.933 0.000

Liquid assets -0.844 -0.300

Percent of variation 43.45 36.49

Cumulative percentage of variation 43.45 79.75 Table 4.13. Role Players in the Process of Documentation

SL

NO.

PLAYERS ROLE PLAYED

1. KAPPEC Exporter

2. CWE Importer

3. Trupthi International Supplier for the exporter

4. Indus Bank Exporters bank

5. Bank of Ceylon Importers bank

6. V.Eskai Pilliai C and F agent of exporter

7. Stewart Surveyors and Asseors Pvt .Ltd. Surveyor assigned by exporter at the

port of loading(POL)

8. Indian Overseas Bank Importers bank

9. Romav Ltd., Carries

10. Moonlight Shipping Services Pvt. Ltd., Carries

11. Customs Authority Govt. Officials at POL

12. Indian Chamber of Commerce Certifying Indian origin

13. GOI Port Health Organization Issues health certificate

14. SCS Inspection Services Joint surveyor Table 4.14. Documentation Process for Export

SI NO DOCUMENTS

1. Tender enquiry from CWE to KAPPEC

2. Enquiry of KAPPEC with suppliers and quotation for the same

3. Quotation of KAPPEC to CWE through local agent at Importing country

4.

Confirmation letter from CWE to KAPPEC and request for performance

guarantee

5. Contract No. from CWE to KAPPEC for acceptance and signature.

6.

Performance guarantee by seller through both seller and buyers bank to

CWE.

7.

L/C from CWE to KAPPEC on receipt of performance guarantee from

KAPPEC.

8.

Confirmation to its supplier by KAPPEC to make arrangements for the

execution of the contract.

9.

Assigning Buyer’s surveyor (Stewart s. A.P.LTD.,) for the consignment from

CWE.

10. Movement of goods to Tuiticorin (POL)-grading and packing.

11.

Goods required documents for export

KAPPEC – Invoices and packing list

Indian Chamber of Commerce and Industries - certificate of origin

Customs – customs Challan

GOI ,port health organization – Health certificate

Romav Ltd.,(carriers) - Bill of loading

Moonlight shipping services P.LTD., - Bill of loading

GOI Ministry of Agriculture – Officials Phytosanitary

Certificate

12. Dispatch of material from POL.

13.

Submission of all documents by KAPPEC to its bank (Indus bank) and a copy

to importers for realizing materials at POD against bank guarantee.

14.

Indus bank negotiates the bills and credits the amount to KAPPEC provided

all documents submitted are as per L/C terms.

15.

Inspection of material at POD by SCS(Joint Surveyor appointed by both

importer and exporter and certificate of quality , weight, packing and condition

upon arrival and a copy sent to both CWE and KAPPEC.

16. KAPPEC credits to its suppliers.

17. Letter to CWE from KAPPEC for returning performance bond.

18. Return of performance bond to KAPPEC by CWE. Fig. 8. Flow chart of documentation process 4.5.3 Documentation Process for Export

The documents required for export are seen in the Table 4.14. Tender enquiry from

cooperative wholesale establishment (CWE) to KAPPEC was the first and for most document

which initiate the export process. The quotation from the supplier and exporter was prepared

based on the prices of the commodity prevailing in the local market. Confirmation letter was

sent to KAPPEC after analyzing all quotations. The importer assigns surveyors on behalf of

him at the port of credit. The health certificate issued by Government of India port of health

organization certifies that the goods being exported are fit for human consumption.

4.6 Constraints of KAPPEC through Index Method

The severity of constraints of KAPPEC through index method was shown in Table

4.15. From the table it was cleared that low financial assistance by the Government to

KAPPEC was one of the major problem faced by KAPPEC, which received an index score of

92.34, lack of postharvest infrastructure facility received an index of 90.00 and also low

productivity per unit area .However, unfavorable tax structure and non existence of organized

and strong domestic market were not severe problems of KAPPEC having an index score of

76.67.

Table 4.15: Constraints of KAPPEC through index method

Sl no. Problems Index scores

1. Low financial assistance 92.34

2. Low productivity per unit area 90.00

3. Post harvest infrastructural facilities 90.00

4. Comparative cost advantage and production efficiency

achieved by the traditional exports

87.20

5. Trade barriers against horticulture/ floriculture exports by

many countries

86.67

6. International prices are unpredictable 83.33

7. IPR’s regime 83.33

8. Non-availability of quality produce for export and processing 83.33

9. High interest cost 80.00

10. Unfavorable tax structure 76.67

11. Non-existence of organized and strong domestic market 76.67 5. DISCUSSION

The results presented in the previous chapter are discussed in this chapter. The

discussions are presented under the following headings:






5.6 Documentation



It could be seen from Table 4.1 that the paid up share capital of the corporation was

constant over the years. This is because the contribution of share capital from the

Government depends on the policy of the Government. No favorable decisions were made by

the Government to enhance share capital of KAPPEC. Hence, it remained constant over the

years.

The assets position of the corporation improved considerably during the last ten

years. The assets position increased eleven times during the study period. The current

assets and liquid assets increased by 9.83 and 0.08 times in ten years. This reflected the

increase in the volume of business of the corporation.

The total liabilities also displayed a similar trend and it has increased by 10.57 times

in ten years.

The total operating expenses increased by 8.03 times from 1997-98 to 2006-07 and

total export value of the commodities registered 103.17 times increase from 1997-98 to 2006-

07 and as the volume of business increased, the total expenses and gross income also

increased to an extent of 7.50 and 7.30 times, respectively.

The profit earned by the corporation varied during the study period. It made the

highest profit of Rs. 205.00 lakhs in 2001-02. Profit increased by 121.84 times in ten years.

The foregoing discussion of the basic financial features of the KAPPEC revealed both

the dark and the bright aspects of the business and it can be concluded that the performance

of KAPPEC was satisfactory over the study period, except in some years. The performance of

the state level organization of this type had to be viewed from the point of discharging the

social responsibilities with respect to the export development as well as from the point of its

performance for its own survival. Further, the ratio analysis might give additional information

about the performance of KAPPEC.

5.1.1 Growth rates of KAPPEC

Compound growth rates were worked out in order to find out the annual growth and

its level of significance. It was worked out for ten performance variables of the institution like

paid up share capital ,Export value of commodities, Total assets, Current assets, Liquid

assets, Liabilities , Expenses, operating expenses, Gross income, net worth and Profit .

The export value of the commodities was significant at 10 per cent level of

significance for the overall period. While the Gross income, Net worth, Operating expenses

and total expenses revealed their non-significance in growth. Liabilities, Total assets, current

assets were significant at 5 per cent level of significance and quick assets were significant at

10 percent level of significance. The compound growth rates of current assets, total assets and quick assets were

20.19, 21.27 and -16.02 per cent. Total assets and current assets were significant which

showed a good growth, but the liquid assets decreased over the years and it was also found

to be significant. Hence, KAPPEC has to take care in increasing its liquid assets.

The total liabilities also registered a high growth rate and were statistically significant

at 5 per cent level of significance. This was not a healthy sign for KAPPEC. This could be

considered as a weak point or spot in the growth and development of KAPPEC. But the

growth rate of total liabilities (21.07 per cent) was little less, than that of the total assets (21.27

per cent). Hence the organization was managing its financial position soundly.

The compound growth rates of gross income, profit and net worth were -6.50, 14.54

and 3.74 respectively, but these three were non significant.

The export value of commodities had registered a growth rate of 37.71 per cent,

which was maximum compared to the growth of other variables. Such a high growth rate was

due to the good establishment in the export market.

The overall growth rate of total expenditure and operating expenditure over all the

periods was -3.09 and -16.47 per cent and were found to be non-significant. This indicated

that the KAPPEC’s operating expenses and total expenses were decreasing over the years.

The above growth rates for the important variables revealed that the overall progress

of KAPPEC with respect to financial structure was satisfactory. There were, however, some

disparities in the growth rates.

5.1.2 Projections for selected financial indicators

Projections were worked out for selected financial variables of KAPPEC. The total

liabilities of the KAPPEC as projected, would be to the tune of Rs. 1974.07 lakhs in 2012 and

Rs. 2630.61 lakhs by 2017.

By 2012 and 2017, considering an increase in total assets; current assets would be

expected to increase in KAPPEC. The projection for this indicator would be Rs.

2034.20 lakhs and Rs. 1814.36 lakhs, respectively in 2012, and in 2017 it may increase to Rs.

2710.90 lakhs and 2402.16 lakhs, respectively. But liquid assets would be Rs. 4.03 lakhs in

2012 and Rs. 0.95 lakhs in 2017.

The projected figure for the gross income and profit would be Rs. 262.16 lakhs and

Rs. 28.39 lakhs in 2012. By 2017 it is expected to be Rs. 50.90 lakhs and Rs. 4.82 lakhs,

respectively. The total export value of commodities would reach a record figure of Rs.

7592.32 lakhs in 2012 and Rs. 9701.08 lakhs by 2017.

While total expenses and operating expenses would be Rs. 249.71 lakhs and Rs.

295.30 lakhs in 2012, these may decrease during 2017 to Rs. 52.83 lakhs and Rs. 46.15

lakhs, respectively. The projected values of operating expenses are decreasing over the

years.

The forgoing analysis revealed that though there is an increase in export value of the

commodities, but the magnitude was less. This led to a decline in operating and total

expenses. As result it may have an adverse affect on the gross income and thereby the profit.

The working of KAPPEC, especially the market information depends to a greater extent on

the Government directions and more over the limited funds and human resources to handle

the business.


The financial ratio represents the relationship between two accounting figures

expressed mathematically. In financial analysis, a ratio is used as an index or yardstick for

evaluating the financial performance or status of institution against certain standards.

5.2.1 Ratio analysis

The purpose of ratio analysis was to optimize the performance and to facilitate the

comparison overtime of an industry. In this study the following groups of ratio were employed,

they are, 5.2.1.1 Test of solvency

The medium term and long term solvency position of the institution was assessed by

these ratios. These ratios indicate owner’s involvement in the total resources and provided

basis for measuring leverage ratio. The various ratios employed were as follows.

5.2.1.1.1 Total Liabilities to Owned Funds Ratio

This ratio indicated the extent of debt on each rupee of the owned funds of KAPPEC.

Even though the prescribed norm is 3:1, the ratio varied from 0.87 to 0.91. This shows that

KAPPEC had used the external funds to the tune of 0.91 times the owned funds. This

indicated that the KAPPEC’s ability to cover its short term and long term obligations were

little bit worsened over the years. The overall ratio (0.70) was less than the prescribed norm.

This indicated the strong solvency position of the corporation.

5.2.1.1.2 Fixed Assets to Owned Funds

This ratio showed an increasing trend over the years except in the initial years. This

indicated that the KAPPEC tended to increase its fixed assets during the period of the study.

The construction activities like cold chain facility in Bijapur and Kustagi; and food processing

in Hubli were largely responsible for the relatively higher ratio of fixed assets to owned funds

of the KAPPEC. The grant received from the Government and other institutions were used in

creating infrastructural facilities and the same were treated as owned funds.

5.2.1.1.3 Debt- equity ratio

This ratio showed the fluctuating trend during the study period. It was found to be less

than one in all the years. In the initial year the ratio was 0.65 because the equity of the

corporation was low. After this year the ratio increased upto 2005-2006 (0.65) due to increase

in long term liabilities of the corporation. In the next year, i.e. 2006-07, the ratio decreased to

0.35, indicating that the long term liabilities of the corporation decreased. The average debt

equity ratio was 0.34 which signified the dynamism of the organization.

5.2.1.2 Liquidity Ratio

Liquidity provides a measure of the institution’s ability to meet its current obligations.

Since liquidity is basic to continuous operation, it was found necessary to examine the degree

of liquidity of the organization and to ascertain its ability in meeting the current financial

obligations.

5.2.1.2.1 Current Ratio

The current ratio is widely used among all the typical balance sheet ratios. This ratio

was greater than unity in all the years. The average ratio was 3.21 and it may be pointed out

that irrespective of the organization, generally a standard ratio of 2.0 is preferred. Although no

standard norms are prescribed for corporations, it is considered better for the corporation to

continue maintaining a current ratio of greater than unity. Natarajan (1980), Kucchal (1979),

Foulsce (1974) considered that a current ratio of two was ideal. Flink and Grunewald (1969)

observed that the value above unity indicates a firm’s ability to meet current obligations. Thus,

it could be concluded that corporation had maintained a reasonable level of liquidity position.

5.2.1.2.2 Liquid assets to total assets

This ratio was more in the initial year and tended to decline over the years. This

tendency was very close to reality because KAPPEC maintained more liquid assets giving

priority to the working capital during the initial years (Kunnal, 1994). Further due to the

acquisition of more fixed assets the ratio was reduced over the years. It can be concluded

that KAPPEC had maintained a low level of liquidity assets but good level of liquidity position.

5.2.1.2.3 Acid test ratio

Since this ratio gave no consideration to the inventory, it could be considered a better

test of financial strength of the corporation. The nature of this ratio was fluctuating over the

years. In the initial year, the ratio was more than unity and during later years the ratio was

less than unity. In initial years corporation had acquired the ability to meet its current

obligations without depending much on early sale of its inventory, but in later years the

corporation was depended on whole of its inventory to meet its current obligations. Since this ratio gave no consideration to the slow moving inventory, it could be considered a better test

of financial strength of KAPPEC, than the current ratio.

5.2.1.3 Test of Profitability

These ratios can be used to asses the financial status and overall efficiency of the

institution. These ratios were used to compare the returns over the investments made. The

following were the important ratios.

5.2.1.3.1 Net profit to total assets ratio

The ratio of net profit to total assets was 0.002 in the initial years as the corporation

made a very low profit during that period. The ratio showed a fluctuating trend upto 2001-02

and later the ratio decreased. The ratio was found to be highest (0.29) in 2001-02 i.e., the rate

of return on assets was 29 percent. After 2001-02 the ratio was low which indicated a

marginal profit. The results indicated that profit level was low in relation to total assets. Hence,

efforts should be made to increase profit by decreasing the expenditure. Returns on assets

were one of the best standards of evaluation. The heavy establishment and contingent

expenses as a proportion to sales were some of the causes of poor performance. Natarajan

et al. (1980) observed a similar phenomena for consumer co-operative in Andra Pradesh,

Pradeep Kumar (1993) for Horticulture producers cooperative marketing and processing

society limited (HOPCOMS), Bangalore . L.B. Kunnal (1994) for Karnataka seeds corporation

limited and T.S. Devaraj (2000) for HOPCOMS.

5.2.1.3.2 Net profit to net worth

The ratio of net profit to net worth is yet another important indicator of financial

efficiency in the utilization of funds in the business ( Ramachandra Rao 1976 ; Walker 1976).

The ratio varied between minus 0.30 to 0.73 with an average of 4.61. A close observation of

the ratio in the light of the service objective of the corporation revealed that it had failed to

achieve a fair return on the net worth, Mohsin (1977) suggested 15 per cent as a standard

norm for profits on net worth. Since this ratio was directly influenced by management’s policy

regarding trading on net worth (Walker 1976), a low efficiency in the utilization of net worth

was reflected by the organization.

5.2.1.3.3 Net profit to fixed assets

The ratio of net profit to fixed assets shows the average rate of return on the fixed

assets over the years. The ratio which was 0.06 in 1997-98, by the next year it was increased

to 11.28 and later decreased. The average during the study period was 3.96. Though fixed

assets have less importance in a trading organization than in manufacturing concerns, its role

in increasing trading activities has to be given due recognition. The ratio of net profit to the

fixed assets, though increased in 1998-99 had decreased by the next years which was not a

healthy sign. This decline was due to lower profits made during the last couple of years in

relation to the fixed assets, i.e., profits have not increased in proportion to the growth in its

fixed assets.

Thus, an evaluation of the profitability ratios over the years revealed that KAPPEC

was not maintaining fair level of profit. The main aim of KAPPEC was to develop and promote

the export of agricultural and horticulture produce from the State. Hence, the extent to which

KAPPEC was able to meet its social obligations was important. The declining profits in the

recent years could be due to the phenomenal increase in the operations of KAPPEC. But

there was no room for complacency on the part of the management. Efforts were called for by

the management to achieve the minimum level of profit to keep the organization self sufficient

and survive to function efficiently and achieve its social goals, increase in its turnover and

expansion of its activities throughout the State may help to increase profitability of the

organization.

5.2.1.4 Test of Efficiency

Following two ratios were adopted to assess the efficiency of the institution, they

were, 5.2.1.4.1 Gross Ratio

This ratio measured the total expenses for every rupee of Rs.100 gross income. This

ratio showed an increasing trend in the first years and fluctuated in reaming years. The ratio

was less than hundred in all the years except 1997-98. The average ratio was found to be 94.

This means that for gross income of Rs. 100 the corporation spent Rs. 94. Keeping in view

the service objective of the corporation, the expenses incurred was less than its income.

5.2.1.4.2 Operating ratio

The ratio did not show any particular trend over the years. In all the years, the ratio

was less than hundred. As the ratio measured the extent of operating expenses to the gross

income and it also reflected the operating efficiency of the corporation. The ratio within

hundred indicates that the corporation spent less than what it earned in carrying its

operations. This speaks about the high operating efficiency of the company.

5.2.1.5 Tests of Strength

The following measures were used to measure the real worth of KAPPEC.

5.2.1.5.1 Net worth

The net worth of the corporation showed an increasing trend over the years barring

few years in-between. The net worth which was minus 1.26 lakhs in initial year but rose to Rs.

63.20 lakhs in a period of ten years. From the above ratio (table) it could be inferred that the

KAPPEC was financially strong during the study period. The excess of liabilities of the

corporation in the process of development in the initial period was responsible for its negative

net worth.

5.2.1.5.2 Net Capital Ratio (NCR)

The NCR for KAPPEC in initial year was 0.99 which was the lowest ratio among all

the years and in all the other years the ratio was more than unity which indicated that the

assets of the corporation were sufficient to cover all its liabilities. KAPPEC appeared to have

built up a good strength by possessing assets worth of Rs.1.02 for each rupee of liability.

5.3 Compound growth rates of KAPPEC

Growth rates of important commodities handled by KAPPEC in terms of quantity and

its market like domestic, export, import markets of KAPPEC in terms of quantity and value

were computed to know the growth trend of KAPPEC over the years.

5.3.1 Growth trend of important commodities handled by KAPPEC

In the domestic and export market, the compound growth rate of mango and potato

were found to be negative. This could be mainly due to the Government policies which in turn

affected the market of these two crops. For onion, the compound growth rate was found to be

positive and significant; this was due to increase in demand in the foreign countries and

Government of India appointed KAPPEC as a canalizing agency for export of onion. Mango,

potato and niger seeds were found to have negative compound growth rate and were also

non-significant. The import market for cloves had a decreasing compound growth rate, it may

be attributed to the fact that the production of clove had increased in the country.

5.3.2 Growth Trend of KAPPEC

The compound growth of domestic market in terms of quantity and value were -

61.09 and -45.58 per cent. The negative sign indicates decreasing growth rate over the years’

i.e., the intervention of KAPPEC in the domestic market was decreasing. The growth in terms

of quantity in domestic market was non-significant but the value of the domestic market was

significant at 10 per cent. By this we can conclude that KAPPEC‘s role in domestic market

has been decreasing over the years.

The compound growth rates of export market of KAPPEC in terms of quantity and

value were 31.18 and 32.06 per cent, which indicated higher growth rates compared to other

markets of KAPPEC (Domestic and Import market).Value of growth rate was positive, which

indicated an increasing trend over the years. The export marketing of KAPPEC in terms of quantity and value were increasing during the study period and the export market in terms of

quantity and value was significant at 10 per cent level of significance.

The compound growth rates of import markets of KAPPEC in terms of quantity and

value were -58.55 and -55.43 per cent. The negative sign indicates a decreasing growth rate,

which means, over the years the import market of KAPPEC was decreasing. Import market of

KAPPEC in terms of quantity and value were non-significant. The above discussion indicated

higher intervention of KAPPEC in the export market and a lower participation in import and

domestic markets. The intervention of KAPPEC in these markets again is directed by the

Government policy and hence the differential treatment.

5.3.3 Projected value for export market of KAPPEC

In the near future KAPPEC has many plans to promote exports by various strategies

such as procurement and supply of good quality inputs, conducting commodity and crop

specific seminars, workshops in growing areas, providing guidance and information to

budding entrepreneurs to undertake exports, creation of post harvest technologies at

Chitradurga, establishing a State of art processing unit at Gulbarga and Hubli in North

Karnataka, establishing six Vanilla Processing units in different vanilla growing areas and

creation of post harvest infrastructure (cold chain) facility at Bidar. Hence the creation of these

infrastructure facilities would definitely boost the export from these areas. It is expected that

by 2012 export market in terms of quantity would increase to 52459.37 metric tonnes and the

value of export market would be Rs. 7213.94 lakhs and by 2017 these may increase to

66530.25 metric tonnes and Rs. 8849.46 lakhs, respectively.

5.4 Principal component analysis of financial indicators

Financial indicators which were highly associated with the performance of KAPPEC

are discussed here in detail.

Four variables had higher factor loading in the first component which extracted 43.45

per cent of total variation (Table 4.11). Three variables in the second component obtained

36.49 per cent of the variation.

The first component extracted the variables related to the assets of the KAPPEC.

Consequently this component was named as “growth in assets”. Total assets, liquid assets

current assets, gross income, net worth indicated the financial soundness of KAPPEC. The

computed growth rates of these variables also corroborated the findings since they showed

increasing growth rate over the years. Even the financial ratios like current ratio and acid test

ratio indicated that the current assets position of KAPPEC was good.

The second component extracted the variables like total expenses, gross income and

net worth. The growth rates of these variables also corroborated the findings since gross

income and total expenses showed a decreasing growth over the years and net worth

showed an increasing growth rate. The total expenses which were inversely related to the

performance of KAPPEC showed a normal expense compared to the income earned by the

KAPPEC. This was also corroborated by the financial ratio analysis. The gross ratio revealed

that KAPPEC was making appropriate expenses in its business transactions. Since the

second component captured the variables having close association with profit it may be

termed as “Profit component”.

The two component put together were able to capture nearly 80 per cent of variation

in its performance. The results of the principal component analysis not only by and large

reiterated the findings of the financial ratio and growth rate analysis but also made the

conclusions more valid.

5.5 Documents

Export activity not only includes shipment of materials, but also includes several

commercial and regulatory procedures. These procedures involve considerable

documentation which was referred to be the most important and tedious job for a fresher for

export process. Export documentation work constitutes a heavy change on the export activity.

It is a complex and cumbersome process. This is partly due to the nature of export trade

which includes a number of intermediary organizations and authorities at different stage of export activity between the sellers and buyers. All these in turn generate a lot of paper work

and procedure formation.

5.5.1 Role players in the process of documentation

Table 4.14 gives the list of role players in the process of documentation, KAPPEC

acts as an exporter which exports the material based on the requirement of importer as per

terms and conditions of letter of credit and cooperative wholesale establishment act as an

importer which imports the materials based on the requirement from the exporter. Trupthi

International is a supplier for the exporter (i.e., for KAPPEC) which supplies materials to the

KAPPEC as per its requirement. Indus Ind Bank acts as an exporters bank i.e., it performs all

the transactions related to exports on behalf of KAPPEC. Bank of Ceylon and Indian

Overseas acts as importer bank which performs all the transactions related to imports on

behalf of the cooperative wholesale establishment (CWE). V. Eskai Pillai and son acts as cost

and freight (C & F) agent of exporter. V. Eskai receives the materials from KAPPEC, grades

them and packs it as per terms and conditions of letter of credit and prepares documents

which are required for loading and ships the lane to the importer. Stewart Surveyors and

assessors Private Limited acts as surveyor for exporter at the port of loading (POL). Romav

Limited and Moonlight shipping services private limited acts as carriers. Customer authority

collects customer cell or duty and gives the receipt for the same. Indian Chamber of

Commerce issues certificate of origin stating that the materials to be exported is of Indian

origin. Government of India port health organization issues health certificate by checking the

container and the materials which are to be exported. Lastly SCS inspection Services which

act as Joint Surveyor which surveys the materials at port of delivery (POD) and issues and

certifies quality, weight, packing and condition upon arrivals and sends certificate copy to both

cooperative wholesale establishment (CWE) and KAPPEC.

5.5.2 Documents required for export

5.5.2.1 Tender enquiry from cooperative wholesale establishment (CWE) to KAPPEC

Tender enquiry from cooperative wholesale establishment to KAPPEC is the first and

foremost document which initiates the export process. The tender letter will be provided by

the importer i.e., CWE specifying his requirements in the enquiry letter. This includes the

specifications like,

a. Specifications of material required in terms of both quality and quantity

b. Specifications of packing

c. Specifications of delivery date and mode of delivery

d. Certificates needed for the process

e. Bills, payment terms, last date for submission of quotation and samples.

f. Shipment, load of survey, validity of offers, samples etc.

5.5.2.2 Quotation to KAPPEC from the supplier Trupti International

The quotation from the supplier is prepared based on the price of the commodity

prevailing in the local market including the overhead costs in activities such as grading,

packing, shipment, validity, port of loading etc.

5.5.2.3 Quotation of KAPEC to CWE through local agent

The quotation from the exporter is prepared based on the price of the commodity

prevailing in the local market (as specified by the supplier) including KAPPEC margin and the

quotation will be sent to the importer. It includes the following,

a. Item quoted for

b. Quantity offered

c. Specifications of the products

d. Price

e. Bankers name and address f. Shipment period offered

g. Validity of quotation

h. Payment terms

i. Port of loading

j. Name and address of local agent.

The local agent of KAPPEC who resides in importing country submits the sample

along with the quotation of KAPPEC to CWE.

5.5.2.4 Confirmation letter from CWE to KAPPEC

The importer (CWE) sends confirmation letter to KAPPEC after analyzing all the

quotations submitted by different exporters, prices they quoted, samples, etc. Apart from the

specifications in the enquiry it also includes contract number and request for performance

guarantee.

5.5.2.5 Contact number from CWE to KAPPEC for acceptance and signature

Contract number is sent by Importer to exporter for the acceptance and signature.

This contact is sent back signing it towards contract This included specifications as

- Quantity and commodity

- Packing

- Price

- Marks and numbers

- Payment

- Specifications of material

- Country of origin

- Total value

- Insurance

It includes the signature of concerned personal of both importer and exporter as

acceptance.

5.5.2.6 Letter to supplier from KAPPEC for agreement of material to be exported

This letter is sent to Truipti International by KAPPEC for arrangement of material to

be exported for example Table potato as per delivery schedule and quality specification.

5.5.2.7 Performance guarantee bond to importer from KAPPEC

The performance guarantee bond is given by the exporter through its bank (Indus Ind

Bank) and by Importer’s bank (Bank of Ceylon) to Importer. This acts as a security bond.

Here in this case the exporter needs to keep USD 975 which is 10 per cent of the value of the

order as the performance guarantee. It ensures the Importer that the exporter will perform the

task of export.

5.5.2.8 Assigning of surveyor by importer at Port of loading

The importer assigns a surveyor (Stewart Surveyor and Assayers Pvt. Ltd.) on behalf

of them at the POL, whose job is to inspect whether material meets all terms and conditions

as per L/C or not. He issues CERTIFICATE OF EXAMINATION which includes the details

like,

- Shipper

- Importer permits number.

- Invoice number.

- Date of Inspection and Place

- Packing - Receiver

- Contract number.

- Bill of lading number and date

- Commodity, quality and quantity

- Container stuffing.

5.5.2.9 Opening up of L/C (Letter of Credit)

It is a document of authority containing the guarantee of a bank to honor the draft on it by

an exporter under certain conditions and up to a certain amount. Essential parties to a

commercial letter of credit are as detailed below,

• The opener or importer or the buyer who opens the credit

• The issuer – the bank that issues the letter of credit on behalf of importer.

• The beneficiary seller in whose favor the credit is opened. Exporter is the beneficiary

because he gets the payment there of.

In practice however, there may be additional parties introduced in order to perform

certain necessary functions. The confirming bank in the beneficiary country, which, at the

request of the beneficiary, guarantees the payment and acceptance of the seller’s draft. The

advising bank located in the beneficiary’s country notifies the seller of opening of the credit.

The advising and confirming banks may be the same the paying or accepting banks is the

one on which the draft are to be drawn.

It is the safest method of exporting the material by the exporter. It is of the highest

importance among all other export documents. Here the exporter after dispatch of his material

from POL submits al documents to his bank, which in turn checks the documents. If they are

as per L/C then the bank credits amount to the exporter. Here the importers bank and

exporters bank will be in the contract, and not the buyer and seller. This includes all the

terms and conditions as per contract. This is referred to be a negotiation of export bills.

5.5.2.10 Preparation of required documents commercial invoice

It is a document of contents. It is exporter’s bill for goods and sets forth the terms of

sales. Invoice is a basic document, which will fully identify the overseas shipment and serve

as a basis for the preparation of all other documents. The exporter should strictly follow the

requirements of the importer in regard to invoicing.

The commercial invoice contains the following information

• The name and address of importer and exporter.

• Commercial invoice number and date

• Description of goods with parameters like quality, quantity, weight and packing

specifications.

• Terms of delivery and payments

• Port of discharge and final destination

• L/C number and date.

• Amounts in terms of USD since it is the largest currency universally accepted by the

bankers.

• Cost involved in freights

• Signature of authorized official of the company exporting the products, which

declaring of above information is true and correct.

5.5.2.11 Packing list

Packing list is a consolidated statement of contents of number of cases or packs or

bags. Since, KAPPEC is into export of agro products which are associated with

perishability, hence it has to go for various types of packing, which suits the products.

The importers specification takes special importance in this section to export the

products in good condition. It will be helpful in estimating shipping cost prices to export and

for the purpose of insurance. It is also used in determining lost bags or packages.

5.5.2.12 Bill of loading

The bill of loading is a document where in the shipping company gives its official

receipts of the goods shipped in its vessel and at the same time contents to carry them to

POD. It is also a document of title to the goods and as such, is freely transferable by

endorsement and delivery. The main purposes of this document are :

• As a document of title to the goods

• As a receipt from the shipping company

• As a contract for the transportation of goods.

Each shipping company has its own bill of loading. The shipping company prepares

the bill of loading, which contains all details of the consignment.

The information contained in the bill of loading includes.

• Name of shipping company and destination agents name.

• Name and address of shipper or exporter

• Name of vessel or voyage number, container numbers and port of loading

• The number of packages (as specified in L/C)

• Freight pay modes and discharge.

When freight charge is paid at the time of shipment or in advance the bill of loading is

marked freight prepaid, if freight charge is not paid then it is to be collected from the

consignee on the arrival of goods, the bill of loading is marked freight to collect.

Bill of loading is acceptable only when it is marked as “clean on board” by

International Chamber of Commerce. The bill of loading is clear when the carrier see no

evidence of damage to the packing or condition of the cargo. Hence the bill of loading

regulates the receivable cargo in good order and condition without exception or irregularity.

5.5.2.13 Certificate of origin

This document is prepared by the exporter, which specifies the country of production

of the goods. This certificate has to be produced before clearance of goods and assessment

of duty, for the customs law of importing country which may require certificate of origin.

A certificate of origin may be obtained from the chamber of commerce, Export

promotion councils and various traders associates, which have been authorized by the

Government.

5.5.2.14 Importance of certificate of origin

It ensures that particular goods from India are not banned for exporting or importing in

the country and at the same time it also confirms that goods have not been reshipped by the

exporter who had earlier imported from some other country.

5.5.2.15 Phytosanitary certificate

KAPPEC is in to agro products exports, where in the importer wants the products to

be free from pests, the government of India Ministry of Agriculture, Directorate of Plant

Protection, Quarantine and storage will issues phytosanitary certificate. This certifies that the

plants or plant products inspected are considered to be free from quarantine and injurious

pests.

5.5.2.16 Health certificate

Health certificate was issued by the Government of India Port of Health Organization,

and certifies that the goods being exported are fit for human consumption. The inspection

carried out by these officials will be on the request of surveyor assigned by importer. 5.5.2.17 Shipping bill

Shipping bill is issued by Tuticorin custom house which includes cess payment details

like, SB number. payment date, vessel name, etc.

Shipments of material are done after fulfillment of all the terms and conditions as per

L/C.

5.5.2.18 Letter to exporter’s bank by exporter (along with documents specified) for

negotiation of bills

After the shipment, KAPPEC submits all the documents along with L/C to its bank

(Indus Ind Bank) for negotiation of bills and requests for crediting the account and send a

copy to importers for realizing material at port of delivery against the bank guaranter.

5.5.2.19 Negotiation of bills by exporter’s bank

If all the documents are as per terms and conditions of L/C, the bank negotiates the

bills, credits the amount to the exporter’s account and sends the same to Importer’s account

and the importer’s bank for getting payment from Importers bank.

5.5.2.20 Bills from suppliers and C & F agent

Bills from supplier and C & F Agents are sent to the KAPPEC (exporter) for the

payment.

5.6 Constraints faced by KAPPEC analysed by index method

Low financial assistances was one of the major constraints faced by KAPPEC. This

was mainly due to the irregular supply of funds by the State Government. In addition to export

business KAPPEC has also been involved in creating awareness about exports and

establishment of infrastructure facilities. For these activities huge investments were needed.

The stiff competition from traditional exporters was another problem. The traditional exporters

have diversified their business covering a large number of commodities and already have well

established relation with growers. Over all, the low productivity per unit area was a bottleneck

to attain exports competitiveness in the international market. The non-existence of an

organized and strong domestic market was among the least problematic for KAPPEC, since

its intention was to capture the foreign market. 6. SUMMARY AND POLICY IMPLICATIONS

This chapter gives the summary of the findings of the present study and policy

implications emerging from it.

Indian agriculture has a distinct position in the World agricultural production. It is the

second largest producer of Rice, Wheat, fruits and vegetables and largest producer of milk.

Still, in the world agricultural trade, its share is very meager. The share of Indian agriculture in

the world export is less than one Export of agricultural products is an important component of

the country’s agrarian scene. Its present position in the Indian economy is quite significant as

exports contribute a great deal to the development of an economy through the foreign

exchange earnings. Agricultural exports comprised about 30 percent of the total exports from

India during 1980-81 and the share dropped to 19 percent in 1990-91.Agricultural exports in

1995-96 constitutes 19.87 percent in the total exports from India and this share has been

decreased to 15.08 per cent in 1999-2000. In 2000-01 agricultural export constitute 14.1

percent in the total exports from India and this share has been decreased to 10.4 percent in

2006-07.Though the proportionate share of agricultural products in total exports declined, the

value of agricultural exports increased during this period.

Karnataka state is predominantly an agriculture State. About 33% of total gross

domestic product is derived from agriculture and 66% of the workforce dependent on

agriculture further 70% of state population is still living in rural areas and are completely

depending on agriculture for their livelihood. As such if the state has to prosper and progress

economically, it is possible only through the development of the agriculture sector. There is

ample scope for the development and increase of agriculture exports from the State.

To promote the exports and provide an inadequate post-harvest infrastructure

facilities like procurement centers, grading washing, waxing, packing units, cold storages etc.,

with in the state and by the recommendations of the agriculture policy of the State,

Government has established Karnataka State Agricultural Produce Processing and Export

Corporation Limited (KAPPEC) on 22

nd

April 1996.The authorized share capital of the

corporation is Rs 500 lakhs. So far the State Government has released Rs 75 lakhs out of

which Rs 25 lakhs as grant and Rs 50 lakhs as share capital. In addition to this the

Government has also released an amount of Rs.10 crore in the budget for the creation of post

harvest infrastructure facilities in the state based on the potential in a phased manner in order

to boost the export of agriculture and horticulture commodities from the state.

Since inception till 31-01-2008, KAPPEC has handled about 3, 07,029 metric tonnes

of agricultural and horticultural commodities valued at Rs 48,739 Lakhs. In addition to Grapes,

KAPPEC has exported Mangoes, Pomegranates, Drumstick, Watermelon, Red split lentils,

Niger seeds, Menthe seeds, Coconuts, Onions, Potato, Chilies, Garlic, Coriander, and

Turmeric to USA, U.K., Singapore, Srilanka, Malaysia, Middleeast, Turkey, Australia,

Netherland, Mexico, and Brazil etc.

The present study is an attempt to asses the performance of the Karnataka

Agricultural Produce Processing and Export Corporation Limited (KAPPEC) during the past

10 years from 1997-98 to 2006-07 during which the KAPPEC not only raised its volume of

business but also greatly diversified its economic activities. The over all objective of the study

is to analyse and evaluate the performance of the KAPPEC.

Specific objectives of the Study:

1. To analyse financial indicators of Karnataka State Agricultural Produce

Processing and Exporting Corporation Limited (KAPPEC).

2. To analyse the trend of agricultural and horticultural commodities exported by

the KAPPEC.

3. To document the export procedure followed for agricultural and horticultural

Commodities.

4. To identify the constraints in the functioning of KAPPEC and suggest appropriate

policy measures. Special feature of the study

1. Special techniques like compound growth rate analysis, principal component analysis

and index method were used in the analysis.

2. About 10 financial performance indicators were carefully identified for the analysis.

3. The opinion survey was deliberately broad based by including in different

management levels separately interviewing officials of KAPPEC.

Methodology

The Karnataka Agricultural Produce Processing and Export Corporation Limited

(KAPPEC) was purposively selected for an indepth evaluation of its performance because of

its tremendous growth and its key role in promoting and developing agricultural and

horticultural produce exports from Karnataka within a span of 10 years.

The opinion of managing directors and general manager were also sought to identify

the constraints in the working of KAPPEC.

Data collection

The secondary data on several aspects of KAPPEC were collected from different

sources. The data relating to the financial aspects of the KAPPEC were abstracted from

balance sheet, profit and loss account, receipts and payment were abstracted from annual

reports and records of the KAPPEC for the period of ten years i.e. from 1997-98 to 2006-07.

Analytical Techniques Used:

The statistical tools employed were percentages, ratios, compound growth rates and

financial ratio analysis.

The principal component analysis was adopted for analyzing the performance and

working of the KAPPEC for identifying the underling dimensions and importance of the

variables in explaining the total variability.

The simple index method was employed to analyse the severe constraints of

KAPPEC. In this method opinion of number of respondents are taken and for their opinion per

centage is calculated. Based on that value we conclude the severe constraint of the KAPPEC.

Findings of the study

The important findings of the study are summarized below.

The tabular analysis

There were substantial increases in the financial indicators of KAPPEC over the

period of study.

The increase in the business of the KAPPEC was manifold. The rapid expansion of

the business of the KAPPEC was observed in activities of the KAPPEC.

The financial ratio analysis

The total liabilities to owned funds ratio were less than one in all the years. The

company is able to cover its short term and long term obligations of business.

Fixed assets to owned fund ratio is increasing over the years. It indicates that

company is increasing its assets over the years.

Debt equity ratio indicated fluctuating trend over the years. The entire ratio signified

the dynamism of the organization.

Current ratio was greater than unity in all the years. By this we conclude that

corporation had maintained a reasonable level of liquidity position.

Acid test ratio revealed that organization was dependent on sales of its inventory to

meet its current obligations and liquid assets to total assets revealed that the KAPPEC had

maintained a low of liquid assets but good level of liquidity position. Net profit to total assets, net profit to net worth and net profit to fixed assets ratio

revealed that eventhough there was an increase in sale, assets over the years the net profit

was low not upto the mark. There by business of the KAPPEC was not very sound or

satisfactory.

The gross ratio indicated the clear trend of increased expenses in the business of the

KAPPEC and operating ratio showed the low operating expenses compare to volume of sales

of the KAPPEC.

Net worth ratio indicated that KAPPEC was financially strong during the study period

and net capital ratio revealed that the assets in the business of the KAPPEC were sufficient

enough to cover all liabilities.

Compound growth rate analysis

The compound growth rates of financial indicators, like total liabilities (21.07), total

assets (21.27), export value of commodity (37.71) and all significant except for total

expanses, operating expenses, gross income, profit, net worth.

Principal component analysis

The principal component analysis of the financial indicators revealed that there were

seven main dimensions existing in the performance of the KAPPEC. The first Component

explained 43.45 per cent of variation, the second component explained 36.49 per cent of

variation. The variables like total assets, liabilities, expenses, gross income, net worth, current

assets and liquid assets were highly associated with the performance of KAPPEC.

Index method

About 92 per cent of respondents opinioned that low financial assistance is the major

constraints of KAPPEC. Lack of infrastructure facility in every district and low productivity per

unit area is another constraint of KAPPEC.

POLICY IMPLICATIONS

The implications of the findings of the present study are as follows.

1. The total liability of KAPPEC registering high growth rate which is not a healthy sign

for its growth. Hence, Government must provide sufficient funds for its proper

functioning.

2. The gross ratio of KAPPEC was found to be higher. Hence, efforts may be made to

reduce the same by improving efficiency.

3. Low productivity was observed to be one of the constraints for export. Hence,

KAPPEC was indirectly involved in increasing the productivity of export related crops

by facilitating inputs and technical guidance in collaboration with scientific bodies..

4. Domestic market adds to the income of KAPPEC and its found to be decreasing over

the years. Hence, efforts may be initiated to improve their marketing strategies for the

domestic market.

5. The projection of selected financial indictors revealed a lower value for business

income and profits. Hence, efforts may be made to increase the volume of export

business to earn higher profit.

6. KAPPEC is concentrating only on two commodities which was found to be a risky, so

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Land .Bank. J., 23 (3) : 21-30. PERFORMANCE OF KARNATAKA STATE

AGRICULTURAL PRODUCE PROCESSING EXPORT

CORPORATION – AN ECONOMIC ANALYSIS

DEEPA TALLIKERI 2008 Dr.S.B.HOSAMANI

Major advisor

ABSTRACT

The objective of the study was to evaluate the performance of Karnataka state

agricultural produce processing export corporation, Limited. Secondary data were used for

the study for the period 1997-2007.The statistical tools like tabular analysis, ratio analysis,

compound growth rate, principal component analysis and index method were used to

evaluate the objectives of the study.

The solvency ratio revealed that solvency position of the corporation was strong

during the study period. Liquidity ratio showed that corporation maintained a reasonable level

of liquidity position. The results of profitability ratio showed that the corporation has not

maintained a fair level of profit because more importance was given to social obligation than

the profit and the operation efficiency of the corporation was high.

Compound growth rate of financial indicators like total liabilities (21.07), total assets

(21.27), export value of commodity (37.71), current assets (20.90), quick assets

(-16.02) and net worth (3.74) were significant and total expenses (-3.09), operating expenses

(-16.47), gross income (-6.50) were found to be non significant. The growth rate of Onion

export was positive and significant, where as growth rate of Potato, Mango and Niger seeds

were found to be negative and non significant. The compound growth rate in terms of quantity

and value of domestic market, import market showed a negative growth rate but export

market growth rate was positive with increasing trend over the years.

Low financial assistance was one of the major constraints faced by KAPPEC. This

was due to irregular supply of funds by the state Government and low productivity per unit

area was another bottleneck to attain export competitiveness in the International market.

performance of karnataka state

Documents

constraints of kappec

financial analysis of

functions of kappec

financial indicators

basic information of

growth trend of kappec

liquidity ratio of kappec

principal component