Operationalising the Agribusiness Infrastructure Development Investment Program- Phase II

Transcription

1 Operationalising the Agribusiness Infrastructure Development Investment Program- Phase II -Bihar- March 2010 Prepared by Client: Asian Development Bank

2 Table of Contents 1 Introduction Project outline and intent Value chain approach Hub and spoke model Integrated value Chain Regions Agri Marketing and Infrastructure Selection of Region Methodology Structure of the Report 9 Muzaffarpur Integrated Value Chain 10 2 FOCUS CROP: LITCHI Post harvest infrastructure Value chain analysis Gaps in the value chain Potential for intervention 19 3 FOCUS CROP: MANGO Value chain analysis Post harvest infrastructure Gaps in the value chain Potential for intervention 25 4 FOCUS CROP: BANANA Value chain analysis Post harvest infrastructure Institutional Infrastructure Gaps in the value chain Potential for intervention 32 DPR: Muzaffarpur Integrated Value Chain Project 33 5 HUB: MUZAFFARPUR Focus Crops and Estimated Throughput Existing Facilities Traders Shops Open & Covered Platforms Godowns General Amenities and Support Infrastructure Proposed Facilities Pack House (with cold infrastructure) Banana Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Multi Fruit Processing Plant Other Facilities 42 i

3 5.4.1 Business Centre Knowledge Centre 42 6 SPOKE: HAJIPUR Focus Crops and Estimated Throughput Existing Facilities Traders Shops Open & Covered Platforms Godowns General Amenities and Support Infrastructure Proposed Facilities Pack House (with cold infrastructure) Banana Ripening Facility Dry Warehouse Other Facilities 50 7 SPOKE: DARBHANGA Focus Crops and Estimated Throughput Existing Facilities Traders Shops Open & Covered Platforms Godowns General Amenities and Support Infrastructure Proposed Facilities Ambient Pack Shed Banana Ripening Facility Other Facilities 54 8 SPOKE: DALSINGHSARAI Focus Crops and estimated Throughput Existing Facilities Traders Shops Open & Covered Platforms Godowns General Amenities and Support Infrastructure Proposed facilities Pack house (ambient) Banana Ripening Facility Dry Warehouse Ambient Onion Stores Other Facilities 58 9 SPOKE: BEGUSARAI Focus Crops and estimated Throughput Existing Facilities Traders Shops Open & Covered Platforms Godowns General Amenities and Support Infrastructure Proposed facilities Pack house (ambient) Ripening Facility Dry Warehouse 63 ii

4 9.3.4 Ambient Onion Stores Other Facilities FINANCIAL ANALYSIS IVCs in Bihar Muzaffarpur IVC Project Details Project Cost Means of Finance Key Operating Assumptions Financial Performance Sensitivity Analysis ECONOMIC ANALYSIS Methodology and Assumptions Muzaffarpur IVC Quantification of Benefits Quantification of Costs Recurring Costs Cost Benefit Statement Calculation of Economic IRR (EIRR) Economic Appraisal Results Major Economic Indicators: 79 PATNA NALANDA INTEGRATED VALUE CHAIN FOCUS CROP: POTATO Value Chain Analysis Value Chain Actors and Functions: Post Harvest Infrastructure Institutional Arrangements Gaps in the value chain Proposed Interventions FOCUS CROP: VEGETABLES Value Chain Analysis Price Build up in the value chain of Cauliflower Price Build up in the value Chain of Brinjal Post Harvest/Marketing Infrastructure Gaps in the value chain and Proposed Interventions 96 DPR: PATNA NALANDA INTEGRATED VALUE CHAIN PROJECT SPOKE: MUSALLAHPUR Focus Crops and estimated Throughput Existing Facilities Traders Shops Open & Covered Platforms Godowns Cold Storage General Amenities and Support Infrastructure Proposed facilities Pack house (ambient) 100 iii

5 Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Other Facilities HUB: BIHAR SHARIF Focus Crops and Estimated Throughput Existing Facilities Traders Shops Open & Covered Platforms Godowns General Amenities and Support Infrastructure Proposed Facilities Ambient Pack shed for vegetables Banana Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Other Facilities SPOKE: GAYA Focus Crops and estimated Throughput Existing Facilities Traders Shops Open & Covered Platforms Godowns General Amenities and Support Infrastructure Proposed facilities Pack house (ambient) Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Other Facilities SPOKE: ARRAH Focus Crops and Estimated Throughput Existing Facilities Traders Shops Open & Covered Platforms Godowns General Amenities and Support Infrastructure Proposed Facilities Pack House Potato Cold Store Dry Warehouse Ambient Onion Stores Other facilities SPOKE: BUXAR Focus Crops and Estimated Throughput Existing Facilities 121 iv

6 Traders Shops Open & Covered Platforms Godowns General Amenities and Support Infrastructure Proposed Facilities Ambient Pack House Potato Cold Store Dry Warehouse Onion Store Other Facilities SPOKE: NOKHA Focus Crops and Estimated Throughput Existing Facilities Traders Shops Open & Covered Platforms Godowns General Amenities and Support Infrastructure Proposed Facilities Pack Shed Potato Cold Store Dry Warehouse Onion Store Other facilities FINANCIAL ANALYSIS Patna Nalanda IVC Project Details Project Cost Means of Finance Key Operating Assumptions Financial Performance Sensitivity Analysis ECONOMIC ANALYSIS Patna Nalanda IVC Quantification of Benefits Quantification of Costs Recurring Costs Cost Benefit Statement Calculation of Economic IRR (EIRR) and NPV Economic Appraisal Results Major Economic Indicators: 140 BIHAR: INTEGRATED VALUE CHAINS CONCEPTUAL PLANS FOR FACILITIES Conceptual Plans for facilities at selected locations of the IVCs Planning Concept Master Plan Buildings Services 143 v

7 Road & Parking Green Area Link Infrastructure Approach and Accessibility Linkages for Power, Water, Storm Water etc General Design Considerations Sanitary Installation, Water Supply and Fire Fighting Systems Solid Waste Management Fire Protection Measures Technical Proposals for up gradation of APMC Market Complex Cost Estimates For IVCs In Bihar Muzaffarpur IVC Patna Nalanda IVC Master Plans and Basic Infrastructure Proposals for 6 Representative Location Stakeholder Consultations IVCs in Bihar Farmers Traders/Wholesalers/Local processors/cold Chain Owners Industry Players Some Major Stakeholder Consultations in Bihar: Bihar: Persons Contacted Assessment of Market Demand Assessment of Food market in India Growth drivers of value added food products Assessment of Food retail Industry Major players in organized food and grocery segment Assessment of major consumption markets Delhi Mumbai Kolkata Patna Impact Assessment Integrated Value Chain: Envisaged Impacts Illustrative example of the Litchi Value Chain Key Overall Impacts Other Impact Assessments Capacity Building Capacity Building: Needs Assessment Farm/Production Cluster level Capacity Building at Farm/Production cluster level Capacity Building at Hub Spoke Level Capacity Building at hub and spoke level Capacity Building Coverage Implementation arrangements Summary Financials for Bihar Policy and Regulatory Aspects Issues relating to policy Agri business infrastructure Regulatory Issues Credit 224 vi

8 Technology Induction Capacity Building Recent Policy Initiatives taken by the Government State Level APMC Initiatives taken to promote Agribusiness Investment in Bihar Existing Schemes Pertaining to Agri business infrastructure Impact of Schemes on Development of Agribusiness Infrastructure Policy Initiatives Critical to Successful Implementation of AIDP Applying the Integrated Value Chain approach Suggested Policy Interventions Implementation Frame work Proposed Models under Public Private Partnership Approach to Public Private Partnership (PPP) in India Experience of PPP in India PPP in Agribusiness Infrastructure: Viability Gap Funding Scheme (VGF) Challenges of VGF model for Agribusiness Infrastructure under AIDP Under VGF, ownership of project assets has to remain with the Government Private sector is given a contract/concession to recover its investments User charges need to be determined before implementation of the project Need for a flexible PPP structure for AIDP BOT vs BOT Annuity models SPV Model Preferred Operational Model for AIDP Proposed Project Grant, O&M Framework and Recovery of Charges Project Implementation Structure Role and Responsibilities of Project Implementing Agency (Mother SPV) 241 Annexure vii

9 1 INTRODUCTION IL&FS Cluster Development Initiative Limited (IL&FS Clusters) has been appointed by Asian Development Bank (ADB) to prepare a Detailed Project Report for operationalising the Agribusiness Infrastructure Development Investment Program Phase II in the states of Bihar and Maharashtra. The Agribusiness Infrastructure Development Investment Program (AIDP) is a Program of Asian Development Bank in the agriculture sector in India. This document is the Final Report. 1.1 PROJECT OUTLINE AND INTENT AIDP is aimed at addressing three main constraints to agriculture growth- outdated technologies; lack of public investment in basic infrastructure and limited diversification. Taking into account the Integrated Value Chain (IVC) approach, the program targets improving physical and institutional linkages along agricultural value chains through support of agribusiness market infrastructure; support infrastructure like last mile roads, power, water; systems relating to market intelligence; and, capacity building and strengthening/establishing value chain linkages. The intent of the program is to achieve accelerated investment in agriculture and to support related infrastructure in rural areas, along the Integrated Value Chains. The interventions may target several or all of the following: Aggregation facilities Sorting, grading, packaging Storage (ambient and controlled temperature) Value addition and market intelligence Distribution facilities including logistics Value chains for end-to-end linkages Value chain approach The Integrated Value Chain approach guides the process and forms the underlying structure for this initiative. Of the several motivations to employ a value chain approach, the development orientation is partial to one that drives economic growth with the aim of poverty reduction through the integration of large numbers of micro- and small players (in this case, farmers, traders, agents etc) into increasingly competitive value chains. By influencing the structures, systems and relationships that define the value chain the aim is to help farmers, traders and other stakeholders to improve (or upgrade) their products and processes, and thereby contribute to and benefit from the chain s competitiveness. Through 1

10 this approach, the government would enable the small and mid-size players including small-scale farmers to create wealth and escape poverty 1. The value chain approach; as discussed here, though not especially different from other economic development approaches is distinct in that it simultaneously emphasizes several features like: A market system perspective A focus on end markets Understanding the role of value chain governance Recognition of the importance of relationships Facilitating changes in behaviour Transforming relationships Targeting leverage points Empowering the private sector through its greater involvement Taking a value chain approach necessitates understanding a market system in its totality: from input supply to end market buyers; the support systems that provide technical, business and financial services; and the business/market environment in which the sector operates. Such a broad scope of analysis is needed because the principal constraints to competitiveness may lie within any part of this system or the environment in which it operates. While it may be beyond the capacity or outside the mandate to address certain constraints, the failure to recognize and incorporate the implications of the full range of constraints generally leads to limited, short-term impact or even counter-productive results. 2 A careful understanding of these dynamics underpinned the project from its early stages right up to the final proposal. In particular, with an eye to effective implementation, special attention has been directed at the proposed institutional arrangements and capacity building support across levels. To elaborate, this approach envisages to bring about positive changes through increased competitiveness, to make visible and measurable differences across the board. The focus of the value chain approach is thus on transforming relationships particularly between players linked vertically in the value chain to: facilitate upgrading to become competitive, and adapt to changes in end markets, in the enabling environment or within the chain to remain competitive Hub and spoke model Use of the concept of the hub and spoke model in the value chains is another key aspect of the project. This takes into account existing players in the supply chains and resolves them into the new, ordered and 1 The Value Chain Framework Briefing Paper 2 ibid 2

11 more efficient structures that employ the use of improved infrastructure and systems. Assignment and clarification of roles along with support of the appropriate infrastructure, or the wherewithal to execute the functions leads to improved efficiencies, greater value realisation and, finally, improved competitiveness. The illustration alongside demonstrates the flow and activities from spoke to hub and from there to the consumption markets. 1.2 INTEGRATED VALUE CHAIN REGIONS In Bihar, though agriculture and agro-based industries comparatively, have a high contribution to the gross value addition the performance level of the sector has much scope for improvement. More so given that it is the third largest vegetable producing state (14.07 mn MT annually accounting for more than 11% of the country s total production) and the seventh largest fruit producing state (3.25 mn MT annually, accounting for just under 6% of the total fruit production in the country). It is the only producer of makhana, the second largest producer of okra and cauliflower, 3rd largest producer of brinjal, cabbage, onion and potato and the largest producer of litchi. It is also the second largest producer of guava, the fourth largest producer of pineapple and fifth largest producer of banana and mango Presently, agriculture is the livelihood of over 76% of the population and it drives the state s economy. Given these conditions, the introduction of a structured Integrated Value Chain approach in the belts with the best potential has been proposed Agri Marketing and Infrastructure Currently, Bihar does not have state regulated agriculture market infrastructure after the APMC Act was repealed by government of Bihar in There were about 100 main wholesale agricultural markets in the state before the repealing of APMC Act. Out of these, 54 are erstwhile APMC mandis of a larger scale. Most of these mandis have some vacant areas in their yards; 13 have more than 8 Ha of vacant land at each location. These mandis provide opportunity for setting up of requisite infrastructure along the value chain. The focus of the program in the state has therefore, focused on the modernization of these markets. At present, most of these markets have very basic infrastructure such as trading sheds, roads, auction areas, etc. with several drawbacks in terms of facilities, amenities and overall organisation. Required infrastructure/services for the agri-business value chain like warehouses, cold stores, pack houses, waste management, etc. are largely absent or in short supply; interventions along these lines therefore, will not only address this gap but also provide opportunity hitherto unavailable for up-scaling.. Total food grain warehousing capacity of Bihar is about 1.34 mn MT only 12% of total production of food grains in the state. There are around 240 cold stores with a capacity of just under a million MT, the 3

12 majority of which is used for storing potato. Most of these cold stores use dated technology; using ammonia, with glass wool insulation and no planned air circulation Selection of Region The regions selected for the Integrated Value Chains in Bihar are based on considerations of crop mix, with focus both on horticultural crops and food grains, taking into account volumes of production and seasonal spread and overall development indicators for the area. The selection has taken into account the diverse crop mix in the two regions, with one being a predominantly fruit production area and the other focusing on vegetable and grain. The two selected regions also account for the production of major food grain crops: maize and paddy respectively, which are both significant in the state s consumption pattern and have been taken into account in the proposed infrastructure along the Integrated Value Chain. The selected areas are: Muzaffarpur region in North Bihar Patna-Nalanda region in South Bihar Muzaffarpur region: The region includes Muzaffarpur, Darbhanga, Vaishali, Samastipur, Bugusarai Muzaffarpur districts in North Bihar, as shown in the map. This region accounts Patna Nalanda for almost 1 mn MT of fruit production per year (fruits like mango, litchi guava and banana). It also accounts for just under 800,000 MT of vegetable production and over 1 mn MT of grain production (including staples like paddy, maize and wheat). This region is especially well-known for litchi and mango and accounts for 50% of the total litchi produced in the country. Patna Nalanda region This region includes Patna, Nalanda, Buxar, Sasaram, Gaya districts and is a major vegetable producing belt. It has recorded more than 2 mn MT of vegetable production and about 1.1 mn MT of grain production annually. Vegetables like cabbage, cauliflower, cucurbits, onion, potato, tomato and okra are the major produce here. Based on the selected area and taking an end-to-end integrated value chain approach, surveys undertaken for the regions brought out the area s latent potential that may be given a fillip with appropriate infrastructure and systems support.. 4

13 Details pertaining to these regions, focus crops and proposed strategies developed are described in detail in the report. 1.3 METHODOLOGY In the course of the assignment, an assessment was made of the current status of produce, existing supply linkages and systems of aggregation, transportation, trade, sale and processing in the identified areas. Feasible clusters of high value agricultural /horticultural produce and high volume produce in Bihar, were specially flagged for examination along with an assessment of gaps, as also of the extant infrastructure. The different phases of the assignment were as follows: Phase I: Identification of regions for the integrated value chains of high value/volume agricultural/horticultural produce in the regions. Phase II: Detailed field survey and analysis, gap analysis, identification of stakeholders Phase III: Stakeholder-consultations Phase IV: Structuring and detailing of project components (including locations and financials) for each of the selected integrated value chains Phase V: Stakeholder-consultations for pre-testing models and project finalization PHASE I: Identification of regions for the integrated value chains of high value/volume agricultural/horticultural produce in the region IL&FS Clusters undertook to identify the major regions for Integrated Value Chains of high value/volume agricultural/horticulture produce based on primary and secondary studies and in consultation with some key stakeholders; representatives of the concerned departments of the state. The methodology adopted for the purpose was: A study of various existing data e.g. relating to production, processing, marketing, infrastructural facilities, along with a mapping of the same. To validate findings of secondary data, limited field assessments have been carried out. A team of agribusiness supply chain experts mapped the state for production clusters, related infrastructure, existing systems and assessed the market demand and supply for different crops. Based on this, different high value and volume crop regions for the integrated value chains were flagged for consideration. The potential for value addition to the produce through processing at different levels to increase efficiency, preserve quality and/or reduce wastage/spoilage was additionally taken into account and assessed Detailed production data of agri/horticultural crops was collected and analyzed. The status of agri/horticultural processing, marketing and infrastructure including storage, connectivity, etc. in the clusters were also assessed in the context of production on the one hand and its consumption market on the other. Focused field assessments were undertaken (of a limited scope) to validate the secondary data in some areas in the envisaged integrated value chains. 5

14 PHASE II: Detailed field survey and analysis, gap analysis, identification of stakeholders A survey team was put in place to undertake detailed field surveys for each of the identified integrated value chains. As part of this exercise, IL&FS Clusters undertook an assessment of the range of activities under the value chain to understand the gaps and inefficiencies in order to identify sub-sectors with the most potential for growth. The methodology adopted is outlined below: A detailed structured questionnaire survey was canvassed for mapping the entire value chain. This included assessment of marketable surpluses, mapping of the existing supply chain and identification of gaps at each stage, with added focus on institutional arrangements and infrastructure including marketing infrastructure, existing technology in use and potential for appropriate technology induction etc. The process of mounting the survey involved: o Identification of blocks to be surveyed, based on production areas of the district that are known for the identified crops; villages from the identified blocks were visited by the survey team to collect data o A two-level assessment- to gauge from farmers about the clusters, crops and quantity, and also obtain information regarding the same from DHOs, DAOs and market players such as commission agents to know their assessment of clusters and quantity. This helped check, verify and triangulate information and views. The survey team was led by the agribusiness supply chain experts, and in addition to the canvassed questionnaire, included focus group discussions at the cluster level, interviews with key stakeholder representatives and group consultations. This process was spread over six weeks. Consultations were a key part of the project development exercise, extending beyond the survey period, and, included stakeholders such as farmers, consumers, traders, agro-enterprises, processors, exporters of raw and value added products, as also private sector firms not currently involved but with the potential for participation in the project. The prepared action plan was validated through focus group discussion and bring out environmental and social acceptability, financial feasibility, legal and other issues. Social and environmental impact experts made independent assessment to understand the context The agribusiness supply chain experts assessed the demand for high-value crops and valueadded products in the domestic and international markets in consultation with the product specialists on the team, and identified sub-sectors in the integrated value chains with the most growth potential. Institutional, infrastructural and logistical barriers for product categories were also identified. The cold chain experts conducted an independent assessment in the field to assess the cold chain needs for the identified integrated value chains, in view of the highly perishable highvalue products to suggest cold chain solutions for each integrated value chain. The cold chain experts along with the logistics expert mapped the existing supply chains to identify the 6

15 temperatures ranges ideal for the selected produce types and their requirements throughout the supply chain. For the focus crops, the following type of information was collected. Crop harvest times; Processes required for different crops picking, washing, grading, packaging, storage; Existing types and numbers of facilities for undertaking these operations; Transport-types used, to and from these facilities; Road networks connecting the clusters and markets, and also the facilities; Main sources of consumption for the different crop types un-organized retail, organized retail (supermarkets), export; Typical number of stages in the existing supply chains commission agents, aggregators, traders, markets, etc. Cold chain technology such as temperature controlled facilities and transport that is in use in the existing supply chains. Based on findings from the field studies, areas where key improvements can be made towards quality, waste reduction and greater value realisation from the produce, with the development of cold chain facilities, were flagged. The identification of cold chain interventions focused on post harvest cold-chain management, reducing metabolic rates (respiration and degradation by enzymes) and water loss/volume reduction and wilting, appropriate time for handling and processing, and, maintaining predictable consistent quality at delivery points. Based on this, facilities, relevant technologies and transportation have been identified and scoped. Infrastructure specialists worked closely with the agribusiness supply chain specialists and the cold chain specialists to identify and rationalize requirements and evolve the applicable Hub and Spoke concept, located within the Integrated Value Chains. A parallel assessment of the consumption markets in the existing supply chains took into account the following aspects: 1. Key market requirements and factors that affect price and shelf life such as quality, packaging, presentation, processing and Good Agricultural Practice (GAP) requirements. 2. The specific activities and unit cost of the specific activities needed to meet market requirements, e.g. mechanical harvesting, grading and packaging, cool storage, etc. 3. The commodity volumes and the synergies that may be developed between different products for harvesting, grading, packaging, processing, storage and transport. Outputs from these were used to define the scope of the infrastructure requirements and provide the design parameters for value-adding plant and equipment as well as agribusiness centres, storage and handling facilities. A social development specialist assessed aspects of the project critical for the project s sustainability. Poverty and Social Assessment was undertaken by the social development specialist on a sample basis pertaining to key indicators of poverty and human development. 7

16 Given the nature of the activities, the project does not have a significant land acquisition component that involves resettlement or any significant impacts to the indigenous peoples in the areas. PHASE III: Stakeholder consultations The program aims at developing commercially sustainable integrated agri-infrastructure projects; inputs and suggestions of potential investors in developing the projects have been used to further develop the projects. After the detailed field survey, the analysis and the gaps identified were discussed with a range of key stakeholder groups, among them, farmers, consumers, agro-enterprises, research and extension organizations, food processing industry, intermediaries in the value chain, exporters and food retailers and private sector firms with potential for participation, etc. to get their feedback on the analysis and understanding of the issues. These valuable inputs have been used at several instances for the accurate structuring and detailing of project components in the integrated value chains. These inputs have also informed the need to build capacities along the envisaged integrated value chains. PHASE IV: Structuring and detailing of project components (including locations and financials) for each of the selected integrated value chains Based on the need assessment for each value chain, action plan were drawn-up and stakeholder consultations undertaken to identify locations of hubs and spokes in each integrated vale chain. International best practices were also used as applicable to benchmark and inform the practises to be instituted along the value chains. The cold chain specialist developed detailed designs of the identified cold chain elements of the selected value chains along with costs- the infrastructure specialists developed the costs of civil works and technical equipment, in consultation with the cold chain experts. Improving efficiencies along the supply chain and greater value realisation were kept in focus. The infrastructure specialist made an estimate of the civil works for buildings as well as for supporting infrastructure like water and power supply, effluent treatment etc. using tabled standard cost norms. The master plans of identified project structures in the selected value chains have been included. A market intelligence and information system has been envisaged an integral part of the proposed interventions and knowledge centres have been proposed at hub/spoke locations. The project finance/ppp specialists along with agribusiness supply chain experts, cold chain experts and infrastructure experts have developed detailed project costs for each value chain. The project finance/ppp specialists have considered various PPP options for project structuring. After detailed analysis of various operation models, most feasible options have been recommended to ensure smooth project implementation. Project structuring for determining various PPP options and identification of procurement options for various components along with sources and quantum of investment from different sources and the possible ways of meeting the O&M expenses of the assets for the value chain of each selected product of project, are also included.. 8

17 The agribusiness supply chain specialists explored existing farmer organizations (groups/clubs/cooperatives/associations) in the identified value chains, and recommendation for further formation of groups and capacity building have been included in the project with a suitable institutional mechanism, to ensure that small and marginal farmers are included in benefiting from the project. PHASE V: Pre testing models and project finalization In consultation with the strategic advisor, pre-testing of project components with potential private sector investors and existing stakeholders has been carried out. The legal/ppp contracts experts undertook to review existing legal frameworks in the states with respect to the sub-project construction and implementation aspects. 1.4 STRUCTURE OF THE REPORT The document, for Bihar, covers both Integrated Value Chains; Muzaffarpur and Patna- Nalanda and the layout is as follows: Muzaffarpur Integrated Value Chain Map of region Introduction- Separate sections detailing focus crops litchi, mango, banana Spoke description, proposed system Proposed Locations for Hub and Spoke model, system Proposed Integrated Value Chain Project Patna Nalanda Integrated Value Chain Map of region Introduction- Separate sections detailing focus crops potato, vegetables Spoke description, proposed system Proposed Locations for Hub and Spoke model, system Proposed Integrated Value Chain Project Conceptual plans of facilities Stakeholder consultations Market assessment Impact assessment Capacity building Policy and regulatory aspects Implementation framework Project implementation structure 9

18 MUZAFFARPUR INTEGRATED VALUE CHAIN Muzaffarpur region, Bihar Focus Crops Litchi Mango Banana DPR: Muzaffarpur Integrated Value Chain Project Description of Hub and Spokes 10

19 Muzaffarpur region Muzaffarpur region, comprising six districts viz. Muzaffarpur, Darbhanga, Vaishali, Samastipur and Begusarai, has been selected as one of the regions under the integrated value chain. The region is less developed, rain fed and flood prone, having low per capita income levels and poor infrastructure and connectivity. The identified districts constitute major agriculture trade centers of the region and any kind of interventions in these districts will give the much required impetus to the overall agribusiness activities in the state. As mentioned earlier, the state was analyzed based on the overall horticulture production scenario in the districts. Also, the seasonality and scale of Production of major produce have been considered for the choice of the districts. Other factors like socio economic profile of the districts and existing infrastructure facilities like rail & road connectivity, rural electrification, etc have been taken into account to determine the regions. While districts like Muzaffarpur, Vaishali and Samastipur have been major hubs for production of fruits like Litchi, Mango and Banana, Darbhanga and Begusarai are major grain producers thereby ensuring diversity and round the year availability of the produce. Though the seasonality is skewed towards winter, the region has a seasonal spread almost round the year. The focus crops for Muzaffarpur region are Mango, Litchi and Banana. The choice of crops is Muzaffarpur based on the adequacy of volume to make any intervention sustainable in the long term. Also, these crops have high-value addition potential. The focus crops in this region are: Litchi Mango Banana 11

20 2 FOCUS CROP: LITCHI Litchi is a speciality fruit which is very famous for its taste. Bihar is the leading state in litchi production accounting for about 70% of the total production of the country. In Bihar, total area and production of litchi in was 29,843 Ha and 2.2 lakh MT respectively. Litchi production in Bihar has grown at a rate of 2.1% per annum in the last decade while for the rest of India; growth has been at the rate of 1.4%. Muzaffarpur, Vaishali and Samastipur districts are well known for cultivation of litchi. The agro climatic condition of North Bihar particularly that of Muzaffarpur region is very congenial for commercial litchi cultivation. In addition to this, the region is also endowed with rich fertile calcareous soil that is very suitable for cultivation of high quality litchi. Shahi and China are the commonly grown varieties of Litchi. Shahi commands premium over china in retail markets because of its colour, taste and aroma. Area and production of Litchi in the identified region Districts Area in Ha Production in MT Muzaffarpur Vaishali Darbhanga Samastipur Begusarai Total 13,218 1,01,339 *Source: Directorate of Horticulture, Govt. of Bihar Around 13,000 Ha is under litchi cultivation in Muzaffarpur region with production of around 1 lakh MT. Thus, Muzaffarpur region accounts for 50% of the total production of litchi in the state. Harvesting of litchi in the region commences during the third week of May and continues up to first to second week of June. Marketable surplus in case of litchi is about 99%. More than 80% of litchi produced in the state is marketed out of the state and rest is consumed within the state. Around MT of Litchi is processed annually in Bihar. Around 30 MT of fresh produce is also exported from the state to Nepal, UAE etc., which accounts for only 18% of the total volume of litchi exported out of the country Post harvest infrastructure The region has five pack houses which are operated by private litchi processors. Around MT of produce, which is less than 2% of the region s production, is handled annually by them. The pack houses handle fresh as well as processed litchi. About MT of fresh litchi is traded and around MT is processed annually by them. The pack houses have facility for pre-cooling and cold storage (around 100 MT each). Mostly the pre-coolers are of 4-10 MT capacity and their maintenance is poor. 12

21 Pre-coolers used for Litchi Brick Structures with inner Polystyrene Foam cladding. As litchis are highly perishable, the cold stores are used by pack house operators to store litchi for days only and thus for transit purpose only. Around 50-60% of fresh litchi is transported through reefer trucks because its availability is a huge concern. Some of the pack house operators also hire reefer trucks from Delhi. The reefer trucks are of 9 MT/7 MT capacities and they can carry around 4-5 MT of fresh litchi. Rest of the produce is transported through normal trucks. These pack houses also have facility for pulping and around MT of litchi is processed annually by them. The installed capacity of pulping units is around 7 MT/hr and the resulting pulps are stored in deep freezers at -18 to -22 Celsius. Other products manufactured by them include litchi shreds/whole in sugar syrup. The same facility is also used by the processors for processing tomatoes, strawberry, pineapple etc Value chain analysis Trade channel of fresh litchi The following illustration depicts the various actors in the litchi supply chain: Various channels of litchi supply chain are Farmer mentioned below: 1. Pre-harvest contract: This is the most commonly used sales system of litchi. More than 95% of the litchi farmer s lease out their orchards to contractors. The farm owners do not want to go through the process of selling litchi Pack house Pre harvest contractor Commission agent Wholesaler themselves owing to the risks Retailer associated with marketing a highly perishable fruit and therefore they lease out their litchi orchards to pre-harvest contractors. These contractors act as agents of wholesale merchants located in cities like Delhi, Mumbai, Lucknow and Amritsar. They take credit facilities from the wholesale merchants/commission and supply produce directly to them. The contractors also supply litchi directly to processing units/pack houses and wholesalers of various districts of Bihar. 13

22 2. A few large farmers have direct linkages with commission agents and they send the produce directly to them. 3. Some of the farmers supply directly to the pack houses. Some of these pack houses also provide extension services to the farmers to improve their crop yield. The role played by various actors in the litchi supply chain and the value added at each stage is briefly captured below: Farmer: The average landholding of litchi farmers is around 1.5 ha. The average size of a litchi orchard is around 0.75 ha. Litchis are planted in pits of 1x1x1 m with a row to row and plant to plant distance of 10m x 10m. Thus trees are planted in a hectare. Farmers incur a cost of Rs 15,000 3 in establishment of litchi orchard and the trees start bearing fruit from 5-6 years of age. The cost of establishment of orchard in a hectare is represented in table below: Activity Cost of sapling (120 sapling) 1800 Labour cost (levelling, digging, weeding, sapling plantation, manure spread, filling etc) 1800 Cost of irrigation (8 times for 6 hours each day) 4320 Compost and fertilizers 4800 Pesticide application 600 Others (Thymate, colidol application) 1560 Total in Rs Cost per Ha (in Rs) Besides the initial establishment cost, farmers incur a cost of Rs ,000/ha annually on maintenance of orchard. The average yield per tree is around 70 kg. Yield of litchi depends upon the age of orchard, variety, locality, agro climatic condition as well as management of orchard. Thus, there is wide variation in yield which varies from kg per tree. Farmers lease out their orchards to contractors when trees are in flowering or early fruiting stage i.e. in the months of January-February. The agreement between farmer and contractor is based on mutual understanding (verbal agreement) and there is no formal contract/lease system. The contractors negotiate price with farmers on the basis of number of plants in fruiting stage and entire orchard is taken on lease by the contractor. On an average, farmers get a price of Rs per tree. About 50% of the total value of contract is paid as advance to the farmer and the remaining amount is paid to the farmer after plucking of fruits from the orchard. The cost of maintenance (Rs ,000 per ha) of orchard, which mainly comprises of irrigation, pruning and spraying costs, is borne by the farmer. The economics of litchi cultivation is represented in table below: Economics of Litchi cultivation No of litchi trees in 1 ha 120 Average yield per tree (kg) 70 Total yield per ha (kg) Cost of land has not been taken into account for calculation of total cost of establishment of litchi orchard 14

23 Price received by farmer (Rs/kg) 10 Total income from sale of litchi (Rs) Annual cost of maintenance of I ha of orchard (Rs) 10,000 Net income to farmer per ha (Rs) 74,000 Net income per kg (Rs) 9 Thus farmer s net income is around Rs74, 000/ha only, without taking into account his initial spending on establishment of orchard. On per kg basis, farmer s net realization is around Rs 9 to 14/kg. Intercropping is only practised until tree is of 3-4 years of age. Hence, litchi farmers are able to generate annual returns from only one crop. In case of other crops, farmers may maximise their returns through cultivation of 3-4 crops annually. Litchi tree does not bear fruit until it attains 5 years of age; hence farmer s investment is blocked for five years and thus it acts as an entry barrier for small and marginal farmers. Pre-harvest contractor: There are about 150 pre-harvest contractors operating in the region. Each of them takes around acres of litchi orchards on lease from farmers for the duration of 1-3 years. When orchard is leased to the contractor for more than a year, the price is fixed every year at the time of fruit setting itself and the cost of maintenance is also borne by the farmer. As the contractors are interface between the farmer and other stakeholders in the chain, they play a very important role in the value chain of litchi. When fruits attain maturity, the contractors hire local labourers for plucking, pooling, grading and packaging and its cost is borne by the contractor, which comes to around Rs 2/kg. Litchis are mostly packed in wooden boxes and dried leaves are used for cushioning. However, for shorter distances plastic crates are used. Pre harvest contractors, who handle relatively lesser volumes (5-7 MT), operate in local market and they do not have well established linkages. However, those contractors who deal with larger volumes ( MT) have strong linkages with commission agents of distant markets, local wholesalers within Bihar, litchi processing units and pack houses. The contractors send the produce directly to them in trucks and the cost of interstate transportation as well as commission at outstation markets is borne by the contractor. Thus, the marketing risk of litchis procured from various farms of the region is borne by him. Commission agent: They provide credit to pre-harvest contractors, which in turn provide advance payment to farmers. Since they bear financial risk as well as facilitate trade between contractor and wholesaler, they charge a commission of 6-8%. Wholesaler: They play an important role in distribution of produce to various locations in the country. Wholesalers deal with large volumes and thus bear marketing risk. Pack house operators: As mentioned earlier, there are 5 litchi pack houses in the region. They procure litchi either through the pre-harvest contractors or directly from the farmers. 15

24 The process flow of pack house operations is represented below: Litchis are sorted/ graded manually at the Litchi pack house and Sorting/Grading thereafter, the best Fresh Litchi Processed Products grade meant for fresh market goes for fumigation and the rest goes for peeling. Fumigation Peeling Packaging of fresh Packaging Processing litchi is done manually in CFB boxes of 2 kg, Pre cooling Deep freeze 6 kg capacity and the boxes are pre-cooled with forced air precoolers. Pre-cooled Normal transport Cold storage Reefer transport litchis are transported in normal trucks or reefer trucks depending on reefer truck s availability. Some of the boxes, awaiting transport, are also cold stored at 2 Celsius for days and further transported in reefer trucks to Mumbai, Pune etc. As litchi is highly perishable, the pack house operators send litchi to various markets rather than holding stock in anticipation of future gains. The cold stores are mostly used by pack house operators for transit purpose. The pack houses also have facilities for processing and the resulting products are stored in deep freezers. The operators have marketing linkages with a few processing units of Dabur, Unilever etc, who are located outside the state. Based on demand from the processing units, pulps are transported in reefer trucks. One of the litchi processors also has a processing unit at Mumbai. Price build up along the value chain of Litchi A value chain indicating the various activities and cost build-up at every step has been mapped for 1 kg of litchi. Some of the assumptions of the price build up are: The most commonly observed trade channel has been selected for the price build up of litchi, i.e. Farmer-PHC-Wholesaler-Retailer. Farmer s margin has been calculated based on his annual cost of maintenance of orchard. The cost of establishment of orchard has not been taken into account. The cost of interstate transportation has been calculated for New Delhi. The cost of retailing, which includes the cost of shop, wages, rent etc, has not been considered. As described earlier, a litchi farmer receives a price of Rs 10-15/kg and he spends around Rs 1/kg in maintenance of the orchard. If the farmer s price is Rs 12/kg (as depicted above), his net margin is around Rs 11/kg. The pre-harvest contractor has an important role to play and he bears the cost of plucking, pooling, packaging, interstate transportation expenses and commission at the wholesale market. The commission agent facilitates trade between contractor and wholesaler, for which it charges a commission of 6-8%. While the wholesale price of litchi is around Rs 30-40/kg (APMC Mumbai/Delhi), retail price in Mumbai/Delhi 16

25 varies from Rs 55-70/kg. In case of litchi sold in retail markets of Bihar, retail price varies from Rs during the season. Consumer price Retailer s margin Wastage Expenses Rs 10 Wholesaler s margin Rs 5 Rs 0.5 Wastage Local transport & storage Rs 2 Rs 50 Farm gate Price Commissio Interstate transportation, Rs 2.5 Plucking & Packing Rs 2.1 Rs 7 Rs 1.8 Contractor s margin Rs 1.0 Wastage Rs 3.2 Rs 35 (Wholesaler s Price) Rs 2.9 Rs 30 (Contractor s Price) Rs 12 The price build up can be summarized, as below: Particulars (in Rs/kg) Farmer Pre-harvest contractor Wholesaler Retailer Cost of maintenance/ Purchase price Cost of marketing, transport, wastage Selling price Price spread Some of the salient features of the price build up are mentioned below: There are 4 intermediaries between the farmer and the consumer in the litchi supply chain. The price build up from farmer to consumer is more than four times. Pre-harvest contractor incurs a cost of around Rs 12 in various activities such as plucking, packaging, transportation etc. Besides this, around 10% produce is wasted in transit that also adds up to his cost. Thus the total cost incurred by the contractor is around Rs 15 per kg. The contractor earns a margin of Rs 3 per kg that is around 7 paisa of a consumer rupee. The commission paid by the contractor to the commission agent constitutes 5 paisa of a consumer rupee. 17

26 Since litchi is highly perishable, wastages are quite high i.e. around 20-30% at various stages in the value chain. Case study: Litchi A cold store owner in the Muzaffarpur region found difficulty competing against many newer and larger potato stores in the area. His store had a capacity of 2,000 MT whilst many other stores had capacities over 7,000 MT. He created a niche by expanding his infrastructure to leverage his existing business. A processing plant was set up to wash, peel, pulp and pasteurise the litchi before packing it to drums then blast freezing at C and storing in a frozen store at 20 0 C. He started supplying frozen Litchi pulp to multinationals like Unilever and Pesico in Nepal and Pune. To have strong backward linkages, the store owner purchased directly from the litchi farmers and cooperatives to acquire the product rather than use the APMC markets. As the finished product is frozen, refrigerated transport is required to ship to the processing plants in Nepal and Pune. Since there is no availability of suitable refrigerated transport in Bihar, it is sourced from Delhi. This income stream is seen to be low risk and as the litchi is immediately frozen there is little risk of product deterioration. Besides this, the store owner also trades fresh litchi. It is pre-cooled and held in a cold store at 2 0 C for up to a month beyond the harvest season in June when litchi supply becomes scarce and prices rise. Transportation to local markets is done through ambient vehicles but for further distances refrigerated vehicles are used. The frozen store is also being used to hold other frozen fruits such as strawberry and pineapple for the ice cream market. The store represented a good example where a relationship had been established with farmers and their cooperatives and also the major multinational corporations to provide a reliable income stream to justify the investment in processing and cold store technology. Having established the facility, opportunities then present themselves for storage and supply of fresh litchi and other frozen fruits Gaps in the value chain The structured questionnaire survey was instrumental in identifying the gaps pertaining to the pre harvest practices in litchi cultivation. The Agri supply chain experts carried out exhaustive interviews with various stake holders like Litchi farmers, intermediaries in the value chain, litchi processors and consumers in order to identify the gaps. Most of the interviews were held in the field purposefully. The idea behind conducting these meetings in the field is to validate the information by observing the prevalent practices. These were further validated by triangulation of information from varied sources during the subsequent visits to the identified regions. The potential interventions have been arrived at after in-depth understanding of the context and numerous brainstorming sessions between survey team and subject matter specialists. This formed a critical step and is found to be extremely useful, as the parties involved in these exercises brought in conceptual clarity and contextual familiarity to the table Each of the intervention suggested has been analyzed by the Agri supply chain experts and Cold chain experts based on the practical applicability in Bihar Context, and whether the suggested interventions were socially and economically meaningfulsome of the gaps identified in the value chain of litchi are as follows: There is no pre-cooling facility at farm level except a few pack houses operating in the region. Less than 2% of litchi produced in the region is pre-cooled before packaging. Even pre-coolers currently in use are forced air type with marginal maintenance evident. Litchis are packed in wooden boxes, which enhance respiration because of higher temperature leading to quality loss. Mostly the produce is transported in normal trucks, which lead to around 15-20% of wastage during transit. 18

27 Lack of credit & crop specific insurance is one of the major gaps identified at farm level. There are no risk mitigation efforts which would encourage growers to channelize their efforts towards increasing area and hence production of litchi. Despite being the most concentrated belt for production of litchi, the growth of processing and other value addition in the litchi value chain has been slow. Some of the major reasons for slow development of processing facilities in the region are: Lack of knowledge and exposure about the markets for finished products. High production cost due to poor electricity and transportation infrastructure. Low level of awareness regarding the sources of finances and subsidy Potential for intervention Potential areas for intervention are: Pack houses may be set up at spokes which would mean that the first stage in cold chain would commence between 5-6 hours of harvest. The pack houses may provide following facilities to litchi growers: Pre-cooling chambers: It will help in maintaining the quality of the produce by reducing the temperature shock between harvesting and transportation to the destinations. Precooling of litchi may be done at relative humidity of 85% to avoid desiccation. Instead of forced air cooling, use of hydro-cooling may be explored. Sorting/Grading facility Fumigation: Litchis may be subjected to fumigation by sulphur dioxide to control browning of pericarp. In other countries, oxalic acid is also used, which may be explored for this region. Packaging: Litchi bunches may be packed in modified atmosphere packing (MAP) which allows for breathing ports. Cold storage: Litchis packed in MAP can be stored at 1.5 degree Celsius, which increases its shelf life by 5 to 8 weeks. For short term storage i.e. less than 2 weeks, it may be stored at 7 degree Celsius. Considering the concentrated production area and distance the produce has to travel to reach the consumption market, produce should be transported in reefer trucks from point of pre-cooling to destination markets. This would prevent quality deterioration during transit. Since litchi is also transported to southern states and some quantities are also exported out of the country, use of rail as well as air transport may be explored. Since litchi is available for short duration and the marketable surplus is more than 90%, setting up of more processing facility in the region would bring better returns to stakeholders. 19

28 3 FOCUS CROP: MANGO Bihar ranks third in mango production in the country and it occupies a share of 12 % in national production. Mango occupies a share of 48% of total area under fruit cultivation and about 41% of total production of fruits in Bihar. In , total area under cultivation in Bihar was around 1.4 lakh Ha with production of 13.3 lakh MT. Productivity of mango in the state is 9.3 MT/ha that is higher than the national average of 6.3 MT/Ha for the year The production trend of mangoes is captured in table below: Year Area in Ha (000 Ha) Production in 000 MT Productivity (MT/Ha) *Source: Directorate of Horticulture, Govt. of Bihar The irregularity in production and productivity over these years is owing to the alternate fruit bearing characteristic of mango tree. In Muzaffarpur region, total area under cultivation in was 0.4 lakh Ha and production was 2.9 lakh MT. Districts Area in Ha Production in MT Muzaffarpur Vaishali Darbhanga Samastipur Begusarai Total *Source: Directorate of Horticulture, Govt. of Bihar Safed Maldah, Fazli, Sukula, Jardalu, Dashahri etc are the major varieties cultivated in the state. Safed Maldah produced in Muzaffarpur region is a very good variety of mango for table purpose. It is famous for its unique taste and flavour. Grafted Mango trees start bearing fruits from fourth or fifth year onwards and a full crop from the tenth or fifteenth year depending up on the variety. Mango is available mainly during June and July. However the produce starts arriving in the markets from May and continues till August. Some of the varieties grown in Bihar and their time of availability are represented in table below: Maturity Class Time of ripening Varieties Early varieties May Bombay green, Jaradalu and Gulab Khas Mid early varieties 30 May - 10 June Himsagar and Krishnabhog Mid time varieties June Maldah (Langra) and Dushahari Mid late varieties 20 June - 05 July Mallika Late varieties 25 June - 25 July Amrapali, Chausa, Sipia, Fazali Extreme late varieties 15 July - 10 August Kataki, Latra Almost 90% of the total produce is marketable surplus and around 70% is consumed in the state itself. Around 20% is sent to Ranchi (state capital of Jharkhand) and other markets of Jharkhand state and the rest is sent to Kolkata, Siliguri etc. Most of the varieties are used for table consumption and are not suitable for processing and pulp extraction because of its high fibre content. Some of the varieties are suitable for processing into pickles; however less than 1% of the mango produced in the region goes into pickling. Some of the varieties are being transported to distant places like Punjab and are being utilized for preparation of pickles. There is no mango processing unit (in the organised 20

29 sector) in the state and some local entrepreneurs are making pickles at small scale for sale in local market Value chain analysis Trade channel of mango The following illustration depicts the various actors of the mango supply chain: Various channels of the mango supply Farmer chain are mentioned below: Pre-harvest contract This is the most commonly used sales system of mango. Around 70% of the mango farmer s lease out their orchards to contractors. Under the pre-harvest contract, the farms are auctioned at the time of flowering stage i.e. in the month of January. After harvesting of fruit, the contractor either brings the produce to local wholesale market or sends directly to the commission agent of distant markets. The wholesaler works either on commission or wholesale basis depending upon the market as well as seller/buyer. Some farmers directly bring their produce to nearest wholesale market. A few retail companies/small processors procure directly from the farmers. The major players involved in trade of mango are farmer, pre-harvest contractor, wholesaler, commission agent, semi-wholesaler and retailer. The role played by each stakeholder and the value added at each stage is briefly captured below: Farmer: Mango saplings are planted by the farmers in pits with a row to row and plant to plant distance of 10x10x10 m. Many orchards of the region have been established unscientifically and random planting and inadequate spacing have been observed. Farmers incur a cost of around Rs 17,0004 in the 1st year in establishment of mango orchard. The cost of establishment of orchard in a hectare is represented in table below: Activity Cost per Ha (Rs) Material Cost Cost of Rs. 40/Grafts 4000 Manure and fertilisers 750 Fencing 1500 Plant protection 250 Irrigation 1250 Intercropping 5000 Labour Cost Land preparation 1000 Digging of pits and filling 1000 Planting 250 Pre harvest contractor Wholesaler Semi wholesaler Retailer Commission agent (distant markets) Outstation buyers 4 It does not include cost of land. 21

30 Intercultural operations 1000 Manuring & plant protection 200 Others 800 Total Besides the initial investment, farmers incur a cost of around Rs annually on maintenance of mango orchard. It includes cost of pruning of dead and diseased branches, costs involved in plant protection and fertilizer application. Farmers lease out their orchard to contractors when tree is in flowering stage, i.e. in mid-january. The contract is based on trust and there is no formal leasing system in place. The price of an orchard is fixed based on fruiting cycle, price trend in previous years, variety and age of orchard. Around 75% of the contract value is paid in advance to the farmer and the rest is paid after plucking of fruits. Pre-harvest contractor: When contract is agreed upon, maintenance of the orchard is taken up by the contractor. Time of harvesting is decided by the contractor on the basis of market demand and price trend. When the fruits are mature, plucking is carried out manually. It usually consumes a day to pluck fruits of one tree, when two labourers are involved per tree and the cost is around Rs 0.4/kg. Mangoes are packed in wooden boxes, bamboo baskets or gunny bags depending upon the destination market. For distant markets, wooden boxes of 20 Kg or 40 Kg capacities are used for packaging. Loading is a cumbersome process in a few cases where the farms are away from the main road and are not accessible by road. This would involve carrying the boxes to the truck on the main road. Light trucks of 4MT capacity are used for transportation of the produce from the farm to markets like Munger, Bhagalpur, Patna and Ranchi. However, for distant markets 10 MT capacity trucks are used. The produce is unloaded in mandi and traded. Though Bihar has repealed APMC act, still contractors pay around 4-8% as market charges to private mandi operators. The entire cost of harvesting to transportation to mandis, which is around Rs 3.5/kg, is borne by the contractor. Thus contractor is responsible for harvesting, packaging, transportation to nearest mandi and payment of market charges in private mandis. Wholesaler: The wholesaler also pays around 2-4% as market charges to the private market operator. The wholesaler is a bulk trader and it brings the produce from mandi to the wholesale point and further supplies to semi-wholesalers and retailers. Some of these wholesalers supply to outstation markets on the basis of commission, which is around 6-8%. Semi-wholesaler: Ripening is mostly carried out at this level. The cost of ripening of Mango is around 25 paisa/kg. Ripe mangoes are supplied to various retail points. Retailer: Retailer deals with small volumes and hence its margin is around Rs 3-4/kg, after incurring expenses like transportation, spoilage during handling of the produce and sorting by the consumers. Price build up along the value chain of Mango Value chain of 1 kg of mango indicating the various activities and cost build-up at every step has been mapped, as shown below. Some of the assumptions of the price build up are: The most commonly observed trade channel has been selected for the price build up of mango i.e. Farmer-PHC-Wholesaler-Semi-wholesaler-Retailer. The price build up has been shown for Safed Maldah variety of mango. 22

31 Farmer s margin has been calculated based on his annual cost of maintenance of orchard. The cost of establishment of orchard has not been taken into account. It is assumed that mangoes are procured from orchard in Muzaffarpur district and sold in retail market of Patna. The cost of retailing, which includes the cost of shop, wages, rent etc, has not been considered. Consumer price Farm gate price Rs 15.0 Harvesting Rs 0.4 Loading and transport to mandi Rs 1.8 Packaging Rs 0.4 Rs 1.3 Contractor s margin Market charges Rs 3 Wholesaler s margin Transport to wholesale point Rs 0.8 Rs 1.4 Rs 21 (Contractor s Price) Rs 0.8 Semi wholesalers margin Losses Ripening and other expenses Rs 24 (Wholesaler s Price) Rs 2.4 Rs 2.0 Retailer s margin Rs 3.0 Rs 29 (semi wholesaler s Price) Rs 36 As depicted above, the farm gate price is Rs 15/kg and the farmer s margin is Rs 13/kg. Thus farmers spend around Rs 2/kg on maintenance of mango orchard. The contractor bears the cost of harvesting of mangoes, grading and packaging, loading, transportation to nearest mandi and pays market charges to the private mandi operator. The total expenses incurred by him is around Rs 3.5/kg. As evident from above, pre-harvest contractor earns highest profit margin in the mango value chain because he performs many marketing functions like harvesting, packing, transport and it a vital link between farmer and wholesaler. Since farmers do not have the capacity to bear marketing risk, it is borne by the contractor for which it earns a margin of Rs 3-4/kg. Mangoes are traded in local mandis, which is bought by the wholesaler. The wholesaler is a bulk trader and supplies to semi-wholesalers and retailers. The wholesaler does further grading of mangoes for better price discovery and earns a margin of around Rs per kg. Ripening is carried out at semi-wholesale level and the semi-wholesale incurs a cost of around Rs 0.3 for ripening of 1 kg of mango. Semi-wholesaler and retailer s margin is around Rs 2/kg and Rs 3/kg respectively. The accumulated wastage observed in case of Mango is 23

32 anywhere between 15 to 22%. Thus the price of mango jacks up to around Rs 36 per kg, when it reaches retail markets. The price build up can be summarized, as below: Particulars Farmer Pre-harvest Wholesaler Semiwholesaler Retailer (in Rs/Kg) contractor Cost of maintenance/purchase price Cost of marketing, transport, wastage Selling price Price spread Some of the salient features of the price build up are mentioned below: There are 4 intermediaries between the farmer and the consumer in this supply chain. The price build up from farmer to consumer is around two times. As evident from figure below, farmers share in a consumer rupee is around 36 paisa for mangoes, which is around 14 paisa higher, compared to litchis. However, mangoes have alternate bearing cycle, which affects the annual income of mango farmers. The contractors earn a net margin of Rs 3/kg that is around 8 paisa of a consumer rupee. Wholesaler, semiwholesaler and retailer earn around 4 paisa, 6 paisa and 8 paisa respectively of a consumer rupee. In the value chain of mango, wastages account for 16 paisa of a consumer rupee. Unripe mangoes are less prone to damages and hence wastage is quite low till the produce reaches wholesale level. Wastages mostly happen at semi-wholesale and retail level when ripe mangoes are handled Post harvest infrastructure There is no post harvest infrastructure in the region for mango. The initial grading and packaging is done at the farm level by the contractor. Mangoes are packed in wooden boxes, bamboo baskets or gunny bags depending upon the destination market. Unripe/green mangoes are not stored in cold stores. There is no farmers cooperative or any other institution which is engaged in the marketing of mango in the region. There is no mango processing unit in the organized sector in the region at present Gaps in the value chain Since the post harvest infrastructure is almost absent in the region, the inadequacies in the value chain are limited to harvesting, handling and marketing of Mango. The gaps have been identified during the survey and focused group discussions with various stakeholders like Mango Farmers, Pre harvest contractors, traders and others in the value chain. The Agri Supply chain experts also triangulated the information with consumption markets to verify the findings pertaining to the gaps in the value chain of Mango. The 24

33 interventions suggested are such that they could be implemented in the given context. Emphasis has been given to include post harvest infrastructure considering that it is almost absent in the state. Some of the gaps identified in the value chain of mango are as follows: Mangoes are plucked, graded and packed manually at farm level. Farm level preprocessing facilities like pre-cooling, washing, grading, sorting are absent. Unripe/green mangoes are not stored in cold stores in Bihar. Hence the stakeholders forego the opportunity of better price realization. Ripening of the fruit is done by carbide, which is a banned practice and it also has harmful implications on health. Ripening chambers for mango are absent in the region. Most of the varieties of Mango grown in the region are of table purpose consumption and hence suitability for pulping is very limited. Mango processing is limited to pickling, which is a household/cottage industry. Mango farmers are highly dependent on contractors for marketing their produce as well as for credit/ advance payments, which reduces their bargaining power Potential for intervention Potential areas for intervention are: Integrated pack houses may be set up at spokes. The pack houses may have facilities for: De-sapping Washing: may include hot water treatment and fungicidal application. Sorting/grading Packing in corrugated boxes Pre-cooling Cold storage Modern cold stores may be set up to store unripe mangoes. Mature green mangoes may be stored at 13 degree Celsius and RH of 90-95%, which increases its shelf life by 1-2 weeks. Ripening chambers may be set up at hub for uniform ripening of mangoes. Exposure to 100- ppm ethylene for 12 to 24 hours at 20 to 22 C and 90-95% relative humidity results in accelerated and uniform ripening of mangoes within 5-9 days. Mango should be transported in reefer vans to avoid physical and quality loss during transit Since mango produced in the region are not suitable for pulping, other processing opportunities like canned mango cubes, pickles etc can also be explored. 25

34 4 FOCUS CROP: BANANA Banana is one of the prominent fruits grown in Bihar. In respect of production, it ranks second to Mango. The state accounts for 5.5% of country s production. In , banana was cultivated in an area of around 30,000 Ha with production of 1.32 million MT. There is just a marginal increase in the area under cultivation of Banana; however productivity has seen significant jump over the last three years. The productivity has gone up by 32% from to Though Banana is grown in almost every part of Bihar, commercial cultivation with high scale of production has been found in Muzaffarpur region. In Muzaffarpur region, area and production of banana in was around 12,500 Ha and 0.57 million MT respectively. Area and production of banana in the identified region Districts Area in Ha Production in MT Muzaffarpur Vaishali Darbhanga Samastipur Begusarai Total *Source: Directorate of Horticulture, Govt. of Bihar Muzaffarpur and Vaishali together account for 63% of the regions production. Major growing areas in Vaishali district include Biddupur, Raghopur, Goraul, Jandaha, Chehrakalan and Mahnar. Banana growing areas in Vaishali district have sandy loam type of soil and river Ganga is the source of irrigation. In Muzaffarpur district, Banana is mainly cultivated in calcareous soil and source of irrigation is river Gandak. Banana is propagated through suckers and the planting is preferred during the rainy season. Major varieties grown in the region are Muthia and Chinia. Harichaal and Robusta are the other varieties grown in the region. Both these varieties produce dwarf type of Banana fruits. The varietal characteristics are mentioned below: Chinia: Chinia is a medium tall variety producing fruits that are small (3 to 4 ) and remain yellowish green throughout their development but turn pale yellow to golden yellow after ripening. The crop is of longer duration with less shelf life of the fruit in comparison to varieties like Hari Chaal and Robusta. Also, this variety is less preferred in retail markets when compared to long varieties. Muthia: The Plants on an average grow up to 3 meters in height with about days from flowering to harvesting. The fruits are bright yellow in colour and are used for table purpose. The fruit is heavier with more girth when compared to dwarf variety but is less sweet in taste. The varieties grown in the region are not processable and are used mostly for table purpose and culinary purpose. The varieties cultivated in this region have lesser acceptance in the market when compared to the long varieties cultivated in other parts of Bihar and wastage is also high due to poor shelf life of the produce. The marketable surplus of Banana is about 88%. 26

35 4.1.1 Value chain analysis Trade Channel of Banana Channel 2 Farmer Aggregator Channel 1 Channel 3 Commission agent Aggregator/wholesaler in distant market Wholesaler/CA in Distant Market Retailer in Local Market Retailer Consumer Consumer The supply chain can be classified into three main types based on the Point of Sale which in turn is influenced by the variety. Channel 1- Sourcing from the Farm Gate: Direct Sourcing from farm is the most preferred mode of sales accounting for % of total banana trade. Under this, commission agents/traders directly liaison with farmers or village aggregator for purchase of Banana. Trade terms and negotiations like quantity, quality and rates are generally fixed over phone through the local aggregator. In this system, local aggregator is the only interface between buyer and grower. The trader or local aggregator, then, arranges for transportation and the produce is directly picked at the farm gate. Channel 2- Direct Marketing by Farmer Accounts for % Channel 3- Sourcing from Distant Markets Accounts for % of the trade The major players involved in the trade of banana are Farmer, Aggregator, Commission agent, Wholesalers and Retailer. The role played by each stakeholder and value added by each of them is briefly captured below: Farmer: Farmer does planting of suckers during the months of July to October in the region. Banana suckers are planted in pits which are generally 50*50*70 cm in size. However, it was observed that pits are not of uniform size and depth is not enough leading to a poor holding to the plant. As a result of this, plants droop when the fruits attain full maturity. Around 1100 to 1200 suckers are planted in an acre. Banana is an annual crop and around three crops are taken from a sucker. One plant gives only one bunch of fruit in a season and the plant is cut after harvesting of the bunch. Farmers incur a cost of around Rs 50,000 in cultivating banana in a hectare. A bunch of fruit takes days to mature after shooting. The maturity of fruit is indicated by drying of top leaves and change in colour of fruits. In case of Chinia, the average weight of a bunch is around kg and in case of HariChaal, the average weight is kg. The average weight of a finger is around gm in harichaal and around gm in case of Chinia and Muthia. 27

36 When fruits attain 80-90% maturity levels, bunches are harvested manually by the farmer. In case of Harichaal harvesting begins from Aug and goes up to January and the peak period is Sep to early Jan. In case of Chinia, fruits are harvested between Aug and Oct with just very low quantity in Nov. Harvesting of the crop in a particular field is not done at one time by the farmer, since bunches produced by different plants do not attain uniform maturity due to difference in their shooting times. Traditionally, Banana is sold by the farmers to aggregators in bunch along with its central stem at the farm gate. Price fixation between the farmer and the aggregator is by negotiation. The aggregator offers a price based on his information of price in the local market. The difference in price in local market and the price offered to the farmer depends on the distance of the market from the farm. When price is decided upon, banana bunches are harvested manually by the farmers. The cost of harvesting, which is around Rs 0.5/gaudh5 is borne by the farmer. Banana bunches are cut at different stages of maturity and basically depends on demand from buyers and transportation time to destination markets. Based on present market scenario, the price received by farmer was approximately Rs 60 to Rs.80 per Gaudh for Chinia variety. Aggregator: The produce is often bought by aggregators at the farm gate level. Aggregators often belong to the same village and have personal contacts with both producers and commission agents in the markets. The aggregator offers a price to the farmers based on his information about production for the season, quality of the produce and prevailing price in the local market. The aggregator is responsible for loading, transportation to the markets and unloading of the material. He incurs the cost towards all these activities. The aggregator retains about Rs.15 per gaudh towards his margin. Commission agent: The commission agents are based out of the market yards and play key role in facilitating the trading activity. The commission agents are well connected with the retailers from local as well as distant markets. The prevailing commission charged by them is about 6%.The commission agents have an important role to play in the value chain as they bear the financial risk to a large extent. The commission agent pays the farmers/aggregators on the spot but receives money from traders/ buyers after a week or more depending upon the terms and conditions agreed upon. Sometimes, the CA also acts as a wholesaler (especially in case of Banana arriving from Andhra) wherein he purchases the produce and trades it. Also, they carry out ripening process wherever required at their end. The process involves placing the produce which needs to be ripened in a small ante-room and by burning saw dust in tin containers. The doors/windows of the room are closed and sealed with mud and the produce is subjected to this treatment for about 18 hours (In Summer it takes about 10 Hrs and in extreme cold weather it takes hours). Depending upon the destination market, the produce is either left in ventilated room(in case of local/nearby destination) or transported to farther destinations (next step in ripening where the produce is left open in ambient conditions and ripening takes place during the transit). Thus by the time the produce reaches the destination it is more or less ripe and ready. Almost 70-80% of the produce reaches the destination in ripened/ ripening stage while only 20-30% of the produce is sent in unripe stage. 5 Banana bunches are called gaudh in local dialect. 28

37 Carbide is also used for ripening the produce. Also, there have been cases where the produce is subjected to Ethrel treatment by dipping the bunches in 50ppm Ethrel solution before ripening. The treatment did not show any improved results and hence this practice is not common now. Traders: Most often they form the penultimate point in the supply chain. They buy the produce through commission agents and in turn sell it either directly/ through other retailers in the consumption markets. The trader bears the costs towards loading, transportation charges to the destination markets, unloading and wastage. After incurring all these expenses the traders retain about Rs per gaudh. Price build up along the value chain of Banana A value chain indicating the various activities and cost build-up at every stage has been mapped for a gaudh/bunch of banana. Retailer s margin Consumer Price Wastage Rs 120 Transportation Rs 15 Loading/U/L Rs 4 Commission Rs 2 Ripening Rs 2 Transportation to Market Unloading charges Aggregator s margin Rs 15 Rs 12 Rs 6 Loading Rs 1 Farm gate price Rs 1.0 Rs 2 Rs 79 (Aggregator s Price) Rs 60 Channel 1: Farmer-Aggregator In the price build up depicted above, the farmer is responsible for cultivation of banana and harvesting of bunches. The cost of cultivation incurred by the farmers is around Rs 25/goudh. The average price realized by a farmer for a goudh is around Rs 60 and his net margin is around Rs 34.5/goudh. The aggregator bears the expenses towards loading, transportation to market and unloading charges at the market, which comes to around Rs 4/goudh. The price realized by the aggregator is around Rs 80 and his net margin is Rs 15/goudh. Banana is traded in the market and the trade process is facilitated by a commission agent, who charges 6% commission from the buyer. The ripening is carried almost in 70 80% of the cases at the market yard and the produce is sent to the destination markets (i.e. to 29

38 trader/retailer) as it ripens during transit. The commission agent carries out the ripening process, on behalf of the buyer, at his end and charges Rs 12/goudh from the trader. The rest 20 30% of the volumes are traded and transported in unripe condition only. The cost of ripening, commission to the agent, loading in the market, unloading at the point of sale is borne by the trader/retailer. The retailer earns a margin of Rs 15/goudh. The price build up can be summarized, as below: Particulars Farmer Aggregator Retailer Cost of cultivation/ Purchase price (Rs/goudh) Cost of marketing, transport, wastage (Rs/goudh) Selling price(rs/goudh) Price spread Some of the salient features of the price build up are mentioned below: There are 3 intermediaries between the farmer and consumer. The intermediaries are aggregator, commission agent and trader/retailer. The price build up from farmer to consumer is almost 2 times. The price realized by the farmer is around Rs 60 per goudh that forms 29 paisa of a consumer rupee. The aggregator bears the product risk and thus gets 12 paisa of a consumer rupee. The commission agent bears the financial risk as well as does ripening on behalf of the trader and thus gets a share of 5 paisa of a consumer rupee. Ripening constitutes 10 paisa of a consumer rupee. Channel 2: Direct marketing by the farmer Consumer price Trader s margin Wastage Rs 120 Transport Rs 15 Loading, U/L Rs 4 Commission Ripening Rs 2 Rs 2 Farm gate price Rs 80 Rs 6 Rs 12 In the above diagram, the farmers pay for the initial loading, transportation to the nearest mandi and unloading charges at the mandi. The total cost incurred by the farmer is around Rs 4/goudh. The price realized by the farmer at mandi is around Rs 80 and his net margin is around Rs 50/goudh. Because farmers do not want to bear marketing risk of bananas, use of this channel is limited. The trader pays for the commission agent s charges, ripening, loading, 30

39 further transportation and unloading. The expenses incurred by the trader is around Rs 26/goudh that includes wastage of 4% and the net margin realized by him is Rs 15/goudh Channel 3: Bananas from Andhra are procured from October to April, which coincides with the lean production season for local chinia variety. The purchase price of theses banana is around Rs 150/goudh. In case of Bananas being sourced from distant markets, major expense is incurred in transporting the produce. About Rs is the cost incurred per trip which includes loading and transportation of about 1000 gaudhs of Banana. The commission agent of Bihar often plays the role of wholesaler in this channel. These costs are borne by him, that comes to around Rs 42/goudh, and along with a margin of about Rs.15/ guadh the produce is sold to traders at the market yards. The trader bears the expenses towards loading, transportation to destination markets and unloading. The margin earned by the retailer is around Rs 15 and the produce reaches consumers at a price of Rs 235/goudh. The price build up for this channel is represented below: Consumer price Loading, U/L Wholesaler s margin Trader s margin Wastage Rs 15 Transportation Rs 8 Rs 2 Rs 234 Transportation Rs 2. Loading, U/L Rs 15 Purchase price Rs 7 Rs 35 Rs 207 (Wholesaler s Price) Rs 150 The major markets for Banana are the district head quarters and major towns in all the districts and distant markets like Hazaribagh, Ranchi, Nawada, Ramgarh, Ranchi, Tata nagar, Girdi, Dhanbad, Bokaro, Siliguri, Assam, etc Post harvest infrastructure In case of Banana, farm level infrastructure is very minimal and restricted to hand sickles for harvesting. Produce is packed using the dried leaves from the farm. Sorting and Grading of bunches is mostly done by the commission agents in the market yard Ripening is done mostly in the erstwhile APMC markets. There are no specific facilities being provided at the market yard for ripening. Most of the Banana trading modules are equipped with small ante-room which is sealed for smoking and ripening by the agents. There is no banana processing unit in the state. 31

40 4.1.3 Institutional Infrastructure In terms of institutional set up, the Banana Research Centre in Vaishali district has now been converted to Krishi Vigyan Kendra for the district and most of the research work related to Banana is limited to Agriculture University farms in Pusa. There are informal producers groups in case of Banana for facilitating market linkages and for market intelligence Gaps in the value chain The gaps in the value chain have been identified based on stake holder consultation involving subject matter specialists and various players in the value chain like Banana cultivators, Pre harvest contractors, Commission Agents, etc., and a survey conducted in the area for the purpose. Some of the gaps in the value chain of banana are as follows: There are no farm level facilities for washing, dehanding and packing. Traditional methods of post harvest mechanism is followed which leads to damage of fingers. The bunches are transported along with the central stem that adds up to the cost of transportation. Presently the ripening carried out is either by smoking using saw dust or using carbide pellets. This might prove to be hazardous and have ill effects on the end consumers as well. The waste disposal mechanism (after stem and hand removal) is far from being satisfactory in most of the markets. In Hajipur, where large volumes of Banana are traded most of the waste like hands, stems, leaves used for packing are used for fuel purpose by the local community Potential for intervention It is proposed to set up facilities for banana handling at proposed hub in Muzaffarpur as well as at 3 spokes in the region. The proposed locations for spokes are Darbhanga, Hajipur and Dalsighsarai. The spoke shall have facilities for: Washing Sorting/Grading Dehanding Packaging The estimated throughput at the hub shall be 8000 MT. In case of spoke at Hajipur, the estimated throughput shall be 5000 MT and other two spokes would handle around 3000 MT each. 32

41 DPR: MUZAFFARPUR INTEGRATED VALUE CHAIN PROJECT Description of Hub and Spokes Hub Spoke Spoke Spoke Spoke Muzaffarpur Hajipur Darbhanga Samastipur Begusarai 33

42 DPR: Muzaffarpur Integrated Value Chain Project In case of Muzaffarpur region the hub is proposed in the town of Muzaffarpur itself while the spokes are proposed at Hajipur (Vaishali District), Darbhanga, Dalsinghsarai (Samastipur district) and Begusarai. Certain common gaps merge in the case of all three focus crops identified for this region. High dependence on pre-harvest contractors for credit/advance payments is predominant in the region. This reduces the bargaining power of the farmers. The on-farm activities at the time of harvesting and packing are found to be basic. Considering the nature of produce and their availability, pack house facilities are found critical for maintaining the quality of produce and better price realization. Lack of adequate processing facilities is another conspicuous gap in the region. The reasons for this vary according to the crop. For Eg: in case of Mango, processing is almost non-existent because of the varieties grown and in case of Litchi there are just few processors due to the limited window of availability. A processing unit is proposed at Hub in order to explore the potential of value addition in these focus crops. Other fruits reaching the hub from distant markets can be processed round the year in order to make it viable. Both Hub and Spokes shall have pack houses so that the stakeholders will not forego the opportunity of better price realization due to lack of storage facilities. All the proposed sites are well connected with each other and with production and consumption areas. However it is important to note that each of the proposed facility can be treated as a strategic business unit in itself where smooth operations are plausible without dependence on other spokes or Hub. This is owing to the fact that each facility is a viable commercial market in itself currently with sizeable throughput and shall have strategic advantage due to strong backward and forward linkages. Synergy with other markets will prove fruitful specially in areas like market intelligence, logistics, etc It is also found that the existing facilities in the proposed project are far from being satisfactory. Traders modules, platforms, internal roads, waste disposal mechanisms, etc need complete revamp and refurbishing. The existing as well as proposed facilities are classified into four types of infrastructure namely Basic, Agribusiness, Add-on/Commercial and Link infrastructure. Depending on the specific site conditions these infrastructure is included in the project as per the requirements. The agribusiness infrastructure suggested includes dry warehouses for grains like Paddy, Wheat and Maize and storage space for Potato & Onion. This has been included taking into account the production of major grains in the region. These crops are significant in the state s consumption pattern. Also, the total food grain warehousing capacity in Bihar is just about 12% of the total production in the state. This forms an important consideration in developing Agri business infrastructure for grains apart from that being proposed for Horticulture produce. 34

43 5 HUB: MUZAFFARPUR The existing APMC market at Muzaffarpur has been proposed as the location for the Hub for the Muzaffarpur Integrated Value Chain. This location has been chosen because of its proximity and connectivity to the production clusters of fruits (litchi, mango and banana) in the region. The market is well linked by road to supply consumption centres like Patna in Bihar and cities in Uttar Pradesh, West Bengal and the North-east. Muzaffarpur district and town are themselves big consumption centres with populations of 3.7 mn and 0.3 mn respectively. Located within the town of Muzaffarpur; the yard is situated on the highway connecting Muzaffarpur and Darbhanga (NH57). Muzaffarpur as a hub-location is also strategic as several National Highways and State roads connect it to the hinterland of production clusters on the one hand and consumption markets on the other: Sitamarhi, Darbhanga, Samastipur, Saran, Gopalgunj, Hajipur and to major cities like Ranchi, Kolkata etc. National Highway 77 passes through this town linking Bochahan, Saraiya, Manipur, Gaighat clusters. Some clusters: Motipur, Sakra, Kurhani and Kanti blocks are connected through both rail and road network. Muzaffarpur Railway station is the nearest railhead. With the improvement of railway perishable transport system in India, the road to the railhead from the market may be developed in the next phase by making it a two-lane highway for speedy transport of produce to destination markets. The total area of the market yard is 8 Ha with very limited vacant space. The details of the existing infrastructure in the market are covered in previous sections on focus crops. Daily arrivals of fruits at the Muzaffarpur market yard are about 150 to 200 MT during normal season and may go up to MT during peak season. Apart from this, about 200 MT of onion and potato arrive daily at the market, and seasonally, MT of cereals and pulses too. Maize arrives in the highest volume followed by wheat, paddy and pulses. 35

44 The Muzaffarpur APMC market also has a fish market which accounts for an arrival of MT of fish every day. Most of the fish (about 70%) comes of Andhra Pradesh while the rest is locally sourced. The major aggregation points and production clusters in the catchment of Muzaffarpur market are Motipur (30 Kms), Sahebgunj (65 Kms), Saraiya (20 Kms), Muraul (30 Kms), Aurai (35Kms), Minapur (20 Kms), Bochahan (10 Kms) for fruits, vegetables and grains. Crop wise production clusters in the catchment of Muzaffarpur Market Paddy is produced in Motipur, Sahebgunj, Paroo, Saraiya, Aurai, Minapur, Katra, Mushahari, Sakra blocks of the district Maize and wheat are produced in Mahinwara, Siwaipatti, Gaighat Chatra, Aurai chatra and Madhepura Mango is produced in Kanti, Mushahari, Gaighat, Kurhani, Muraul, Minapur, Aurai majorly Litchi is produced in Mushahari, Kanti, Minapur, Saraiya,Kurhani, Gaighat and Bochahan blocks of the district. Guava is produced in Mushahari, Kanti, Minapur,Saraiya,Kurhani, Gaighat, Bochahan and Sahebgunj blocks Banana is traded in Purnea, Katihar and Naugachia these are also the major production areas for this region. Major production areas within the district from where the produce reaches the market are Motipur, Sahebgunj, Bochahan, Muraul and Saraiya 5.1 FOCUS CROPS AND ESTIMATED THROUGHPUT Muzaffarpur region has a very vibrant trade of various fruits and vegetables. The present APMC market caters to almost all kinds of produce grown in the region. For the purpose of the proposed Integrated Value Chain, the identified focus crops for the Hub are litchi, mango, banana and vegetables. The focus crops and estimated throughputs have been identified based on present production in the catchment area, the present capacities of existing similar infrastructure/facilities, potential for interventions, and stakeholders consultations (see value chain analysis of focus crops). Based on the above, the estimated annual throughput of the pack house in MT is as follows: Spoke Litchi Banana Vegetables Mango Muzaffarpur The arrival pattern of the focus crops for the pack house will be as follows: Litchi Banana Vegetables Mango Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec The arrival pattern shows that there will be round-the-year arrivals of produce which will support optimum capacity utilization of the facilities at the pack house. 5.2 EXISTING FACILITIES As already discussed, the objective of the project in Bihar is the upgradation of existing APMC markets, hence the effort has been to refurbish/renovate the existing usable facilities in the market and also to propose new facilities as per the assessed requirement. 36

45 The existing facilities are outlined below: Traders Shops The Market yard can be conveniently divided into various sections where trading of different produce takes place. There are about 350 traders shops in various sections of the market. Viz. Fish, Fruit, Grain, Potato/Onion and Oil trading sections. The trading modules mentioned above are permanent in nature with area varying anywhere between 150 s.ft to 500 s.ft. They have a display area and most of them are in dilapidated. Apart from these, there are also semi permanent structures made of bamboo which are erected within the covered platforms which are also being used for trading. Muzaffarpur market yard also accommodates more than 600 hawkers who carry out trade for few hours every day. There is a shortage of modules in almost all the sections of the market and the existing structures are far from being satisfactory Open & Covered Platforms There are about 13 covered and one open platform which are currently being used by traders as their modules. The platforms are broken and need repair Godowns The godowns are four in number with storage capacity of 1200 MT and spread over an area of 8000 s.ft. These are leased in by various organizations like FCI, BSWCL, Beej Nigam,etc. The storage capacaity is inadequate vis-à-vis the arrival volumes General Amenities and Support Infrastructure Other amenities like eateries (eleven in number and operated by vendors) and restrooms(three in number and operated by private entity) are inadequate considering the daily footfalls which are not less than daily. The Bank building is operational but needs renovation. Other facilities like Weigh Bridge, Water tank, etc are non operational. 5.3 PROPOSED FACILITIES The proposed new facilities are outlined below Pack House (with cold infrastructure) The pack house will have cold chain infrastructure as well as space for ambient handling of produce. As the focus crops are litchi and mango, the cold infrastructure is designed keeping in mind the varied handling and temperature parameters for both. The planned capacity too takes into account introductory and viable volumes for both produce types. Infrastructure space is provided to cater to other vegetables and the remaining volumes of litchi and mango to ensure synergy with existing ambient supply chain practices, and for the optimal utilisation of facilities through the year. The proposed facility design is in compliance with EHS regulations and provides segregated amenities and working zones, by gender. Amenities like rest rooms and changing rooms in the 37

46 work stations are segregated by gender. This is available currently and will be a design feature in the proposed facility. Cold Chain: The peak arrival of litchi is estimated to be 50 MT per day out of which 30% (i.e. 15 MT is expected to pass through the cold chain. The remaining 35 MT will be handled in the ambient section and only sorting, grading, packing and fumigation of that lot will be carried out. The selected cold chain throughput has been optimized taking into account existing availability of cold chain transportation in the region. Greater volumes of cold handling may lead to a break in the cold chain due to non-availability of refrigerated trucks. It is proposed that this infrastructure include at least two reefer vehicles or reefer containers for captive utility, thereby offsetting some of the dependence on 3 rd party evacuation of packaged cold chain produce. To allow capacity utilization and spread, across seasons, the facility is intended for use for both mango and litchi, in season. Additionally, the facility design proposed allows simultaneous handling of both produce in the overlap periods, with peak capacity handling of each produce in its individual season. The basic sub components of the pack house are as follows: Sorting and grading facilities suitable for both product types. o For mango complete mechanized line: De-sapping racks Hot water dip/vapour treatment system Waxing and drying system Grading system o For litchi partial mechanized line: Sorting grading conveyor manual sorting. Additionally static S&G tables (for low volume handling). Fumigation room, incorporating SO 2 evacuation system. Inspection and packaging area tables standard stainless steel type. Weighing and unitization area certified weighing machines and palletisation equipment Buffer store (Anteroom) holding area for 24 pallets pending cold application Pre-cooler Forced air pre-coolers: capacity 5 MT, each running 3 batches in 18- hour period. In peak season, more than 15 MT will be pre-cooled daily through these pre-coolers Cold Store - 25MT capacity (daily output and an additional 50% stock overrun to cater for transport delays). The pre-coolers can also be used to supplement contingency storage Both pre-cooler and cold store refrigeration will cater to 2ºC to 12 ºC temperatures Staging Area (Ante Room) 24 pallets pending dispatch/transport Material handling equipment pallet movers, trolleys Waste disposal systems Vehicle waiting areas Crate washing system 38

47 Ambient Supply Chain: To facilitate relationship-building with produce growers and in alignment with existing supply chain, an ambient handling yard with associated amenities is proposed. Additionally, this will provide for the produce not suitable as cold chain output to find an appropriate revenue channel. The cold chain interface has not been proposed to be perceived as a selective acquirer but as a friendly facilitator. Through this facilitation, greater farmer footfall is provided for. In the ambient handling yard, adjoining the cold chain facility, the following infrastructure will be provided: Covered pack shed (open to ambient) with landing area. Requisite weighing equipment and transaction recording arrangement. Sorting and grading areas (with tables). Packaging store and packing tables. Waste disposal systems. Vehicle parking areas. Litchi process flow: Cold Chain Litchi cannot be stored at room temperature for more than a few days. It loses its bright red colour and turns brown within 2-3 days of harvesting. Cold chain technology interventions aid in extending shelf life and support quality enhancement. The process flow for litchi handled through cold chain in the pack house is shown in the diagram. Technology / Facilities Quality Check Sorting Grading Fumigation Packing and Pre cooling and Storage Transport Description The litchi that comes to the pack house after harvesting will be checked thoroughly and would be segregated for cold and ambient handling. The better lot in terms of size and maturity level be taken for cold handling and the remaining would go to ambient Manual sorting and grading is suggested in the pack house. Automation is not suggested due to availability of inexpensive labour in the region. Sorting and grading tables are proposed for the same. Litchi will be treated with sulphur fumes to prevent peri carp browning Manual packing of litchi in Corrugated Fibre Board (CFB) boxes will be done. Tables are proposed for packing. Each box will hold about 2 Kg of litchi. The boxes will be arranged in pallets (one pallet will hold 284 boxes). Pre cooling will be done at o C, 90 95% RH by forced air method. The duration of one batch of pre cooling will be about 6 hrs Storage of litchi in CFB boxes will be done at 2 7 o C at 90 95% RH till the time it is transported to destination market. The maximum time for which litchi can be stored is 3 4 weeks. For export and distant domestic market, Reefer containers (at 1 2 o C) will be used. Litchi will be transported in pallets as mentioned earlier. 39

48 For short term storage of less than 2 weeks, a temperature of 7 C is sufficient. When the market is more than two weeks away, a range closer to 2 C is applied. For a combination of quality and shelf life, a temperature between 5 to 7 C is used. Judicious energy application in the cold chain, with adjustments in accordance with estimated market demand, can optimize energy costs. Bulk, long term storage is recommended closer to the consumption market, where the last leg distance to retail centres is shortest. Litchi process flow: Ambient In season, about 35 MT of litchi will be handled at ambient temperature in the pack house. For ambient handling, a separate space will be provided in the pack house. After receiving the produce from the field sorting, grading and manual packing in CFB boxes will be done. The produce will then be dispatched to markets, in normal trucks of 9-10 MT capacity. Mango Process Flow: Cold Chain The process flow for mango handled through the cold chain in the pack house is shown in the diagram: It is envisaged that in the long run, a large amount of the sorting for all produce will occur at farm level itself, by incentivising farmers to sort and grade as per size and quality requirements, before delivery to the facility; for example, mangos can be de-sapped at farm level. Where bore-well water (which is C below ambient) is available, mangos can be kept in water troughs at the farm, pending transport; to remove field heat; this helps in reducing pre-cooling time, and washing off latex to minimise the chance of latex burns. Technology / Facilities Quality Check De sapping Description The mango that comes from the field will undergo quality check similar to that of litchi Mangoes will be placed on de sapping racks for removal of latex Washing Drying Sorting Grading Pre cooling Cold Storage Transport and and The fruit will then be washed and air dried. Manual sorting and grading of mango is proposed in the hub due to easy availability of inexpensive labour in the region. Will be packed in CFB boxes for different capacities depending on the requirement in the destination markets, 6 to 24 mangoes per box. The boxes will then be palletized. Pre cooling will be done at 12 o C at 90% RH by forced air method. Storage is done at o C, 85 90% RH for 2 3 weeks. For transportation of the produce, refrigerated vehicles will be used. Where hot dip or vapour treatment is needed (recommended for mango) 52 ºC for 5 minutes, solar thermal panels with electric heaters as back-up, can be used. 40

49 Mango Process Flow: Ambient In season, about 35 MT of mango will be handled at ambient temperature in the pack house. For ambient handling, a separate space will be provided in the pack house. Upon receiving the produce from the field, it will be sorted, graded and packed in CFB boxes manually, and then dispatched to markets in normal trucks of 9-10 MT capacity. The same ambient space will be used for vegetables as well in the non-litchi/mango season. Here, vegetables such as cauliflower, cabbage, cucurbits, brinjal etc. will be sorted, graded and packed as per market requirements. Aggregation Mechanism The pack house will have its own aggregation mechanism : trucks/pick-ups would be sent to aggregation points to collect produce from the farmers/pre-harvest contractors directly. Farmers cooperatives wherever they are functional, will be encouraged to manage/handle the aggregation points. Pack house owners may also invest in developing the points by creating/improving the infrastructure of the points such as platforms, sheds, etc. To strengthen the aggregation mechanism, focus on capacity building and other extension services in the catchment may be explored. Training of farmers on best farming practices and better post harvest handling practices of produce are proposed be conducted at regular intervals. Other initiatives such as best inputs and technology transfer may also be taken up. Pack House Logistics The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, etc. At peak of operations, about incoming tucks/vehicles of an average of 4 M capacity will be coming to the pack houses. The outbound trucks would include about 6 normal trucks of 10/15 MT and 6 refrigerated trucks of 6 MT. Small capacity field vehicles (load 800Kg to 1MT), have also been incorporated in the project, to serve as feeders from local farms to ensure backward integration Banana Ripening Facility A banana ripening facility is proposed in the hub. There will be 5 ripening chambers of 10 MT capacities. Since banana takes 4 days to ripen, the daily output of ripened banana will be 10 MT. The other chamber may be used for ripening of other produce like papaya, mango, etc. depending on market demand. Ethylene is proposed to be used as catalyst in the ripening process(see Annexure for technical details) Potato Cold Store A modern potato cold store of 5000 MT capacity is proposed in the hub. There will be 16 chambers for storage and 8 anterooms which may be used for warming up of potato before taking it out of the cold store. The store will be a prefabricated structure with insulated puff panels. Ammonia type refrigeration will be used for the cooling (see Annexure for technical details). 41

50 5.3.4 Dry Warehouse A dry warehouse of 5000 MT capacity is proposed at the hub. It will used for storage of grain (rice, wheat, maize) Ambient Onion Stores Separate facilities for onion storage are proposed in the hub. There will be 10 onion stores of 50 MT capacities and they will segregated to prevent odour contamination of other areas Multi Fruit Processing Plant A vacant plot will be earmarked in the hub for establishment of a multi-fruit processing plant. The plant may have pulping/juicing facilities for litchi, mango and other fruit. The processing plant will have supply linkages with other spokes, in particular Hajipur and Darbhanga which will supply litchi, mango and other fruit to the plant as per season. 5.4 OTHER FACILITIES Business Centre A Business Centre is proposed in the hub which will include an administrative block for the market. There will also be rooms/sections which may be rented out to selected NGOs, companies, grass-roots level organizations such as microfinance institutions, etc as office space Knowledge Centre A Knowledge Centre is also proposed in the market. This space will be utilized for extension services provided to the farmers, traders, aggregators and others in the catchment area. Rooms may be used for trainings, meetings and conferences and may also be rented out. There will be demonstration rooms displaying various modern technologies and best practices in agri-business. This facility could be utilized by the department of agriculture for various programs and extension services extended to stakeholders. The knowledge centre will also be instrumental in dissemination of information regarding demand-supply and price trends of the produce. Apart from the new facilities proposed in the hub, there will be refurbishment/renovation of existing facilities like: Trading Platforms Trading Shops Parking Area Guest House and Canteen Weigh Bridge Water Supply Facilities DG Rooms Solid Waste Management Area Other Amenities 42

51 PROPOSED INTERVENTION Pack House (with Cold Infrastructure) Pack House (Ambient) Pack House Logistics Banana Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Multi Fruit Processing Plant Trading Platforms & Shops Knowledge Center Business Center Parking Area Guest House & Canteen Weigh Bridge DG Rooms Solid Waste Management system Approach Road Water Supply System Electricity TYPE OF INFRASTRUCTURE Agribusiness infrastructure Add On / Commercial Infrastructure Basic Mandatory Infrastructure Link Infrastructure 43

52 6 SPOKE: HAJIPUR Hajipur is identified as one of the spokes for the Muzaffarpur Integrated Value Chain. This gains significance since the proposed spoke is located in Vaishali district which is among the top producers of fruit in the state - in particular, banana and litchi. The erstwhile APMC market at Hajipur is located within the town, about 1 km from the Jharua junction and is spread over 6.5 Ha of land. The market yard is about 3 km from National Highway 19. Hajipur is well connected to Patna and the rest of South Bihar through Mahatma Gandhi Setu (the longest single river bridge in the world). It is also connected to the consumption centres like Patna, Muzaffarpur, etc by road and has good rail connectivity to distant consumption centres in Delhi, Uttar Pradesh, West Bengal and states in the North- East. Hajipur Junction is an important railhead in the Eastern Central Railways and a major halt for trains plying between UP, Jharkhand, Uttarakhand and West Bengal. With the improvement of railway perishable transport system in India, the road to the railhead from the market may be developed in the next phase by making it a two lane highway for speedy transport of produce to the destination markets. Produce comes from almost all the major blocks of the district namely Bidupur, Goraul, Raghopur, Lalganj, Mahua,Jandaha, Bhagwanpur, Desari, Chechar, Chakausal, etc. At present, the roads connecting Serai, Mahua to Hajipur are in poor condition while those connecting Lalgunj, Manhar,etc are in good condition. The consumption markets are Danapur (16 Km), Patna (8 Km), Ranchi (259 Km), Siliguri (330 Km), Aurangabad (133 Km), Gaya (105 Km), Jehanabad (63 Km), Kachi Durgah,etc for vegetables and banana. Most of the potato and onion is sold within Hajipur town and in nearby villages in Vaishali district. The major commodities being traded in the market yard are potato, onion, banana, vegetables (During Nov- Feb) and mango (During May- July). The Daily arrival in case of vegetables is about MT (Cauliflower baskets, Gourds-20 MT. Other seasonal vegetables like radish, turnip, spring onion-about 6 to 8 MT). In case of banana the daily arrivals are anywhere between 150 MT during late March and October and about 50 MT from mid November to March. The daily arrivals are the highest at about MT for about days during mid October (Chhatt festival). About MT of potato and 20 MT of onion arrive daily at the market. The market yard also has space for fish trading. However, this is not currently being utilized. The other prominent sub-markets are Jharua market, Station market and Anjanpur chowk market, which are the three major markets located within a 3 km radius of the market yard. These are prominent markets given their location and accessibility. The arrivals in each market are sizeable with about 4 truck loads (40 MT) of fruits traded daily from Station market and about 4 to 5 MT of vegetable traded daily at Jharua market. 44

53 Crop wise production clusters in the catchment of Hajipur Market Banana is produced in Chehar, Madhurapur, Ramdauli, Sadulla, Jharua blocks of the district Mango is produced majorly in Mahua, Jandaha, Bhagwanpur and Lalgunj blocks of the district Banana is produced majorly in Raghopur blocks in Tarasiya, Saraipur, Chaukia, Sahpur villages majorly. Jarua, Karnpura, Sahdulapur, Vidupur, Amir, Chechar, Gadai Sarai are other major Banana producing places. Vegetables are grown extensively in Khargualiya, Saddapur, Kishapura clusters in Bhagwanpur block and Shahjahanpur, Ghatora Tola, etc in Llalgunj. Kanpur, Varanasi, Manimah are the main sourcing points of Potato by traders in this market Nashik is the main sourcing point for Hybrid Onion; local varieties are sourced from Aara, Chechar, Fatuha, Mahanar, Vidhupur 6.1 FOCUS CROPS AND ESTIMATED THROUGHPUT Hajipur occupies a prominent place in the trade of fruits and vegetables. Most fruit and vegetable is traded in various markets in Hajipur. However, litchi, mango, banana and vegetables are the focus crops for this spoke. The selection of focus crops and estimation of throughputs for each is based on current production trends in the catchment area, existing infrastructure facilities, feasibility for interventions and feedback from various stake holders. The estimated annual throughput of the pack house in MT is: Spoke Litchi Banana Vegetables Mango Hajipur The arrival pattern of the focus crops for the pack house will be as follows: Litchi Banana Vegetables Mango Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Most facilities at the pack house will be utilized to an optimal capacity as reflected in the envisaged arrival pattern. 6.2 EXISTING FACILITIES The existing infrastructure in this market yard is limited to basic infrastructure which is confined to about 30% of the land. The existing facilities at Hajipur are outlined below Traders Shops The Market yard has about 60 traders shops in various sections of the market. Viz. Fish, Potato/Onion and Banana trading sections. The trading modules mentioned above are permanent in nature with area of about 250 s.ft each. The section earmarked for Fish trading is currently not operational. There are about 20 traders in Banana and 45 traders in Potato & Onion trading here. The traders shops are inadequate considering the number of traders operating from the market yard. The shops are in dilapidated state and there have been instances of roof collapsing in few traders shops. 45

54 6.2.2 Open & Covered Platforms There are two covered and one open platform which are currently being used by traders as their modules. The platforms are broken and need repair. The covered platforms are being used by the Vegetable and Potato traders Godowns The godowns are two in number with storage capacity of 800 MT and spread over an area of 3000 s.ft. These are leased in by various organizations like FCI, BSWCL, etc. The storage capacity is inadequate vis-à-vis the arrival volumes General Amenities and Support Infrastructure Other amenities like eateries (three in number and operated by vendors) and restroom are inadequate. The administrative building is operational but needs renovation. The market yard lacks facilities like Weigh Bridge, Water tank, Check Post, etc. The boundary wall is broken and allows multiple entry and exit points making security a cause of concern. The market yard shares boundary wall with primary school. The existing facilities mentioned above need renovation/refurbishment 6.3 PROPOSED FACILITIES It is reported that the existing APMC market yard has almost 60% vacant land. The proposal for this location includes renovation of existing usable facilities in the market supplemented by the development of new facilities. The new facilities being proposed are as follows: Pack House (with cold infrastructure) The pack house will have cold chain infrastructure as well as space for ambient handling of produce. As the focus crops are litchi and mango, the cold infrastructure is designed to suit the varied handling and temperature parameters for these two. The planned capacity targets an introductory and viable volume for the two produce types. To maintain synergies with existing ambient supply chain practices, space is also provided to cater to other vegetables and the litchi and mango not entering the cold-chain. Facility design is in compliance with EHS regulations and provides segregated working zones and amenities by gender. Cold Chain: The peak arrival of litchi is estimated to be 40MT per day out of which 30% (i.e. 12 MT will pass through the cold chain. The remaining 28 MT will be handled in ambient areas and only sorting, grading, packing and fumigation for that amount will be carried out. The selected cold chain throughput has been optimized taking into account existing availability of cold chain transportation in the region. Greater volumes of cold handling may lead to a break in the cold chain due to non-availability of refrigerated trucks. It is proposed that this infrastructure (spoke) include at least two reefer vehicles or reefer containers for captive 46

55 utility, thereby offsetting some of the dependence on 3 rd party evacuation of packaged cold chain produce. To allow capacity utilization and spread across seasons, the facility is intended for use of both mango and litchi, in their respective season. Additionally the facility design proposed, allows simultaneous handling of both produce types in overlapping periods, with peak capacity handling of each produce in its individual season. The basic sub components of the pack house are as follows: Sorting and grading facilities as suited for both product types o For mangos complete mechanized line: De-sapping racks Hot water dip/vapour treatment system Waxing and drying system Grading system o For litchi partial mechanized line: Sorting grading conveyor manual sorting Additionally static S&G tables (for low volume handling) Fumigation room, incorporating SO 2 evacuation system Inspection and packaging area tables- standard stainless steel type Weighing and unitization area certified weighing machines and palletisation equipment Buffer store (ante room) holding area for 24 pallets pending cold application Pre-cooler Forced Air Pre-coolers: capacity 5 MT, each running 3 batches in an 18 hour period. In peak season, more than 15 MT will be pre-cooled daily Cold Store - 25MT capacity (daily output plus 50% stock overrun to cater for transport delays). The pre-coolers can also be used to supplement contingency storage Both pre-cooler and cold store refrigeration will cater to 2 ºC to 12 ºC temperatures Staging area (ante room) 24 pallets pending dispatch/transport Material handling equipment pallet movers, trolleys Waste disposal systems Vehicle waiting areas Crate washing system The process flow for litchi and mango is the same as that proposed at the Hub facility in Muzaffarpur and is shown here. Litchi Process flow: Technology / Facilities Quality Check Sorting Grading and Description The litchi that comes to the pack house after harvesting will be checked thoroughly and segregated for cold and ambient handling. The better lot in terms of size and maturity will be taken for cold handling and the rest would go for ambient handling Manual sorting and grading is suggested in the pack house. Automation is not suggested due to the availability of inexpensive labour in the region. Sorting and grading tables are proposed. 47

56 Fumigation Packing Pre cooling and Storage Transport The litchi will be treated with sulphur fumes to prevent the peri carp from browning Manual packing of litchi in Corrugated Fibre Board (CFB) boxes will be done. Tables are proposed for packing. Each box will hold about 2 Kg of litchi. The boxes will be arranged in pallets (one pallet holds 284 boxes). Pre cooling will be done at o C, 90 95% RH by forced air method. The duration of one batch of pre cooling will be about 6 hrs Storage of litchi in CFB boxes will be done at 2 7 o C at 90 95% RH until the time it is transported to the destination market. The maximum time of storage of litchi is 3 4 weeks. For export and distant domestic markets, Reefer containers (at 1 2 o C) will be used. They will transport the litchi in pallets as mentioned earlier. Ambient Supply Chain: An ambient handling yard with associated amenities is proposed in alignment with the existing supply chain. It is also estimated that produce not suitable as cold chain output will still find an appropriate revenue channel through the ambient route. The cold chain interface has been envisioned as a friendly facilitator, not as a selective acquirer and through this, greater farmer footfall is also ensured. In the ambient handling yard, adjoining the cold chain facility, the following infrastructure is proposed: Covered Pack shed (ambient, open to air) with landing area Requisite weighing equipment and recording arrangements for transactions Sorting and grading areas (with tables) Packaging store and packing tables Waste disposal systems Vehicle parking areas Mango Process Flow: Cold Chain The process flow for mango handled through the cold chain in the pack house is depicted in the diagram: Technology / Facilities Quality Check De sapping Description The mango that comes from the field will undergo a quality check similar to that of litchi Mangoes will be placed on de sapping racks for removal of latex Washing Drying and The fruit will then be washed and air dried. Sorting and Grading Pre cooling Manual sorting and grading of mango is proposed in the hub due to the easy availability of inexpensive labour in the region. The produce will be packed in CFB boxes of different capacities based on the requirement of the destination markets, 6 to 24 mangoes per box. The boxes will then be palletized. Pre cooling will be done at 12 o C at 90% RH by forced air method. 48

57 Cold Storage Transport Storage is done at o C, 85 90% RH for 2 3 weeks. Refrigerated vehicles will be used for transportation of the produce. Aggregation Mechanism The pack house will have its own aggregation arrangements where trucks/pick-ups would be sent to the aggregation points to collect the produce from farmers/pre-harvest contractors directly. Farmers cooperatives where functional, will be encouraged to manage/handle the aggregation points. It appears that this would be feasible in Hajipur as there are already a few farmers clubs promoted by NABARD that are procuring inputs and marketing produce collectively. Investments in developing the aggregation points may be made by creating/improving the infrastructure: platforms, sheds, etc. Capacity building and other extension services may be undertaken to strengthen the aggregation mechanism in the catchment. Trainings of farmers on best farming practices and better post harvest handling practices of produce are proposed to be conducted periodically. Other initiatives such as best inputs and technology transfers may also be undertaken. Pack House Logistics The produce will come to the pack house from the aggregation points and farms in various modes of transport like trucks (4 MT), vans, etc. At the peak of operations, about incoming tucks/vehicles of an average of 4 M capacity will come to the pack houses. The outbound trucks would include about 6 normal trucks of 10/15 MT and 6 refrigerated trucks of 6 MT. Small capacity field vehicles (load 800Kg to 1MT), have been considered as feeders from local farms for backward integration Banana Ripening Facility A banana ripening facility is proposed in the market yard. There will be 5 ripening chambers of 10 MT capacity. Since banana takes 4 days to ripen, the daily output of ripened banana will be 10 MT. The other chamber may be used for ripening of other produce such as papaya, mango, etc. depending on market demand. Ethylene is proposed to be used as catalyst in the ripening process (see Annexure for technical details) Dry Warehouse A dry warehouse of 5000 MT capacity is proposed at Hajipur for storage of grain (rice, wheat and maize). 49

58 6.4 OTHER FACILITIES Business Centre A business centre is proposed at Hajipur which will house the administrative block for the market. There may also be rooms/sections that may be rented out to selected NGOs, companies, grass-roots level organizations such as microfinance institutions, etc as office space. Knowledge Centre A knowledge centre is also proposed in the market. This space will be utilized for extension services provided to the farmers, traders, aggregators and others in the catchment area. Rooms for trainings, meetings and conferences may be included which may be rented out. Demonstration rooms displaying various modern technologies and best practices in agribusiness may also be included. Apart from the new facilities proposed in the spoke, refurbishment/renovation of existing facilities is also proposed.: The infrastructure suggested for Hajipur spoke could be classifies into broad categories as follows. PROPOSED INFRASTRUCTURE Pack House (with Cold chain & Ambient) Pack house logistics Banana Ripening Facility Dry Warehouse Traders Shops & Platforms Knowledge Center Business Center Godowns Eateries & Guest Houses Water Supply System Internal Roads Waste Management System INFRASTRUCTURE TYPE Agribusiness Infrastructure Add On / Commercial Infrastructure Agribusiness Infrastructure Mandatory/ Basic Infrastructure 50

59 7 SPOKE: DARBHANGA The existing APMC market at Darbhanga has been identified as the spoke for the Muzaffarpur Integrated Value Chain because of its proximity to the fruit and vegetable producing clusters and established trade linkages with markets within as well as outside Bihar. The facilities at the spoke have been designed to introduce better handling practices and reduce quality deterioration of farm produce. The APMC market caters to neighbouring districts like Muzaffarpur, Patna, Hajipur, Samastipur, Vaishali, Begusarai and other markets: Nepal, Siliguri, Delhi and Kolkata. Major crops cultivated in the catchment areas of the proposed spoke are mango, banana, vegetables etc. While major production clusters of vegetables are Jaughatta, Motipur, Jayanatipur, Milki etc; mangoes are cultivated in the clusters of Raje, Narayanpur, Sakri, Gangouli etc. The APMC market is located within the town of Darbhanga. The condition of the approach road to the market yard is good however, internal roads are in a poor condition. The total area of the market yard is around 13 Ha. Of this, around 75% of the land is under use for trading/other infrastructure and around 10% is vacant. There are 11 covered platforms, 34 sundry shops inside the market yard, 26 shops outside the compound and 150 trading shops in the market yard. Some 200 grain traders and 10 potato/onion traders operate from the APMC market. The market is well connected with all weather roads to the production clusters. Rail and road connections to major locations in the country are also good. NH 57 connects Darbhanga to the proposed hub at Muzaffarpur and NH 105 connects Darbhanga to Madhubani and Jaynagar. Darbhanga railway station is the nearest railhead. With the improvement of railway perishable transport system in India, the road to the railhead from the market may be developed in the next phase by making it a two-lane highway for speedy transport of produce to the destination markets. Rice, pulses, makhana and wheat are the major commodities traded in the market. The daily arrival of rice at the Darbhanga market yard is about MT. Apart from this, about 300 quintals (10 quintal=1 MT) of wheat, 500 quintals of Makhana and 300 quintals of pulses arrive daily at the market. Other commodities such as sugar, onion, potato, spices, dates etc are also traded in the market. 7.1 FOCUS CROPS AND ESTIMATED THROUGHPUT The focus crops and estimated throughputs of the pack shed have been identified based on the present production in the catchment areas, potential for interventions and stakeholders consultations. The estimated annual throughput of the pack shed in MT shall be as follows: Spoke Mango Banana Vegetables Darbhanga The arrival pattern of the focus crops at the ambient pack shed shall be as follows: Banana Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 51

60 Vegetables Mango The arrival pattern shows that there will be round the year availability of produce for the pack shed, which would ensure its operational efficiency and thereby maximize capacity utilization. Donar is a prominent aggregation point for vegetables grown in the catchment area. However, most of the fruits and vegetables are also aggregated on either side of the roads leading to the market. Supply is expected to come from these and neighbouring production clusters. While Mango is supplied to all over the state from this market Vegetables are mainly consumed in local markets like Bahera, Raje Chowk, Singhwara and Darbhanga. 7.2 EXISTING FACILITIES The market yard in Darbhanga predominantly has grains, Potato/Onion, Makhana and spice trading currently. The vegetables and Fruits are traded from a local market nearby. The details of the existing facilities are given in the ensuing sections Traders Shops The Market yard has about 220 traders shops in various sections of the market. Viz. Grain, Potato/Onion and Sundry trading sections. The trading modules mentioned above are permanent in nature with area of about 250 s.ft each. The section earmarked for sundry trading is currently operational both inside and outside the premises. There are about 200 traders in grain trading and 10 traders in Potato & Onion trading here. The traders shops are inadequate considering the number of traders operating from the market yard. The shops are inadequate considering the volumes and number of traders present. Spice trade is also seen in the market Open & Covered Platforms There are eleven covered and three open platform which are currently being used by traders as their modules. The platforms are broken and need repair. The covered platforms are being used by the grain traders for storage and trading purposes Godowns There are three godowns with approximate storage capacity of 1200 MT and spread over an area of 7000 s.ft. These are leased in by various organizations like FCI, BSFC, etc. The storage capacity is inadequate vis-à-vis the arrival volumes General Amenities and Support Infrastructure The other support infrastructure present in this market are Post Office, Administrative building and Bank Building which are all operational. Hnad pumps are the main source of water here. Other amenities like eateries (approx ten in number and operated by vendors) and restrooms are inadequate. The market yard lacks facilities like Weigh Bridge, Water tank, Check Post, etc. The boundary wall is broken and allows multiple entry and exit points making security a cause 52

61 of concern. The internal roads are far from being satisfactory and make the vehicular movement a constraint specially in monsoon. The existing facilities mentioned above need renovation/refurbishment. 7.3 PROPOSED FACILITIES Given that the objective of the project in Bihar is the upgradation of existing APMC markets, refurbishing/renovating existing usable facilities in the market is included as also the focus on new facilities. The proposed new facilities are: Ambient Pack Shed An ambient pack shed is proposed to be set up for handling mango, banana and vegetables. The handling capacity of the pack shed shall be 50 TPD. As mentioned earlier, the pack shed would receive mangoes from May to August, bananas from Jan to March and vegetables almost through the year. The pack shed shall have the following facilities: Sorting and grading facility Marshalling yard with de-handing and packing tables for onward domestic movement Packaging area Technology / Facilities Quality Check Sorting and Grading Packing Transport Pack Shed Logistics Description Quality of the farm produce shall be assessed at the pack shed based on identified criteria Manual sorting and grading is suggested. Sorting and grading tables are proposed in the pack shed. Packaging tables would be provided for manual packing of mangoes/ banana hands in CFB boxes. Depending upon the requirements of the destination markets, packaging material would be used Produce will be transported in trucks of 9 10 MT capacity. The produce will come to the pack shed in various modes of transport such as auto rickshaw, vans, thelas and mini trucks etc. It is envisaged that around vehicles will bring the produce daily from various aggregation points as well as from farms directly. During peak operation periods, the outbound logistics would involve 5 trucks of 10 MT capacities each for onward dispatch. Aggregation Mechanism The pack shed shall receive material from various aggregation points as well as directly from farms. Primary sorting and grading will be done at the aggregation point and the produce will be brought in trucks to the pack shed. This is aimed at improving current handling practices of farm produce, to reduce quality deterioration and ensure assured supply to the pack shed Banana Ripening Facility A banana ripening facility is proposed with a ripening chamber capacity of 10 MT per day. The ripening chamber may also be used for other fruit such as mango, if required. Ripening is 53

62 proposed to be done using ethylene as catalyst (see Annexure for technical details). Ethylene generators would be utilised for appropriate dosing of the catalyst. Where the ripening facility is located adjoining the pack shed (for local market), conveyor rollers are proposed to carry the crates directly to the ripening area. A separate receiving and de-handing shed may be located adjacent to the banana ripening facility to aid locally sourced farm produce to be input for local ripening. A waste disposal area to cater to the ripening room is proposed. A material handling pallet mover is provided for daily operations. A covered receiving shed is proposed for protection from direct sunlight and inclement weather. Though only one chamber will output daily, sufficient space is provided to cater for dispatch staging as well as marshalling of incoming produce. It is envisaged that the produce will be loaded from the ripening facility, onto smaller vehicles for tertiary dispatch - a separate designated parking for these vehicles is proposed Other Facilities Business Centre A business centre is proposed to house the administrative block for the market. There will also be rooms/sections which may be rented out to reputed NGOs, companies, grass-root level organizations such as microfinance institutions, etc as office space. Knowledge Centre A knowledge centre is also proposed in the market for dissemination of information to farmers, traders etc. The facility may also be used for training of various stakeholders. Apart from the new facilities proposed in the hub, there will be refurbishment/renovation of existing facilities. They would include: Trading Platforms Trading Shops Parking Area Guest House and Canteen Weigh Bridge Water Supply Facilities DG Rooms Solid Waste Management Area PROPOSED INFRASTRUCTURE Pack House (Ambient) Pack house logistics Banana Ripening Facility Dry Warehouse Traders Shops & Platforms Knowledge Center Business Center Godowns Eateries & Guest Houses Water Supply System Internal Roads Waste Management System INFRASTRUCTURE TYPE Agribusiness Infrastructure Add On / Commercial Infrastructure Agribusiness Infrastructure Mandatory/ Basic Infrastructure 54

63 8 SPOKE: DALSINGHSARAI Dalsinghsarai APMC, a proposed spoke, is located at a distance of 3kms from the National Highway 28 and is linked to it with a good road. The surrounding area is fertile, producing a variety of fruits and vegetables; this is also the mango belt of Bihar and the envisaged catchment area includes clusters producing banana and vegetables. The major arrivals in the Dalsinghsarai mandi, in season, are mango and litchi, among fruit and in vegetables: cucurbits, cauliflower, brinjal, tomato, potato, peas and okra. The significant villages in the catchment production clusters in roughly a radius of 20 km, include Basaria, Madhaipur, Mirjapur, Nargaon, Vajitpur and Malpur. These clusters will serve to supply this spoke all year round with mango, banana and various vegetables, as per season. This present location of the APMC includes a market yard spread over about 8 Ha with 3 open auction platforms, 3 godowns and one administrative block. A pack house has been proposed here, a ripening facility for bananas, a dry warehouse for maize and a segregated onion store. Details of the spoke facilities proposed for Dalsinghsarai, are discussed below. 8.1 FOCUS CROPS AND ESTIMATED THROUGHPUT Mango is the focus crop for this proposed spoke with an estimated throughput of 35 MT. The assessment is based on a combination of factors that include the present production in the catchment, capacities of existing similar infrastructures/facilities, potential for interventions, and has been vetted during consultations with local stakeholders In addition to mango, facilities for banana, vegetables and maize have also been included to ensure year round utilisation. The estimated annual throughput of the pack house in MT is: Spoke Mango Banana Vegetables Dalsinghsarai The arrival pattern of the focus crops at the pack house is shown below: Mango Banana Vegetables Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ensuring year-round utilisation of the facilities was an important design criterion as can be seen in the above table. The catchment will include Janakpur,Wazidpur, Meyani and the surrounding villages that produce Cauliflower, Potato, Brinjal round the year and presently cater to Patna and other distant markets like Guwahati, Ranchi (when the local production is lean), Tatanagar, etc. 55

64 Crop wise production clusters in the catchment of Dalsinghsarai Market Mango is produced in Kanti, Mushahari, Gaighat, Kurhani, Muraul, Minapur, Aurai majorly Banana which is traded in Purnea, Katihar and Naugachia which are the major production areas for this region. Major production areas within the district from where the produce reaches the market are Motipur, Sahebgunj, Bochahan, Muraul and Saraiya Maize and Wheat are produced in Mahinwara, Siwaipatti, Gaighat Chatra, Aurai chatra and Madhepura 8.2 EXISTING FACILITIES The market yard in Dalsinghsarai is currently not operational. The vegetables and Fruits are traded from a local market nearby. The details of the existing facilities are given below Traders Shops The Market yard has about 20 traders shops which are permanent in nature with area of about 250 s.ft each. The shops are inadequate in case of fully operational market with sizeable arrivals on a daily basis Open & Covered Platforms There are five covered out of which three platforms are in good condition. Two platforms are broken and need repair Godowns There are two godowns with approximate storage capacity of 500 MT General Amenities and Support Infrastructure The other support infrastructure present in this market are Toll Collection Building and Administrative building. Hand pumps are the main source of water here. The boundary wall is broken and allows multiple entry and exit points making security a cause of concern. The internal roads are satisfactory. The existing facilities mentioned above need renovation/refurbishment. The availability of vacant land makes creation of new facilities and infrastructure possible. 8.3 PROPOSED FACILITIES Pack house (ambient) The pack house is designed for handling a daily throughput of 35MT of mango/vegetables, bananas etc. It is estimated that mangoes would be received from May to August, bananas from Jan to March and vegetables would be available almost round the year Ambient Supply Chain: In the ambient handling yard, the following infrastructure will be provided: 56

65 Covered Pack shed (open to ambient) with landing area. Requisite weighing equipment and transaction recording arrangement. Sorting and grading areas (with tables). Packaging store and packing tables. Waste disposal systems. Vehicle parking areas. Process flow for produce (ambient) In season, about 35 MT of mango ill be handled in ambient temperature in the pack house. The produce will be sorted here after being brought from the field. It will be graded and packed in CFB boxes manually and dispatched to markets in normal trucks of 9-10 MT capacities. The illustration shows the process flow for mango and vegetables, envisaged at the pack house The same ambient space will be used for vegetables as well in the non-mango season. Here, vegetables such as cauliflower, cabbage, cucurbits, brinjal etc. will be sorted, graded and packed as per market requirements. Aggregation Mechanism The pack house will have its own aggregation mechanism where trucks/pick-ups would be sent to collect the produce from the farmers/pre-harvest contractors directly. The pack house will encourage farmers cooperatives to manage/handle the aggregation points wherever applicable. It may also invest in developing the points by creating/improving the infrastructure of the points such as platforms, sheds, etc. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment (some of these have been covered in the section on capacity building). Trainings of farmers on best farming practices and better post harvest handling practices of produce are proposed to be conducted periodically. Other initiatives such as appropriate inputs and technology transfer may also be taken up as per assessed need. Pack house logistics The produce is expected to reach the pack house from aggregation points and/or farms in various modes of transport such as trucks (4 MT), vans, etc. At peak of operations, about 40 incoming tucks/vehicles of an average of 4 M capacity will be coming to the pack house. The outbound trucks would include about 12 normal trucks of 10/15 MT Small capacity field vehicles, load 800Kg to 1MT, are incorporated in the project to serve as feeders from local farms as backward integration. Transport logistics have been taken into consideration in the proposed design and layout for the Dalsinghsarai spoke. 57

66 8.3.2 Banana Ripening Facility A banana ripening facility is proposed. Capacity of the ripening chamber will be 10 MT per day. The ripening chamber can also be used for other fruits such as mango, if required. Ripening would be done using ethylene as the catalyst (see Annexure for further technical details). Ethylene generators would be utilized for appropriate dosing of the catalyst. Where ripening facility is located adjoining the pack house, conveyor rollers are optioned to carry the crates directly to ripening area. The Banana ripening facility could adjoin a separate receiving and de-handing shed to allow for locally sourced direct farm produce to be input for local ripening requirements. A waste disposal area to cater to ripening room is specially designated. Material handling pallet mover is provided for the daily operations. The receiving shed is covered to protect from direct sunlight and weather. Though only one chamber will output daily, sufficient space is provided to cater for dispatch staging as well as incoming marshalling of the produce. The ripening facility is envisaged to output into smaller vehicles for tertiary dispatch and a separate designated parking lot for the same is designed. A capacity of 1000lts of water is provided for end of process cleanup operations Dry Warehouse A dry warehouse of 5000 MT capacity is proposed at the spoke with dehumidification facilities. It will used for storage of grains such as maize, rice, and wheat. Adequate layout for vehicular movement and parking have been incorporated in the proposed layout Ambient Onion Stores Separate facilities for onion storage are proposed at this location. There will be 10 onion stores of 50 MT capacities and they will form a separate section of the spoke to prevent odour contamination of other areas. These storehouses would be constructed as per existing guidelines for storage of dry onions, incorporating enclosures that allow ventilation while protecting from overhead inclement weather. The roof would be extended to protect from driving rain while protecting from direct sunlight, boundary walls of mesh material protecting the produce from rodents while allowing adequate ventilation. The base platform would be raised to truck bed height easing loading and unloading operations Other Facilities Trading platforms and Trading shops: At Dalsinghsarai spoke, 5 trading platforms of 400sqm area have been proposed, to handle a daily through put of 125 MT. In addition, trading shops are also proposed to address a daily flow of 100MT. 58

67 It is estimated that this Spoke will provide employment to over 200 persons directly, with the majority being employed at the trading shops. Additionally, in peak season, up to 300 persons are expected to find wage-labour within the Spoke. Given the combination of facilities proposed and taking into account the needs of workers, farmers and traders at the location, the following facilities and amenities have also been included: Parking Area Canteen Weigh Bridge Water Supply Facilities DG Rooms Solid Waste Management Area Other Amenities Eventually, additional space may be utilized for extension services provided to farmers, traders, aggregators and others in the catchment area. Rooms may be rented out for trainings, meetings and conferences. Demonstration rooms displaying various modern technologies and best practices in agri-business may also be included at select locations, over the years. PROPOSED INTERVENTION Pack House (with Cold Infrastructure) Pack House (Ambient) Pack House Logistics Banana Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Multi Fruit Processing Plant Trading Platforms & Shops Knowledge Center Business Center Parking Area Guest House & Canteen Weigh Bridge DG Rooms Solid Waste Management system Approach Road Water Supply System Electricity TYPE OF INFRASTRUCTURE Agribusiness infrastructure Add On / Commercial Infrastructure Basic Mandatory Infrastructure Link Infrastructure 59

68 9 SPOKE: BEGUSARAI The APMC market yard for Begusarai, located near the railway station is not currently in use. This location is proposed as a spoke in the Muzaffarpur Integrated Value Chain. Presently, the produce brought to Begusarai in significant quantity, for onward movement and sale includes various locally grown vegetable, mango and maize. The catchment clusters for vegetables include the villages of Larwara, Chilmill, Chapki, Rajaura, Sitarampur Chandpura, Kamruddinpur, Majhaul, and Saidpur, among others. In addition to an ambient pack house, with mango as seasonal focus crop, it is proposed that the spoke at Begusarai include a ripening facility (primarily for bananas), a dry warehouse for grain, a segregated onion store and trading platforms, shops and also input shops. The facilities and their operations are discussed below. 9.1 FOCUS CROPS AND ESTIMATED THROUGHPUT The focus crop proposed for this spoke is Mango, with an estimated throughput of 35 MT. The assessment is based on a combination of factors that include the present production in the catchment, capacities of existing similar infrastructures/facilities, potential for interventions, and also takes into account consultations with local stakeholders In addition to mango, facilities for vegetables and maize have also been included to ensure year round utilisation. The estimated annual throughput of the pack house in MT is as follows: Spoke Mango Vegetables Begusarai The arrival pattern of produce at the pack house will be as follows: Mango Vegetables Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec The arrival pattern shows that there will be year-round arrival of produce to maximise capacity utilization of the facilities at the pack house Cheria Bariarpur, Baliya, Matihani,Begusarai and Bhagwanpur are the major production clusters in the district. Crop wise production clusters in the catchment of Begusarai Market Mango is produced in Kanti, Mushahari, Gaighat, Kurhani, Muraul, Minapur, Aurai majorly Maize and Wheat are produced in Mahinwara, Siwaipatti, Gaighat Chatra, Aurai chatra, Madhepura, Manjhaul, Pabra,Sripur, Khanjapur and Bikrampur villages in Cheriyabariyarpur block,rahatpur,meenapur in Bailya. Potato is majorly produced in Nayagaon, Sonapur, Balahpur in Matihani block and Tegdha and Bhagwanpur blocks in the district. 60

69 9.2 EXISTING FACILITIES The market yard in Begusarai is currently not operational. The vegetables and Fruits are traded from three local markets nearby namely Ratanpur Chatti Vegetable market, Fruit Mraket and Subzi mandi. The details of the existing facilities in the market yard are given below Traders Shops The Market yard has about 40 traders shops which are permanent in nature. The shops are inadequate in case of fully operational market with sizeable arrivals on a daily basis Open & Covered Platforms There are three covered and one open platform out of which three platforms are in good condition. Two platforms are broken and need repair Godowns There are four godowns with approximate storage capacity of 1200 MT.These are being currently utilized by FCI, SFC and private entities General Amenities and Support Infrastructure The other support infrastructure present in this market are Bank Building and Administrative building which are both operational. Hand pumps are the main source of water here despite Water tank being present. The boundary wall is broken and allows multiple entry and exit points making security a cause of concern. A check post / toll collection building is present in the market. The internal roads are satisfactory. The existing facilities mentioned above need renovation/refurbishment. The availability of vacant land makes creation of new facilities and infrastructure possible. 9.3 PROPOSED FACILITIES Pack house (ambient) The pack house is designed for handling a daily throughput of 35MT of mango/vegetables; mangoes will arrive between May and August, whereas vegetables will be received through the year. Ambient Supply Chain: In the ambient handling yard, the following infrastructure will be provided: Covered Pack shed (open to ambient) with landing area. Requisite weighing equipment and transaction recording arrangement. Sorting and grading areas (with tables). Packaging store and packing tables. Waste disposal systems. Vehicle parking areas. 61

70 Process flow for mango and vegetables (ambient) In season, about 35 MT of mango will be handled in ambient temperature in the pack house. The produce will be sorted here after being brought from the field. It will be graded and packed in CFB boxes manually and dispatched to markets in normal trucks of 9-10 MT capacities. The same ambient space is proposed to be used for vegetables as well in the non-mango season to ensure better utilisation of the facilities. Here, vegetables such as cauliflower, cabbage, cucurbits, brinjal etc. will be sorted, graded and packed as per market requirements. The illustration shows the process flow for mango and vegetables, envisaged at the pack house. Aggregation Mechanism The pack house will have its own aggregation mechanism where trucks/pick-ups would be sent to collect the produce from the farmers/pre-harvest contractors directly. The pack house will encourage farmers cooperatives to manage/handle the aggregation points wherever applicable. It may also invest in developing the points by creating/improving the infrastructure of the points such as platforms, sheds, etc. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment (some of these have been covered in the section on capacity building). Trainings of farmers on best farming practices and better post harvest handling practices of produce are proposed to be conducted periodically. Other initiatives such as appropriate inputs and technology transfer may also be taken up as per assessed need. Pack house logistics The produce is expected to reach the pack house from aggregation points and/or farms in various modes of transport such as trucks (4 MT), vans, etc. At peak of operations, about 40 incoming tucks/vehicles of an average of 4 M capacity will be coming to the pack house. The outbound trucks would include about 12 normal trucks of 10/15 MT Small capacity field vehicles, load 800Kg to 1MT, are incorporated in the project to serve as feeders from local farms as backward integration. Transport logistics have been taken into consideration in the proposed design and layout for the Dalsinghsarai spoke Ripening Facility A ripening facility is proposed at the Begusarai Spoke with a daily capacity of 10 MT This facility may be used for ripening of produce such as banana, papaya, mango, etc. depending 62

71 on the local market demand. The ripening would be done using ethylene as the catalyst (see Annexure for further technical details) Dry Warehouse A dry warehouse of 5000 MT capacity is proposed at the spoke with dehumidification facilities. It will primarily be used for storage maize; grains such as rice and wheat may also be stored Ambient Onion Stores Separate facilities for onion storage are proposed at this location. There will be 10 onion stores of 50 MT capacity each, located in a separate section of the spoke to prevent odour contamination of other areas. These storehouses would be constructed as per existing guidelines for storage of dry onions, incorporating enclosures that allow ventilation while protecting from overhead inclement weather. The roof would be extended to protect from driving rain while protecting from direct sunlight, boundary walls of mesh material protecting the produce from rodents while allowing adequate ventilation. The base platform would be raised to truck bed height easing loading and unloading operations. 9.4 OTHER FACILITIES Trading platforms and trading shops: At Begusarai, 5 trading platforms of 400sqm area have been proposed, to handle a daily through put of 125 MT. In addition, trading shops are also proposed to handle a daily flow of 100MT. This Spoke is expected to provide direct employment to over 200 persons, with the majority being employed at the trading shops. In addition, in season the number of persons finding wage-labour here is expected to be around 300. Given the combination of facilities proposed and taking into account the needs of employees, farmers and traders at the location, the following facilities and amenities have also been included: Parking Area Canteen Weigh Bridge Water Supply Facilities DG Rooms Solid Waste Management Area Other Amenities Eventually, additional space may be utilized for extension services provided to farmers, traders, aggregators and others in the catchment area. Rooms may be rented out for trainings, meetings and conferences. Demonstration rooms displaying various modern technologies and best practices in agri-business may also be included at select locations, over the years. 63

72 PROPOSED INTERVENTION Pack House (Ambient) Pack House Logistics Banana Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Multi Fruit Processing Plant Trading Platforms & Shops Knowledge Center Business Center Parking Area Guest House & Canteen Weigh Bridge DG Rooms Solid Waste Management system Approach Road Water Supply System Electricity TYPE OF INFRASTRUCTURE Agribusiness infrastructure Add On / Commercial Infrastructure Basic Mandatory Infrastructure Link Infrastructure 64

73 10 FINANCIAL ANALYSIS This section contains details of project cost, funding mechanism, projected revenue, assumptions underlying project cost and revenue projections and analysis of financial viability of the projects. The project cost details are based on detailed value chain analysis and market assessment as given in the previous sections IVCS IN BIHAR As indicated in the previous section, the proposed IVCs in Bihar are to be located at the existing APMC market yards. Thus, the project in Bihar would have a twofold objective: Setting up modern infrastructure along the value chain as well as renovation and modernization of the existing APMC markets. The IVCs in Bihar would have a major component of agricultural marketing infrastructure considering the dual objective of the program in the state. Thus, while the proposed IVCs would have value added facilities like cold packhouses (with pre-cooling and cold store facilities), cold stores, ambient packhouses and ripening facilities, they would also consist of auction platforms, trading shops and dry warehouses in line with a modern agricultural wholesale market. While most of these facilities would be leased out on monthly rental basis, for some other facilities it may be done on job work basis. The detailed cost estimates for the locations have been done based on detailed engineering surveys of the markets. The estimation takes into account costs for the existing and proposed facilities/infrastructure in these markets. The details related to the IVC are given below: MUZAFFARPUR IVC Project Details The facilities/infrastructure proposed in hub and spokes for the IVC are summarized below: Facilities Muzaffarpur Hajipur Darbhanga Dalsinghsarai Begusarai 15 MT/day ( MT/day Packhouse Cold Chain sq. m) (750 sq. m) 2 MT/ Hr (900 Fruit Pulping plant sq. m) 35 MT/day ( MT/day 35 MT/day 35 MT/day ( MT/day Fruit Packhouse Ambient sq. m) (750 sq. m) (750 sq. m) sq. m) (750 sq. m) Trading Platforms 3490 sqm 1700 sqm 2465 sqm 1700 sqm 3350 sqm Warehouse 5000 MT 2300 sqm 2300 sqm 2300 sqm 2300 sqm Potato Cold Store 5000 MT 2700 sqm Onion store 500 MT 540 sqm 540 sqm 540 sqm Ripening chamber 10 MT/day 10 MT/day 10 MT/day 10 MT/day 10 MT/day Traders Shops 9330 sqm 2000 sqm 3805 sqm 3300 sqm 3950 sqm To support the operations of the above facilities, the hub and spokes will also have adequate basic infrastructure and other support infrastructure like power and water supply systems, 65

74 ETP, solid waste disposal facility, administration block/business centre, canteen, parking space, etc. A list of these basic and support infrastructure facilities (hub and spoke wise) is given below: Non technical Facilities Units Muzaffarpur Hajipur Darbhanga Dalsinghsarai Begusarai Guest House Sq. m Business centre Sq. m Knowledge centre Sq. m Water Supply LPD Power Supply KVA Project Cost The cost estimates for IVCs mainly consist of two categories: the renovation/refurbishing of existing building and basic infrastructure and construction of new value added facilities. It has been attempted to use existing infrastructure to the extent possible and replacement of existing assets have been recommended only in cases of absence or unusable condition of these assets/facilities. The cost estimates of plant and machinery are based on the information obtained from equipment suppliers including quotations given by them for similar facilities. The civil work and basic infrastructure costs have been worked out by architects/engineers based on layout plans and as per the industry standards. The component wise costs of the project are given below: Items Sr. No. Description Amount (Rs Mn) Amount (Mn $) A 1 Land Land Development Buildings Plant Machinery & Equipments Utilities & other fixed assets Sub Total (A) 1, B Preliminary and Pre Operative Expenses C Contingencies D Margin Money for Working Capital Land Total Project Cost (A+B+C+D) 1, The land cost has not been taken into consideration as the project would be using the land of existing APMC market yards. Land Development The land development cost has been calculated based on the detailed engineering surveys in selected APMC market yards. The calculation takes into account the land development cost for both the existing and proposed facilities/infrastructure in these markets. Based on these costs, for the other markets land development cost has been taken proportionately. The detailed costing for these markets will be incorporated in the final report. Cost of land development includes boundary wall, road, water drainage, parking etc. The average cost of development is coming at Rs 5.2 mn/ha. 66

75 Buildings The estimated costs of construction for various buildings in the projects are given below: [Amount in Rs million] Facility Muzaffarpur Hajipur Darbhanga Dalsinghsarai Begusarai IVC IVC Existing buildings Trading Platform Trading Shops Buildings (Admin. Building, canteen, Bank, Ware Houses, etc Sub Total (A) Proposed buildings Pack house Cold Chain Fruit Pulping plant (2 MT/ Hr) Pack house Ambient Trading Platforms Warehouse 5000 MT Potato Cold Store 5000 MT Onion store Ripening chamber Traders Shops Guest House Business centre Knowledge centre Utilities Sub Total (B) Total (A+B) The building construction rate for fruit packhouse (cold chain) has been estimated to be Rs. 8000/sq. m whereas rate for ambient packhouse/trading platform for fruit and vegetable has been estimated to be Rs. 6000/sq. m. The construction rate for dry warehouse for grains and onion store has been assumed at Rs. 6500/sq. m. The lumpsum cost of pre-fabricated banana ripening chamber of 40 MT capacity (which is equivalent to 10 MT/day ripening capacity) having an area of 280 sq.m has been taken as Rs million. The construction cost of potato cold store with pre-fabricated insulated building is estimated at Rs. 8000/sq. m. The rates are in tune to the industry standards and have been verified against quotations received from different industry players. In case of non technical infrastructure, the construction rate has been estimated at Rs per sq. m for facilities such as administrative building/business centre, guest house, canteen etc. Equipment The details of the estimated costs of major machineries are provided below: Table: Machinery Cost [Amount in Rs million] Facility Muzaffarpur Hajipur Darbhanga Dalsinghsarai Begusarai IVC Refrigeration potato store Precoolers 5 MT

76 Sorting grading line 3 MT/hr Pulping line Ripening equipments Electronics auction system Pallets Crates Pallet Movers Weighing scales 500 kg Sorting grading tables De sapping tables Refer vehicles 7 MT Normal Pickup vehicles Normal trucks 15 MT Total Plant Machinery & Equipment The cost wise major components of the project are refrigerated trucks (Rs mn), pulping line (Rs. 25 mn), refrigeration equipments for potato cold stores (Rs. 20 mn) and electronics auction system (Rs. 20 mn). The rates for plant, machinery and equipments are comparable to the industry standards and have been verified with the quotations from different suppliers. Miscellaneous Fixed Assets / Utilities The details of the estimated cost of the miscellaneous fixed assets and utilities are provided below: [Amount in Rs million] Facility Muzaffarpur Hajipur Darbhanga Dalsinghsarai Begusarai IVC DG sets Power supply system IT system Furniture Total Misc Fixed Assets The power load for the total project has been estimated to be 2000 KVA. DG sets have been taken for each spoke and hub and the capacities vary from 50 KVA to 1200 KVA depending on the requirement. The project would require 0.20 million LPD of water for the operations. The cost of water supply has been distributed among the locations in proportion to their water requirements. Preliminary & Pre operative Expenses The provision towards preliminary & pre-operative expenses includes expenditure towards preliminary expenses like salaries & administrative expenses, travel expenses, market development expenses, interest during construction period etc. It is also assumed that the majority of the project facilities will be commissioned over a period of one year. The interest during construction period is capitalized in the project cost. Pre-operative expenses other than interest during construction period are assumed to be 5% of cost of fixed assets. Working Capital Requirement As the project is meant to create facilities and offer them to various users on rental basis, the WC requirement is assumed to be operating costs like management, maintenance, insurance, power and water. As most of these expenses and the rent receipts are monthly in nature, so to cover these expenses the requirement of working capital is calculated by considering the fund requirement for 30 days. 68

77 Contingencies The amount is calculated as shown in table below: Contingencies Physical Price Contingencies Contingencies Contingencies Contingencies (Rs Mn.) (Mn. $) Land 0.0% 0.0% Land Development 5.0% 8.3% Buildings 5.0% 8.3% Plant Machinery & Equipments 0.0% 8.3% Utilities & Other Assets 5.0% 8.3% Total The price contingencies are based on the Whole Sale Price Index during FY Means of Finance The suggested implementation framework mentions that the funding requirement for the project would be met by project grant from state government and equity by private developer. The minimum equity from the private developer is envisaged at 10% of cost of project in case of Bihar. The remaining funds would be contributed as project grant by State government including funds from ADB as detailed below: Particulars Amount (Rs Mn) Amount (Mn $) Share Asian Development Bank % Government of Bihar % Equity Private Investor % Total % Key Operating Assumptions The key operating assumptions underlying the project s business plan are described below. Operating Cost Assumptions: While the marketing infrastructure like trading shops and platforms are likely to be operational for at least 330 days, the overall operation for all the facilities has been assumed at 300 days per annum. Power & Fuel Costs: The total connected load of the facilities for all locations is estimated at 2000 KVA. The power tariff has been assumed at the prevailing rate of Rs 4.25 per unit for agro based industry in Bihar. Average daily requirement of power would be about 7200 KWH. The details of power load assumptions for the facility are given below: Facilities Trading Plateform/Ambient Packhouse Warehouse Cold Store Ripening Chamber Mango Packhouse Cold Chain Mango Packhouse Ambient Business Centre & Misc facilities Assumption 1 KVA/ 60 sqm 1 KVA/ 92 sqm 1 KVA/ 10 MT 50 KVA/ 40 MT 50 KVA/ 15 MT 1 KVA/ 40 sqm 1 KVA/ 30 sqm The table below shows the location wise power requirement: Locations Power Load (KVA) 69

78 Muzaffarpur 1200 Hajipur 250 Darbhanga 175 Dalsinghsarai 200 Begusarai 175 Total 2000 Taking into account the current power supply scenario in the state it has been assumed that the facilities would run on DG sets for about 2 hrs/day. The average fuel cost for DG set is assumed Rs. 35/litre. Water Cost Daily requirement of water is estimated to be 0.20 million litres/day for all the locations combined. The charges are assumed to be Rs 20/KL. Employee Cost The employee cost has been estimated by considering the man power requirement for managing the facility. The project will be managed by the SPV, which will maintain and operate the facilities in the project. This includes management and 24 hour maintenance of the plant and machineries, management of the canteen, business centre, security, etc. So, a team of technical engineers, support staffs and security personals will be required. The details of manpower and their average costs are given in the following table: Grade/ Employee Number Salary/month (Rs) Total (Rs) Managers Technical Manager Operators Maintenance Account Security Support Staff Total Employee Cost (Per Month) *Increment in salary is assumed at 5% p.a for 1 st five years of operations. Cost of Maintenance The cost of maintenance has been assumed as 1.0% of value of plant & machinery and miscellaneous fixed assets. The maintenance cost will increase by 2.5% every year due to aging of assets. Cost of Insurance The cost of insurance has been assumed as 1.0% of value of plant & machinery and miscellaneous fixed assets. Admin & Marketing Overheads The SPV will be largely responsible for only the management and maintenance of the facilities and users/traders would be doing necessary marketing arrangements for their operations. Initial tie ups are needed for better capacity utilization of the facilities. Most of the promotional/marketing expenses will be incurred up front with only small recurring expenses afterwards. Hence during operations, marketing and business development expenses will not be significant for the project. The major overheads for the project will be traveling costs, statutory (like audit etc.) costs and communication expenses etc. So, the admin & selling overhead costs have been 2.0% of revenue in line with the industry norms for such facilities. 70

79 Financial Assumptions Taxes Income Tax rate is assumed to be 33.99% flat (Prevailing Corporate Tax Rate). Income tax is calculated on PBT after adjusting for the difference between the depreciations calculated according to Companies Act, 1956 and Income Tax Act, Depreciation Rates Depreciation has been calculated by straight-line method, as per the Companies Act, 1956, for book purpose, whereas for tax purpose (As per Rule-5 of Income Tax Act, 1961), written down value method is employed. The rates of depreciation are in tune to the rates that are used in cold storage and warehousing industry. The depreciation rates used for different assets are given below: Depreciation Rates Book Depr Tax Depr Plant & Machinery 10.34% 15.00% Miscellaneous Fixed Assets 10.34% 15.00% Buildings 3.34% 5.00% The plant & machinery includes refrigeration and cooling systems used for operation of facility, sorting-grading equipments, crates, pallets etc. The noncore equipments like water supply system, transformers etc are included in miscellaneous fixed assets. Buildings include, building for ripening facility, ambient and cold pack-houses, dry warehouse storages, business center, canteen etc. Revenue Assumptions Rental assumptions Based on the discussion with market players (service providers, food processors, users, traders and wholesalers) the rental charged for various facilities is tabulated below: Facilities Charges/ Unit Unit of Charge Trading Platforms/ ambient packhouses 60 Rs/sqm/month Fruit Pulping plant 8000 Rs/MT Banana Ripening Facility 1400 Rs/MT Packhouse Cold Chain Sorting/Grading/Packaging charges 5000 Rs/MT Pre cooling charges 1000 Rs/MT Warehouse 100 Rs/sqm/month Business Centre 200 Rs/sqm/month Crates 7 Rs/cycle/crate Weighbridge 2 Rs/MT Logistics 10 Rs/Km Cold Store 250 Rs/MT/Month Onion Store 250 Rs/MT/Season The rentals charged for these facilities are comparable to the prevailing market rates. Capacity Utilization The estimated capacity utilizations are shown in the table below. Year Year 1 Year 2 Year 3 and Onwards Capacity Utilization Agricultural Marketing Infrastructure 80% 90% 100% Value addition/ storage facilities 40% 60% 80% Basic/ Support Infrastructure 80% 90% 100% 71

80 The capacity utilizations have been assumed conservatively for value addition infrastructure, starting at 40% in the first year Financial Performance The estimated financial projections for the project are tabulated below: Income Statement: (Rs Million) Year Capacity Utilization Agricultural Marketing Infrastructure 80% 90% 100% 100% 100% 100% 100% Value addition/ storage facilities 40% 60% 80% 80% 80% 80% 80% Basic/ Support Infrastructure 80% 90% 100% 100% 100% 100% 100% Revenue A. Agricultural Marketing Infrastructure Rental Trading platforms Rental Traders shops and business centre Sub Total (A) B. Value addition/ storage facilities Rental Pack House Cold Chain Rental Warehouse Rental Potato Cold Store Rental Onion Store Rental Ripening Chambers Rental Fruit Processing unit Sub Total (B) C. Basic/ Support Infrastructure Rental Logistic Rental Crates Weighbridge Sub Total (C.) Revenue Expenses Power & Fuel Employee Cost Water cost Maintenance cost Insurance Admin & Selling Overheads Total Expenses EBITDA Interest Long Term Debt (LTD) Interest Working Capital borrowing Depreciation PBT Tax Net Profit (PAT) Cash Flow to government

81 Net Profit to Private Investor In the above table, it is seen that in the first year of operations with mentioned capacity utilization, the revenue from the project is Rs millions which increases to Rs millions during eighth year. As the project would pay 20% of gross revenue to the government as royalty, the net profit to private developer would be Rs million during 1st year of operation Major Financial Performance Indicators: Year EBITDA Margin 84.08% 85.62% 86.74% 86.76% 86.73% 86.66% 86.71% PAT margin 53.27% 52.46% 52.08% 50.78% 49.65% 48.66% 47.90% Debt Equity Ratio Debt to EBITDA ratio Interest Coverage Ratio DSCR Average DSCR Project IRR 19.34% The above table shows the operational and financial efficiencies of the project. The project is able to achieve an operating margin (EBITDA Margin) of about 84% from the first year of operations itself. From fourth year onwards, the project is able to convert about 50% of its revenue into net profit. The project IRR is coming around 19.34%, which seems attractive from investor point of view Sensitivity Analysis The sensitivity analysis has been attempted below to establish the need for capital grant support for the project. The various levels of equity contribution by private developers have been tested with minimum being 10% and the maximum being 30% of the project cost as mentioned in the implementation framework. The sensitivity analysis of financial performance indicator (IRR) of the project with respect to equity contribution by private bidder is given below: Equity (%) 10% 20% 30% IRR (%) % 58.64% 39.52% Analysis of the above table shows that with 30% of the project cost as bidder/developer s equity contribution (and 70% capital grant from state government), the private equity IRR comes to about 40% which means the project is highly attractive from bidder/developer s perspective The spoke wise project cost, means of finance and revenue statements are given in the Annex.to this section 73

82 11 ECONOMIC ANALYSIS The need for economic analysis of any project is to assess various intangible costs and benefits which are normally not captured in the financial analysis. Any decision on desirability or otherwise of a project would therefore require to take into consideration such costs and benefits and then arrive at a net impact of the project on the economy as a whole. This is more relevant for projects which have a bearing on large segments of the society such as farmers. The IVCs have been proposed mainly to plug the gaps and deficiencies along the agricultural value chains and aim at enlarging the size of the value chains in terms of greater revenue and ensuring larger share to farmers. The major benefits therefore expected would be in terms of better price realization, wastage reduction and employment generation. The major costs considered are opportunity cost of factors of production viz. land, capital and labour. The above costs and benefits have not been captured in the financial analysis as major assumptions there include all facilities being developed by private developers for leasing out to actual users. Thus, financial analysis has taken revenue in form of rentals only which do not truly reflect above gains. Also, as land for all facilities is to be provided by state governments on BOT model, financial analysis does not include cost of land even as these land parcels may have large opportunity cost to the economy as a whole METHODOLOGY AND ASSUMPTIONS The economic analysis is aimed at calculating EIRR which has been done by identifying the benefits arising due to the proposed practices and infrastructure/facilities and are evaluated by comparing With Project and Without Project scenarios. The major benefits considered for calculation of EIRR are those which are easily quantifiable and are as follows: Better Price realization due to quality improvement of the agricultural produces A major impact expected is significant improvement in produces through modern methods of handling, packaging, storage and transportation which would lead to better price realization. Wastage Reduction The interventions in technological infrastructure such as packaging, storage, temperature controlled transportation and better post harvest management practices will help in increasing the shelf life of the perishable commodities. The improved shelf life will lead to low wastage level even during transportation and marketing to distant places in the country. 74

83 Employment Generation Considering the high unemployment rate in India and the seasonal availability of work for agricultural labor the project will provide good opportunity to work throughout the year for the people of surrounding areas. Large increase in revenue and tax realization The project envisages large investments in agribusiness infrastructure which are likely to generate sufficient revenues and lead to incremental tax realization by the government. Similarly, the major quantifiable costs considered for calculation of EIRR are given below. While opportunity cost of land has been treated as a capital cost for the purpose, opportunity cost of capital (project grant) and labour has been treated as recurring cost. Opportunity cost of land The land for the IVCs is to be provided by state governments on BOT model. Thus, the cost of land has been taken as the rates prevalent for industrial land in the surrounding areas. In case of Bihar, project sites are erstwhile APMC market yards. However, the cost of land has been taken based on the industrial land rates prevalent in the region as per Bihar Industrial Area Development Authority (BIADA). Opportunity cost of capital/ project grant The project provides for large amount of capital grant to private developers, which may range from 90% of project cost in Bihar to 70% of the project cost in Maharashtra. For the purpose of EIRR calculation, the opportunity cost of project grant amount has been considered which was not captured by the financial analysis. Opportunity cost of capital contributed as project grant is assumed at 10% per annum. The assumption is based on the fact that the money invested as grant can be invested elsewhere and a minimum return of 10% per annum has been assumed conservatively. Opportunity cost of labour The project assumes large employment generation for agricultural labourers and limited employment opportunities for management professionals. For the calculation of EIRR, the opportunity cost of agricultural labourers has been taken assuming that they had options to work on other projects such as National Rural Employment Guarantee Scheme (NREGS). The detailed calculations for the above mentioned benefits and costs has been done at IVC level and are given below: 11.2 MUZAFFARPUR IVC Quantification of Benefits Quality improvement leads to premium Price of the commodities The incremental price realization is calculated based on the price range available in the market for different grades (based on firmness, color, size etc.) of the produce. The table 75

84 below compares the Without Project and With Project cases to estimate the incremental benefits due to improved quality of the produce. Crops Without Project Price (Rs/MT) With Project Estimated Additional Price Realization (%) Min Max Weighted Average Price (Rs/MT) Incremental Benefit (Rs/MT) Quantity (MT) Total Incremental Benefit (Mn Rs) Vegetable % 25% 13.0% Fruits % 30% 22.0% Banana % 15% 11.0% Grains % 10% 6.0% Onion % 15% 11.0% Processed Fruits % 50% 42.0% Total The incremental price realization by player in the value chain is estimated to be Rs million at 100% capacity utilization. Wastage Reduction Without Project With Project Wastage Reduction Range (%) Selling Price (Rs/MT) Quantity Saved (MT) Quantity Weighted Min Max Crops Saved (MT) Average Vegetable 0 10% 20% 12.0% Fruits 0 15% 20% 16.0% Banana 0 10% 15% 11.0% Grains 0 5% 10% 6.0% Onion 0 10% 15% 11.0% Processed Fruits 0 30% 40% 32.0% Total Total Incremental Benefit (Mn Rs) The investment in IVC would help in saving of about MT of agricultural produce with estimated value of Rs million. Employment Generation Without Project Annual amount (Rs Mn) With Project Annual amount (Rs Mn) No. of Day/ No. of Day/ Location workers Annum workers Annum Muzaffarpur Hajipur Darbhanga Dalsinghsarai Begusarai Annual Incremental Benefit (Rs Mn) Total The project is expected to generate additional income of about Rs 53 million for the agricultural labour. 76

85 Large increase in revenue and tax realization The investment in the IVC will help in better utilization of existing resources and will help in better price/rental realization for trader s shops etc. as estimated below: Location Without Project Area Rental/Sqm. (Sqm) Month (Rs) Annual amount (Rs Mn) With Project Area Rental/Sqm. (Sqm) Month (Rs) Annual amount (Rs Mn) Muzaffarpur Hajipur Darbhanga Dalsinghsarai Begusarai Annual Incremental Benefit (Rs Mn) Total QUANTIFICATION OF COSTS Economic Cost of Project Items Sr. No. Particulars Amount (Mn Rs) A 1 Land Amount (Mn $) 2 Land & Site Development Buildings Plant Machinery & Equipments Utilities & other Assets Sub Total (A) B Project Implementation of ADB Funds C Pre op expenses D Contingencies E Capacity Building Total Project Cost (A+B+C+D+E) All the capital expenses such as land &site development, buildings, plant machinery & equipments, utilities & other assets are incremental in nature and thus considered as various components of economic cost of the project. The opportunity cost of land is assumed to be paid upfront and is therefore treated as capital cost. The project implementation cost (technical assistance etc.) is assumed as 10% of funds contributed by ADB. The pre-op expenses and contingencies related to project implementation are also taken as economic cost of the project. Further, the cost related to environmental impact has also been treated as one time expenditure in terms of equipments and facilities provided under the project. The environmental assessment for the project has not indicated any long term impact which would have significant cost implications. Finally, the social cost also would be mainly towards capacity building efforts and does not envisage any other cost like resettlement etc. Based on the above assumptions the estimated economic cost of the project is Rs million or million $. The exchange rate of Rs per Dollar is considered for calculation of cost of project in Dollar value. 77

86 Recurring Costs Opportunity cost of labour Location No. of workers Days/Annum Muzaffarpur Hajipur Darbhanga Dalsinghsarai Begusarai Total Annual amount (Rs Mn) As mentioned earlier the estimates are based on NREGS. According to the scheme the government will provide minimum 100 days of employment to rural families with daily wage of Rs 125 per worker. Opportunity cost of capital Opportunity cost of capital contributed as project grant is assumed at 10% per annum. The assumption is based on the fact that the money invested as grant can be invested elsewhere and a minimum return of 10% per annum has been assumed conservatively Opportunity cost of other factors Opportunity cost of other factors such as power, water, fuel etc. is not incremental in nature as these factors are available already and will be used from existing sources COST BENEFIT STATEMENT Year Capacity Utilization Value added Infra Imp Period 40% 60% 80% 80% 80% 80% 80% 80% Capacity Utilization Marketing Infra 80% 90% 100% 100% 100% 100% 100% 100% Capacity Utilization Support Infra 80% 90% 100% 100% 100% 100% 100% 100% A. Economic Benefits Quality Improvement Wastage Loss Incremental Labour Incremental Income Tax Incremental Revenue from existing infrastructure Incremental revenue Support Infrastructure Total Economic Benefits (A) B. Economic Costs Opportunity cost of labour Opportunity cost of Capital Total Economic Cost (B) Net Economic Benefits (A B)

87 The table above shows the annual cost and benefits arising from the project CALCULATION OF ECONOMIC IRR (EIRR) Economic IRR (EIRR) Year Imp Period Economic Investment Net Economic Benefits Net Economic Cash Flow Economic IRR (EIRR) 34% The economic IRR for the project is estimated to be 34% which may considered as good and indicates the economic viability of the project ECONOMIC APPRAISAL RESULTS Major Economic Indicators: The major economic indicators considered to assess the economic viability of the project are given in the table below: NPV (Rs Mn.) 2, NPV (Million $) Benefit Cost Ratio 5.64 NPVI 1.94 NPV: The positive NPV for the project indicates the viability of the project. The NPV is calculated considering the economic life/ concession period of project as 20 years. The discounting rate for calculation of NPV is the Weighted Average Cost of Capital (WACC). The WACC is calculated by assuming the capital cost of 16% for the private investor and 10% for project grant. The calculation of WACC is shown in the below table: Details Share Cost of Capital Project Grant 90.00% 10% Equity Private Investor 10.00% 16% WACC 10.60% Benefit Cost Ratio (BCR): The average BCR over the project life is estimated to be The ration indicates that for every one $ of expense it will generate more than five times of expense over the life of project. Hence, the project is highly economic viable. Net Present Value per $ of Investment (NPVI): The NPVI of more than zero is always considered as a good indicator of the economic viability of the project. In this case, the estimated NPVI is 1.94 which is high. 79

88 PATNA NALANDA INTEGRATED VALUE CHAIN Patna Nalanda region, Bihar Focus Crops Potato Vegetables DPR: Patna Nalanda Integrated Value Chain Project Description of Hub and Spokes 80

89 Patna Nalanda Region The region and districts have been chosen in order to incorporate functional diversity into the model considering that this is the initial phase of the project. The region is irrigated with predominant production of Vegetables and Paddy. The region is comparatively more developed with higher per capita income levels with better connectivity between the districts. The focus crops for the region are Potato and Vegetables. Potato is grown extensively in and around Patna, Nalanda while Vegetables are grown in Patna, Nalanda, Buxar, Gaya, Nokha and Arrah. The map below shows the Patna-Nalanda region, identified for the Integrated Value Chain Project. This region includes Patna, Nalanda, Buxar, Sasaram, Gaya districts Patna Nalanda In case of Patna- Nalanda region the hub is proposed in the town of Bihar Sharif (Nalanda district) while the spokes are proposed at Musallapur (Patna District), Gaya, Arrah, Buxar and Nokha. 81

90 12 FOCUS CROP: POTATO India is the fifth largest producer of potato in the world after china, Russia, Poland and USA. Uttar Pradesh is the leading potato growing state in the country followed by West Bengal and Bihar. The area under cultivation of potato in Bihar is 315,460 Ha during the year with a production of 6,019,650 MT. In , the total production of potato in Bihar was 5,741,300 MT and it showed a growth of about 5% from to The productivity of potato in Bihar 19.1 MT/Ha which is almost same as the national average (19.3 MT/Ha). However, the productivity of potato in Bihar is lower than that of West Bengal (24.7 MT/Ha) and Uttar Pradesh (22.0 MT/Ha). The marketable surplus of potato in the region is about 90-92%. The following table gives district wise details of area and production under potato in the study region. Area & Production of Potato in the identified Region Within the region, Nalanda and Districts Patna Nalanda Rohtas Gaya Buxar Bhojpur Region Total Bihar Area (Ha) Production(MT) Patna grow very high volumes of potato and Bihar Sharif is one of the largest markets dealing with potato. From this region, potato is sent to various places out of Bihar such as Jharkand, UP, West Bengal etc. Potato is a temperate or cool season crop which needs low temperature, lower humidity and bright sunlight. Area/Production of the 24.75% 25.52% Potato being a fast growing crop fits region as % to State Source: Directorate of Horticulture, Govt. of Bihar. FY:07-08 well in different multiple and intercropping systems. In the region, potato season starts from February and peaks in March and April. Harvesting assumes considerable importance because the crop has to be harvested as early as possible as harvesting coincides with the onset of summer. Sometimes, harvesting time may also coincide with heavy rainfall or severe cyclone and floods. In view of these situations suitable technology is, therefore, necessary for reducing the harvesting time and safe storage at farm level VALUE CHAIN Farmer Other State ANALYSIS On Farm Trader Cold Storage Commission Agent The diagram explains the major channels of trade of potato in the study region: The Supply chain depicted above could be broadly classified into two categories based on the point of sale. Wholesaler Retailer Consumer 82

91 1. At Farm Gate : This Accounts for 5-10% 2. At wholesale Mandis within production clusters : This is seen predominantly and accounts for 90-95% of the produce The important operations carried out after harvesting of the crop are bagging, storage, sorting and processing (wherever applicable). The produce is stored in cold storages either by the farmers or by the commission agents/traders for sale at later date. The major players involved in the trade channels of potato are farmer, commission agent, cold storage owners and wholesalers. The roles played by each player in the value chains are given below: Farmer The average size of potato farm in the region is about 2 acres (1 Ha = 2.5 Acres). The cost of cultivation of potato is about Rs. 40,000 per Ha. The breakup of the cost is given below: Field Operations Cost (Rs.) per Ha As mentioned earlier the average productivity 600kg/ac of potato in the region is about 19 MT/Ha and Land preparation ploughing 1500 the range varies from 12.5 MT/Ha to 23.5 Land preparation planking 1250 Land preparation cultivator 1250 MT/Ha. Based on the current year s Land preparation ridging 1000 production scenario (where most of the crop is Sowing 4 labour per day/ac 1000 affected by Late Blight disease) the price Irrigation (2 times) 3000 received by farmer was approximately Rs Fertilizer Urea 200kg /Kg. The produce is stored either by the Fertilizer DAP 100kg 2500 farmer or is sold to the trader who then stores Fertilizer MOP 50kg 1250 the produce in cold storage for sale at later Pesticide spray 2500 Potato uprooting 1500 date. The transport cost to the cold storage is Grading 500 borne by the farmer. Price fixation between Packing 500 the farmer and the trader is by negotiation. It Gunny 9/bag 2250 is observed that the farmers avail credit Total facilities extended either by traders or cold storage owners in few pockets of Nalanda. In such cases the farmer is obligated to sell his produce to the trader and the price realization may not be as per the prevailing market rates. Commission Agent (CA) CA facilitates the sale of farmer s produce for which they charge a commission of 4 to 6% of the sale value from the farmers or from the wholesalers/buyers. They arrange facilities such as trading area and weighing facility. They provide financial support to farmers for cultivation of crops. They have linkages with the wholesalers in the mandis as well as cold storage owners. They play a vital link in the value chain as linkages with distant markets are made through them. Traders Traders are the major buyers of Potato in the markets. One of the predominant features of these players is that they buy the produce from framers and spread the sale throughout the year. They buy the potato during season and store it from February to October in the cold storages. The duration of storage may vary depending upon the price realization by the traders during off season. Cold Storages The produce typically arrives in the cold storages in the months of February and March. It is stored for four to six months depending upon the demand in the off season. The cold storage 83

92 charges are around Rs.120 to Rs 150 per Quintal for the entire season. Size wise sorting of the produce is carried out at the storage by engaging labour. There is about 11-12% loss of potato after the season s storage at the cold store. The losses are due to moisture loss, rotting and wastages during sorting, grading and packaging of potato after it is taken out of the cold stores. At present most of the potato cold stores in Bihar operate in under capacities. They store potato for 7-8 months and rest of the year the stores are empty. Also, there is a power shortage in Bihar and the cold stores have to use diesel generators for power for a considerable time (typically electricity is there for about 8-12 hours a day in most places in Bihar) which increases the cost of operation of the cols stores to a large extent. The storage facilities have controlled temperature and humidity conditions. However, the technology used in cold storages is conventional with less effective insulation and ventilation system. Ammonia is generally used as the coolant. Refrigeration equipments are out-dated with fans circulating the cold air from the evaporators vertically from the top of the store rather than horizontally (to enable a good distribution of cold air before it drops to the bottom of the store). Humidity and gas is controlled by opening windows to allow humid air to enter or a build up of gases from produce respiration to escape. This method is crude as far as control is concerned and inefficient due to the temperature rise in the store. Poor power supply was quoted as greatest hindrance in the proper functioning and development of cold storages in Bihar. Intermittent power supply forces the cold stores to use diesel generators for power supply which increases the operating cost substantially. Concrete constructed cold store in Bihar Old fashioned evaporators with vertical fans Value Chain Actors and Functions: Value Chain Physical Functions Actor Farmer 1. Cultivation 2. Harvesting 3. Farm level sorting and bagging On farm 1. Loading and Transportation of the Traders produce to the market 2. Payment to the farmer Commission Agent Wholesaler/ Trader 1. Providing trading area 2. Weighing 1. Storing of potato in the cold stores 2. Sorting and grading of the produce at the cold stores 3. Packaging 4. Loading and transportation to consumption markets Financial Functions 1. Selling of potato to on farm traders/wholesalers 1. Price communication to the farmer 2. Price risk between harvesting to sale in the Mandi or distant consumption market 3. Transit losses 1. Price discovery by auction/ negotiation 2. Cash Advances/credit to the farmers during production 1. Price risk in the distant market as there is a gap between buying and reselling 2. Sorting grading and moisture loss 3. Transit losses 4. Credit risk in the distant consumption market 84

93 Cold Stores 1. Providing cold storage space for potato 1. Charge rentals for storing 2. Cash Advances/credit to the farmers during production 3. Risk of reduction in weight of potato during storage more than the accepted reduction of 10% A value chain indicating the various activities and cost build-up at every step has been mapped for 1 kg of potato. Some of the assumptions for the price build up are: The most commonly observed trade channel has been selected for the price build up of potato, i.e. Farmer-Wholesaler-Retailer. The cost of retailing, which includes the cost of shop, wages, rent etc, has not been considered. Transportation Retailer Margin Wholesaler s Margin Transportation Rs. 4 6 Farmer s Price Rs.5.00 Harvesting Rs.0.50 Local Transportation to Cold storage Bagging & Loading Losses Rs. 0.5 Rs. 0.5 Storage Charges Rs.0.2 Rs.1.3 Commission Rs.0.3 Sorting Rs.0.1 Bagging, Loading & Unloading Losses Rs.0.70 Rs.0.2 Rs.0.1 Rs. 2.0 Rs Rs.0.1 (Wholesaler s Margin) Rs (Retailer s Margin) From the above diagram it is evident that the farmers pay for harvesting, initial packaging, labour charges towards bagging (in 50 Kg bags) and loading and sometimes transportation to the nearby Mandi or Cold storage as the case may be. Initial losses occur while harvesting the crop and also due to moisture loss. The farmer would also bear the storage charges in case he stores the produce for seed purpose or for sale at later stage or for his own consumption. The trader/wholesaler pays for the commission, sorting & also storage if the produce is stored in the cold storage by him. He would also bear the cost of bagging the produce, loading and transporting it to the nearby mandi. From the wholesalers, the retailers buy the products paying for transport to their retail outlets. The price build up can be summarized, as below: Rs/Kg Particular Farmer Trader/Wholesaler Retailer Cost of Production/ Purchase Cost of Marketing incl. Commission Agent charges, wastages, Losses, etc Sale Price Spread Some of the salient features of the price build up are mentioned below: There are 3 intermediaries between the farmer and the consumer in the lemon supply chain (including the commission agent). 85

94 The price build up from farmer to consumer is around 3 times. The farmer earns a margin of Rs which is about 11% of the consumer rupee which is low as compared to other crops Trader/wholesaler incurs a cost of around Rs 3.00 per Kg in various activities such as labour, storing charges, packaging, transportation, wastages etc. The wholesaler earns a margin of Rs 2.00 per Kg that is around 13 paisa of a consumer rupee. The commission paid by the farmer to the commission agent constitutes 2 paisa of a consumer rupee. The cold store owners earns about Rs. 1.3 per Kg which is about 9% of the consumer rupee. The total wastages along the chain is about Rs per Kg which is about 8% of the consumer rupee. The share of consumers rupee by various actors in the value chain emerges as below (in % of consumer s rupee) : Post Harvest Infrastructure Potatoes are graded and packed manually. The produce is bagged in 50 kg jute/ poly net bags. Usage of poly net bag is being encouraged by the traders due to its low cost and better aeration. There is no infrastructure for grading and packaging at farm level. As mentioned earlier, the potatoes are stored in cold storages. As per the SHM Report 2008, the total cold store capacity in the region is 15.8 lakh MT and a gap of 44 lakh MT of cold store space exists in the region. Also, the existing cold storages are all conventional in nature with no proper insulation or ventilation system Institutional Arrangements There is no farmers cooperative which is engaged in the marketing of potato in the region. However, there are some farmer s club operating in the region. Farmers Clubs are grass root level informal forums. Such Clubs are organized by rural branches of banks with the support and financial assistance of NABARD. NABARD launched this program in The main activities taken up by the Farmer s clubs are to coordinate with banks to ensure credit flow, act as an interface with subject matter specialists for technical know-how upgradation, liaison with input suppliers for bulk purchase of inputs, facilitate joint activities like collective farm produce marketing, processing, value addition and market rural produce. There are no potato processing units in the region at present GAPS IN THE VALUE CHAIN Some of the gaps identified in the value chain during the field surveys are listed below: 86

95 After harvest, potato tubers are dried in the open and not in the shade resulting in quality loss. As mentioned,grading and packing is done manually which is labour intensive. Potatoes are not pre-cooled before storage. There is no accurate weighing mechanism either at the farm level or at the cold store. The produce is not weighed at the time of taking it out from cold stores. Thus weight loss during storage is not recorded. The cold storages do not maintain the temperature consistently at one level due to poor availability of electricity. However, the fuel required to bring the facility to the required temperature is much higher than that required to maintain it constant throughout the day. For example, the cost of fuel to maintain temperature of the facility at 2 degree Celsius throughout the day is much lesser than that required to bring the temperature to 2 degrees Celsius from 10 degree Celsius. Though potato can be cold stored at higher temperature levels, many of the cold stores of this region operate at 1 to 2 degree Celsius, which increases their overhead expenses. As mentioned earlier, the technology used in cold storages is conventional with less effective insulation and ventilation system. Ammonia is generally used as the coolant. Refrigeration equipments are out-dated with fans circulating the cold air from the evaporators vertically from the top of the store rather than horizontally. Humidity and gas is controlled by opening windows to allow humid air to enter and to flush out carbon dioxide. This method is crude and inefficient. All the cold stores are bunker-fin type with air being pushed from top to bottom. Because of this potatoes stored on the top floor get chilled resulting in higher starch accumulation. The concept of sun-side & shade-side of the cold store is not followed resulting in temperature difference of more than 5 C between these two sides. Potato in grown in many places in Bihar as an intercrop with Maize. This results in rapid spread of Late Blight, due to which around 40% of the crop was damaged this year. Many of the farmers take advances from traders or cold storage owners towards expenses for the next crop. This pushes them into a debt trap and the farmer is forced to settle his/her produce against the loans taken from the traders / cold storage owners. Information dissemination regarding price is not even at all the levels in the value chain. Absence of processing units in Bihar discourages farmers to grow processing varieties PROPOSED INTERVENTIONS Potential areas for intervention for potato in the region are: Drying sheds may be set up at farm level for proper drying of potatoes. There is a need to create energy efficient modern cold storage facilities for potatoes in the region. Skill development and capacity building of cold store operators and technicians. Setting up of processing unit in the region would accelerate cultivation of processing varieties and thus create better marketing avenues for the farmers. 87

96 13 FOCUS CROP: VEGETABLES A wide range of vegetables are grown throughout the year in Bihar, ensuring a regular yearround supply of summer/kharif vegetables such as bottle gourd, sponge gourd, cucumber, brinjal, chilly, radish, onion and cowpea and winter/rabi vegetables such as cabbage, cauliflower, potato & tomato. Vegetables are grown in open fields as a seasonal commercial crop, in newly established fruit orchards as an intercrop, or grown with sugarcane or maize as an intercrop. The primary commercial vegetable crops representing more than 90% of the cultivated vegetable area in Bihar are crucifers (cauliflower, cabbage), solanaceous vegetables (eggplant, tomato and chilli), okra, cucurbits (gourds, cucumber and melons), root crops (radish, carrot, turnip) and pulses (peas, beans). Secondary vegetable crops, also of significant commercial importance include leafy vegetables (spinach and amaranth) and tubers (sweet potato, amorphophallus, colocasia, and yam-bean). Both the area under cultivation and production of vegetables saw a constant increase over the last three years. The production of vegetables has gone up from 13,356,000 MT during to 14,809,000 MT during The trends for the same can be depicted with the help of the table given below. Year Area (000 Ha) Production (000 MT) Source: Annual Action Plan 09, Directorate of Horticulture, Govt. of Bihar The productivity status of various vegetables and how they fair as against the national average is given in the table below. It is observed that in most of the vegetables the productivity in Bihar is marginally more than the national average. However, total yield potential of these crops has not been exploited yet. Productivity Status of Vegetables in Bihar State ( ) Crop Av. Yield Yield Potential Yield gap National average (MT/Ha) (MT/Ha) (MT/Ha) (MT/Ha) Okra Brinjal Cauliflower Onion Tomato Cabbage Bottle Gourd Sponge gourd Bitter gourd Pointed gourd Cowpea Peas Source: Annual Action Plan 09, Directorate of Horticulture, Govt. of Bihar 88

97 For the purpose of the study, based on the production volume, cauliflower and brinjal are taken as representative vegetables for the region and have been studied in details. The area and production figures of brinjal and cauliflower for the study regions are given below. Area & Production of Brinjal in the identified Region ( ) Area (Ha) Production (MT) Patna Nalanda Rohtas Gaya Bhojpur Buxar Total Area & Production of Cauliflower in the identified Region Area (Ha) Production (MT) Patna Nalanda Rohtas Gaya Bhojpur Buxar Total VALUE CHAIN ANALYSIS The supply chain in case of vegetables consists of farmers, local aggregators, commission agents, wholesalers/traders and retailers. The trade channels are shown in the diagram below. Farmer Channel 3 Channel 2 Local Aggregator/ Commission Agent Commission Market Channel 1 Wholesaler/Trader Retailer Trader Retailer Customer Customer In case of vegetables, farmers typically sell the produce to a wholesaler/trader (through a local commission agent) who sells it directly to the retailer (Channel 1 through which 70% of the trade happens). Many times the local commission agents act as local aggregators who buys the produce from the farmers and sell it to wholesaler at the markets (through 89

98 commission agents in the market) (Channel 2- about 5-10% of the produce). In some cases, the farmers (medium and large) have direct relationships with market commission agents and they directly sell their produce to the market wholesalers through commission agents in the markets (Channel 3- about 20-25% of the trade). The vegetables in the region are mostly consumed locally with some amount being sent markets in Jharkhand (about 10-20%). The roles played by different players in the supply chain are given below: Farmers: The average size of farms in the region is less than 1 Ha (about 0.8 Ha). The cost of cultivation of 1 Ha of brinjal and cauliflower is about Rs. 50,000 and Rs. 51,500 respectively per season. The breakups of the costs per Ha are given below. Brinjal Cauliflower Cultivation practices Rs. Rs. Field preparation Nursery planting/sowing with seed cost & irrigation Weeding Plant Protection Fertilizer Wages Total The average per season productivity of brinjal and cauliflower in the region is MT and 19 MT respectively. However, the trading unit of cauliflower is number of pieces instead of weight. The prices received by the farmers are Rs. 3-5 per Kg for both the produce. Typically the produce is harvested by the farmers and packed in Cloth Bags, Sacks and Baskets by late evening. It is then transported to the nearest aggregation point during early hours of the next day either by carrying on heads, Cycles, Cycle carts, Tractors, and Auto Rikshaws. The choice of mode of transport depends upon the volume of produce being sold by each producer. In case of smaller volumes like one to two baskets (approx. 20 to 60 Kg) each farmer either carries the produce as a head load or carries it on Bicycle. In those cases where the volume to be sold by each farmer is between 4 8 baskets (80 to 200 Kgs) the produce is transported by cycle push carts / Thelas and Auto Rikshaws. Other modes of transport like tractors are used to transport larger volumes either by individual progressive farmers/by small farmers who pool their produce and utilize the facility. Except for tractors and auto rikshaws, the other modes of transport are often owned by the farmers and hence there is no additional cost incurred by them towards transportation of the produce. Other necessities like baskets, bags, weighing scales, etc are owned by the farmers. The weighing balance is carried by the producer along with the produce every day. In those cases where the farmer sells the produce directly in the markets he transports the produce to the market and is also responsible bears the cost of weighing. All the costs pertaining to the above mentioned activities are borne by the farmers. It is observed that in some markets the farmer s also pay certain minimal amount (either 3% or in kind) towards the commission agents charges. Local Aggregator/ Commission Agent The village commission agents provide the link between the farmer and the market agents. They are mostly entrepreneurs, whose income depends on matching the supply of produce with the demand of the market. Their primary role is to deliver the farmer s produce to the nearby semi-wholesale/retail market. At no time during this process is the title to the goods held by the agent who is only involved as a facilitator and hence does not suffer risks such as 90

99 losses, wastages etc. Additionally, all expenses incurred are charged to the farmer and buyer. They typically charge 3% to the farmer and 5% to the buyer. In most of the cases the agents extend credit to the farmers. As mentioned earlier, sometimes the local commission agents play the role of aggregators as well. He purchases the produce from small and marginal farmers and aggregates it at the village level. In this case, the aggregators bear the cost of transport, labour, weighing and commission at the market. Aggregation of vegetables happens at the Village level Haats or Collection centres. Most of these aggregation points are located conveniently on the road side thereby easing the transportation of the produce. Each of the aggregation point serves villages which are within 10 Km radius. The average volume handled by each aggregation point is about MT on a daily basis. The existing aggregation points can be classified into three types based on the ownership and overall management of the collection centres. They are described in detail below. Model 1: In this model the ownership and management of the land are with two different private entities. The private entity owning the land leases out the space to another individual who pays an annual compensation towards utilization of the area. The private entity who manages the day-to-day operations of the aggregation point in turn allows the farmers and traders to utilize the space and also facilitates the trading. He charges a commission either in cash (fixed percentage on transactions from traders) or in kind (this is observed in case of transactions with the farmers, wherein some produce brought for trading by the farmers is retained by the operator). Only wholesale trade is observed in this model. Model 2: The ownership and the daily operation of the aggregation point are with one private entity. A small portion in an orchard or field with good access near the roadside is typically converted into an aggregation centre by an individual entity. Apart from providing space the operator also extends some basic facilities for weighing, slightly raised platforms for grading and sorting for the buyers. The facility being provided is basic but provides shelter and protection during rain and shine. The commission charged from traders is a fixed percentage of the entire transaction (The prevailing rate is Rs.4 to Rs.6 on every Rs.100 of transaction). Both wholesale and retail trade is observed here. Model 3: Here also, the ownership and daily operation of the aggregation point are with one private entity. However, these are road side collection points where the operator actively facilitates the auctions and also sub leases space for small vendors to carry out some retail trade. The commission is charged on the volume of produce being transacted. The wholesale transactions are more organized here with one additional step where monitoring is done by the operator himself. The entire trading is a two step process in this model wherein in stage 1 the produce is brought to the aggregation point by the farmer and auctioned/ sold to a trader after price negotiation. In stage 2 the produce which is traded is then weighed by the operator to check for volumes upon which the commission will be charged from the buyers. The establishments are spacious and competitive to some extent. In a bid to attract more farmers and larger volumes, each facility is promoted to some extent with banners which communicate the advantages of the facility. After the trade, the produce is weighed and repacked into gunny bags or baskets by the trader. Depending upon the volume, it is transported to the destination either by trucks or on Bus top. The operator collects his commission after every transaction before loading the produce for transport to destination. Commission Agents: 91

100 The role played by the commission agent in the market yards is more or less similar. The market commission agents facilitate the transactions at the yard either by auctions or by price negotiation when traders arrive at the market for purchase. The facilities provided by the agents are weighing scales, labour for loading/ unloading on chargeable basis and also provide contacts of transport service providers. Wholesalers/Traders: Wholesalers buy produce in bulk either from the markets or from village level aggregation points. They absorb the cost of storage, sorting, grading, transportation, quantity losses, etc. In case of buyers from distant markets like Ranchi and Dhanbad, a credit cycle of 2-3 days are observed. There are also some semi-wholesalers operating in the region. Semiwholesalers are typically smaller wholesalers/large retailers who supply to the smaller retailers. They are small and independent operators in the value chain- a combination of squatters, pushcarts and stalls and small shops. In the case of vegetables, retailers buy produce from the wholesale market on a daily basis due to lack of storage facilities. Street vendors are present even in municipal markets in addition to being present in almost every locality in major consumption markets Price Build up in the value chain of Cauliflower A value chain indicating the various activities and cost build-up at every step has been mapped for 100 pieces (approximately 60 Kg) of cauliflower. Some of the assumptions for the price build up are: The most commonly observed trade channel (Channel 1) has been selected for the price build up of cauliflower, i.e. Farmer-Wholesaler-Retailer. The cost of retailing, which includes the cost of shop, wages, rent etc, has not been considered. Commission 5% from trader Commission charges Rs 3% from farmer Unloading, weighing Rs Loading Transportation Rs Wastages Rs 10.0 Trader s Margin Rs 50.0 Rs (Trader s Price) Transportation Rs Rs 25.0 Wastages Rs 13.0 Retailer s Margin Rs (Retailer s Price) Farmer s Price Rs Transportation Packaging & Loading Harvesting Rs 30.0 Rs 20.0 Rs Rs 5.00 Rs

101 The harvesting activity is generally carried by farmers themselves. However, if this activity were to be assessed in terms of cost incurred by the farmer it comes to Rs per piece of Cauliflower. Farmer s incur cost of about Rs.30 per basket. The produce is packed in such a way that each basket holds exactly 100 pcs. This will also ease the following transactions. The produce is transported with the help of cycle push carts/ thelas and about 5 baskets are transported per trip which costs about Rs.50 for 10 Km distance. The unloading and other handling charges by labour which are prevalent in the market is about Rs.5 per basket. After paying a commission of about 3% to the commission agent the farmer gets anywhere between Rs.300 to Rs.800 per basket depending upon whether it is peak/non peak season. The trader too pays a commission of 5% to the agent in the market for facilitating the transaction. Loading charges are about Rs.5 per basket in most of the market yards. In case of distant markets (about 80 to 150 Km of distance) the transportation costs for a mini tempo is about Rs.1000 per trip and about 800 pcs are transported in each trip. The reported wastage at the trader s end is about 5% and with a margin anywhere between Rs. 200 to Rs 400 per basket the consumer price of Cauliflower is about Rs.6.50 (Peak Season) to Rs.15 (Non Peak Season) per piece. The price build up can be summarized, as below: Rs/300 pieces Particular Farmer Trader Retailer Cost of Production/ Purchase Cost of Marketing incl. Commission Agent charges, wastages, etc Sale Price Spread Some of the salient features of the price build up are mentioned below: There are 3 intermediaries between the farmer and the consumer in the cauliflower supply chain (including the commission agent). The price build up from farmer to consumer is around 2.2 times. The farmer earns a margin of Rs. 65 which is about 10% of the consumer rupee which is low as compared to other crops Trader/wholesaler incurs a cost of around Rs per 100 pieces in various activities such as labour, storing charges, commission, packaging, transportation, wastages etc. The wholesaler earns a margin of Rs per 100 pieces that is around 7 paisa of a consumer rupee. The commission paid by the farmer and trader to the commission agent constitutes 4 paisa of a consumer rupee. The retailer earns a margin of Rs. 150 which is 22% of the consumer rupee. This clearly shows that the retailers earns the highest profit and controls the trade to a large extent. The share of consumers rupee by various actors in the value chain emerges as below (in % of consumer s rupee) : 93

102 Price Build up in the value Chain of Brinjal A value chain indicating the various activities and cost build-up at every step has been mapped for 1 Kg of brinjal. Some of the assumptions for the price build up are: The most commonly observed trade channel (Channel 1) has been selected for the price build up of brinjal, i.e. Farmer-Wholesaler-Retailer. The cost of retailing, which includes the cost of shop, wages, rent etc, has not been considered. Commission 5% from trader Commission charges Rs 3% from farmer Unloading, weighing Weighing & Loading Rs 0.25 Transportation Rs 1.25 Wastages Rs 0.25 Trader s Margin Rs 2.00 Rs (Trader s Price) Transportation Rs 4.00 Rs 0.50 Wastages Rs 0.50 Retailer s Margin Rs (Retailer s Price) Transportation Packaging & Loading Rs 0.15 Rs 0.15 Harvesting Farmer s price Rs 0.20 Rs 5.00 Rs 0.25 Rs 0.30 In case of brinjal also the harvesting is done by own labour. About 4 Mann (1 Mann = 40 Kg) is harvested with the help of one woman labour at the cost of Rs per day. The harvested produce is packed in gunny bags which contain about 40 Kg. Sometimes as much as 160 Kg is filled into big gunny bags which are supported with paper board material supporting the bags from within. The packaging cost comes to about Rs.0.25 per Kg. About 160 kg of brinjal can be transported in one trip by cycle push cart to the nearby market/ aggregation point which would cost about Rs.50 per trip. The charges for weighing and unloading are fixed in most of the markets at Rs.5 per Mann (40 Kg).The farmer s price is Rs.5 per Kg and he would in turn pay Rs.0.15 ( About 3%) towards commission charges to the agent. The commission from the trader is 5% and the trader bears weighing and loading charges of Rs.0.2 per Kg. Further transportation to distant markets works out to be Rs.1.25 per Kg (About 20 Mann can be transported in mini trucks which would cost about Rs.1000 per trip). Wastage is about 2% at the wholesaler s end and about 4% at the retailer s end considering sorting and multiple handling by the customers. The margin retained by the semi wholesaler is about Rs.2 per Kg while that by the retailer is about Rs.4 per Kg. The price build up can be summarized, as below: Rs/Kg Particular Farmer Trader Retailer Cost of Production/ Purchase Cost of Marketing incl. Commission Agent charges, wastages, etc

103 Sale Price Spread Some of the salient features of the price build up are mentioned below: There are 3 intermediaries between the farmer and the consumer in the cauliflower supply chain (including the commission agent). The price build up from farmer to consumer is around 2.8 times. The farmer earns a margin of Rs. 2 which is about 14% of the consumer rupee Trader/wholesaler incurs a cost of around Rs 2/Kg pieces in various activities such as labour, storing charges, commission, packaging, transportation, wastages etc. The wholesaler earns a margin of Rs 2/Kg that is around 14% of consumer rupee. The commission paid by the farmer and trader to the commission agent constitutes 3% of consumer rupee. The retailer earns a margin of Rs. 4 which is 29% of the consumer rupee. Here again, the retailers earns the highest profit and is the mail driver of the value chain. The share of consumers rupee by various actors in the value chain emerges as below (in % of consumer s rupee) : 13.2 POST HARVEST/MARKETING INFRASTRUCTURE Most of the post harvest infrastructure between farmer and the aggregation point is very basic and owned by the farmers or aggregators. The packaging material (Baskets/ Gunny bags) are reused by the farmer s who own the material. The choice of mode of transport depends upon the volume of produce being sold by each producer. In case of smaller volumes like one to two baskets (approx. 20 to 60 Kg) each farmer either carries the produce as a head load or carries it on bicycle. In those cases where the volume to be sold by each farmer is between 4 8 baskets (80 to 200 Kgs) the produce is transported by cycle push carts / Thelas and Auto Rikshaws. Other modes of transport like tractors are used to transport larger volumes either by individual progressive farmers/by small farmers who pool their produce and utilize the facility. As mentioned earlier, most of the aggregation points are located in private land which is leased out to one entity who operates this facility and charges commission from farmer s and traders. They are located along the road side and are often inundated during monsoon. In case of market yards facilities like covered, raised platforms to unload the produce, weighing scales, labour for loading/ unloading are provided by the commission agent. The Infrastructure is very basic and far from being satisfactory. 95

104 13.3 GAPS IN THE VALUE CHAIN AND PROPOSED INTERVENTIONS Absence of scientific grading, sorting or other quality checking mechanism: The quality of the produce is hardly determined while deciding the price. Even in those cases where quality is assessed it is determined manually and visually by traders Inaccurate weighing is a common feature in this trade. Most of the markets do not have electronic weighing machines which leaves enough scope for weight manipulation. Wastage remains one of the challenges in the entire value chain of the vegetables. Most of the wastages occur during transportation to the markets where the traders try to overload the trucks to gain in transportation costs. This leads to impact breaks and other damages. The factors responsible for the same are o Improper harvesting, handling and packaging at the farmer s end. o Manual and multiple handling of the produce during grading and sorting further deteriorate the quality of the produce at the wholesaler s end. o Most of the damage at the semi wholesaler s or retailers end happens due to impact breaks and lack of good storage facilities. Poor Market Intelligence: While the traders are in touch with destination markets and get information regarding the prices and demand, farmers do not have access to these. Even in instances when farmers have taken their produce to neighbouring markets, the collusion between traders has made it difficult for them to get better realization. Also, as there is no formal recording mechanism of the arrivals of produce in any of the Haats/Markets the flow of information regarding demand supply is restricted to only certain players in the value chain. Price display mechanisms are not prevalent anywhere. Pricing: Change in price during a particular day is also a variable of the quantum of purchase to be made by traders from that mandi on a particular day. In case the traders have purchased their predetermined quantum, the prices are then lowered arbitrarily by individual traders due to the simple fact that the farmers would prefer to sell the produce on the same day. Potential areas of interventions for vegetables in the region are: Development of basic infrastructure such as covered sheds and raised platforms at the aggregation points will help in reduction of wastages especially during the rains Introduction of plastic crates for handling and transporting the produce will reduce wastages to large extent Scientific sorting, grading and packaging facilities with electronic weighing options have huge potential in increasing the value realized in vegetables for farmers. Ambient modern vegetable handling facilities are proposed at Bihar Sharif, Gaya, Patna, Arrah, Buxar and Nokha. The pack houses will have following facilities for vegetables: Sorting Grading Packaging in plastic crates Electronic weighing machines These pack houses will cater to potato as well. The details of the facilities have been captured in the subsequent chapters. 96

105 DPR: PATNA NALANDA INTEGRATED VALUE CHAIN PROJECT Description of Hub and Spokes Spoke Hub Spoke Spoke Spoke Spoke Patna- Musallahpur Nalanda- Biharsharif Gaya Arrah Buxar Nokha 97

106 Patna Nalanda Integrated Value Chain Project An effort has been made in the previous sections to detail out the value chains of both Potato and Vegetables with an assessment of the gaps. The in-depth study of Potato Value chain revealed specific gaps pertaining to the crop. It has been found that the Cold storage facilities which are required for better price realization by the farmers are inadequate. Creating energy efficient cold storage units is of utmost importance in this region. Certain gaps emerge as common gaps in case of both Potato and Vegetables. High dependence on intermediaries for credit/advance payments is predominant in the region. This reduces the bargaining power of the farmers. The on-farm activities at the time of harvesting and packing are found to be basic. Also weighing and packing is found to be basic and often inaccurate and inappropriate for the produce. Multiple handling deteriorates the quality of the produce. Connectivity with aggregation points remains a critical component in this value chain considering the nature of the produce in case of Vegetables. As mentioned earlier all the proposed sites are well connected with each other and with production and consumption areas. Each of the proposed facility be it Hub or Spoke could be treated as a viable business proposition. The volume of arrivals are sizeable in each of the locations and linkages with both production and consumption clusters are strong. The two tier structure suggested will prove beneficial in bringing in the synergies between various proposed facilities especially because of strengthened market intelligence and logistics. The agribusiness infrastructure suggested includes dry warehouses for grains like Paddy, Wheat and Maize and storage space for Potato & Onion. This has been included taking into account the production of major grains in the region. This is a critical intervention considering the state s consumption pattern. Also, the total food grain warehousing capacity in Bihar is just about 12% of the total production in the state. This forms an important consideration in developing Agri business infrastructure for grains apart from that being proposed for Horticulture produce. It is also found that the existing facilities in the proposed project are far from being satisfactory. Traders modules, platforms, internal roads, waste disposal mechanisms, etc need complete revamp and refurbishing. The existing as well as proposed facilities are classified into four types of infrastructure namely Basic, Agribusiness, Add-on/Commercial and Link infrastructure. Depending on the specific site conditions these infrastructure is included in the project as per the requirements 98

107 14 SPOKE: MUSALLAHPUR Musallahpur mandi located within the city of Patna is the biggest of all mandis in the state with respect to through-put. The market is spread over an area of 16Ha. Well-established commission agents with strong trade linkages both within and outside the state, operate in this market. Local produce arrivals include cucurbits, okra, brinjal, tomato, chilly, radish, carrot, cabbage and cauliflower among vegetables and mango, litchi and banana among fruits. Being amongst the top producers of mango, litchi and banana, the mandi has established linkages with various other mandis like Aazadpur in Delhi, Ranchi and Jamshedpur in Jharkhand and even with southern state capitals like Hyderabad and Bangalore. The estimated daily arrival in this mandi is around MT with the peak arrival crossing 400 MT during Mango and Litchi season. The market, apart from arrivals from its catchment spread in a radius of 100 km, also witnesses trade in large quantities of fruit and vegetable from other parts of the country, which are not locally produced like orange, grape, pomegranate, papaya, apple among fruits, and onion, green peas, cucumber among vegetables. In spite of its current significance in agri-produce trade spoke-level facilities have been proposed at Musallahpur. The current location has several issues pertaining to vehicular access, parking, overall spatial organisation and limited area for expansion, among others. The significant volumes and variety traded here has been taken into account while proposing infrastructure for the location. An ambient temperature pack house has been proposed to address the common requirements of a variety of produce, a ripening facility, a cold store for potato, segregated storage for onion and a dry warehouse; trading platforms and other support facilities have also been proposed FOCUS CROPS AND ESTIMATED THROUGHPUT Whereas no specific focus crop has been considered for this location, vegetables and potato, as also grain has been included as the significant produce that will be routed through this Spoke, based on trends and current flows. The estimated annual throughput of the pack house in MT is as follows: Spoke Potatoes Vegetables Musallahpur 5,000 10,000 The arrival pattern of the focus crops for the pack house will be as follows: Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Potato 20% 40% 40% Vegetables 99

108 14.2 EXISTING FACILITIES As already discussed, the objective of the project in Bihar is the upgradation of existing APMC markets, hence the effort has been to refurbish/renovate the existing usable facilities in the market and also to propose new facilities as per the assessed requirement. The existing facilities are outlined below: Traders Shops The Market yard can be conveniently divided into various sections where trading of different produce takes place. There are about 240 traders shops in various sections of the market. Viz. Fish, Fruit, Potato/Onion and Banana trading sections. The trading modules mentioned above are permanent in nature with area varying anywhere between 150 s.ft to 300 s.ft. They have a display area and most of them are in dilapidated except for fish traders shops which have been built in the recent past. There is a shortage of modules in almost all the sections of the market and the existing structures are far from being satisfactory Open & Covered Platforms There are about 9 covered and two open platforms which are currently being used by traders as their modules. The platforms are broken and need repair. Apart from these the market has almost about 500 hawkers carrying out trade on a daily basis in the wee hours Godowns The godowns are four in number with storage capacity of 1200 MT and spread over an area of 9000 s.ft. These are leased in by various organizations like FCI, BSWCL, etc. The storage capacity is inadequate vis-à-vis the arrival volumes Cold Storage The Cold storage is currently operational and has been leased out to private entity for a period of five years. The facility is being utilized for storage of fruits arriving from distant markets like Himachal, Kashmir, etc. There are six chambers out of which only four are operational while the other two chambers require repair General Amenities and Support Infrastructure Other amenities like eateries (six in number and operated by vendors) and restrooms(one facility and not operational) are inadequate considering the daily footfalls which is not less than every day. The Admin building and Post Office are not operational and need renovation. Other facilities like Weigh Bridge, Water tank, etc are non operational PROPOSED FACILITIES Pack house (ambient) An ambient pack shed is proposed to be set up at the spoke for handling of a variety of vegetables. The handling capacity of the pack shed will be 35 TPD. In the ambient handling yard, the following infrastructure is proposed: 100

109 Covered Pack shed (open to ambient) with landing area. Requisite weighing equipment and transaction recording arrangement. Sorting and grading areas (with tables). Packaging store and Packing tables. Waste disposal systems. Vehicle parking area. Ambient Pack Shed Process flow: The process flow of the produces handled in the pack shed is depicted below: Facilities Quality Check Description Quality of vegetables to be assessed at the pack shed. Sorting Grading Packing Dispatch and Manual sorting and grading is suggested, which is cost effective. Sorting and grading tables are proposed in the pack shed. Packaging tables would be provided in the pack sheds for manual packing of vegetables in boxes/crates etc. depending on market requirement Appropriate packing material store for streamlined material flow. The same area would be offloaded on a daily basis. The packaged produce would be staged on the raised platform. Produce is expected be transported in trucks of MT capacity. Pack House Logistics The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, tractor trolleys, etc. Aggregation Mechanism The pack house will have its own aggregation mechanism where trucks/pick-ups would be sent to the aggregation points to collect the produce from the farmers/pre-harvest contractors directly. The pack house will encourage farmers cooperatives to manage/handle the aggregation points wherever applicable. It may also invest in developing the points by creating/improving the infrastructure of the points such as platforms, sheds, etc. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment. Trainings of farmers on best farming practices and better post harvest handling practices of produce will be conducted on regular intervals. Other initiatives such as providing best inputs and technology transfers will also be taken up. 101

110 Ripening Facility A ripening facility for banana and other fruit is proposed at Musallahpur aimed at the local consumption market of Patna. The facility is designed such that is can be used for ripening of other produce such as papaya, mango, etc. depending on demand. The ripening would use ethylene as the catalyst (see Annexure for further technical details) Potato Cold Store A modern potato cold store of 5000 MT capacity is proposed at this Spoke. There will be 16 chambers for storage and 8 ante rooms which may be used for warming up of potato before taking it out of the cold store. The walls of the store will be a prefab structure with insulated PUF panels. Ammonia type refrigeration will be used for the cooling (see Annexure for further technical details). Warm up chambers have been included in the potato store for thermally controlled extraction of potatoes per demand. These cold rooms can double-up as storage for other incoming precooled agri-produce. The storage rooms will incorporate controlled ventilation for CO 2 control (current practice is to leave doors open). Simple heat-exchangers to retrieve energy from vented cool air will be incorporated. A water storage of 5000 litres is planned for regular cleanup processes. Existing potato stores can be upgraded using solar thermal vapour absorption refrigeration, which can reduce operating electrical costs by 50 to 80%. Individual stores would need specific insulation upgrades, appropriate sun shading on south facing walls, upgrading or repairs to existing refrigeration machinery to bring efficiency, control systems evaluated for possible improvements Potato Cold Store Logistics At peak of operations, about 20 incoming tucks/vehicles of an average of 4 M capacity will be coming to the cold store. The outbound vehicle flows would comprise about 7 normal trucks of 10/15 MT Dry Warehouse A dry warehouse of 5000 MT capacity is proposed at the Spoke. It will used for storage of grains such as rice, wheat and maize. Adequate facilities for vehicular movement and parking have been incorporated in the proposed layout Ambient Onion Stores Separate facilities for onion storage are proposed here. There will be 10 onion stores of 50 MT capacities and they will form a separate section of the Spoke to prevent odour contamination of other areas. Since onion is graded and packed at farm level, only storage facilities have been provided for onion. These storehouses would be constructed in accordance with existing guidelines for storage of dry onions, incorporating enclosures that allow ventilation while protecting from overhead 102

111 inclement weather. Roof extension is proposed to protect from rain as also from direct sunlight, boundary walls of mesh material are also incorporated in the design to protect the produce from rodents while allowing for adequate ventilation. The base platform would be raised to truck-bed height for easier loading and unloading operations OTHER FACILITIES Trading platforms Four trading platforms of 400sqm area have been proposed, to handle a daily through put of 100 MT. It is estimated that trading related activities will provide wage-work to some 130 persons daily. Provisions for transport logistics for some 70 incoming vehicles per day and 30 outgoing, during peak season, have been made in the proposed layout. Business Centre A Business Centre is proposed at the location with an administrative block for the market. Rooms/sections may be rented out to reputed NGOs, companies, grass-roots level organizations such as microfinance institutions, etc as office space. The centre will incorporate bank, post office and other office support services. A common testing lab can also be included in the business centre. Local district level government offices will also ensure utility, footfall and regular interaction at location. These could include local passport offices, tax centre, land records office, family planning centre, etc. Knowledge Centre A Knowledge Centre is also proposed and may be utilized for extension services provided to the farmers, traders, aggregators and others in the catchment area. There will also be rooms for trainings, meetings and conferences which may be rented out. There will be demonstration rooms displaying various modern technologies and best practices in agribusiness. Apart from the new facilities proposed at Musallahpur, there will be refurbishment/renovation of existing facilities. They would include: Trading platforms Trading shops Parking area Guest house and canteen Weigh bridge Water supply facilities and drainage DG Rooms Solid waste management area Other amenities The proposed facilities can be summarized and classified into broad categories of infrastructure as given in the table below. 103

112 PROPOSED INTERVENTION Pack House (Ambient) Pack House Logistics Banana Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Traders Shops Trading Platforms Knowledge Center Business Center Parking Area Guest House & Canteen Weigh Bridge DG Rooms Solid Waste Management system Approach Road Water Supply System Electricity TYPE OF INFRASTRUCTURE Agribusiness infrastructure Add On / Commercial Infrastructure Basic Mandatory Infrastructure Link Infrastructure 104

113 15 HUB: BIHAR SHARIF The existing APMC market at Bihar Sharif has been identified as hub given its locationbeing situated in the major potato, vegetable and grain production region of Bihar. It is also very well connected by road and rail networks to different cities within and outside the state. The headquarters of Nalanda district are at Bihar Sharif. It is about 80 km from Patna lying on the intersection of National Highways 31 and 82; it is well connected to consumption markets in Uttar Pradesh, West Bengal, Jharkhand and the North-east. Nalanda district and Bihar Sharif town are themselves big consumption centres with populations of 1.9 mn and 230 thousand, respectively. The APMC market is located within the Bihar Sharif town limits, very close to the intersection of National Highway 31 and a main road of the town. The total area of the market yard is just under 14 Ha with a vacant space of about 4.5 Ha. The major arrivals at the market are vegetables such as potato, cauliflower, brinjal, cabbage, onion, peas, okra, gourds and other vegetables. Daily arrival volumes of perishables range between 100 MT to 500 MT depending on the season. Grains mainly, paddy, wheat and pulses are also traded in large volume in the market. On an average, about 300 MT of paddy, 100 MT of wheat, and about 150 MT of pulses are traded everyday at the market. The major production clusters in the catchment of Bihar Sharif market are Devi Sarai, Maghada, Beamani, Soh, Choti Pahadi, Badi Pahadi, Aasanagar, Habipura, Kakda mandach, Meyyar, Rajgir, Silau, Mahalper, Bemani, Aasanagar, Dumarama, Deepnagar and Saidi for vegetables. 105

114 15.1 FOCUS CROPS AND ESTIMATED THROUGHPUT Bihar Sharif region is an active trading centre of agricultural products especially vegetables and grains. The present APMC market caters to all kinds of agricultural produce grown in the region. Trade in produce not locally grown in the region such as fruits is also significant. The focus crops for the hub are potato and vegetables like cauliflower, brinjal, tomato, etc. The focus crops and estimated throughputs have been identified based on present production in the catchment area, potential for interventions, and stakeholders consultations (see value chain analysis). Vegetables like okra, cauliflower and gourds come from Devi Sarai, Maghada, Beamani, Soh, Choti Pahadi, Badi Pahadi, Aasanagar, Habipura, Kakda mandach, Meyyar and Saidi. The catchment for tomato includes: Kharuwara, Teegha, Chechdu, Harnaut, Nakatpura, Chamnahua,Musauhri, Noorsarai, Jhamaa. In addition, other prominent production clusters are around Rajgir, Silau,Mahalper and Deepnagar, and may be included as well. The estimated annual throughput of the pack house in MT is as follows: Hub Potato Vegetables Bihar Sharif The arrival pattern of the focus crops for the pack house will be as follows: Vegetables Potato Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 15.2 EXISTING FACILITIES Since up-gradation of the existing APMC Markets is one of the main objectives, enlisting the existing facilities which need refurbishing and renovation is critical. The existing facilities in Bihar Sharif are outlined below: Traders Shops The Market yard can be conveniently divided into various sections where trading of different produce takes place. There are about 92 permanent traders shops in various sections of the market. Viz. Vegetable, Fruit, Grain, Potato/Onion and Banana trading sections. The trading modules mentioned above are permanent in nature with area varying anywhere between 150 s.ft to 300 s.ft. Apart from these, about 165 shops have been constructed along the boundary wall on self financing model. There is a shortage of modules in the grain and vegetable sections of the market and the existing structures are in relatively good consition Open & Covered Platforms There are about 8 covered and two open platforms which are currently being used by traders as their modules. The platforms are broken and need repair. Apart from these the market has almost about 500 hawkers carrying out vegetable trade on a daily basis in the wee hours Godowns The godowns are seven in number with storage capacity of 1400 MT (for five)and 1000 MT (for two) and are spread over an area of 9000 s.ft. These are leased in by various 106

115 organizations like FCI, BSWCL, Breweries, etc. The storage capacity is inadequate vis-à-vis the arrival volumes General Amenities and Support Infrastructure Other amenities like eateries (sixteen in number and operated by vendors) and restrooms(one facility and not operational) are inadequate considering the daily footfalls which is not less than every day. The Admin building, Bank and Post Office are not operational and need renovation. Other facilities like Weigh Bridge, Water tank, etc are non operational either PROPOSED FACILITIES The project objective in Bihar is towards upgradation existing APMC markets, to refurbish/renovate the existing usable facilities as also to propose new facilities as required. The proposed new facilities are outlined below Ambient Pack shed for vegetables An ambient pack shed is proposed to be set up at the spoke for handling tomato and vegetables. The handling capacity of the pack shed will be 35 TPD. In the ambient handling yard, the following infrastructure will be provided: Covered Pack shed (open to ambient) with landing area. Requisite weighing equipment and transaction recording arrangement. Sorting and grading areas (with tables). Packaging store and packing tables. Waste disposal systems. Vehicle parking area. Ambient Pack Shed Process flow: The process flow of the produces handled in the pack shed is shown below: Facilities Quality Check Description Quality of vegetables shall be assessed at the pack shed. Sorting Grading and Manual sorting and grading is suggested, which is cost effective. Sorting and grading tables are proposed in the pack shed. 107

116 Packing Dispatch Packaging tables would be provided in the pack sheds for manual packing of vegetables in boxes/crates etc. depending on market requirement Appropriate packing material store for streamlined material flow. The same area would be offloaded on a daily basis. The packaged produce would be staged on the raised platform. Produce is expected be transported in trucks of MT capacity. Pack House Logistics The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, tractor trolleys, etc. At peak of operations, about 8-10 incoming tucks/vehicles of an average of 4 M capacity will be coming to the pack houses. The outbound trucks would comprise of about 3-4 normal trucks of 10/15 MT. Aggregation Mechanism The pack house will have its own aggregation mechanism where trucks/pick-ups would be sent to the aggregation points to collect the produce from the farmers/pre-harvest contractors directly. The pack house will encourage farmers cooperatives to manage/handle the aggregation points wherever applicable. It may also invest in developing the points by creating/improving the infrastructure of the points such as platforms, sheds, etc. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment. Trainings of farmers on best farming practices and better post harvest handling practices of produce will be conducted on regular intervals. Other initiatives such as providing best inputs and technology transfers will also be taken up Banana Ripening Facility A banana ripening facility is proposed. Capacity of the ripening chamber will be 10 MT per day. The ripening chamber can also be used for other fruits such as mango, if required. Ripening would be done using ethylene as the catalyst (see Annexure for further technical details). Ethylene generators would be utilized for appropriate dosing of the catalyst. Where ripening facility is located adjoining the pack house, conveyor rollers are optioned to carry the crates directly to ripening area. The Banana ripening facility could adjoin a separate receiving and de-handing shed to allow for locally sourced direct farm produce to be input for local ripening requirements. A waste disposal area to cater to ripening room is specially designated. Material handling pallet mover is provided for the daily operations. The receiving shed is covered to protect from direct sunlight and weather. Though only one chamber will output daily, sufficient space is provided to cater for dispatch staging as well as incoming marshalling of the produce. The ripening facility is envisaged to output into smaller vehicles for tertiary dispatch and a separate designated parking lot for the same is designed. 108

117 Potato Cold Store A modern potato cold store of 5000 MT capacity is proposed in the hub. There will be 16 chambers for storage and 8 ante rooms which may be used for warming up of potato before taking it out of the cold store. The walls of the store will be a prefab structure with insulated puff panels. Ammonia type refrigeration will be used for the cooling (see Annexure for further technical details). The Potato store additionally proposes warm up chambers for thermally controlled extraction of potatoes per demand. These cold rooms can also be doubled as storage for other incoming precooled agri-produce. The storage rooms will incorporate controlled ventilation for CO2 control (current practice is to leave doors open). Simple heat-exchangers to retrieve energy from vented cool air will be incorporated. Existing potato stores can be upgraded using solar thermal vapour absorption refrigeration, which can reduce operating electrical costs by 50 to 80%. Individual stores would need specific insulation upgrades, appropriate sun shading on south facing walls, upgrading or repairs to existing refrigeration machinery to bring efficiency, control systems evaluated for possible improvements Dry Warehouse A dry warehouse of 5000 MT capacity is proposed at the hub. It will used for storage of grains such as rice, wheat and maize. The warehouses would plan for sufficient parking and eased traffic flow layout along with waste disposal areas Ambient Onion Stores 10 onion stores of 50 MT capacities each are proposed in the spoke. The onion storage structures would be a separate section of the spoke facility to check odour contamination. Since onion is graded and packed at farm level itself, only storage facility has been provided for onion. These storehouses would be constructed as per existing guidelines for storage of dry onions, incorporating enclosures that allow ventilation while protecting from overhead inclement weather. The roof would be extended to protect from driving rain while protecting from direct sunlight, boundary walls of mesh material protecting the produce from rodents while allowing adequate ventilation. The base platform would be raised to truck bed height easing loading and unloading operations Other Facilities Business Centre A Business Centre is proposed in the hub which will host the administrative block for the market. There will also be rooms/sections which may be rented out to reputed NGOs, 109

118 companies, grass-root level organizations such as microfinance institutions, etc as office space. The centre will incorporate bank, post office and other office support services. A common testing lab can also be included in the business centre. Local district level government offices will also ensure utility, footfall and regular interaction at location. These could include local passport offices, tax centre, land records office, family planning centre, etc. Knowledge Centre A Knowledge Centre is also proposed in the market. This space will be utilized for extension services for farmers, traders, aggregators and others in the catchment area. Rooms are also proposed for trainings, meetings and conferences which may be rented out. There will be demonstration rooms displaying various modern technologies and best practices in agribusiness. Apart from the new facilities proposed in the hub, there will be refurbishment/renovation of existing facilities. They would include: Trading Platforms Trading Shops Parking Area Guest House and Canteen Weigh Bridge Water Supply Facilities DG Rooms Solid Waste Management Area Other Amenities PROPOSED INTERVENTION Pack House (Ambient) Pack House Logistics Banana Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Traders Shops Trading Platforms Knowledge Center Business Center Parking Area Guest House & Canteen Weigh Bridge DG Rooms Solid Waste Management system Approach Road Water Supply System Electricity TYPE OF INFRASTRUCTURE Agribusiness infrastructure Add On / Commercial Infrastructure Basic Mandatory Infrastructure Link Infrastructure 110

119 16 SPOKE: GAYA Gaya APMC market spread across about 23 Ha of land is situated at a distance of about 6 Km from the city was never used. It is located in Chandauti village on the Gaya-Tekari Road near Gaya Medical College and is connected to the town with a good all-weather road. The surrounding clusters, in addition to paddy and potatoes, produce a variety of vegetables that are traded locally, like brinjal, cauliflower, okra, tomato etc. These clusters include the following important locations in the catchment: Khinjar Sarai, Manpur, Bodh Gaya, Gaya Nagar, Tekari. Significant quantities of potato are traded there and there are several privately run cold stores in the area. This is also in the vegetable growing are and a variety of vegetables are traded at the local mandis. All these factors have been taken into account in the planning of facilities for Gaya and the following are proposed to be part of the Spoke-level infrastructure: 16.1 FOCUS CROPS AND ESTIMATED THROUGHPUT A focus crop has not been considered for this location, vegetables, potato, and grain have been included as the significant produce that will be routed through this Spoke, based on trends and current flows. The estimated annual throughput of the pack house in MT is as follows: Spoke Potato Vegetables Gaya 2,000 4,000 The arrival pattern of the focus crops for the pack house will be as follows: Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Potato 20% 40% 40% Vegetables The following clusters are proposed to form the catchment for this spoke: Khinjar sarai (8km), Lodipur (3km), Saidpur (5km), Manpur (4km), Sekha Bigha (6km), Rati Bigha, Basari, Gaya nagar, Tekari ; these are the main vegetable producing villages which currently cater to Gaya, Patna and Bihar Sharif to some extent EXISTING FACILITIES The existing market yard is not operational and hence all the existing facilities are not utilized currently. The general condition of infrastructure is good and requires minimal renovation and refurbishing. 111

120 Traders Shops There are about 60 traders shops and 10 sundry shops built in the market yard. These are being used by the government as storage space for election material at the time of survey Open & Covered Platforms There are about 4 covered and two open platforms which are partly broken and need repair Godowns The godowns are three in number which are spread over an area of s.f, 6000 s.ft and 6300 s.ft. Two of the godowns are leased in by Bihar State Warehousing Corporation while one is rented out to private entity General Amenities and Support Infrastructure The Admin building, Bank and Post Office are not operational and need renovation. Other facilities like Weigh Bridge, Water tank, etc are non operational either. The market yard has a police station within the premises which is operational currently PROPOSED FACILITIES Pack house (ambient) An ambient pack shed is proposed to be set up at the spoke for handling of a variety of vegetables. The handling capacity of the pack shed will be 35 TPD. Vegetables will be received through the year, as per season. In the ambient handling yard, the following infrastructure is proposed: Covered Pack shed (open to ambient) with landing area. Requisite weighing equipment and transaction recording arrangement. Sorting and grading areas (with tables). Packaging store and Packing tables. Waste disposal systems. Vehicle parking area. Ambient Pack Shed Process flow: The process flow of the produces handled in the pack shed is depicted below: 112

121 Facilities Quality Check Description Quality of vegetables to be assessed at the pack shed. Sorting Grading Packing Dispatch and Manual sorting and grading is suggested, which is cost effective. Sorting and grading tables are proposed in the pack shed. Packaging tables would be provided in the pack sheds for manual packing of vegetables in boxes/crates etc. depending on market requirement Appropriate packing material store for streamlined material flow. The same area would be offloaded on a daily basis. The packaged produce would be staged on the raised platform. Produce is expected be transported in trucks of MT capacity. Pack House Logistics The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, tractor trolleys, etc. Aggregation Mechanism The pack house will have its own aggregation mechanism where trucks/pick-ups would be sent to the aggregation points to collect the produce from the farmers/pre-harvest contractors directly. The pack house will encourage farmers cooperatives to manage/handle the aggregation points wherever applicable. It may also invest in developing the points by creating/improving the infrastructure of the points such as platforms, sheds, etc. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment. Trainings of farmers on best farming practices and better post harvest handling practices of produce will be conducted on regular intervals. Other initiatives such as providing best inputs and technology transfers will also be taken up Ripening Facility A ripening facility for banana and other fruit is proposed at Musallahpur aimed at the local consumption market of Patna. There will be 5 ripening chambers of 10 MT capacities. Since banana takes 4 days to ripen, the daily output of ripened banana will be 10 MT. The facility can also be used for ripening of other produce such as papaya, mango, etc. depending on demand. The ripening would use ethylene as the catalyst (see Annexure for further technical details) Potato Cold Store A modern potato cold store of 2000 MT capacity is proposed at this Spoke. There will be chambers for storage and the ante rooms to be used for warming up of potato before taking it out of the cold store. The walls of the store will be a prefab structure with insulated PUF panels. Ammonia type refrigeration will be used for the cooling (see Annexure for technical details). Warm up chambers have been included in the potato store for thermally controlled extraction of potatoes per demand. These cold rooms can double-up as storage for other incoming pre- 113

122 cooled agri-produce. The storage rooms will incorporate controlled ventilation for CO 2 control (current practice is to leave doors open). Simple heat-exchangers to retrieve energy from vented cool air will be incorporated. A water requirement of 5000 litres is provided for in the facility for periodic cleaning operations aside from refrigeration cooling tower requirements Existing potato stores can be upgraded using solar thermal vapour absorption refrigeration, which can reduce operating electrical costs by 50 to 80%. Individual stores would need specific insulation upgrades, appropriate sun shading on south facing walls, upgrading or repairs to existing refrigeration machinery to bring efficiency, control systems evaluated for possible improvements Potato Cold Store Logistics At peak of operations, about 10 incoming tucks/vehicles of an average of 4 M capacity will be coming to the cold store. The outbound vehicle flows would comprise about 7 normal trucks of 10/15 MT Dry Warehouse A dry warehouse of 5000 MT capacity is proposed at the Spoke. It will used for storage of grains such as rice, wheat and maize. Adequate facilities for vehicular movement and parking have been incorporated in the proposed layout Ambient Onion Stores Separate facilities for onion storage are proposed here. There will be 10 onion stores of 50 MT capacities and they will form a separate section of the Spoke to prevent odour contamination of other areas. Since onion is graded and packed at farm level, only storage facilities have been provided for onion. These storehouses would be constructed in accordance with existing guidelines for storage of dry onions, incorporating enclosures that allow ventilation while protecting from overhead inclement weather. Roof extension is proposed to protect from rain as also from direct sunlight, boundary walls of mesh material are also incorporated in the design to protect the produce from rodents while allowing for adequate ventilation. The base platform would be raised to truck-bed height for easier loading and unloading operations OTHER FACILITIES Trading platforms and trading shops Four trading platforms of 400sqm area have been proposed, to handle a daily through put of 100 MT. Trading shops have also been proposed to handle 100 MT daily. It is estimated that trading related activities will provide wage-work to some 130 persons daily, in addition to providing employment to some 200 persons. 114

123 Provisions for transport logistics for about 70 incoming vehicles per day and 30 outgoing, during peak season have been made in the proposed layout. Given the combination of facilities proposed and taking into account the needs of workers, farmers and traders at the location, the following facilities and amenities have also been included: Parking Area Canteen Weigh Bridge Water Supply Facilities DG Rooms Solid Waste Management Area Other Amenities Eventually, additional space may be utilized for extension services provided to farmers, traders, aggregators and others in the catchment area. Rooms may be rented out for trainings, meetings and conferences. Demonstration rooms displaying various modern technologies and best practices in agri-business may also be included at select locations, over the years. PROPOSED INTERVENTION Pack House (Ambient) Pack House Logistics Banana Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Traders Shops Trading Platforms Knowledge Center Business Center Parking Area Guest House & Canteen Weigh Bridge DG Rooms Solid Waste Management system Approach Road Water Supply System Electricity TYPE OF INFRASTRUCTURE Agribusiness infrastructure Add On / Commercial Infrastructure Basic Mandatory Infrastructure Link Infrastructure 115

124 17 SPOKE: ARRAH The existing APMC market at Arrah has been identified as one of the spokes for the Nalanda Hub as part of the Integrated Value Chain region. The market is chosen as the spoke because of its proximity to the production clusters of potato and onion in the region. The market is well connected and can feed to consumption centres such as Patna in Bihar and cities in other states such as Uttar Pradesh, West Bengal and Northeast India. The APMC market is located on the Arrah-Sasaram Road, 2 km from Arrah Railway Station. The approach road to the market is an all weather road. The area under the market is about 16 Ha. The market is well connected by road to the Barhampur, Barhara and Sahar blocks and the towns of Semeriya, Ghanpur, Kasap and Udawantnagar. The market is well connected by rail to Behea, Chatpokhri, Piro blocks and Keolwar, Agiaon and Ekwari block. The daily arrivals of potato at the Arrah market yard is about 30 to 40 MT during normal season and which goes up to MT during the peak season. The daily arrival of Onion is about 25 to 30 MT per day. The daily arrival of other vegetables is about MT in the nearby markets. In addition the daily arrival of Banana is about 25 to 35 bunches per day during normal season and 45 to 55 bunches during the peak season FOCUS CROPS AND ESTIMATED THROUGHPUT The Arrah region has a very vibrant trade of various fruits and vegetables. The present APMC market caters to almost all kinds of produce grown in the region. However, the focus crops for the spoke are potato and onion. The focus crops and estimated throughputs have been identified based on present production in the catchment area; the present capacities of existing similar infrastructures/facilities, potential for interventions, and stakeholders consultations (see value chain analysis). The estimated annual throughput of the pack house in MT is as follows: Spoke Potato Vegetables Arha The arrival pattern of the focus crops for the pack house will be as follows: Potato Onion Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec The production clusters for potato in the catchment of Arrah market are Sariya, Chandi, Behrampur (in Kayamnagar) and Jagdishpur. Vegetable aggregation points at Koelwar market and some by the road side where produce is collected from the nearby farms will be included for liking with the spoke EXISTING FACILITIES The existing facilities are described below. 116

125 Traders Shops There are about 60 traders shops out of which only 22 are currently operational. These are being used by traders carrying out trade in Potato/Onion, Banana and Fruits.Out of the total 22 traders shops ten are operated by Potato/ Onion traders, Eight by Banana Traders and Four by Fruit traders Open & Covered Platforms There are about two covered and two open platforms which are partly broken and need repair Godowns The godowns are four in number out of which one has been rented to FCI, two to SFC. The other godown has been built and taken possession by BISCOMAN General Amenities and Support Infrastructure The Admin building is in dilapidated state and needs renovation. Other facilities like Weigh Bridge, Water tank, etc are non operational either. The hand pumps are the source of drinking water currently. Multiple entry/ exit makes the security a matter of concern at present PROPOSED FACILITIES As already discussed, the objective of the project in Bihar is mainly directed towards up gradation of existing APMC markets, hence the effort has been to refurbish/renovate the existing usable facilities in the market and also propose new facilities as required. The proposed new facilities are: Pack House Considering the existing ambient supply chain practices, infrastructure space is provided that will cater to Potato and other vegetables. To allow capacity utilization and spread across seasons, the facility is intended for use of both potato and onion when in season. The basic sub components of the pack house are as follows: Covered Pack shed (open to ambient) with landing area. Requisite weighing equipment and transaction recording arrangement. Sorting and grading areas (with tables). Packaging store and Packing tables. Material handling equipment pallet movers, trolleys. Waste disposal systems. Vehicle Parking areas. 117

126 Ambient Pack Shed Process flow: The process flow of the produces handled in the pack shed is shown Aggregation Mechanism The pack house will have its own aggregation mechanism where trucks/pick-ups would be sent to the aggregation points to collect the produce from the farmers/pre-harvest contractors directly. The pack house will encourage farmers cooperatives to manage/handle the aggregation points wherever applicable. It may also invest in developing the points by creating/improving the infrastructure of the points such as platforms, sheds, etc. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment. Trainings of farmers on best farming practices and better post harvest handling practices of produce will be conducted on regular intervals. Other initiatives such as best inputs and technology transfers will also be taken up. Pack House Logistics The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, etc. At peak of operations, about 10 incoming tucks/vehicles of an average of 4 MT capacities will be coming to the pack houses. The outbound trucks would include about 2 normal trucks of 10/15 MT and Small capacity field vehicles, load 800Kg to 1MT, are incorporated in the project to serve as feeders from local farms as backward integration Potato Cold Store A modern potato cold store of 2000 MT capacity is proposed in the spoke. There will be 8 chambers for storage and 4 ante rooms which may be used for warming up of potato before taking it out of the cold store. The walls of the store will be a prefab structure with insulated puff panels. Ammonia type refrigeration will be used for the cooling (see Annexure for further technical details) Dry Warehouse A dry warehouse of 5000 MT capacity is proposed at the spoke. It will used for storage of grains such as rice, wheat and maize Ambient Onion Stores Separate facilities for onion storage are proposed in the spoke. There will be 10 onion stores of 50 MT capacities and they will form a separate section of the market to prevent odour contamination of other areas. 118

127 Other facilities Business Centre A Business Centre is proposed in the spoke which will host the administrative block for the market. There will also be rooms/sections which may be rented out to reputed NGOs, companies, grass-root level organizations such as microfinance institutions, etc as office space. Knowledge Centre A Knowledge Centre is also proposed in the market. This space will be utilized for extension services provided to the farmers, traders, aggregators and others in the catchment area. There will also be rooms for trainings, meetings and conferences which will be rented out. There will be demonstration rooms displaying various modern technologies and best practices in agri-business. Apart from the new facilities proposed in the market yard, there will be refurbishment/renovation of existing facilities. They would include: Trading Platforms Trading Shops Parking Area Guest House and Canteen Weigh Bridge Water Supply Facilities DG Rooms Solid Waste Management Area Other Amenities PROPOSED INTERVENTION Pack House (Ambient) Pack House Logistics Banana Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Traders Shops Trading Platforms Knowledge Center Business Center Parking Area Guest House & Canteen Weigh Bridge DG Rooms Solid Waste Management system Approach Road Water Supply System Electricity TYPE OF INFRASTRUCTURE Agribusiness infrastructure Add On / Commercial Infrastructure Basic Mandatory Infrastructure Link Infrastructure 119

128 18 SPOKE: BUXAR The APMC market at Buxar has been identified as one of the spokes as part of the Nalanda Integrated Value Chain region. The market shall prove to be an important spoke in the value chain considering its proximity to the production clusters of potato, tomato and onion in the region. The APMC is located very close to the Buxar railway line (just 3 km away from the Delhi- Patna-Kolkata line). The area of the market is just under 30 Ha. Buxar is well connected by road to Barhampur, Rajpur, Itarhi, Nawanagar and Dumraon blocks. It is also well connected by road to towns like Kuran sarai, Murar, Raghunathpur in the District. In addition there is excellent rail connectivity with Baruna and Chausa. In the erstwhile APMC market at Buxar, Rice, Wheat and Pulses were traded. The market also had a vegetable haat. However, after the repealing of APMC Act, only rice is being traded in this market. There are about 40 odd wholesalers, who are using their shops-cumgodown for storing as well as trading. The daily volume of trade is estimated to be 1350 MT during the Paddy season and about 300 MT during off season. This market has good catchment area of Paddy production. However, following the scrapping of APMC Act the wholesale trading has got scattered having a direct bearing on the trading here. Gorakhpur and Varanansi are major markets for Tomatoes from Dumrao and Simri. Bihta, Buxar, Arah and Patna are other markets. Smaller markets are Dumrao, Simri, Darhara, Itari and Rajpur. Crop wise production clusters in the catchment of Buxar Market Majhwari, Dhananjaypur, Saihar, Padari are important production clusters in Simri block while Dharahara, Sarwara, Arakah in Dumraon block produce Tomato and other vegetables. Potato is cultivated in vast stretches in Simri, Dumraon, Rajpur and Nawanagar Paddy is produced extensively in Etadi and Rajpur blocks of the district FOCUS CROPS AND ESTIMATED THROUGHPUT The focus crops for the spoke are potato, onion and tomato. Based on the feedback during various stakeholder discussions and secondary data on production in the cluster the focus crops and estimated throughputs have been identified. The estimated annual throughput of the pack house in MT is as follows: Spoke Vegetables Potato Buxar The arrival pattern of the focus crops for the pack house will be as follows: Potato Vegetables Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 120

129 Most of the aggregation for Buxar market is seen along the Arah-Buxar road. Other major points of aggregation are located in Krishnabelpur, Brahmpur, old Bhojpur and some around Dumraon, Simari. Majhwari, Dhananjaypur,Padari,Nagwan villages in Simri produce tomatoes. In Dumraon block Dharahara, Chekil, Sarwara and Arakah, major producers of vegetables, are envisaged as part of the spoke s catchment EXISTING FACILITIES Traders Shops There are about 71 traders shops. These are being used by Sundry and grain traders.out of the total 71 traders shops 40 are operated by Potato/ Onion traders while the rest are owned by sundry. The facilities are being used for storage purposes and trading is minimal from these shops currently Open & Covered Platforms There are five covered and One open platforms which are partly broken and need repair. One of the platforms is utilized by Bihar Police currently Godowns The godowns are Nine in number out of which one has been rented to FCI, two to SFC, one to Bihar State Seed Corporation Ltd, three to BISCOMAN. Two twin chamber warehouses are leased to Central Warehousing Corporation General Amenities and Support Infrastructure The general amenities present in the market are Admin building which is in dilapidated state and needs renovation. Other facilities like Weigh Bridge, Water tank, etc are non operational either. Check Post with Check post building which is currently used by Bihar Police Three cattle sheds out of which two are occupied by Home gaurds and one by Forestry Department Hand pumps are the source of water Canteen area spread in two different sections of the market TV Tower: Prasar Bharati s low power transmitter station ispresent in the market yard Residential building for workers PROPOSED FACILITIES The prime focus in most of the spokes in Bihar is to utilize the existing usable facilities by refurbishing/renovating them and adding new facilities wherever required as per the requirements of the identified focus crops, distance of the market from production and consumption centres. The proposed new facilities are: 121

130 Ambient Pack House Considering the existing ambient supply chain practices, infrastructure space is provided that will cater to Potato and other vegetables. To allow capacity utilization and spread across seasons, the facility is intended for use of both potato and onion when in season. The basic sub components of the pack house are as follows: Covered Pack shed (open to ambient) with landing area. Requisite weighing equipment and transaction recording arrangement. Sorting and grading areas (with tables). Packaging store and Packing tables. Material handling equipment pallet movers, trolleys. Waste disposal systems. Vehicle Parking areas. Ambient Pack Shed Process flow: The process flow of the produces handled in the pack shed is depicted below: Aggregation Mechanism The pack house will have its own aggregation mechanism where trucks/pick-ups would be sent to the aggregation points to collect the produce from the farmers/aggregators directly. The pack house will encourage farmers cooperatives to manage/handle the aggregation points wherever applicable. It may also invest in developing the points by creating/improving the infrastructure of the points such as platforms, sheds, etc. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment. Trainings of farmers on best farming practices and better post harvest handling practices of produce will be conducted on regular intervals. Other initiatives such as best inputs and technology transfers will also be taken up. Pack House Logistics The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, etc. At peak of operations, about 12 incoming tucks/vehicles of an average of 4 MT capacities will be coming to the pack houses. The outbound trucks would include about 4 to 5 normal trucks of 10/15 MT Small capacity field vehicles, load 800Kg to 1MT, are incorporated in the project to serve as feeders from local farms as backward integration. 122

131 Potato Cold Store A modern potato cold store of 2000 MT capacity is proposed in the hub. There will be 8 chambers for storage and 4 ante rooms which may be used for warming up of potato before taking it out of the cold store. The walls of the store will be a prefab structure with insulated puff panels. Ammonia type refrigeration will be used for the cooling (see Annexure for further technical details) Dry Warehouse A dry warehouse of 5000 MT capacity is proposed at the hub. It will used for storage of grains such as rice, wheat and maize Onion Store Separate facilities for onion storage are proposed in the spoke. There will be 10 onion stores of 50 MT capacities and they will form a separate section of the spoke to prevent odour contamination of other areas Other Facilities Business Centre A business centre is proposed in the hub which will host the administrative block for the market. There will also be rooms/sections which may be rented out to reputed NGOs, companies, grass-root level organizations such as microfinance institutions, etc as office space. Knowledge Centre A knowledge centre is also proposed in the market. This space will be utilized for extension services provided to the farmers, traders, aggregators and others in the catchment area. There will also be rooms for trainings, meetings and conferences which will be rented out. There will be demonstration rooms displaying various modern technologies and best practices in agri-business. Apart from the new facilities proposed in the hub, there will be refurbishment/renovation of existing facilities. They would include: Trading Platforms Trading Shops Parking Area Guest House and Canteen Weigh Bridge Water Supply Facilities DG Rooms Solid Waste Management Area Other Amenities 123

132 19 SPOKE: NOKHA The existing APMC market at Nokha has been identified as one of the spokes as part of the Nalanda Integrated Value Chain region. The market shall be an important spoke considering its proximity to the production clusters of potato and other vegetables in the region. The APMC is located in Nokha off the main Sasaram (District Headquarter) - Bikramganj road (Bikramganj is on National Highway 30). The area of the market is nearly 17 Ha with almost 40% of area being vacant. The approach road to the market is in good condition though the internal roads are not well developed. Nokha is well connected by road to Karakat, Nasriganj, Rajpur, Dawath and Dinara blocks in the district. It is also well connected by road to towns like Sasaram, Bikramganj, Sajhauli, Ghusiya, and Karwandiya in the District. In addition Nokha is also on the Sasaram -Bikramganj rail line as well. Main consumption markets for Nokha market yard currently are Patna, Sasaram and other major towns within the district. Currently the erstwhile APMC market is not operational. This is despite having rich catchment area of Paddy production as there are a lot of rice mills in the vicinity of the market, which have become trading centres. Farmers prefer selling Paddy directly to the Rice Millers as they get instant cash and also they save on double transportation. If they had to bring the produce for sale in this market, they had to first get the Paddy converted to rice in the rice mill and then market it to the wholesaler. This meant not only double transportation cost but also lot of time FOCUS CROPS AND ESTIMATED THROUGHPUT The focus crops for the spoke are potato and other vegetables. The focus crops and estimated throughputs have been arrived at considering the production statistics, feedback from various stake holders. The estimated annual throughput of the pack house in MT is as follows: Spoke Vegetables Potato Nokha The arrival pattern of the focus crops for the pack house will be as follows: Potato Vegetables Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 19.2 EXISTING FACILITIES Traders Shops There are about 30 traders shops. These are not operational currently and are far from being satisfactory 124

133 Open & Covered Platforms There are three covered platforms which are partly broken and need repair Godowns The godowns are three in number out of which one is dilapidated and not in use. One of the godowns is being used by private traders for drying Produce while the other is used as storage space by FCI to store Food grains like Paddy and Wheat meant for Public Distribution System General Amenities and Support Infrastructure The general amenities present in the market are Admin building, Bank and Post Office are in dilapidated state and need renovation. Water tank is present but not operational. The hand pumps are source of water currently. Check Post, Watch Tower and Guard Quarters are not present Staff quarters for electricians and Plumbers exist. They are in dilapidated state. An area has been earmarked for Canteen. This needs refurbishing PROPOSED FACILITIES Considering that there is sizeable vacant land in the existing market yard, efforts could be focused on not just renovating the existing usable facilities in the market but also on developing relevant new facilities as required Pack Shed Considering the existing ambient supply chain practices, infrastructure space are provided that will cater to Potato and other vegetables. To allow capacity utilization and spread across seasons, the facility is intended for use of both potato and onion when in season. The basic sub components of the pack house are as follows: Covered Pack shed (open to ambient) with landing area. Requisite weighing equipment and transaction recording arrangement. Sorting and grading areas (with tables). Packaging store and Packing tables. Material handling equipment pallet movers, trolleys. Waste disposal systems. Vehicle Parking areas. Ambient Pack Shed Process flow: 125

134 The process flow of the produces handled in the pack shed is depicted below: Facilities Quality Check Description Quality of Potato and other vegetables shall be assessed at the pack shed. Sorting Grading Packing Dispatch and Manual sorting and grading is suggested, which is cost effective. Sorting and grading tables are proposed in the pack shed. Packaging tables would be provided in the pack sheds for manual packing of vegetables in boxes/crates etc. Appropriate packing material store for streamlined material flow. The same area would be offloaded on a daily basis. The packaged produce would be staged on the raised platform. Produce is expected be transported in trucks of MT capacity. Aggregation Mechanism The pack house will have its own aggregation mechanism where trucks/pick-ups would be sent to the aggregation points to collect the produce from the farmers/aggregators directly. The pack house will encourage farmers cooperatives to manage/handle the aggregation points wherever applicable. It may also invest in developing the points by creating/improving the infrastructure of the points such as platforms, sheds, etc. To strengthen the aggregation mechanism, the pack house will also concentrate on capacity building and other extension services in the catchment. Trainings of farmers on best farming practices and better post harvest handling practices of produce will be conducted on regular intervals. Other initiatives such as best inputs and technology transfers will also be taken up. Pack House Logistics The produce will come to the pack house from aggregation points and farms in various modes of transport such as trucks (4 MT), vans, etc. At peak of operations, about 20 incoming tucks/vehicles of an average of 4 MT capacities will be coming to the pack houses. The outbound trucks would include about 6 normal trucks of 10/15 MT. Small capacity field vehicles, load 800Kg to 1MT, are incorporated in the project to serve as feeders from local farms as backward integration Potato Cold Store A modern potato cold store of 2000 MT capacity is proposed in the spoke. There will be 8 chambers for storage and 4 ante rooms which may be used for warming up of potato before taking it out of the cold store. The walls of the store will be a prefab structure with insulated 126

135 puff panels. Ammonia type refrigeration will be used for the cooling (see Annexure for further technical details) Dry Warehouse A dry warehouse of 5000 MT capacity is proposed at the market yard. It will used for storage of grains such as rice, wheat and maize Onion Store Separate facilities for onion storage are proposed in the spoke. There will be 10 onion stores of 50 MT capacities and they will form a separate section of the spoke to prevent odour contamination of other areas Other facilities Business Centre A Business Centre is proposed in the market yard which will host the administrative block for the market. There will also be rooms/sections which may be rented out to reputed NGOs, companies, grass-root level organizations such as microfinance institutions, etc as office space. Knowledge Centre A Knowledge Centre is also proposed in the market. This space will be utilized for extension services provided to the farmers, traders, aggregators and others in the catchment area. There will also be rooms for trainings, meetings and conferences which will be rented out. There will be demonstration rooms displaying various modern technologies and best practices in agri-business. Apart from the new facilities proposed in the spoke, there will be refurbishment/renovation of existing facilities. They would include: Trading Platforms Trading Shops Parking Area Guest House and Canteen Weigh Bridge Water Supply Facilities DG Rooms Solid Waste Management Area Other Amenities The proposed facilities can be categorized into four broad categories of Infrastructure as given below Pack House (Ambient) PROPOSED INTERVENTION Agribusiness infrastructure TYPE OF INFRASTRUCTURE 127

136 Pack House Logistics Banana Ripening Facility Potato Cold Store Dry Warehouse Ambient Onion Stores Traders Shops Trading Platforms Knowledge Center Business Center Parking Area Guest House & Canteen Weigh Bridge DG Rooms Solid Waste Management system Approach Road Water Supply System Electricity Add On / Commercial Infrastructure Basic Mandatory Infrastructure Link Infrastructure 128

137 20 FINANCIAL ANALYSIS The background and introduction to this analysis is found in an earlier section on the Muzaffarpur IVC (Section 10) and apply to this value chain as well. This section outlines the financial analysis for the Patna-Nalanda Value Chain PATNA NALANDA IVC Project Details The facilities/infrastructure proposed in hub and spokes for the IVC are summarized below: Facilities Bihar Sharif Patna Gaya Arrah Buxar Nokha Vegetable 35 MT/day 35 MT/day 35 MT/day 35 MT/day 35 MT/day 35 MT/day Packsheds (750 sq. m) (750 sq. m) (750 sq. m) (750 sq. m) (750 sq. m) (750 sq. m) Ambient Trading Platforms 4400 sqm 5267 sqm 3951 sqm 3433 sqm 4590 sqm 3525 sqm Warehouse 5000 MT 2300 sqm 2300 sqm 2300 sqm 2300 sqm 2300 sqm 2300 sqm Potato Cold Store 2700 sqm 2700 sqm 2000 MT 2000 MT 2000 MT 2000 MT (5000 MT) (5000 MT) (1080 sqm) (1080 sqm) (1080 sqm) (1080 sqm) Onion store sqm 540 sqm 540 sqm 540 sqm 540 sqm 540 sqm MT Ripening chamber 10 MT/day 10 MT/day Traders Shops 8000 sqm 6956 sqm 4963 sqm 4178 sqm 4567 sqm 4317 sqm To support the operations of above facilities, the hub and spokes will also have adequate basic infrastructure and other support infrastructure like power and water supply systems, ETP, solid waste disposal facility, administration block/business centre, canteen, parking space, etc. A list of these basic and support infrastructure facilities (hub and spoke wise) is given below: Non technical Facilities Units Bihar Sharif Patna Gaya Arrah Buxar Nokha Guest House Sq. m Business centre Sq. m Knowledge centre Sq. m Water Supply LPD Power Supply KVA Project Cost The cost estimates for IVCs mainly consist of two categories: the renovation/refurbishing of existing building and basic infrastructure and construction of new value added facilities. It has been attempted to use existing infrastructure to the extent possible and replacement of existing assets have been recommended only in cases of absence or unusable condition of these assets/facilities. The cost estimates of plant and machinery are based on the information obtained from equipment suppliers including quotations given by them for similar facilities. The civil work and basic infrastructure costs have been worked out by architects/engineers based on layout plans and as per the industry standards. The component wise costs of the project are given below: 129

138 Items Sr. No. Description Amount (Rs Mn) Amount (Mn $) A 1 Land Land Development Buildings Plant Machinery & Equipments Utilities & other fixed assets Sub Total (A) 1, B Preliminary and Pre Operative Expenses C Contingencies D Margin Money for Working Capital Total Project Cost (A+B+C+D) 1, Land The land cost has not been taken into consideration as the project would be using the land of existing APMC market yards. Land Development The land development cost has been calculated based on the detailed engineering surveys in selected APMC market yards. The calculation takes into account the land development cost for both the existing and proposed facilities/infrastructure in these markets. Based on these costs, for the other markets land development cost has been taken proportionately. The detailed costing for these markets will be incorporated in the final report. Cost of land development includes boundary wall, road, water drainage, parking etc. The average cost of development is coming at Rs 3.38 mn/ha. Buildings The estimated costs of construction for various buildings in the projects are given below: Amount in Rs millions Bihar Sharif Gaya Nokha Buxar Arrah IVC IVC Mn $ Facility Patna A. Existing buildings Trading Platform Trading Shops Buildings ( Admin. Building, Bank, Ware Houses, etc) Sub Total (A) B. Proposed buildings Packhouse Ambient Trading Platforms Warehouse 5000 MT Potato Cold Store 5000 MT Onion store Ripening chamber Traders Shops Guest House Business centre Knowledge centre Utilities Sub Total (B) Total (A+B) The building construction rate for ambient packshed/trading platform for fruit and vegetable has been estimated to be Rs. 6000/sq. m. The construction rate for dry warehouse for grains and onion store have been assumed at Rs. 6500/sq. m. The lump sum cost of pre-fabricated banana ripening chamber of 40 MT capacity (which is equivalent to 10 MT/day ripening 130

139 capacity) having an area of 280 sq.m has been taken as Rs million. The construction cost of potato cold store with pre-fabricated insulated building is estimated at Rs. 8000/sq. m. The rates are in tune to the industry standards and have been verified against quotations received from different industry players. In case of non technical infrastructure, the construction rate has been estimated at Rs per sq. m for facilities such as administrative building/business centre, guest house, canteen etc. Equipment The details of the estimated costs of major machineries are provided below: Table: Machinery Cost Amount in Rs millions Facility Bihar Sharif Patna Gaya Arrah Buxar Nokha IVC Refrigeration potato store Ripening equipments Electronics auction system Crates Weighing scales 500 kg Normal Pickup vehicles Normal trucks 15 MT Total Plant Machinery & Equipments The cost wise major components of the project are refrigeration for potato stores (Rs mn), and electronics auction system (Rs. 40 mn). The rates for plant, machinery and equipments are comparable to the industry standards and have been verified with the quotations from different suppliers. Miscellaneous Fixed Assets / Utilities The details of the estimated cost of the miscellaneous fixed assets and utilities are provided below: Amounts in Rs millions Facility Bihar Sharif Patna Gaya Arrah Buxar Nokha IVC DG sets Power supply system IT system Furniture Total Misc Fixed Assets The power load for the total project has been estimated to be 3200 KVA. DG sets have been taken for each spoke and hub and the capacities vary from 400 KVA to 750 KVA depending on the requirement. The project would require 0.20 million LPD of water for the operations. The cost of water supply has been distributed among the locations in proportion to their water requirements. Preliminary & Pre operative Expenses The provision towards preliminary & pre-operative expenses includes expenditure towards preliminary expenses like salaries & administrative expenses, travel expenses, market development expenses, interest during construction period etc. It is also assumed that the project will be commissioned over a period of one year. The interest during construction period is capitalized in the project cost. Pre-operative expenses other than interest during construction period are assumed to be 5% of cost of fixed assets. 131

140 Working Capital Requirement As the project is meant to create facilities and offer them to various users on rental basis, the WC requirement is assumed to be operating costs like management, maintenance, insurance, power and water. As most of these expenses and the rent receipts are monthly in nature, so to cover these expenses the requirement of working capital is calculated by considering the fund requirement for 30 days. Contingencies The amount is calculated as shown in the table below: Contingencies Physical Price Contingencies Contingencies Contingencies Contingencies (Rs Mn) (Mn $) Land 0.0% 0.0% Land Development 5.0% 8.3% Buildings 5.0% 8.3% Plant Machinery & Equipments 0.0% 8.3% Utilities & Other Assets 5.0% 8.3% Total The price contingencies are based on the Whole Sale Price Index during FY Means of Finance The suggested implementation framework mentions that the funding requirement for the project would be met by project grant from state government and equity by private developer. The minimum equity from the private developer is envisaged at 10% of cost of project in case of Bihar. The remaining funds would be contributed as project grant by State government including funds from ADB as detailed below: Particulars Amount (Rs Mn) Amount (Mn $) Share Asian Development Bank % Equity Government of Bihar % Equity Private Investor % Total Key Operating Assumptions The key operating assumptions underlying the project s business plan are described below. Operating Cost Assumptions: While the marketing infrastructure like trading shops and platforms are likely to be operational for at least 330 days, the overall operation for all the facilities has been assumed at 300 days per annum. Power & Fuel Costs The total connected load of the facilities for all locations is estimated at 3200 KVA. The power tariff has been assumed at the prevailing rate of Rs 4.25 per unit for agro based industry in Bihar. Average daily requirement of power would be about KWH. The details of power load assumptions for the facility are given below: Facilities Trading Plateform/Ambient Packhouse Assumption 1 KVA/ 60 sqm 132

141 Warehouse Cold Store Ripening Chamber Business Centre & Misc facilities 1 KVA/ 92 sqm 1 KVA/ 10 MT 50 KVA/ 40 MT 1 KVA/ 30 sqm The table below shows the location wise power requirement: Locations Power Load (KVA) Bihar Sharif 800 Patna 800 Gaya 400 Arrah 400 Buxar 400 Nokha 400 Total 3200 Taking into account the current power supply scenario in the state it has been assumed that the facilities would run on DG sets for about 2 hrs/day. The average fuel cost for DG set is assumed Rs. 35/litre. Water Cost Daily requirement of water is estimated to be 0.20 million litres/day for all the locations combined. The charges are assumed to be Rs 20/KL. Employee Cost The employee cost has been estimated by considering the man power requirement for managing the facility. The project will be managed by the SPV, who will maintain and operate the facilities in the project. This includes management and 24 hour maintenance of the plant and machineries, management of the canteen, business centre, security, etc. So, a team of technical engineers, support staffs and security personals will be required. The details of manpower and their average costs are given in the following table: Grade/ Employee Number Salary/Month (RS) Total (Rs) Managers Technical Manager Operators Maintenance Account Security Support Staff Total Employee Cost (Per Month) *Increment in salary is assumed at 5% p.a for 1 st five years of operations. Cost of Maintenance The cost of maintenance has been assumed as 1.0% of value of plant & machinery and miscellaneous fixed assets. The maintenance cost will increase by 2.5% every year due to aging of assets. Cost of Insurance The cost of insurance has been assumed as 1.0% of value of plant & machinery and miscellaneous fixed assets. Admin & Marketing Overheads The SPV will be largely responsible for only the management and maintenance of the facilities and users/traders would be doing necessary marketing arrangements for their operations. Initial tie ups are needed for better capacity utilization of the facilities. Most of the promotional/marketing expenses will be incurred up front with only small recurring expenses afterwards. Hence during operations, marketing and business development expenses will not be significant for the project. The major overheads for the project will be traveling costs, statutory (like audit etc.) costs and communication expenses etc. So, the admin & 133

142 selling overhead costs have been 2.0% of revenue in line with the industry norms for such facilities. Financial Assumptions Taxes Income Tax rate is assumed to be 33.99% flat (Prevailing Corporate Tax Rate). Income tax is calculated on PBT after adjusting for the difference between the depreciations calculated according to Companies Act, 1956 and Income Tax Act, Depreciation Rates Depreciation has been calculated by straight-line method, as per the Companies Act, 1956, for book purpose, whereas for tax purpose (As per Rule-5 of Income Tax Act, 1961), written down value method is employed. The rates of depreciation are in tune to the rates that are used in cold storage and warehousing industry. The depreciation rates used for different assets are given below: Depreciation Rates Book Depr Tax Depr Plant & Machinery 10.34% 15.00% Miscellaneous Fixed Assets 10.34% 15.00% Buildings 3.34% 5.00% The plant & machinery includes refrigeration and cooling systems used for operation of facility, sorting-grading equipments, crates, pallets etc. The noncore equipments like water supply system, transformers etc are included in miscellaneous fixed assets. Buildings include, building for ripening facility, ambient and cold pack-houses, dry warehouse storages, business center, canteen etc. Revenue Assumptions Rental assumptions Based on the discussion with market players (service providers, food processors, users, traders and wholesalers) the rental charged for various facilities is tabulated below: Facilities Charges/ Unit Unit of Charge Trading Platforms/ ambient packhouses 60 Rs/sqm/month Banana Ripening Facility 1400 Rs/MT Warehouse 100 Rs/sqm/month Business Centre 200 Rs/sqm/month Crates 7 Rs/cycle/crate Weighbridge 2 Rs/MT Logistics 10 Rs/Km Cold Store 250 Rs/MT/Month Onion Store 250 Rs/MT/Season The rentals charged for these facilities are comparable to the prevailing market rates. Capacity Utilization The estimated capacity utilizations are shown in the table below. Year Year 1 Year 2 Year 3 and Onwards Capacity Utilization Agricultural Marketing Infrastructure 80% 90% 100% Value addition/ storage facilities 40% 60% 80% Basic/ Support Infrastructure 80% 90% 100% 134

143 The capacity utilizations have been assumed conservatively for value addition infrastructure, starting at 40% in the first year Financial Performance The estimated financial projections for the project are tabulated below: Income Statement: (Rs Million) Year Capacity Utilization Agricultural Marketing Infrastructure 80% 90% 100% 100% 100% 100% 100% Value addition/ storage facilities 40% 60% 80% 80% 80% 80% 80% Basic/ Support Infrastructure 80% 90% 100% 100% 100% 100% 100% Revenue A. Agricultural Marketing Infrastructure Rental Trading platforms Rental Trader Shops and Business Centre Sub Total (A) B. Value addition/ storage facilities Rental Warehouse Rental Potato Cold Store Rental Onion Store Rental Ripening Chambers Sub Total (B) C. Basic/ Support Infrastructure Rental Logistic Rental Crates Weighbridge Sub Total (C.) Revenue Expenses Power & Fuel Employee Cost Water cost Maintenance cost Insurance Admin & Selling Overheads Total Expenses EBITDA Interest Long Term Debt (LTD) Interest Working Capital borrowing Depreciation PBT Tax Net Profit (PAT) Cash flow to Government Net Profit to Private Developer In the above table, during 1st year of operation the net profit from the project is Rs millions which increases to Rs millions at maximum capacity utilization. 135

144 Major Financial Performance Indicators: Year EBITDA Margin 83.61% 85.03% 86.07% 86.11% 86.11% 86.07% 86.12% PAT margin 55.25% 54.02% 53.31% 52.01% 50.87% 49.88% 49.10% Debt Equity Ratio Debt to EBITDA ratio Interest Coverage Ratio DSCR Average DSCR Project IRR 19.33% The above table shows the operational and financial efficiencies of the project. The project is able to achieve an operating margin (EBITDA Margin) of about 85% and net profit margin of about 50% from the first year of operations itself. The project IRR is at around 19.00%, which seems attractive from the investor s perspective Sensitivity Analysis The sensitivity analysis has been given below to establish the need for capital grant support for the project. The various levels of equity contribution by private developers have been tested with minimum being 10% and the maximum being 30% of the project cost as mentioned in implementation framework The sensitivity analysis of financial performance indicator (IRR) of the project with respect to equity contribution by private bidder is given below: Equity 10% 20% 30% IRR % 58.72% 39.51% Analysis of the above table shows that with 30% of the project cost as bidder/developer s equity contribution (and 70% capital grant from state government), the private equity IRR comes to about 40% which means the project is highly attractive from bidder/developer s perspective. The spoke wise project cost, means of finance and revenue statements are given in the Annex to this section 136

145 21 ECONOMIC ANALYSIS 21.1 PATNA NALANDA IVC The background and methodology of the economic analysis have been described earlier in the report, in Section QUANTIFICATION OF BENEFITS Quality improvement leads to premium Price of the commodities The incremental price realization is calculated based on the price range available in the market for different grades (based on firmness, colour, size etc.) of the produce. The table below compares the Without Project and With Project cases to estimate the incremental benefits due to improved quality of the produce. Without Project Price (Rs/MT) With Project Estimated Additional Price Realization (%) Min Max Weighted Average Price (Rs/M T) Incremen tal Benefit (Rs/MT) Quanti ty (MT) Total Incremen tal Benefit (Mn Rs) Crops Vegetab les % 25% 13.0% Fruits % 30% 22.0% Banana % 15% 11.0% Grains % 10% 6.0% Onion % 15% 11.0% Total The incremental benefit due to quality improvement is estimated to be Rs million per annum at 100% capacity utilization. Wastage Reduction Without Project With Project Wastage Reduction Range (%) Min Max Weighted Average Selling Price (Rs/MT) Quantity Saved (MT) Total Incremental Benefit (Mn Rs) Crops Quantity Saved (MT) Vegetables % 20% 12.0% Fruits % 20% 16.0% Banana % 15% 11.0% Grains % 10% 6.0% Onion % 15% 11.0% Total The interventions in the IVC would help in reduction in wastage of about Rs million per annum with annual saving of about MT of fruits, vegetables, grains, pulses etc. at 100% capacity utilization. 137

146 Employment Generation Without Project Annual amount (Rs Mn) With Project Annual amount (Rs Mn) No. of Day/ No. of Days/ Location workers Annum workers Annum Patna Bihar Sharif Gaya Nokha Buxar Arrah Total Annual Incremental Benefit (Rs Mn) The estimated income from incremental employment will be about Rs million. Incremental Revenue from Marketing Infrastructure The investment in the IVC will help in better utilization of existing resources and will help in better price/rental realization for trader s shops etc. as estimated below: Location Without Project Area (Sqm) Rental/Sqm. Month (Rs) Annual amount (Rs Mn) With Project Area (Sqm) Rental/Sq m. Month (Rs) Annual amount (Rs Mn) Patna Bihar Sharif Gaya Nokha Buxar Arrah Total Annual Incremental Benefit (Rs Mn) 21.3 QUANTIFICATION OF COSTS Economic Cost of Project Items Sr. No. Particulars Amount (Mn Rs) Amount (Mn $) A 1 Land Land & Site Development Buildings Plant Machinery & Equipments Utilities & other Assets Sub Total (A) B Project Implementation of ADB Funds C Pre op expenses D Contingencies E Capacity Building Total Project Cost (A+B+C+D+E) Based on the earlier mentioned assumptions the estimated economic cost of the project is Rs million or million $. The exchange rate of Rs per Dollar is considered for calculation of cost of project in Dollar value. 138

147 Recurring Costs Opportunity cost of labor Location No. of workers Days/Annum Annual amount (Rs Mn) Patna Bihar Sharif Gaya Nokha Buxar Arrah Total The incremental annual income for agricultural labourers is estimated at Rs million. Opportunity cost of capital Opportunity cost of capital contributed as project grant is assumed at 10% per annum. The assumption is based on the fact that the money invested as grant can be invested elsewhere and a minimum return of 10% per annum has been assumed conservatively COST BENEFIT STATEMENT The table below shows the cost benefit statement over the life of the project. Year Capacity Utilization Value added Infra Imp Period 40% 60% 80% 80% 80% 80% 80% 80% Capacity Utilization Marketing Infra 80% 90% 100% 100% 100% 100% 100% 100% Capacity Utilization Support Infra 80% 90% 100% 100% 100% 100% 100% 100% A. Economic Benefits Quality Improvement Wastage Loss Incremental Labour Incremental Income Tax Incremental Revenue from existing infrastructure Incremental revenue Support Infrastructure Total Economic Benefits B. Economic Costs Opportunity cost of labour Opportunity cost of Capital Total Economic Cost Net Economic Benefits (A B) CALCULATION OF ECONOMIC IRR (EIRR) AND NPV Economic IRR (EIRR) 139

148 Year Imp Period Economic Investment Net Economic Benefits Net Economic Cash Flow Economic IRR (EIRR) 28% The economic IRR for the IVC is estimated to be 28%. The considerably good IRR of 28% is clear indication of the economic viability of the project ECONOMIC APPRAISAL RESULTS Major Economic Indicators: The major economic indicators considered to assess the economic viability of the project are given in the table below: NPV (Rs Mn.) 2, NPV (Million $) Benefit Cost Ratio 4.78 NPVI 1.37 NPV: The positive NPV for the project indicates the viability of the project. The NPV is calculated considering the economic life/ concession period of project as 20 years. The discounting rate for calculation of NPV is the Weighted Average Cost of Capital (WACC). The WACC is calculated by assuming the capital cost of 16% for the private investor and 10% for project grant. The calculation of WACC is shown in the table below: Details Share Cost of Capital Project Grant 90.00% 10% Equity Private Investor 10.00% 16% WACC 10.60% Benefit Cost Ratio (BCR): The average BCR over the project life is estimated to be The ration indicates that for every one $ of expense it will generate more than four times of expense over the life of project. Hence, the project is highly economic viable. Net Present Value per $ of Investment (NPVI): The NPVI of more than zero is always considered as a good indicator of the economic viability of the project. In this case, the estimated NPVI is 1.37 which is high. 140

149 BIHAR: INTEGRATED VALUE CHAINS Muzaffarpur Integrated Value Chain and Nalanda Patna Integrated Value Chain Conceptual plans of facilities Stakeholder consultation Market Assessment Impact Assessment Capacity building support Policy and regulatory aspects Implementation framework Project Implementation Structure 141

150 22 CONCEPTUAL PLANS FOR FACILITIES 22.1 CONCEPTUAL PLANS FOR FACILITIES AT SELECTED LOCATIONS OF THE IVCS The planning for the proposed facilities for different locations of the IVCs in Bihar has been evolved based on the sizes and numbers of the proposed facilities as well as essential support infrastructure such as business centre, canteen and parking etc. In Bihar, renovation/refurbishment of existing facilities is also planned and hence existing facilities in the APMC market yards have also been considered in the planning. Effort has been made to integrate the new proposals with the existing facilities. At places the existing facilities have been augmented or expanded to cater the proposed higher capacities. Also the existing locations of the various infrastructure installations and facilities have been left unchanged and integrated with the new planning for a cost effective solution for the enhanced capacity. Adequate provision of basic infrastructure such as access roads, water supply facilities for domestic industrial and fire fighting, effluents carriage and treatment, solid waste management, internal electrical distribution and communication lines has been kept in mind at the proposed facilities. Concepts of proper green areas for aesthetics and a pleasant ambience have been used besides adequate and efficient vehicular traffic access and parking to create a modern facility in eco-friendly manner Broad planning concepts for the master planning and main components design are as follows: Planning Concept The concept of the proposed Facilities is derived based on the requirements of the functions with self contained facilities. The proposed facilities shall be environment friendly facility comprising of physical and common infrastructure components interwoven with green spaces. The concept is guided by the applicable development guidelines of the Site Planning, Spatial Planning norms and principals. The design philosophy revolves around prioritizing various aspects viz., circulation, land suitability, environmental sustainability. The master plan is based on modern planning concepts of providing good and efficient internal movement, efficient layout of services with supporting infrastructure and facilities in an aesthetic environment. The existing facilities in Bihar have been surveyed and majorities have been found to be in abysmal conditions. Leave apart conducting business even mere access to the different facilities is impossible. Concepts like health and hygiene have been found to be completely absent. With no maintenance mechanism in place most have been just conducting business just because of absence of any alternate. In such conditions it has been considered to transform the existing complexes into modern, eco-friendly places of conducting business replete with all necessary infrastructure facilities that provide a sanitized and encouraging ambience 142

151 Master Plan The guiding principle of the master plans is to incorporate the principles of an eco-industrial facility by maximizing green space and open spaces, and provision of green belts. The design envisages functional and accessible work places by incorporating prudent and scientific planning principles and includes the following: 1. Provision of Basic Infrastructure to the proposed facility adequate for the proposed usage with anticipated vehicular traffic and other service requirements 2. Location of process and non-process activities 3. Location of process activities with requirement of mechanical services 4. Providing efficient access to the main road from all buildings 5. A central common facility center interwoven with green spaces 6. Provision of services area with ease of connecting with main service lines Buildings 1. Shed building are planned with dimensions optimized for economic structure. 2. Building are placed at the longer axis to provide long loading / unloading dock 3. All building are provided with proper parking and circulation area for heavy vehicles 4. Building which require mechanical services cold storage are clustered together 5. The structural design shall cater to the usage for the proposed life with wind and earthquake resistance Services 1. Adequate space has been provided to cater to the proposed usage of the facilities such as water supply, sewerage/effluent carriage and treatment, power and telecom distribution 2. Water supply and Electrical Room are provided near the main road to provide easy access to operation and maintenance also provides provision connect with main external infrastructure 3. Sewerage, Storm water drainage are planned considering the outlet towards the entrance to facilitate easy connection with external storm water drainage system Road & Parking 1. The proposed internal roads are of sufficient width and adequate parking as per requirements along with pedestrian paved path 2. The proper signage system is adopted to make sure the smooth traffic movement inside the market complex 3. The main access to the facility center is taken from at least 15mt wide road. 4. The proposed access to the facility shall connect with the existing access roads with a well-defined access to the development 5. No road shall be less than 6 meters in width of paved top 6. The secondary roads within the markets, where the movement of HMV is not 143

152 required and the transportation can be done by LMV only, the proposed road widths are 4.5 M. 7. The pedestrian walkway 2.0 m wide is also provided from Main entrance to different blocks of markets. 8. Adequate parking spaces are provided for weigh-bridge, covered Platform, shops, Godown etc. 9. A centralized parking is proposed along with driver s rest room, toilets and canteen 10. Every Building is proposed with an apron of paved area where the vehicle can park away from main road and loading/unloading can be done 11. Signage systems are proposed to clearly indicate Vehicular and pedestrian movement along with buildings, parking space and other utilities Green Area 1. The green areas planned as centralized open space to provide access from all around which provide visual relief. 2. The extent of open space shall not be less than 10 percent of the total area of the facility 3. Conceptual Master Plans along with sectional drawings for 2 market complexes, one in each zone, have been provided based on the facilities proposed as per the specific requirements LINK INFRASTRUCTURE The proposals for the various locations have been framed considering the requirements of the specific location. The basic support infrastructure like roads, power, telecom, water supply, sewerage system, storm water drainage, solid waste management has been provisioned considering the planning norms and the specific business requirements. But the proposed market complexes with modern infrastructure facilities cannot function in isolation. Efforts have been made and possibility has been explored to propose self contained facilities where possible such as solid waste management and water supply and waste water disposal. With regards to the large quantum of agricultural waste expected to be generated composting centers have been proposed which may function even without the corresponding external solid waste collection and disposal arrangements. Irrespective of the standalone facilities planned the internal infrastructure has to be matched with adequate infrastructure outside the proposed complexes and linked by suitable means for smooth functioning as planned Approach and Accessibility 1. Approach and accessibility to APMC markets, play a vital role in proper functioning of the Bazaar. 2. There are a significant number of HMV and LMV traffic coming and going out to the markets along with pedestrian movement. 3. The Approach roads to the APMC markets are required be of sufficient width along with proper signage. 4. The main Approach road should be of minimum 9m Width with proper turning radius 144

153 to the Complex along with some buffer space between main road and Entrance Gate so that if required one or two HMV could wait for some time. 5. The Approach roads at all locations proposed were found to be of insufficient width, and lacking in proper signage system. 6. The Approach roads need to be widened and at some places a slip road has to be proposed so that entry/exit to and from the markets do not lead to congestion of general traffic, as would be the case in the present condition. 7. In the proposals, where ever possible, slip roads are considered and entry or exits are provided to lead on to these roads. In some cases, where the space is not available for the slip road, the main entry/exits are located after providing the buffer space so that general traffic would not be affected with the movement of HMV/LMV to and from these markets. 8. Proper Signage are proposed and recommended regarding the Entry/Exits of Markets along with the approach lane to follow Linkages for Power, Water, Storm Water etc. A detailed study of the available infrastructure outside the proposed marketing complexes has not been undertaken in the scope of work of the present study. However, generally there is a need to augment the external infrastructure in all fields such as roads, water and waste water, storm water drainage, power and telecom etc General Design Considerations The proposals has been drafted considering the prudent engineering practices in provision of the various infrastructure as well building facilities. The proposals for 6 locations in Bihar have been formed in detail considering the requirements and survey of existing facilities. The master plans have been drawn and the cost estimates have been prepared accordingly. The cost estimates of the remaining 5 facilities in Bihar have been prepared according to the requirements and prevalent costing norms with help from the similar proposals. The major technical considerations are as follows Electricals Electrical services are one of the most important services of any complex. Various Electrical facilities for the building have been envisaged considering the usage of area, patterns of electrical load and relevant Indian Standards / Codes. Power supply for the complex shall be catered at 11 KV from the Bihar State Electricity Board and stepped down to 415 V using distribution transformers for further distribution. This report gives the brief design criterion proposed to be adopted on the various facilities of the Electrical System. The design shall be based on Indian Standards, IE rules, NBC and NEC, CPWD Specifications and all the statutory requirements shall be complied with. Power Supply And Sub Station : D.G. SETS: 1. Considering the chronic power shortage in the country and increasing power cuts by Bihar State Electricity Board it is essential to have alternative power source to meet 145

154 electrical requirements under power failure / break down conditions. DG Sets of adequate capacity shall be provided to meet all the requirements of the building in non-availability of power grid 2. Considering 80% loading on DG Sets, 90% load of Cold storage various sizes of DG Sets with AMF facilities are proposed as an emergency power supply for the complex. 3. The Transformers and DG Sets shall be connected in parallel so that operational flexibility shall be available in case of break down in Transformer or DG Sets. L.T. Panels: The LT Panels shall be provided with sufficient number of ACBs/ MCCBs, through which required number of feeders shall be catered for various purposes. The panel shall be in compartmentalized design and it shall be totally enclosed floor standing and cubical type, accessible from front preferably with cable entry from top/as per site condition. The bus bar of the panel shall be made of High Electrolytic Conductivity Aluminum strips. The transformer and the panel shall be connected through adequate sized 415 V, 3 phase, 4 wire cables. Power Correction System: 1. As per the condition of supply of Electricity Board, consumers are advised to improve and maintain the power factor of their installation 0.9 or above because of various advantages. Improvement in the power factor would affect savings in the energy bill. Also the life of individual apparatus can be increased considerably by high power factor. For the improvement of power factor, suitable size of capacitor panel banks shall be provided. The Capacitor Banks shall be a part of LT Panel. 2. Automatic power factor correction relay of reputed make shall be provided to sense the power factor of the system and switch on the capacitors depending on the system requirements. The power factor shall be maintained around 0.95 to 0.98 through this system. Lighting: 1. Lighting shall be designed according to the required illumination levels as per Indian Standard / NBC Code. Generally, energy efficient CFL light fixtures matching with the internal layout have been proposed for the each building. Special emphasis shall be given on low energy consumption light fittings especially in the Corridors and in Walk-ways where suitable make light fitting with compact fluorescent 26/18/14W lamps are proposed to be provided. Light fixtures shall be used with electronic ballast for energy savings. 2. Similarly, energy efficient CFL Lamps fitting shall be provided for External Lighting. All the light fittings shall be provided with energy saving devices. The final selection of the light fittings shall be made in consultation with Architect / Client/ Consultant. 3. The number of light points and socket shall be based on the accepted norms usually followed for this type of Building. The Illumination levels or Lux levels of different areas have been based on the NBC Code and are as follows: S.No. Description Lux Level 146

155 1. Common Areas lux 2. Office Areas lux 3. Pump Rooms / Sub Station 200 lux 4. Parking Areas lux 5. Lobbies / Corridors 200 lux 6. Staircase Landings 200 lux 7. Cold Storage lux 8. Covered platform in Mandi Area 200 lux Cabling: All MV Power Cables provided for power distribution shall be armoured PVC sheathed and XLPE insulated Aluminium Conductor, 1.1 KV grade, conforming to IS:1554. Appropriate Screened Copper cables / wires shall be used for all special purposed and Communication Systems. Earthing System: Considering the hazardous nature of electrical energy, safety measures in using this energy is of paramount importance. Earthing System is one of such safety systems. It is proposed to provide effective Earthing System conforming to IS : All non current carrying metal parts forming the Electrical System shall be connected to the Earthing System as per the requirements of Indian Electricity Rules and local Statutory requirements. The Earthing System shall be so designed that the resistance of the Earthing Network shall be less than 1.0 ohm at any point of the system. The Earthing System is proposed as follows: Sub - Station Equipments: a. Transformer Neutral Earthing Copper (600x 600 x 3.15mm) Plate Earthing b. Transformer Body Earthing G.I. (600 x 600 x 6mm) Plate Earthing c. H.T. Switch-Gear Earthing Copper (600 x 600 x 3.15mm) Plate Earthing d. D. G. Set Neutral Earthing Copper (600 x 600 x 3.15mm) Plate Earthing e, D.G. Set Body Earthing G.I. (600 x 600 x 6mm) Plate Earthing Panel Earthing: a. L.T. Panels Earthing G.I. Plate Earthing b. Distribution Boards Earthing PVC Insulated Copper wire with sub mains. c. Equipment Earthing G.I. Plate Earthing d. Lighting / Power Point Circuits 1.5/2/4.0/6.0 Sq mm PVC insulated Single Core Green Wire e. Laboratory Equipment/UPS/ Copper Plate Earthing f Server/EPABX Earthing Sanitary Installation, Water Supply and Fire Fighting Systems The objective of the design is to achieve the most efficient and high quality system to meet the required standards. It is therefore essential to spell out and understand the basic 147

156 objectives of design of all the services. This would assist in the detailed engineering and preparation of final working drawings for execution. The sanitary engineering services covered in this project for which detailed engineering handled are : Plumbing Sanitary fixtures, chromium plated fixtures and accessories. Soil, waste and vent pipe systems. Cold water supply. Rainwater pipes and disposal,rain water harvesting. External sewerage disposal including connection up to existing manhole. Municipal water connection, storage tanks and overhead tanks. Construction of tubewell, pumps and accessories. Garden irrigation system. Sewage treatment plant Fire Protection System 1. External Fire hydrant system. 2. Under ground and overhead fire reserves. 3. Fire pumps and ancillaries. In the planning of all the above services following objectives have been kept in view. 1. Effective and efficient disposal of all wastes from the building quickly. 2. Prevention of back flow of waste waters from external sewer or other sources and minimizing the possibility of encroachment of rats, insects from main sewers or manholes by adequate trapping of all fixtures. 3. Easy access to all services for proper maintenance with adequate number of cleanouts, door bends and access points. 4. Protection of pipe lines from corrosion and accidental damage. 5. Prevention of pollution of surrounding environment. 6. Supply of water in adequate quantity and pressures in all areas on 24 hour basis. 7. Selection of materials and equipment of best indigenous makes requiring minimum maintenance and repairs. 8. Piping system to be so designed as to prevent, as far as possible and practical, any obstruction to normal movement of men and materials and be generally aesthetically pleasing. 9. Statutory requirements of all the services 10. All sanitary services shall be designed as per Indian Standard code of practice relevant to the service and the services are modified to suit local conditions, architectural and structural considerations of this particular project. 148

157 Soil, Waste And Vent Pipe Systems The system shall be designed on TWO PIPE SYSTEM as recommended in code of practice for soil and waste pipes above ground (IS: ). External Sewerage Sewerage from the building will be collected by means of underground sewerage system and connected to the Sewage Treatment plant. Manholes would be provided at all junctions and turning points and generally not exceeding 30 mt. in distance. Material a. All soil, waste and vent pipes shall be CI spun Iron pipes with drip seal/lead joints. b. The waste pipes used for wash basins and sinks shall be GI /upvc of designated class. c. Pipes used for external sewerage system shall be CILA pipe due to uneven and rocky soil. Disposal All the rain water from the building roof and area around the building shall be connected separately taken up to open surface drain with grating and gully grating chambers and covered peripheral drains. These drains shall be further connected to rain water re-charge pits and the overflow shall be connected to the municipal storm water disposal system/nallah. Material 1. Pipes used for rain water inside the building shall be upvc 6kg/cm2 pipes with drip seal joints. 2. Pipes used for storm water drainage shall be RCC. Water Supply System a. Owing to shortage of Municipal water supply, it would be necessary to augment the same by providing tubewells within the site. b. Untreated tubewell water shall be utilized for garden supply. c. The estimated total population, requirement of water supply and the proposed storage capacity for the project is given in separate Annexures. Potable Water (Non Flushing): a. The water supply from City Water Supply (Municipal Main), Borewells & Truck fill point shall be brought to underground fire storage tank and overflow from fire storage tank shall be taken to raw water storage tank in order to replenish the fire storage water. b. The water from Raw Water Storage Tank shall be pumped through dual media pressure sand filter, activated carbon filter Softener Cum brine tank & taken into underground Treated water storage tank (Soft). 149

158 Flushing Water System (Recycled from STP): Recycled water from Flushing cum Irrigation Water Storage Tank located at Sewage Treatment Plant (STP) shall be pumped through battery of two pumps (One working & one Standby) to over head Flushing Water Storage Tank. Distribution System Water from the tubewell and Municipal supply are connected to a fire reserve. The overflow is collected in to raw water tank. Water from this raw water will then be passed through filter and polishing softener as required and stored in domestic treated water tank. The entire site is divided into two wings for easy running and maintenance. Irrigation System The premises comprises of irrigable area such as planter, lawns etc, hydrant system is proposed as per Landscape/ plantation design. Source of Water: The irrigation water shall be made available from treated effluent of sewage treatment plant (STP). Sewerage: Drainage system for soil & waste is based on the most efficient, functional design, minimum maintenance after installation and available side topography to minimize the excavation work in laying the pipes; two pipe system (soil and waste) is proposed to carry soil and waste separately from the building under gravity. Waste pipes are connected to manhole through gully trap and soil pipes are to be directly connected to the manhole. The main drainage is carried through a battery of manholes and finally discharged into Sewage Treatment Plant (STP). Sewage Treatment Plant: Sewage Treatment Plant of capacity shall be provided in the final requirement of 80% domestic water. The Waste Water Treatment System will be treated using an extended aeration activated sludge type system consisting of following system:- Component I [Pre Treatment]: Screen Chambers Collection cum Equalization Tank Solids handling sewage transfer pumps. Bypass pump from equalization tank to municipal sewe Component II [Secondary / Biological Treatment] : Aeration Tank Clarifier Tank (Secondary settling tank) Chlorine Contact Tank\ Chlorine Dosing System Aerobic Sludge Digester cum Thickener Tank 150

159 Sludge Disposal Pump Sludge Recirculation Pump Component III [Tertiary Treatment] : Filter Feed/Backwash Pumps Pressure Sand Filter Activated Carbon Filter Softener cum brine tank Soft Water Storage Tank Soft Water Transfer Pumps Irrigation cum Flushing Tank Irrigation Water Transfer pump Flushing Water Transfer Pump. Storm Water Drainage System : Storm water drainage systems will be designed based on a rainfall intensity of 70 mm per hour. Rainwater harvesting pit of size 3m dia x 3.5m effective depth shall be provided. Storm water drainage system will be provided for the building roof drainage and the site drainage. The Storm water will be collected by gravity through catch basin, storm water manhole and RCC pipe and finally discharge to the Rainwater Harvesting Pit. Overflow of rainwater harvesting pit shall be discharged to city storm water drain/storm water sump Solid Waste Management Solid waste management is an important aspect of wholesale fruits and vegetable markets. On the one hand, the large amounts of organic-vegetable wastes emanating fro these markets are a valuable resource, while on the other, mismanagement of this resource, lead to much scenic blight, filth and pollution, contributing to an overall poor level of environment in these markets. In the proposal for the Bazaar Samiti markets in Bihar, Solid-waste management, has been planned and integrated in a systematic way, so as to achieve resource recovery in a natural, organic and sustainable manner. In each market, provision for solid waste management is provided as following: Local level organic waste collection chambers are proposed in close vicinity of (i) shops, (ii) open and covered platforms, (iii) stores, and (iv) godowns, in relation to anticipated waste generation per day. These wastes from the local waste collection chambers would be transferred to one centralized location within each bazaar, where there would be a facility for vermi - composting /composting, for organic recycling of waste. After recycling of these wastes into manure, the compost would be sold back to farmers for application in their fields. 151

160 The surplus/ excess organic wastes [which cannot be treated within the site due to space constraints] are proposed to be transferred to a nearby location for composting/ vermicomposting. The compost would then be brought back to the bazaar and sold to farmers. The proposed method for organic-vegetable solid-waste management is consistent with natural ecological principles and environmental good practices. Flow Chart showing the solid waste management process Shops Platforms Godowns Stores Organic Vegetable Waste Organic Vegetable Waste Primary Collection h b Primary Collection h b Primary Collection h b Primary Collection h b To Composting/ Vermicomposting on site Centralized Organic Vegetable Waste Collector Organic Manure Other Suitable Nearby Location for Composting / Vermi Composting For Sale to the Farmers through Bazaar Samiti Fire Protection Measures 1 Type Of Risk 1.1. Since the project is mainly used as Mandi, the type of risk can be categorized as under NBC / TAC. 2. Proposals 2.1 It is proposed to have a total protection system best suited for this Project and also as per the directives of NBC/ TAC Fire Service. These shall include the following. a. External Fire Hydrant system b. Automatic pumping set for the systems. c. 2,00,000 ltrs underground fire reserve in one compartment accessible for hydrant systems. d. Fire fighting hand appliances of various categories to be located throughout the Campus. 3. Fire Reserve 3.1 It is proposed to have an underground storage tank of 2,00,000 ltrs, in one 152

161 compartment exclusively for firefighting purposes. The tank is located in such a way that it is readily accessible to fire appliances. Necessary manholes shall be provided in this tank to enable the fire brigade to draw water from the tank in case of necessity. A three way fire service inlet shall be provided for the underground storage tank. 4. Source Of Water Supply a. For underground tank: From Municipal mains with additional supply from tubewells at site. 5. External Hydrant System 5.1 It is proposed to have External hydrant system throughout the Campus. Yard fire hydrant shall be provided on the main fire line The minimum outlet pressure at the top most hydrant would be 6.5 kg/sqcm. 5.2 The system would be permanently connected to the fire pump outlets by a common header of 200 mm dia. 5.3 External hydrants connected to the fire line have been proposed in the proposed complex TECHNICAL PROPOSALS FOR UP GRADATION OF APMC MARKET COMPLEX Survey has been carried out to map existing facilities and infrastructure of 6 locations. Information has also been gathered from other sources to map the existing facilities at the proposed locations. Based on inputs from value chain analysis new facilities have been proposed to cater to enhanced requirements as well as to fill up crucial gaps along the value chain. Master Plans for these 6 locations with specific proposals for basic infrastructure facilities have been worked out and presented herewith. The surveyed locations are Muzaffarpur, Hajipur and Dalsinghsarai in Muzaffarpur region and Patna (Musallapur), Bihar Sharif and Buxar in Nalanda region. The locations considered are a representative sample of the proposed facilities in both the IVCs and cover all the aspects of development of Integrated Value Chains. The proposals for the other locations have been prepared based on similar considerations. Based on the assumptions and specifications mentioned above, the estimates of power and water requirement for all the identified hub and spoke locations in Bihar have been calculated. The calculations of the requirements of power and water in Muzaffarpur hub have been given below, as an illustration. Similar calculations have been done for the other hub and spokes in Bihar. The calculation for electric load required for Muzaffarpur Hub is given below: Sr. No. A) Facilties ELECTRICAL LOAD Area in Sq. Feet. Lighting 1 W/Sq. Feet Total Load in KW D.F. Maximum Demand Power 1.5 W/Sq. Feet Total Load KW in D.F. Maximum Demand 1 Covered Platfrom Open Platfrom Whole Sale 3 Traders Shop

162 4 Retail Shop Traders Shop Admin./ Buisiess/ Knowledge Center Bank Extention 7 Counter Multi Processing 8 Unit Godown Stores (Onion) Pack House Cold Parking Waste Yard Weigh Bridge Canteen Potato Cold 16 Storage Ripening Facility Total of Electrical Load (A) B) COMMON AREA LOAD 1 Plumbing Pump Load Fire Fighting Load External Lighting Load Total Load of Common Area (B) 40 Total Maximum Demand (A+B) Rounded off 1200 The calculation for water requirement for Muzaffarpur Hub is given below: Sr. No. Facilities Estimated No. of Daily Users Water requirement Litre Per Person/Day Total Requirement (Litres/Day) 1 Open Platfrom Whole Sale Traders 2 Shop Retail Shop Traders Shop Admin./ Business/ 5 Knowledge Center Toilets Bank Extention 8 Counter Multi Processing Unit Ls Godown Pack House Cold Parking Canteen Potato Cold Storage Drivers Rest Area Rest / Guest House 17 (Extra) Misc 10% 7655 Total Water Requirement Water 154

163 22.4 COST ESTIMATES FOR IVCS IN BIHAR Muzaffarpur IVC The engineering cost estimates of Muzaffarpur IVC, based on the specifications given earlier, are given below: Land Development: In Rupees Mn Muzaffarp Hajipu Darbhan Dalsinghsar Begusar IVC IVC (Mn Facility ur r ga ai ai $) Existing Road Proposed Road Paving Water Supply Sewerage Line, Waste(Solid/Water) Treatment, and Recycling Street Lighting Storm water drain and RWH pits Boundary wall ( Repair) Total Land Development The above costs have been calculated based on the master plan and drawings prepared by engineering, industrial infrastructure and cold chain experts. The total construction areas required for various existing/proposed facilities in each spoke of the IVC and rates of construction are given below: Facilities Unit Number of Units Cost/Un Muzaffarp Hajipu Darbhang Dalsinghsar Begusar it (Rs) ur r a ai ai Existing Road Sqm Proposed Road Sqm Paving Sqm Water Supply Ha SewerageLine, Ha Waste(Solid/Water) Treatment, and Recycling Street Lighting Nos Storm water drain and RWH pits Boundary wall ( Repair) Buildings: RM RM The cost of existing/proposed buildings of Hub and all spokes in Muzaffarpur IVC is given below: In Rupees Mn Muzaffarp ur Hajipu r Darbhang a Dalsinghsar ai Begusar ai 6.60 IVC Mn $ Facility IVC Existing buildings Trading Platform Trading Shops

164 Buildings ( Admin Building, Toilets, canteen, Pump House, Check Post, Bank, Ware Houses, etc Sub Total (A) Proposed buildings Packhouse Cold Chain Fruit Pulping plant (2 MT/ Hr) Packhouse Ambient Trading Platforms Warehouse 5000 MT Potato Cold Store MT Onion store Ripening chamber Traders Shops Guest House Business centre Knowledge centre Utilities Sub Total (B) Total (A+B) The total construction areas required for various existing/proposed facilities in each spoke of the IVC and rates of construction are given below: Rate/Sq. m. Muzaffarp Buildings (Rs) ur A. Existing buildings in Sq. m. Hajipu r Darbhang a Dalsinghsar ai Begusar ai Trading Platform Trading Shops Buildings ( Admin Building, Toilets, canteen, Pump House, Check Post, Bank, Ware Houses, etc Sub Total (A) B. Proposed buildings Packhouse Cold Chain Fruit Pulping plant (2 MT/ Hr) Packhouse Ambient Trading Platforms Warehouse 5000 MT Potato Cold Store 5000 MT Onion store Ripening chamber Traders Shops Guest House Business centre Knowledge centre Utilities Sub Total (B) Sub Total (A+B) LS

165 Miscellaneous Fixed Assets / Utilities The requirements of power and water have been estimated based on industry norms. The estimates have been prepared based on market rates and similar projects costing norms. The break-up of the estimated cost of the miscellaneous fixed assets and utilities at each spoke is provided below: In Rupees Mn Facility Muzaffarpur Hajipur Darbhanga Dalsinghsarai Begusarai IVC IVC (Mn $) DG sets Power supply system IT system Furniture Sub Total (5) Patna Nalanda IVC The engineering cost estimates of Nalanda IVC, based on the specifications given earlier, are given below: Land Development: Facility Existing Road Proposed Road Paving Water Supply SewerageLine, Waste(Solid/Water) Treatment, and Recycling Street Lighting Storm water drain and RWH pits Boundary wall ( Repair) Total Land Development In Rupees Mn Patn Bihar Gay Nokh Buxa Arra IVC (Rs a Sharif a a r h Mn) IVC (Mn $) The above costs have been calculated based on the master plan and drawings prepared by engineering, industrial infrastructure and cold chain experts. The total construction areas required for various existing/proposed facilities in each spoke of the IVC and rates of construction are given below: Bihar Sharif Gaya Nokha Buxar Arrah Rate/ Unit (Rs) Land Development Unit Patna in Sq. m. Existing Road Sqm 3,500 4,200 2,328 2,205 4,800 2,333 1,500 Proposed Road Sqm 12,000 10,500 5,819 5,513 11,500 5,833 2,000 Paving Sqm 14,900 9,000 4,988 4,725 14,500 5, Water Supply Ha ,000 SewerageLine, Waste(Solid/Water) Treatment, and Recycling Ha ,000,

166 Street Lighting Nos ,000 Storm water drain and RM 5,600 4,800 2,660 2,520 7,500 2,667 3,000 RWH pits Boundary wall ( Repair) RM 1,800 1, , ,500 Buildings: The cost of existing/proposed buildings of Hub and all spokes in Nalanda IVC is given below: In Rupees Mn Facility Patna Bihar Sharif Gaya Nokha Buxar Arrah IVC IVC Mn $ A. Existing buildings Trading Platform Trading Shops Buildings ( Admin. Building, Bank, Ware Houses, etc Sub Total (A) B. Proposed buildings Packhouse Ambient Trading Platforms Warehouse 5000 MT Potato Cold Store 5000 MT Onion store Ripening chamber Traders Shops Guest House Business centre Knowledge centre Utilities Sub Total (B) Total (A+B) The total construction areas required for various existing/proposed buildings/facilities in each spoke of the IVC and rates of construction are given below: Facility Unit Patna Bihar Sharif Gaya Nokha Buxar Arrah Rate/ Unit A. Existing buildings in Sq. m. (Rs) Trading Platform Sqm Trading Shops Sqm Buildings ( Admin. Building, Bank, Ware Houses, etc Sqm Sub Total (A) B. Proposed buildings Packhouse Ambient sqm Trading Platforms sqm Warehouse 5000 MT sqm Potato Cold Store 5000 MT sqm Onion store sqm Ripening chamber LS Traders Shops sqm Guest House sqm Business centre sqm Knowledge centre sqm Utilities sqm Sub Total (B) Total (A+B)

167 Miscellaneous Fixed Assets / Utilities The requirements of power and water have been estimated based on industry norms. The estimates have been prepared based on market rates and similar projects costing norms. The breakup of the estimated cost of the miscellaneous fixed assets and utilities at each spoke is provided below: In Rupees Mn Facility Patna Bihar Sharif Gaya Nokha Buxar Arrah IVC IVC (Mn $) DG sets Power supply system IT system Furniture Total MASTER PLANS AND BASIC INFRASTRUCTURE PROPOSALS FOR THE SIX REPRESENTATIVE LOCATION Muzaffarpur Musallahpur Hajipur Bihar Sharif Buxar Dalsingsarai 159

168 23 STAKEHOLDER CONSULTATIONS During the course of the preparation of the Detailed Project Reports, various stakeholder consultations were carried out in both the states of Maharashtra and Bihar. Consultations with various stakeholders were conducted mainly during the phases II (during detailed field surveys and analysis and consultations were held mainly with farmers, traders, cold store/warehouse/packhouse owners and other intermediaries in the value chains) and III (which mainly consisted of stakeholders consultations with food processors, organized retailers, exporters, and others) of the study. During the field surveys, in-depth interviews and Focus Group Discussions (FGDs) with farmers, traders/wholesalers, cold store/warehouse/packhouse owners etc were held in most of the important locations of the value chains. The stakeholders were asked about the details of the value/supply chains of the identified crops in the regions, trade practices, constraints faced by them as crucial members of the chains, gaps and market dynamics. Through such meetings and discussions, validation of data was also done at all major locations along with identifications of major clusters in the regions. In case of the consultations with food processing and agri-business industries, exporters, organized retail chains, potential investors, government representatives, etc, interviews, group meetings and brain storming sessions were held in Delhi, Mumbai, Patna and some other major cities in the states of Maharashtra and Bihar IVCS IN BIHAR As discussed earlier, the focus of the project in the context of Bihar will be modernization/upgradation of erstwhile APMC markets. Many of these markets are still operational with traders/wholesalers, etc operating markets with very wide network of backward linkages with farmers, Post Harvest Contractors (PHCs) etc. who are vital to the functioning of the present value chains. Keeping these in view, the present traders/wholesalers (and even retailers as well) in these markets, traders organizations, etc have been given due importance during stakeholders consultations in Bihar and their views, concerns and feedback about the project and its implications have been noted and considered during the designing the implementation framework for the project in Bihar. Apart of that, other stakeholders such as farmers, local processors, cold chain and packhouse owners and industry players have also been consulted for their valuable inputs in the course of the study. The summary of the stakeholder consultations (per major stakeholder groups) in Bihar are given below: Farmers During the detailed field surveys, several interviews and FGDs with farmers were organized with the objective of gathering information on the farming practices, trading practices, constraints, gaps and other details of the value chains of the identified crops for both the regions. Availability and status of post harvest and marketing infrastructure were also assessed through the consultations. Both orchard owners/cultivators and farm 196

169 owners/cultivators were consulted for understanding the dynamics of fruit, vegetable and grain value chains in the identified regions. During the consultations, extensive farm and orchard visits were also conducted. The farming technologies used in the state are out-dated and there is a lack of knowledge of modern technologies and their benefits in agriculture. It was learnt from the farmers that agricultural loans are not easily received for the financial institutions and in most of the cases the famers depend on the traders/wholesaler of PHCs for informal credit. Moreover, farm proximate infrastructures are almost negligible and hence there is high wastages and low storage capacities in the state. The Post Harvest Contractors (PHCs) were also consulted at different stages of the study with the objective of understanding their role in the value chain along with their modes of operations. Their relationship with the farmers and traders were also studied. The major concerns which came out of the consultations with farmers and PHCs are as follows: Lack of quality inputs such as seeds, fertilizers, pesticides, equipments, etc affects the productivity and the quality of the produce. Absence/negligible presence of farm farm-proximate/post harvest and proper storage infrastructure which leads to higher wastages and distress sales Lack of access to formal credit leads to dependency on traders/wholesalers/cold store owners which reduces the profit margin of the farmers in many cases due to high interest rates (many times which are hidden as lower than market rates offered to farmers, etc.) Asymmetry in market intelligence about price and demand of produce in the markets which does not allow the farmers/phcs to gain on temporal/locational arbitrage Traders/Wholesalers/Local processors/cold Chain Owners Several FGDs (mostly with traders/wholesalers) and interviews with traders/wholesalers/local processors/cold chain owners were conducted in different markets in the identified districts of Bihar. The consultations were helpful in capturing the details of their role, trade practices and other aspects of the value chains. As mentioned, the present traders/wholesalers operating out of the erstwhile APMC market yards are a very important group of stakeholders and hence the AIDP project was explained to them in details to get their views, feedback and concerns regarding the same. One of the main issues which came out of the discussions is their concern about the continuation of their rights of operations and shop ownerships in the markets after the development under the project. The potential role of the traders/wholesalers in SPV formation was also discussed. Other major concerns of this group of stakeholders include lack of scientific storage facilities for perishables which reduces the holding period and hence the traders/wholesalers are unable to capitalize on the time arbitrage of the produces. Moreover, although they are willing to invest in modern post-harvest infrastructure with the support of government however, the knowledge of modern technologies available for the same is absent. The traders/wholesalers are also concerned about the common services and maintenance (such as garbage removal, etc.) of the market yards in Bihar as after the repeal of APMC Act in Bihar, such services have not been provided by the APMC/state government. The other issues flagged by the traders/wholesalers are security concerns and difficulty in truck 197

170 movement to the market yards due to congestion in the city roads (most of the erstwhile APMC markets are situated within the city limits). The cold store owners have very limited knowledge of the modern cold technologies. The cold store operations/technologies are also not efficient which increases the cost significantly. The details have been discussed in the value chain chapters. Capacity building measures are required in this regard Industry Players Several food processing and agri-business industry players, exporters and organized retail chains were interviewed in the course of the project. Their perceptions about business opportunities and experiences of doing business in Bihar were discussed in details. The project concept was placed with them and their feedbacks were noted. The major feedback received from the industry players are as follows: The market infrastructure should be developed in the PPP mode for better efficiency The land transfer issue should be carefully considered as it is sensitive in nature Since the local traders may lack technical expertise in the managing the market professionally, role of a technical partner should be considered Time bound subsidy and grant announcement is desirable for private sector. Clarity on the disbursement of loan with state government guarantee is desirable Some Major Stakeholder Consultations in Bihar: Stakeholder s Consultation Meet at Patna A stakeholder consultation meet for AIDP was organized by IL&FS Clusters on 22 nd December, 2009 at Patna. The participants of the meet included the following: Director, Horticulture, Department of Agriculture, Government of Bihar Director, Bihar Agriculture Management & Training Institute (BAMETI) IL&FS Clusters representatives Representatives of Traders Association from APMC markets Food Processors President, The Confederation of Indian Industry (CII) Farmers groups The meet started with an introduction of the project by Director, Horticulture and he presented the background of the stakeholders meeting as an important step in moving forward in modernization of the APMC markets. He also explained the three probable models of implementation of the project: 1) Design Build Operate and Transfer (DBOT) Model where a large private developer enters into a contract with the state government by which the mandi is transferred to it for an mutually agreed period of years. The facilities would be built and operated by the private developer and it would transfer it back to the government after the contract period. 198

171 2) A company would be formed by state government with traders/wholesalers as equity partners for developing the market as well as its operation and management 3) Government would develop the markets by making the capital investments. However, the O&M would be taken care of by the traders associations present in the markets. The pros and cons of each model were discussed and feedbacks were received from each of the stakeholder groups. During the course of the discussion several concerns and views came up. Continuation of the rights of the traders/wholesalers to operate from the market was discussed. Ownership issues of their shops were also discussed. Traders/Wholesalers were also concerned about the modalities of formation of the SPV, their capacity to invest, fate of temporary traders, etc. The feedback from the industry partners were mainly about careful handling of land transfer issues, need of technical partners, etc. Stakeholder s Meeting at Musallahpur, Patna A stakeholder consultation was conducted at Musallahpur APMC Market, Patna on 21st January, 2010 for AIDP. The participants of the meet included the following: Representatives of Asian Development Bank (ADB) Representatives of the State Government Farmers Traders from different Markets Representatives of Traders Associations from APMC markets IL&FS Clusters representatives AIDP was discussed with the participants with a focus on the following: The existing APMC markets would be the locations for the Integrated Value Chains (IVCs) There will be a mother SPV at state level and SPV for each IVC. State-promoted SPV will be responsible for the renovation, upgrading and construction works of the marketing and support infrastructure along the value chain. GoB will retain 51% of the SPV shares and 49% will be bid out to private sector players which would include the existing traders as partners. This would be one of the bidding parameters. The share of GoB will be diluted over a period of time The above points were well received by the stakeholders and a positive response was witnessed BIHAR: PERSONS CONTACTED The potential investors who have been contacted/ consulted during the AIDP study are given below: Mr. Bhadri Narayan, General Secretary, Fruit Merchant Association, Musallapur Market, Patna President, Potato Traders Association, Mussllahpur Market, Patna Sri. S Balaji, Managing Director 199

172 GreenPort Corporation Pvt. Ltd. Mr. Munna Khan, Fruit Merchant Association, Hajipur Market Mr. Sanjay Nandrajog, Chief Executive FieldFresh Foods Pvt. Ltd. Mr. Mayank Jalan, Managing Director Keventer Agro Ltd. Mr. Vinit Kumar, Chairman and Mr. Shyam Mahale Temptation Foods Ltd. Director Bengal Salarpuria Eden Infrastructure Development Company (P) Limited Mr. Sunil Kumar Pandey, Rice Miller, Sasaram Mr. A. Kumar Rice Miller, Sasaram Mr. Manish Kumar Rice Miller, Sasaram Other Contacts Apart from the above list, the organizations with whom IL&FS Clusters have been in touch for other projects such as Modern Terminal Market, Mega Food Park, etc and who may also considered as potential investors for the AIDP projects in both the states are: Mr. A. Srinivasa Ramanujam, AVP - Operations Adani Agrifresh Ltd. Mr. B.B. Pattanaik, Chairman & Managing Director Central Warehousing Corporation Mr. M C Goyal, Chief Executive Officer Deepak Fertilisers & Petrochemicals Corp. Ltd. Mr. Kishore Biyani, Chairman Future Group Mr. Mayank Jalan, Managing Director Keventer Agro Ltd. Sri Arvind Jhamb, CEO Ruchi Infrastructure Ltd Mr. Vinit Kumar, Chairman Temptation Foods Ltd. Mr. Arun Uppal, Head New Businesses Hariyali Kisaan Bazaar Mr. Mike Cockrell, Chief Merchandising Officer Bharti Wal-Mart Pvt. Ltd. Mr. Thomas Varghese, CEO Aditya Birla Centre Mr. R. Sreeram, Vice President-Manufacturing Dabur India Ltd. Mr. Shrijeet Mishra, Hindustan Unilever Ltd. 200

173 Hindustan Unilever House Mr. S Sivakumar, Chief Executive-Agri Businesses ITC Limited Mr. Sumantra Banerjee, President Spencer s Retail Ltd Mr. Anil K Choudhary, Managing Director & CEO National Bulk Handling Corporation Mr. Sanjeev Asthana, President & CE, Agri Business & Food Supply Chain Reliance Industries Limited Dr. J. S. Yadav Premium Farm Fresh Produce Ltd. Sri S K Jain LMJ International Limited Mr. Vimal Mody, General Manager Usha Breco Realty Pvt. Ltd. Sri Sushil Kumar Agarwal, Director Haldiram s Mega Food Parks Private Limited Sri Raja Mehta Indiabulls Real Estate Limited Mr. Vipin Jain, Vice President (Finance) Negolice India Ltd Mr. Makarand Khanolkar, Vice President Unity Infra Projects Limited Mr. Avinash Rangnekar, Ace Agro Industries Private Limited Mr. Malamma B Bidari, Chairman & Managing Director FOREMMS Industries Limited Director Bengal Salarpuria Eden Infrastructure Development Company (P) Limited Pantaloon Retail (India) Limited Ruchi Soya Industries Limited 201

174 24 ASSESSMENT OF MARKET DEMAND India is the world 4 th largest economy on purchasing power parity basis. India is also the second fastest growing major economy in the world, with a GDP growth rate of 6.7 percent in India s economic growth has accelerated significantly over the past two decades. Real average household disposable income has almost doubled since With rising income levels, household consumption has increased manifold with the emergence of a redefined middle class. The country is on the brink of becoming an economic powerhouse and it is gaining huge attention from global players as an excellent investment destination. Indians with an ability to spend over US$ 30, 000 per annum on PPP basis account for around 3 percent of the country s total population. With a population base of 1.07 billion, this segment amounts to 20 million people. High economic growth has led to increased disposable income for the booming Indian middle class, which is estimated to reach a size of 582 million from its current size of 50 million by Accordingly, the disposable incomes are set to rise at an average rate of 8.5 percent by Maharashtra is the largest economy in the country with a high per capita income of US $ It is also among the most industrialized states, which is coupled with availability of skilled manpower, enabling infrastructure and a strong institutional framework. Maharashtra is the second most populous state in the country with a population of 96.9 million 4. It is also the second most urbanized state in the country, with 42 per cent of the people living in urban areas. Bihar, on the other hand, has a per capita income of US $ 139 5, which is much below the national average of US $512. The total population of Bihar is million. Unregistered units dominate the industrial sector of the state and the major industries are Tea and dairy ASSESSMENT OF FOOD MARKET IN INDIA The size of the Global Food Industry is estimated at around US $3.6 trillion and India accounts for less than 1.5 percent of the international food trade. India currently produces about 50 million MT of fruits, which is about 9 percent of the world s total production of fruits and 90 million MT of vegetables, which accounts for 11 percent of the world s total vegetable production. Despite its large size, only 6 percent of the processed foods are traded across India s borders as compared to 16 percent of major bulk commodities. Hence there is huge scope for export of value added food products in the international market. 1 NACER Research 2 Ernst & Young Research, Data: census 5 IBEF 202

175 The Indian food market in 2007 has been estimated at around US$ 200 billion 6 and is slated to reach US$ 310 billion 7 in Food products are the single largest component of household consumption expenditure. Food and beverages (including tobacco) accounts for one third of the household expenditure. A survey done by NCAER reveals that food and beverages accounts for 35 percent and 32 percent of household expenditure in mega cities and boomtowns. It is estimated that by 2025, food and beverages segment will still be the biggest category in terms of consumer spends, though its share would drop from existing 35-40% to 25%. Food and Grocery contributes to around 41 percent of private consumption expenditure and about 74 percent of total retail revenue. Broad category-wise expenditure for each category of cities is shown in the table below. It is evident from above that more than one third of the monthly household expenditure is on Food and beverages segment. There is also an increasing shift from price consideration to quality, branded and hygienic products. The number of working women, as a percentage of the total female population, has risen from 15 percent in Source: NCAER Research, to close to 25 percent in This has resulted in growing disposable income, which in turn, leads to increasing spend on convenience food, value added food products and grocery items GROWTH DRIVERS OF VALUE ADDED FOOD PRODUCTS India possesses the advantage of having a large young population. It is estimated that around 35 percent of India s population is under 14 years of age and more than 50 percent of the population is estimated to constitute the working age group. The large population of working age group forms a wide consumer base. Rapidly changing demographic profiles and increased disposable income are changing the face of Indian consumers. The swelling middle class is redefining the consuming pattern with a shift towards branded and value added food products. With the country s income pyramid changing rapidly, a definite shift is observed from saving to spending attitude. Discretionary spending has seen 16 percent rise for the urban upper and middle classes and the number of high income households has grown by 20 percent year-on- 6 Food Processing: Market and opportunities by KPMG 7 McKinsey & Company 203

176 year since The self employed segment of the population has also grown significantly. Growth drivers for emerging markets of value added food products are summarized below: Food and grocery dominates total retail spend: While rural consumers spend around 53% 9 of their total consumption expenditure on food, urban India spends 40% of their retail spend on food items thus offering huge opportunity for value added food products. Higher disposable income: High economic growth has led to increased disposable income for the Indian middle class, which is switching over to healthy and value added food products. It is estimated that disposable income is set to rise at an average rate of 8.5 % by Also, the middle class is estimated to reach a size of 582 million from its current size of 50 million by Shift in demographic profile: The median age of Indian population is 24 years and approximately 65% of Indian population is below 35 years of age. The large population of working age group forms a wider consumer base for food products. Emergence of organized food retail: It is estimated that the total food and grocery retail space will grow at a CAGR of 6% over , with the organized share likely to increase from less than 1% currently to 6-6.5% 12. This will translate into more business opportunity for value added food products ASSESSMENT OF FOOD RETAIL INDUSTRY Traditionally, the Indian retail sector has been dominated by large number of small and medium sized retailers, who account for more than 95 percent of the total retail business. In categories like food & grocery, fresh fruits and vegetables, their share is as high as 98 percent. Over twelve million small and medium retail outlets exist in India, the highest across the world. More than eighty percent of them are run as family owned businesses and the exemplary mom-and-pop retail outlets constitute a major part of country s retail store formats. Modern retailing in India is evolving rapidly, with consumer spending growing by unprecedented rates and with increasing number of domestic and global companies investing in this sector. 8 Ernst & Young Research, NSS 62 nd round 10 E&Y Research, NCAER Research 12 Retail Edelweiss report,

177 Org. Retail Total Retail Source: Data Monitor, 2007, Sales in US $ Billion, Exchange Rate: US $ 1: INR 41 The size of Indian retail Industry was estimated at US$ 385 billion 13 in In , the retail market size was US$ billion. In 2007, organized retail stood at US$ 16.5 billion, implying a share of 4% of the total retail revenue. Organized retail revenues are expected to increase from US$ 12.9 billion in to more than US$ 43.8 billion by Today, top eight cities (four metros, Pune, Ahmedabad, Bangalore and Hyderabad) together account for almost 80 percent of the total organized retail. Food retail, dominated by around 5 million retail outlets in India, is currently estimated at US$ 160 billion. Within this, organized food retail grew from US$ 391 million in 2002 to US$ 1624 million in 2007 with a CAGR of about 33 percent. India tops the AT Kearney's annual Global Retail Development Index (GRDI) for the third consecutive year, maintaining its position as the most attractive market for retail investment. Furthermore, a report by Price Waterhouse Coopers foresees India and China to continue as the top sourcing hubs in retail and consumer sector in the coming years. Driven by the huge potential in the sector a number of large corporations, both domestic and global, have forayed in to the market recently. It includes Reliance, AV Birla, RPG, Bharti- Walmart, Future Group, Big Apple, Godrej, Heritage and Wadhan Group (Spinach) to name a few. A few more global players like TESCO, Carrefour and Landmark are also expected to enter in the market. The growth in organized retail sector has been spearheaded by the food & beverages segment and they are also likely to see a higher growth rate in future. The figure below depicts the responses of retailers about the fastest growing retail segments in India. This clearly shows that food and grocery is by far the Source: KPMG 13 IBEF 205

178 fastest growing segment in the Indian retail sector. India has one of the largest numbers of retail outlets in the world. Of the 12 million retail outlets, nearly 5 million sell food and related products. Nearly two third of the food retail outlets in India are located in rural areas, which is also being reflected in the graph below: Figure: Category wise Distribution of Retail Outlets Source: NSSO 5 th round, KPMG and Cygnus Research The retail sector in India is primarily characterized by different SKUs rather than different retail formats in operation. It is envisaged that modern retail will adapt and absorb some of the traditional retail formats in subsequent years. Also, with the rural retail constituting the largest share of total retail revenues, the existing players are now looking at rural markets to tap the opportunity. A few players like ITC Limited, Godrej and DSCL have already started the venture under the brand name of Choupal Sagaar, Aadhaar and Hariyali Kisaan Bazaar respectively MAJOR PLAYERS IN ORGANIZED FOOD AND GROCERY SEGMENT Major players in organized food and grocery segment are Pantaloon Retail, Reliance Retail, RPG, Aditya Birla Retail etc. None of the organized retailers have presence in Bihar. However, Maharashtra is one of the leading states in terms of growth of retail space. Besides Mumbai, organized retailers are also present in tier I and tier II cities of Maharashtra. The table below shows the food and grocery sales (2008) as well as no of stores of major players in organized retail segment: Sl No. Name of retailer Food and grocery sales ($ million) No of stores 1. Pantaloon Retail Reliance Retail RPG Aditya Birla Retail Dairy Farm Source: IGD, excludes cash and carry formats A brief profile of the major retailers is given below: Pantaloon Retail (India) Limited: Pantaloon has established strong presence across multiple consumption categories in a bid to capture maximum consumer wallet share. It has widened its format offerings from a single format to over 15 formats, which captures almost 75% of the consumption basket. Food Bazar, Big Bazar and KB s Fairprice are the various banners under which Pantaloon Retail operates in the food and grocery segment. Out of these three, Food Bazar mainly caters to fruit and vegetable, staples, dairy 206