INTERNATIONAL JOURNAL OF MANAGEMENT RESEARCH AND REVIEW

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1 INTERNATIONAL JOURNAL OF MANAGEMENT RESEARCH AND REVIEW ROLE OF AGRICULTURAL & PROCESSED FOOD PRODUCTS EXPORT DEVELOPMENT AUTHORITY (APEDA) FOR THE DEVELOPMENT OF FRUIT PROCESSING INDUSTRY: A STUDY OF FRUIT PROCESSING INDUSTRY IN CHITTOOR DISTRICT OF ANDHRA PRADESH Dr. Kota Sreenivasa Murthy* 1, Himachalam Dasaraju 2 1 Principal, Seshachala Institute of Management Studies, Puttur, Chittoor District, Andhra Pradesh, India. 2 Prefessor & Chairman BOS (PG), Sri Venkateswara University, Tirupati, Andhra Pradesh, ABSTRACT India. This article made an attempt to review the status of fruit processing industry and need lot of encouragement and the financial support from APEDA for the development of mango processing industry in Chittoor District of Andhra Pradesh. Based on the observations of the Export potentiality, appropriate suggestions are also offered to tone up the growth of the fruit processing industry in Chittoor District in particular. The Chittoor Fruit Processing Cluster (CFPC) is the largest cluster of its kind in India. Lack of mutual trust, intense inter-firm competition and a roller-coaster performance marked the growth of the cluster before the interventions in Other problems afflicting it were unscientific raw material handling practices, primitive processing technologies, unremunerative product-mix, poor product quality and Scarcity of capital. The interventions by APITCO, as the Cluster Development Agent (CDA), with the active participation of the firms and their commitment to swim or sink together attitude; along with proactive support from National Horticulture Board (NHB), Agricultural and Processed Food Products Export Development Authority (APEDA), Ministry of Food Processing Industry (MFPI), Government of India and Government of Andhra Pradesh (GoAP). Increased exports, domestic sales and employment; led to introduction of HACCP protocols; and setting up of aseptic packaging facilities and effluent treatment plants. An Agri-Export Zone (AEZ) covering the entire district. Key Words: - Fruit Processing Industry in Chittoor district, Financial Assistance sanctioned by APEDA, Schemes of APEDA, Fruit Processing Industry in Chittoor District. INTRODUCTION India can become one of the largest fruit and vegetable exporters in the world and can equally be a large importer given its demographic diversity. This strong footing in agriculture provides a large and varied raw material base for food processing. There should be technology up gradation, quality management, firm adherence to export commitments and acquisition of appropriate negotiation skills. Many non-traditional vegetables mainly processed & gherkins and others like asparagus, celery, bell pepper, sweet *Corresponding Author 926

2 corn, green and lime beans and organically grown vegetables are also being increasingly exported. India s exports of Processed Food were worth Rs Crores in , which included the share of products like Mango Pulp worth (Rs Crores), dried and Preserved Vegetable (Rs Crores), Other Processed Fruit and Vegetables (Rs Crores), Pulses (Rs Crores), Groundnuts (Rs Crores), Guargum (Rs Crores), Jaggery & Confectionary (Rs Crores), Cocoa Products (Rs Crores), Cereal Preparations (Rs Crores), Alcoholic and Non-Alcoholic Beverages (Rs Crores) and Miscellaneous Preparations (Rs Crores) 1. The Indian food processing industry is primarily export oriented. India s geographical situation gives it the unique advantage of connectivity to Europe, the Middle East, Japan, Singapore, Thailand, Malaysia and Korea. One such example indicating India s location advantage is the value of trade in agriculture and processed food between India and Gulf region. METHODOLOGY OF THE STUDY Apart from the analysis hither to make on the status and progress of fruit processing industry, the study purports to analyse the financial support of APEDA to fruit processing units in Chittoor district. This is micro level study confined to Chittoor district. The study covers 15 small and medium processing units because the size and conditions under which they operate varies from the unit to unit. The data is collected through canvassing questionnaires to the entrepreneurs of fruit processing units. This study is limited only to the financial support of APEDA to fruit processing industry in Chittoor District. SOURCE OF THE DATA The present study is mainly based on both primary as well as secondary data. The Primary data was collected from the sample units by way of field study. Schedules specially designed for the purpose were filled in through personnel interviews and information given by the respondents was also recorded, analysed and drawn interferences. Secondary data for the study have been collected from the annual reports of National Horticultural Board, AP Horticultural Department and District Industrial Centre. The other data have also been gathered from various annual reports, journals, and periodicals. PERIOD OF STUDY The present study has been selected for a period of six years commencing from to This period is quite satisfactory to evaluate the financial assistance of APEDA for the existing fruit processing units in Chittoor District. OBJECTIVE OF THE STUDY The purpose of the present study is to identify the financial assistance sanctioned by the Agricultural & Processed Food Products Export Development Authority (APEDA) to provide infrastructural and marketing facilities for the development of fruit processing industry in Chittoor district of Andhra Pradesh. The present study is mainly based on the primary data collected form the district industrial centre by way of field study. As the study is localized and confined only to the chittoor district. The main objective of the present study is Copyright 2012 Published by IJMRR. All rights reserved 927

3 1. To examine the role of APEDA for the development of food processing industry, particularly in fruit industry. 2. To study the horticultural scenario of fruits in Andhra Pradesh 3. To identify the financial assistance sanctioned by APEDA to fruit processing industry in Chittoor district AGRICULTURAL & PROCESSED FOOD PRODUCTS EXPORT DEVELOPMENT AUTHORITY (APEDA) The Agricultural and Processed Food Products Export Development Authority (APEDA) was established by the Government of India, under the Agricultural and Processed Food Products Export Development Authority Act passed by the Parliament in December, The Act (2 of 1986) came into effect from 13th February, 1986 by a notification issued in the Gazette of India: Extraordinary: Part-II [Sec. 3(ii): ). The Authority replaced the Processed Food Export Promotion Council (PFEPC). In accordance with the Agricultural and Processed Food Products Export Development Authority Act, 1985, (2 of 1986) the following functions have been assigned to the Authority 2. Development of industries relating to the scheduled products for export by way of providing financial assistance or otherwise for undertaking surveys and feasibility studies, participation in enquiry capital through joint ventures and other reliefs and subsidy schemes; Registration of persons as exporters of the scheduled products on payment of such fees as may be prescribed; Fixing of standards and specifications for the scheduled products for the purpose of exports; Carrying out inspection of meat and meat products in slaughter houses, processing plants, storage premises, conveyances or other places where such products are kept or handled for the purpose of ensuring the quality of such products; Improving of packaging of the Scheduled products; Improving of marketing of the Scheduled products outside India; Promotion of export oriented production and development of the Scheduled products; Collection of statistics from the owners of factories or establishments engaged in the production, processing, packaging, marketing or export of the scheduled products or from such other persons as may be prescribed on any matter relating to the scheduled products and publication of the statistics so collected or of any portions thereof or extracts there from; Training in various aspects of the industries connected with the scheduled products; Such other matters as may be prescribed. Copyright 2012 Published by IJMRR. All rights reserved 928

4 APEDA is mandated with the responsibility of export promotion and development of the following scheduled products: Fruits, Vegetables and their Products. Meat and Meat Products. Poultry and Poultry Products. Dairy Products. Confectionery, Biscuits and Bakery Products. Honey, Jaggery and Sugar Products. Cocoa and its products, chocolates of all kinds. Alcoholic and Non-Alcoholic Beverages. Cereal and Cereal Products. Groundnuts, Peanuts and Walnuts. Pickles, Papads and Chutneys. Guar Gum. Floriculture and Floriculture Products Herbal and Medicinal Plants Scheme of APEDA APEDA provides financial assistance to its registered member exporters under the following schemes Scheme for Market Development Scheme for Infrastructure Development Scheme for Quality Development Scheme for Research and Development Scheme for Transport Assistance Fruit Processing Industry in Andhra Pradesh Andhra Pradesh is the fifth largest state in the country both in area and population. The state has 23 districts classified under 3 regions, viz. Telegana (10 districts), Coastal (9 districts) and Rayalaseema (4 districts). Except Hyderabad, all the remaining 22 districts are categorized as rural districts. The state has 1112 mandals with villages. The state can be divided into three distinct physical regions. The coastal plains, which consist of the best agricultural lands, covers about 35% of the area and comprises reverine and coastal alluvial and red soils with the altitude rising up to 150m above mean sea level. The peninsular plateau covers 52% of the area and lies with in altitude of m. It comprises numerous hills, seasonal streams and tanks. The Eastern Ghats account for 13% of Copyright 2012 Published by IJMRR. All rights reserved 929

5 the area, with altitudes ranging between 600 to 900 m and covered by forest and a series of broken hills and ridges 3. Agriculture contributes 12.9% of the State GDP and employs 32% of the total work force. The net sown area is 37% of the total Geographic area (compared to the National average of 46%). The Gross cropped area is 123 lakh ha with cropping intensity of 122. Small and marginal farmers account for 83% of land holding and 46% of operated area. Irrigation covers 35% of the net sown area while the remaining 65% of the net sown area is rain fed. Andhra Pradesh with high geographical diversity, seven agro-climate zones, varied soil types and good irrigation resources is better placed for production of various horticultural crops 4. Horticulture contributes to approximately 4% of the state GSDP. Horticultural crop covers 13% of the gross cropped area in the state. The area under horticulture is 16 lakh ha, with an annual production of 118 lakh tonnes. Production strength of Andhra Pradesh in Horticulture Andhra Pradesh ranks first in the production of Mango, Sweet Lime and Papaya Table1 showing strength of Andhra Pradesh Name of the Crop All India Rank Mango, Sweet Lime, Papaya, Chilles 1 Lemons/Lime, Coriander, Loose Flowers 2 Cashew 3 Sapota 4 Banana, Guava, Grapes, Ginger 5 Source Rabo India Finance Pvt. Ltd, September In India also Andhra Pradesh takes the 1 st rank in the production of mango, lime and papaya 5. Production of Various Horticultural crops Mango, Sweet Orange and Banana are the leading fruit crops in Andhra Pradesh and account for over 86% of the area under fruit and over 77% of the total fruit production. Figure-1 Graph Showing the Fruit Area and Production 8% 1% 2% 3% 8% 17% 61% Mango Sweer Orange Banana Lemon Papaya Sapota Other Copyright 2012 Published by IJMRR. All rights reserved 930

6 Source: - NHB, Horticultural Scenario in Andhra Pradesh The following are the major strengths and weaknesses of Horticultural crops in Andhra Pradesh 6. Strengths The state abundant in sub soil water reserves. There exists a good network of nurseries / seed agencies The farming community is fairly educated and enterprising. There has been a spread and prevalence of new high-tech technologies. The horticulture sector has been treated as focus area by the State Government. Weaknesses There is inadequate power supply in many parts of the state. There is lack of proper regulation in plant material supply. There are inadequate programmes for waste land utilization. The number of Leaf Analysis Laboratories is not found to be adequate. There is lack of focus on post harvest management and facilities like cold storage, precooling and waxing centers, processing units etc. The marketing channels are not well developed. There is no focus on farmer training programmes for horticulture. Opportunities Large tracts of dry lands / rain fed areas / wastelands can be utilized for promotion of horticulture. There is an opportunity to set up processing industries for horticultural crop on the back of improved post harvest practices. There are export opportunities which can be tapped/ flowers to EU, Mango to Far East, and Banana to Middle East. Threats The increase in the soil and water salinity levels would limit the productivity of horticultural crops. There are wide fluctuations in the market prices and the price discovery mechanism is not transparent. Andhra Pradesh is India s leading producer of mangos, accounting for about 30% of the country s mango production and also for about 80% of the country s mango pulp production. Under the National Rural Employment Guarantee Scheme, about 6000 acres of assigned Copyright 2012 Published by IJMRR. All rights reserved 931

7 lands of scheduled caste families in chittoor district come under mango cultivation in and another 15,000 acres is being taken up in Mango cultivation is being encouraged in these lands, in preference to Totapuri variety which goes entirely production. Agricultural and Processed Food Products Exports Developments Authority (APEDA) has already existed a Vapur Heat Treatment (VHT) plant at Vashi near Mumbai and is setting up three more at Tirupathi, Nuzvid in Andhra Pradesh and at Saharanpur in Uttar Pradesh. The investment at each of the VHTs is 8 crores. Three VHTs have already come up in the private sector at chittoor, Thane and Nashik. The VHT plants are essential for treating Indian mangos so that they meet Japanese health standards. The state of Andhra Pradesh ranks Second in the Country in Fruit Production and the Mango Production alone is 31,64,172 M.T.s and the Production of Mango Pulp is about One Lakh Fiifty thousand Tons mostly produced in Chittoor District only 7. Finance is the life blood to any industry. Financial institutions are advancing fixed and working capital to Fruit Processing Industry in the district. But capital, rapid technological changes are necessitating the replacement of obsolete machinery by updating high cost sophisticated machinery for the development of exports. It is also responsibility of APEDA to provide financial and infrastructural facilities for the rapid development of the fruit processing industry. Fruit processing industry is a seasonal industry as, the industry works for 60 days only in a year and the rest of the year, it is kept idle. Fruit Processors effort to run the Industry throughout the year with other fruits is not successful due to lack of market facilities and involvement of huge capital and the interest burden on the Industry is heavy. For Working Capital each Bank is charging 12% to 15% as Rate of Interest which amounts to lakhs of rupees and which is more than the profit margin earned some times. Many Units have become sick due to lack of Working Capital and support from Financial Institutions. The heavy burdens of Interest accumulated month after month have become a big liability. It is very sad to note that 2 Units were already sold in distress. At present there are nearly 15 Units which are on the brink of becoming sick and on the verge of collapse condition. The Fruit Processing Industry is facing several financial crises in the District, as the District is prone to chronic drought year after year. Fruit processing Industry in Chittoor District Chittoor district is one of the few major mangos growing district in the entire State. Mango is grown on 53,401 acres producing around 2.14 lakh tonnes per year. Production of major crops Mango (3, 58,617 MT), Cashew nut (161.5 MT), Tomato (4, 00,000 MT), Papaya (6,000 MT), tamarind (15,000 MT). Chittoor district is basically an agricultural district with added potentialities and having good agriculture, horticultural, dairy and mineral resources 8. Mango is the major horticultural crop of Chittoor District with an average of 1, 19,539 Acres crop and Producing 3, 58,617 M. Tonnes per Annum. There are 53 Fruit Processing Industries in Small and Medium scale sector. There are 40 processing units in Chittoor region, 10 units in Tirupati region and 3 Units in Madanapalli region manufacturing fruit pulp with a total capacity of 10,000 M. Tonnes per Annum. There is a scope for more units with Copyright 2012 Published by IJMRR. All rights reserved 932

8 asceptic packing which is export oriented. The mango processing units produce large amount of mango peels and mango kernels, which largely remain unutilized. There exists potential in setting up units for extraction of oil from mango kernel, which can be used in varnishes, soaps etc. Similarly mango peels can be dried and converted into protein additive for cattle feed. This is an innovative process not in use in the district, hence the appropriate technology for the same needs to be developed. The development of Fruit Processing Industry in the district has generally stimulated the production of horticultural products particularly mangos. There are about 53 Fruit Processing Units (48 Small and medium and 5 large scale units in the district) functioning in the District and are developed in to a cluster. 90% of the Mango Pulp produced in the District is being exported mainly to the Gulf countries like Kuwait, Saudi, Dubai and also to the European Countries. For the first time in 18 years, Indian mangoes will be available in US super market. India produces about 13 million tonnes of mangoes every year, i.e., over half the world s total mango supply. However, barely 1% of its produce is exported. It accounts for only 19 % of global mango. The American green light for import of Indian mangos will give growers of the fruit in India access to the US mango market, which is pegged at 2,50,000 tonnes per year. The US is the world s larger importer of mangoes and so far it has been Mexico, which produces only 5% of the world s mangoes, that has dominated the US market. India will now look to edge out the Mexicans. Besides, American import of Indian mangoes is expected to make it easier for India to enter other high-value markets. Japan for instance, opened its doors to Indian mangoes after the American green light. Australia and New Zeland are likely to follow suit soon 9. Mango Processing Industry in Chittoor district 53 processing units are established in the district 7 units are with Aseptic processing 46 units are with canning system 4.02 lakh MTs of Mango production 1.90 lakh MTs of raw mangoes are processed lakh Mrs of mango pulp were produced. 90% of totapuri fruit, 50% of Alphonso fruit is utilized for pulp processing and remaining is being used for table purpose. Status of Fruit Processing Industry in Chittoor District The Chittoor Fruit Processing cluster is the largest of its kind in the country. 53 processing units are presently operating in the district. Nearly 83 % of the units are located with a radius of about 35 kms from chittoor town, the district headquarters. Out of 53 units, 48 units are small scale units and 5 are medium scale units they are categorized based on investment range 10. The growth dimensions of the Fruit Processing clusters in Chittoor district across the years as revealed by some lead indicators are presented in the table2 Copyright 2012 Published by IJMRR. All rights reserved 933

9 Table-2 Growth of Chittoor Fruit Processing Cluster ( to ) S.No Indicator Status Growth Rate% Fruit Processing Firms[Nos] Firms having aseptic packing facility [Nos] 3 Installed Capacity [Tonnes/day] 4 Investment Channelised [Rs.Crores] Employment [Nos] Exports [Rs.Crores] Domestic Sales [Rs.Crores] 8 Firms implementing HACCP (Nos) 9 Firms having ETPs ( Nos) (Source: - Field Survey) HACCP-Hazard Analysis Critical Control Point, ETP-Effluent Treatment Plant. Table 2 shows that the trend of the fruit processing industry in Chittoor District in about 10 years. The fruit processing firms increased by 130 per cent from to along with this there has been 100 per cent increase in installed capacity, remarkably increase in investment, employment, exports and domestic sales. Major factors contributing to the growth of the cluster are A majority of the promoters of the units own mango orchards and abundant availability of mangoes (Totapuri) was thus assured. Besides, they are not to resort to distress selling in time of bumper harvests. Domestic consumption of mango pulp has been increasing with the introduction of RTS beverage e.g.maaza, Frooti and Slice. Presence of major exporters in the cluster assured ready market for the end products. Exports of mango pulp over the years have been steady. Copyright 2012 Published by IJMRR. All rights reserved 934

10 Low investment is another factor, which attracted the entrepreneurs to opt for fruit processing. Traditional skills of mangoes. Excellent climatic conditions. 7-8 different fruits are grown. No major quality complaints with regard to products exported from Chittoor fruit processing cluster. Quantum increases in exports from MTS to 1,20,000 Mts. About 76% units operate on job work basis for the leading merchant exporters of mango pulp and manufacturers of mango bar and RTS beverages % of mango pulp produced by the cluster units is exported, while the rest is consumed in the manufacturer of downstream products such as fruit bars, jams, jellies and RTS beverages. Financial Assistance of APEDA to Fruit processing Industry in Chittoor District In view of the negligence of the central Government, the Horticultural crops in Chittoor district haave become doubtful. The centre has completely stopped funding for the last three years and the funds realized earlier were also very inadequate. At this point, we have to remember the fact that the Government of India established 60 Agri Export Zones with the objective of exporting Mango Pulp under the supervision of APEDA and Chittoor is one of the above Zones. As a result, the export of Mango and other fruits increased considerably and number of fruit processing units in Chittoor district increased incomparably in the state of Andhra Pradesh. This enabled the farmers to get satisfactory price for their produce. Unfortunately the Central Government extended no helping hand by stopping funds completely. So the unusual boom in the exports of mango and other fruits and the fruit processing units came to a standstill. Objective of the Government to develop Fruit Processing Industry To export farming products wherever possible To provide satisfactory price to the farmers within the country To provide training to the entrepreneurs in exporting of the quality products and provide assistance to the researchers. To provide infrastructural and marketing facility to the processing units. To provide employment opportunities through fruit processing industry. Assistance of APEDA in Chittoor District In Chittoor district alone Mango is grown in 65,000 H.a, Tomato in 16,838 H.a, Beans in 1,509 H.a. The district stands in the first place in the production of mangos. Another remarkable feature is that mango forms 95 per cent of the total production of the fruits. There Copyright 2012 Published by IJMRR. All rights reserved 935

11 are 61 fruit processing units, 9 cold storages to preserve fruits with a capacity of processing 4,000 tones. As a result of Agri-Export Zone in the district the mango production has increased from 8,000 H.a to 20,000 H.a and production of Guava, Papaya, and Tomato also increased. But the Central Government has not sanctioned funds corresponding to the increase mentioned above for increasing the exports. The Central Government promised to invest 53 crores Central-20 crores,state-9.5 crores and Private investments 23.5 crores for the purpose of exporting fruit pulp to Japan, Singapore, Middle Asia and Gulf Countries. But it sanctioned only 3.32 crores in five years as shown in the table 3. Table -3 Amount sanctioned by APEDA Year Sanctioned amount(in crores) Total 3.32 Source: - DIC, Chittoor The Andhra Pradesh State Government sanctioned only 2.12 crores for up-gradating electricity in the fruit processing industry. As a result the fruit processing units, production of fruit pulp and exports increased in a period of 8 years. The export of fruit pulp increased to a large extent as shown in the table 4 Table 4 - Exports of fruits from to Year Exports( in Crores ) Growth Rate % Source: - DIC, Chittoor The above table shows that there was exports growth rate of per cent in the year , per cent in the year But the export growth rate declined per cent in However the average growth rate of exports is percent. Copyright 2012 Published by IJMRR. All rights reserved 936

12 Figure-2 Exports of Fruits in Chittoor District in Crores Year Exports Growth Rate % CONCLUSION In view of the facts mentioned above one feels that the fruit processing industry needs lot of encouragement from the Ministry of Food Processing Industry, APEDA and Horticultural Department of Andhra Pradesh. The entrepreneurs need financial assistance by way subsidized loans from the government, subsidized power, modernized packing system to export of fruit pulp and serious efforts should be made to expand external market as processing industry is rapidly increasing throughout the country. This task of expansion of foreign market should be undertaken by Central government, state government of Andhra Pradesh, Ministry of Food Processing Industry, APEDA and other organizations specially created for the purpose. REFERENCES 1. Annual report of Food Processing Industry , Ministry of food processing, Government of India Mahendra, Rao NC. Food Processing in Andhra Pradesh Opportunities and Challenges. S June, 2008, p Vision, Strategy and Action Plan, published by Rabo India Finance Pvt. Ltd. for Ministry of Food Processing Industries in India, April Fresh Fruits, Vegetables and Dairy Products:India s Potential for Exports to Other Asian Countries, EXIM Bank: Research Brief, January Sectoral Constraints Vision 2015 Strategy & Action Plan for Food Processing Industries in India - MOFPI, GOI. 7. Diagnostic Study of MSME, The food processing Cluster in Krishna district of Andhra Pradesh, by cluster development organization, DIC, Krishna District, Copyright 2012 Published by IJMRR. All rights reserved 937

13 8. Fruit processors cluster Association and District Industrial centre, Chittoor district. 9. Indian processed Food Industry, Opportunities Galore, Nisha Harchekar, p.8, Agri-Export Advantage published by Export Import Bank of India, March 2006, Vol. V, Issue II. 11. District Industrial Centre, Chittoor 12. Processed Foods and Agribusiness Opportunities for investment in India KPMG India and FICCI, Directorate of Horticultural department, Government of Andhra Pradesh annual Reports Indian processed Food Industry, Opportunities Galore, Nisha Harchekar, p.8, Overview of food Processing in India Indo Italian chambers of Commerce. 16. A.S. Yarso, Fruit Processing Industry in India, Akansha publishing house, New Delhi., Copyright 2012 Published by IJMRR. All rights reserved 938