The Indian food processing market is one of the largest

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1 a case study International Journal of Commerce and Business Management (April, 010) Vol. 3 Issue 1 : Economics of fruits and vegetables processing unit in Pune district of western Maharashtra Accepted : March, 010 Key words : Economics, Cost, Return The Indian food processing market is one of the largest in terms of production, consumption, export and import prospects. India is one of the largest in fruit production and second largest in vegetable production. But the processing level of fruits and vegetables is only % of the total production, whereas in other countries, the processing level is too high. To find out the causes for the same, the study was undertaken in Pune district of Western Maharashtra to analyze the economics of fruits and vegetables processing unit. A small scale ownership based fruits and vegetable processing viz., Surya Food Products, Pune was selected for study. The analyzed data on capital investment, variable costs, cost of raw material purchased per annum, marketing cost and income received for the year have been presented. The main objectives of the study are to work out the profitability of the unit, to estimate per unit cost of processing and capital requirement of processing unit. The total share of income from vegetable and fruit products was per cent and 8.10 per cent, respectively. The total capital investment of the processing unit was worked out to Rs. 1,9,40,000. The major items of total capital investment were purchase of land (34.77 per cent), construction of building (30.91 per cent) and machinery of equipments (1.36 per cent). The total production cost was estimated to Rs.1,90,53,000 for one year, which included both variable cost (Rs. 1,73,0,500) and marketing charges (Rs. 17,50,500). The total gross returns were estimated to Rs.,01,8,000. The profit was estimated to Rs.11,9,000. The Indian food processing market is one of the largest in terms of production, consumption, export and Correspondence to: M.B. NICHIT, Department of Agricultural Process Engineering, Padmashree Dr. D.Y. Patil College of Agriculture and Business Management, Akurdi, PUNE (M.S.) INDIA Authors affiliations: M.D. JAGTAP, S.R. BENKE AND G.R. BORSE, Agricultural Economics Section,, Padmashree Dr. D.Y. Patil College of Agriculture and Business Management, Akurdi, PUNE (M.S.) INDIA import prospects. Since, India is one of the major food producers worldwide, with new reforms ruling the roost; it presents exciting opportunities for commercial openings for a wide range of investors across the globe. India is the second largest producer of vegetables in the world (rank next to China). But the processing level of fruits and vegetables in India is only % of the total production whereas in other countries, the processing level for fruits and vegetables is too high. This indicates vast scope for investors, exporters, producer as well as cultivators. Also for successful farming, only improvement in productivity of different agricultural products is not sufficient, but efficient marketing of products is equally important. Many experts have also opined that the main defect in agricultural marketing is least share of producer in consumer s rupee. This problem, particularly in Post GATT Era has become vital as prices are going to be determined mainly in open market and purely on the basis of law of demand and law of supply. To eliminate the defects of agricultural marketing, many remedies have been suggested and selling of processed products is one of them. Due to processing, value addition is possible and from the cultivator s point of view, this will be very much beneficial and remunerative. After independence, some attempts in this direction have been made, but these are restricted to few agricultural products like for instance, pomegranate, grapes and some oilseeds. In Pune district cooperative sugarcane processing industries are running very for last 50 years. But until now, number of agril. products are sold in unprocessed form. As a result of this, the cultivators are unable to accure the additional value. However, during the last decade, the approach of cultivators is gradually changing and many agricultural fruits and vegetable processing units have come into existence such units are useful for increasing the income of cultivator s. Therefore, it is now necessary to see how far such units are economically viable. In view of this, one fruits and vegetable processing unit, recently established in Pune district has been selected and a case

2 144 study was conducted with the following specific objectives: Objectives: To study the capital requirement for the fruits and vegetable processing unit. To estimate the cost of raw material purchased per annum. To estimate per unit cost of processing. To workout the profitability of the unit. A smallscale ownership based fruits and vegetableprocessing unit viz, Surya Food Products, LoniKalbhor, Dist. Pune, was selected for study. The data pertaining to the year were obtained by personal interview and from the records of the said processing unit. The collected data were related to cost of establishment, management expenditure, expenses on purchase of raw material used for processing of different fruit and vegetable products. The data were analyzed by simple tabular method. General information of selected processing unit: The selected unit was registered in as Surya Food Products. AtpostLonikalbhor, Tahsil Haveli, Dist. Pune. This is a smallscale unit established on ownership in the year. The production has also been started since form 00. The Pune district where this unit established is famous for fruits and vegetable production. It was established with a view to tap the potential market in Maharashtra, mainly in Pune, Mumbai, Nashik and other regions surrounding Pune district. Hence, large quantity of agricultural products like jam, sauce and different types of syrups are processed in this unit. The processing unit has turnover of about.0 crores. The analyzed data on capital investment, variable costs, cost of raw material purchased per annum, marketing cost and income received for the year have been presented in four tables separately. Capital investment: Though this processing unit was established in, actual production was started in 00. The detail of capital investment for the establishment of this unit has been presented in the Table 1. It is observed that the total capital investment (fixed capital) was worked out to Rs. 1,9,40,000. If the item wise investment is examined, it is found that the major capitals were required on account of construction of buildings and purchase of land, as these items contributed per cent and per cent, respectively. The investment on purchase of land was higher because this unit is located only 5 km away from Pune city. The other important items of capital investments were machinery and equipments (1.36 per cent) and vehicles (15.45 per cent). As far as investment in machinery and equipments are concerned, it is observed that major amount was required for purchase of boiler (Rs. 6,00,000) as steam plays important role in processing unit to concentrate the products. Followed by major amount required for purchase of washer (Rs.,00,000) and filling machine (Rs. 1,80,000) because washing of raw material is must to control the hygienic conditions and attractive packaging play important role in marking of products in growing competition. The minor investment items were expenses on water supply structure, fencing furniture and office/laboratory equipments together the share of which was only 6.48 per cent in total capital investment. Raw material purchased per annum: The details of raw material purchased per annum with its value are given in Table. It is observed that the total amount required for purchase of raw material was worked out to Rs. 1,13,38,05. The major expenses are on purchase of sugar and other spices (4.63 per cent) followed by expenses on purchase of vegetables (9.86 per cent) and fruits (7.51 per cent). As far as fruits and vegetables were concerned, the maximum stress is give on purchase of mango and tomato, which contributed per cent and per cent, respectively. The other major item was sugar, which contributed % share in total raw material cost. Variable cost and marketing cost: The data presented in Table 3 is related to variable costs and marketing charges incurred by the processing unit during the period under study. It reveals that the expenses incurred towards purchase of variable inputs and marketing charges together estimated to Rs. 1,90,53, of which variable costs accounted to Rs. 1,73,0, Among the different variable cost items, the expenses on account of purchase of raw material was the highest as it shared per cent of the total cost. The other important items of costs were on wages, pay and allowances (14.7 per cent) followed by expenditure were interest on fixed capital (6.79 per cent), depreciation on building, equipments and machinery (4.46 per cent) and transport charges (5.77 per cent). It can be seen from figures that the expenditure on purchase of raw material, wage, pay and allowances and interest on fixed capital was higher. For profit maximization an increase in production is not sufficient, but cost minimization measures need to be taken. Also the management of processing Internat. J. Com. & Bus. Manage., 3(1) April, 010

3 ECONOMICS OF FRUITS & VEGETABLES PROCESSING UNIT IN PUNE DISTRICT OF WESTERN MAHARASHTRA 145 Table 1: Capital investment of fruits and vegetable processing unit Sr. Items Unit Quantity Year of purchased / construction Amount Total Amt. Percentage 1. Acquisition of land Acre 45,00,000 45,00, Water supply structure 1,50,000 a. Borewell with submersible 1.7 1,65,000 pump b. Pipe line ft , Construction of building (processing house, laboratory, 4 40,00,000 40,00, godown, office 4. Fencing (wall compound) 75,000 75, Machinery and equipments a. Pulper b. Fruit mill c. Seamer d. Filling machine e. Boiler f. Kettle i. With stirrer ii. Without stirrer g. Washer h. Retort machine i. Can stamping j. Foil sealing machine k. Weight balance ,000 80,000 40,000 1,80,000 6,00,000 1,60,000 70,000,00,000 1,10,000 30,000 40,000 0,000 16,00, Vehicles 5 0,00,000 0,00, Furniture 5,00,000 5,00, Office/laboratory equipments 1,00,000 1,00, Total 1,9,40, unit either has employed excessive permanent employees or has failed to exploit the productivity from the workers. As far as marketing charges are concerned, it has been noticed that only Rs. 17,50, were spent on marketing. On percentage basis, it was only 9.0 per cent of the total cost. The major item of marketing cost was transportation charges. In the total marketing charges its share was to the tune of 6.84 per cent. Other minor items of marketing charges were packing charges, taxes and miscellaneous expenses. The product of this unit was marketed in the cities like Pune, Mumbai, Nasik and other districts surrounding Pune. Thus, the marketing was found to be limited. Another defect was the absence of advertisement, which is essential now in competitive market for efficient marketing. Returns and profitability: The data pertaining to cost of production and returns are presented in Table 4. It reveals that the total cost of Internat. J. Com. & Bus. Manage., 3(1) April, 010 production was estimated to the tune of Rs. 1,90,53,000 for producing 3,85,000 kg of different products. During the study year vegetable products, fruit products and syrups were produced. In vegetable products the main product was sauce and in fruit concerned the main product produced was jam. The highest production of 10 tons with highest cost 3.75 per cent was observed in respect of tomato sauce, in fruit products the highest production of 5 tons with highest total cost of production 8.14 per cent for mango jam. It is also revealed that per cent of the total cost was required for processing of vegetable products only where as 4.00 per cent and 4.41 per cent of total cost were required for processing of fruit products and syrups, respectively. As far as gross returns are concerned, it is noticed that the maximum gross returns of Rs. 1,45,10,000 were obtained from vegetable products, followed by Rs. 47,89,000 and Rs. 8,83,000 were obtained from fruit products and syrups, respectively. The total share of

4 146 Table : Raw material purchased per annum Sr. Particulars Tones Value A. Fruits 1. Mango 30 1,00,000 (10.38). Guava 1,40, Papaya 1 1,44, Banana 0,40, Strawberry 06 6,00, Apple 10 4,00, Orange 05 1,75, Pineapple 10 1,0,000 Sub total 31,19,000 (7.51) B. Vegetables 1. Tomato 00 0,00,000 (17.64). Onion Carrot 50 4,00, Potato 40 4,00, Green chilli 10 1,00, Red chilli 01 30, Soya bean 30 4,50,000 Sub total 33,86,000 (9.86) C. Others 1. Sugar ,10,000 (15.08). Citric acid.90 10,15, Ginger , Garlic , Acetic acid / ,65 vinegar 6. Black pepper.90,90, Cinnamon.90,90, Cardamom.90 11,60, Preservative , Salt.90 17, Other spices,00,000 Sub total 48,33,05 (4.63) Total 1,13,38,05 income from vegetable products was per cent whereas share of fruit products and syrups, respectively were 3.73 per cent and 4.37 per cent, respectively of the total return of Rs.,01,8,000 during the year However, the per kg price realized was highest (Rs. 70 per kg) for strawberry jam product, followed by Table 3 Variable cost and marketing charges incurred during the year Sr. Total cost Percentage Item of cost to total A. Variable cost 1. Wages, pay and 7,19, allowances. Electric charges 8,00, Repairing of machinery 3,00, and equipments 4. Purchase of raw materials 1,13,38, Depreciation on building, 8,50, equipments and machinery 6. Interest on fixed capital 1,94, Subtotal variable cost 1,73,0, B. Marketing charges 1. Packing charges 4,95, Transport charges 11,00, Taxes 60, Miscellaneous 95, Subtotal 17,50, Marketing charges Total cost 1,90,53, Rs. 68 per kg for apple jam and other are below of it. The highest income was obtained from tomato sauce which Rs. 66,00,000 with share of 3.70 per cent in vegetable products whereas from mango jam was Rs. 16,5,000 with share of 8.05 per cent of the total income. The productwise profitability has also been worked out and presented in Table 4. It indicates that all the products produced by the processing unit were profitable. The highest profit Rs. 8,70,000 was gained by selling of different types of vegetable sauces are. The profit from various types of jams and syrups were Rs.,16,000 and Rs. 43,000, respectively. The highest profit was obtained by selling tomato sauce with Rs. 3,60,000. The net returns worked out to Rs. 11,9,000. These results indicate that the processing unit under the study was in good profit during the year Similar type of studies were also made by Lohar and Bansode (1984), Killedar et al. (004) and Nichit and Patil (008). Conclusion: The total capital investment of the processing unit was worked out to Rs. 1,9,40,000. The major items of total capital were purchase of land (34.77 per cent), construction of building (30.91 per cent) and machinery and equipments (1.36 per cent). The highest investment was on land acquisition because this processing unit is Internat. J. Com. & Bus. Manage., 3(1) April, 010

5 ECONOMICS OF FRUITS & VEGETABLES PROCESSING UNIT IN PUNE DISTRICT OF WESTERN MAHARASHTRA 147 Table 4 : Cost of production and income during the year 005 Sr. Name of the product A. Vegetable products 1. Tomato sauce Production (kg.) Cost of Production (Rs./kg.) Price realized (Rs./kg.) 1,0, Total Cost 6,40,000 (3.75) Total income 66,00,000 (3.70) Profit 3,60,000. Soya bean sauce 80, ,60,000 44,00,000,40, Tomato veg. Sauce 30, ,40,000 1,30,000 90, Red chilli sauce 30, ,50,000 11,40,000 90, Green chilli sauce 30, ,50,000 11,40,000 90,000 Subtotal 1,36,40,000 1,45,10,000 8,70,000,90,000 (71.59) (71.90) (77.06) B. Fruit products a. Jam 1. Pineapple jam 8, ,96,000 5,0,000 4,000. Papaya jam 4, ,4,000,40,000 16, Apple jam 8, ,8,000 5,44,000 16, Mango jam 5, ,50,000 (8.14) 16,5,000 (8.05) 75, Guava jam 10, ,10,000 5,40,000 30, Carrot jam 10, ,80,000 5,00,000 0, Strawberry jam 4, ,7,000,80,000 8, Mix fruit jam 9, ,13,000 5,40,000 7,000 Subtotal 78,000 45,73,000 (4.00) 47,89,000 (3.73),16,000 (19.13) b. Syrup 1. Jamun, ,000 96,000 4,000. Orange, ,04,000 1,08,000 4, Pineapple, ,1,000 1,18,000 6, Lemon 3, ,3,000 1,41,000 9, Khus, ,000 98,000 4, Kale khatta, ,000 98,000 4, Ginger, ,08,000 1,14,000 6, Rose, ,04,000 1,10,000 6,000 Subtotal Total 17,000 3,85,000 (Figures shown in parenthesis indicate percentage in total) 8,40,000 (4.41) 1,90,53,000 (100.00) 8,83,000 (4.37),01,8,000 (100.00) 43,000 (3.81) 11,9,000 ( located only 5 km away from Pune city, but it benifitable to reduce marketing cost. The total production cost was estimated to Rs. 1,90,53,000 for one year, which included both variable cost (Rs. 1,73,0,500) and marketing charges (Rs. 17,50,500). The major item of costs were value of raw material, wages paid to staff and labourers and interest on fixed capital which accounted per cent,14.7per cent and 6.79 per cent of the total cost, respectively. Among the different products, tomato sauce in vegetable products and mango jam in fruit products were proved to be most important. Out of total production of 3,85,000 kg, the production of tomato sauce was maximum (1,0,000 kg). The highest per kg cost of production worked out to Rs in respect of apple jam while that was lowest for red chill sauce and green chill sauce (Rs ). The highest per kg price Rs was received by selling strawberry jam products followed by apple jam (Rs ) and mango (Rs ). Internat. J. Com. & Bus. Manage., 3(1) April, 010

6 148 The highest profit was estimated by selling tomato sauce, which accounts Rs. 3,60,000. The total gross return was estimated to Rs.,01,8,000. The maximum share of profit received from vegetable products, which per cent (Rs. 8,70,000) followed by fruit products and syrups with profit Rs.,16,000 and Rs. 43,000. At overall level, the said processing unit was in good profit during the year The profit was estimated to Rs. 11,9, Killedar, N.S.,.Mangave, K., Ingavale, M.T. and Lohar, N.S. (004). Economics of co operative Chillipowder making unit in Kolhapur district A case study. Agricultural Marketing. JanMarch 004. Lohar, N.S. and Bansode, S.D. (1984). A study on the Costs and Returns of Chillies in Gadhinglaj area of Kolhapur district (M.S.) Agril. Banker JanMarch REFERENCES Nichit, M.B. and Patil, S.N. (008). Mushroom Making profitable agribusiness in Pune district of Western Maharashtra A Case Study, Indian J. Mktg., 38 (7) : *** Internat. J. Com. & Bus. Manage., 3(1) April, 010