IDE INDIA S EXPERIENCE IN SUBSECTOR MARKET ASSESSMENT AS AN INPUT TO PROGRAMME DESIGN BACKGROUND By: Shyam Barik Following the startup workshop in Chiangmai, Thailand, IDE India (IDEI) initiated the process of conducting a Subsector Market Assessment. A week long field exercise in Bangladesh to develop tools for conducting SSA helped a lot to understand the tools and their application in the process of SSA. Similarly an Action for Enterprise training programme on subsector analysis and BDS market assessment held in Bangladesh also developed staff capacity to conduct a subsector BDS market assessment and develop the subsequent programme design. Given this backdrop IDEI decided to apply the subsector market assessment approach for its programme design. To begin with, the pineapple subsector in Gajapati district, Orissa state was selected. Pineapple Subsector Market Assessment in Rayagada block, Gajapati district, Orissa Selection of the subsector was based on the following considerations. High participation of tribal farmers in the production of pineapple. Potential for higher income and profit for the poor tribal farmers Pineapple is one of the high value horticultural crops in Orissa High market potential and new market creation opportunities Value addition possibilities Geographical condition and topography is conducive for large-scale enhanced production of pineapple in the region Demand for good quality pineapple from the fruit processing industries from in and outside the state. Implementation of a programme would largely benefit poor tribals as well as impact the economic activity of other players in the subsector. SUMMARY OF FINDINGS The Gajapati district of Orissa is a contiguous area with topography characterized by fertile tract, hilly terrain, undulating landscape, dense forest, glacial gorges, plateaus and impassable chains of mountains. The population is sparse. There are many streams and small rivers (now almost dry or drying up because of deforestation) and an absence of an all weather road to a significant number of villages. The district is one of the poorest in the state. The demographic composition reveals the predominance of tribes, scheduled castes and other communities. In spite of access to rich natural capital (the climatic conditions are very favorable for horticultural production) the tribals of the area have remained below India s national poverty line. They grow a wide range of horticultural crops (such as pineapple, oranges, jackfruits, mangos, lemons, etc). However in spite of cultivating horticulture crops, they receive an inadequate price and remain below the poverty line. Since they are physically distanced from
markets, they do not market the produce by themselves. They sell the produce to the traders, usually the scheduled castes (a socio-economically backward community) living in the region, who in turn sell it to the middlemen for onward sale to other larger markets. As a result, the tribals lie at the most disadvantaged end of a long marketing chain. There are a number of factors that disadvantage the tribals and limit the market opportunities available to them. First, the produce is usually seasonal, is perishable and has a low shelf life. In addition, the tribal farmers neither have the knowledge and skills nor access to information regarding value addition options. As a result, given its perishable nature, the farmers often resort to distress sales receiving very low prices. For example, for pineapple during the peak harvest time the tribals only get about Re0.50-1 per piece. Secondly the tribals have to traverse long distances by foot (they live several kilometers in the interior hills) to reach the nearest market. They have also limited options for selling their produce. They depend mainly on the trader particularly on the weekly market days. This means that in the interim period they are not able to pick the fruit which over ripens giving the trader another reason to give reduced prices. Culturally, tribals spend their limited resources on rituals and festivals in the villages. Credit requirements are thus high and in the face of under developed credit options, the tribals are often dependent on the traders for credit which comes in the form of farming inputs, barter with essential items or even cash for the ceremonies. At times, the farmers then mortgage their land for 2-3 seasons and end up working as labourers on their own lands. While the tribal farmers have been growing horticulture crops, the marketable product quality has not improved. The adoption of improved varieties as required by the market is slow. Erratic rainfall, pest attacks, degrading soil fertility and inadequate knowledge of agronomic practices have further impacted the marketable quality. Though the government tribal and horticulture departments have been working in the area, there have been ineffective extension services provided to the farmers. There have been attempts by several institutions such as the government departments, local NGOs and private sector players to address some of these issues. For example, the government had set up a processing unit in the adjoining district for procuring and processing horticulture produce of tribals. This unit was closed due to mismanagement and was sold to an entrepreneur from a nearby state who moved critical equipment to his state. The government had also attempted to procure the produce at remunerative prices but it was the initiative of an individual that ended on his transfer. The local NGOs have been organizing the farmers into self help groups for thrift and credit but have not been able to do much on improving market linkages due to inadequate expertise in that arena. Although a lot of farmer friendly technologies are available with the research stations like Orissa University of Agriculture and Technology (OUAT), few of them have been taken to the field due to the limited linkages with the implementing organizations such as NGOs, entrepreneurs and others. Infrastructure related problems such as road, telecom, electricity, transport, storage and preservation, and proper market places are yet to draw proper attention of the government or the private sector.
After critically assessing the findings, IDEI decided to develop a program design for the interest of the tribal farmers within this sub sector. The findings of the subsector market assessment provided enough information to develop a project titled Integrating markets, products and partners: An action research to explore and develop a management system for linking tribal communities to markets through value addition. The project attempted to use a total system approach with several institutional actors such as OUAT, in Bhubaneswar, Orissa state, as the technical partner, the Centre for Community Development (CCD) as the NGO partner, and IDEI as the managing partner with complementary skills participating in it. As a result this project aimed at developing and testing systems and strategies for institutional arrangements to function effectively such that poor tribal horticulture growers through value addition gain higher returns. This approach could be possible due to the relationship and understanding developed among the partners during the Subsector market assessment. The project was submitted to the UK bilateral Department for International Development (DFID) for a Crop Post Harvest Project grant.. APPROACH TO PROJECT DESIGN Any intervention for value addition and thereby poverty reduction necessitates strong linkages at various levels; between markets (both for supply of inputs as well as for receipt of outputs), intermediaries, users, technology suppliers, research institutes as well as grassroot level facilitating organisations. IDE has developed and refined such an approach over the last 10 years of its experience in the water sector in India. The approach uses commercial marketing principles such that markets are influenced to be more pro poor. IDEI plays the role of a facilitator and integrates the efforts of various players such as marketing intermediaries, manufacturers, and NGOs to create demand for and supply of appropriate, affordable technologies for the small and marginal farmers of India. This approach has understood the importance of partnerships, the need for using marketing principles for more effective pro poor solutions and the relevance of BDS principles in IDEI s field of work. This project was designed to use management principles, further building on IDEI s approach to explore technology and livelihood interventions for the tribals and to further explore and build a series of relationships that can support and sustain technology development and supply, markets and the integration of poor people into these market and technology systems. Further, this project is designed as a coalition project with three key partners: a) IDE as the managing partner with skills in marketing, b) OUAT as the technical partner with skills in adapting technology for specific needs and contexts and c) CCD (Centre for Community Development) a local NGO partner with excellent social skills and a close relationship with the tribal community. This project would look into increasing returns to the tribals by value addition to the crop produce. It would evaluate various options such as facilitating marketing linkages with private sector agro-processing units, processing of the produce to increase shelf life which again can be fed into an agro processing unit, processing for sale as the final product or perhaps even creating
new and alternative markets for the produce. These and other possible options would be assessed in line with needs of the farmers, quality of the produce, and market demand for the output. The outputs of the project were: 1. Enhanced understanding of constraints faced by tribals in accessing higher returns for the key high value crops grown by them; 2. Identification of appropriate technology for value addition to horticulture produce; 3. Prototype business, marketing and implementation plan developed using a multi- agency inclusive approach bringing various stakeholders together. Project outputs and activities The project outputs and activities to be undertaken under each of these are described below. Output 1: Enhanced understanding of constraints faced by tribals in accessing higher returns for the key high value crops grown by them Activity 1: Conducting a study for analysing the potential of value addition to various crops grown. The Subsector Analysis (SSA) threw light on the markets, but a detailed study to understand the potential for value added crops needed to be carried out. The market study would help to identify why tribal horticulture growers lack access to high value markets and to identify a commodity/crop with high scope for value addition with which this project will work. For this, the following aspects will be studied: Current market conduct who are the various market players and service providers, their roles, existing infrastructure, bottlenecks in access to markets, returns on the produce for various players e.g. traders at the village level, traders at larger markets, etc, opportunities that exist for linkages to higher value markets, processing units, etc. Understanding the raw material supply base crop-wise total production volumes, quality of the various horticulture crops e.g. sweet or sour, size of fruit, etc., surpluses available for value addition that fetch extremely low prices during periods of distress sales, wastages due to inability to harvest, store or sell, etc. Analysis of opportunities of value addition in fresh, processed, semi-processed, by-products (based on crop type, availability and quality) for understanding the potential for market expansion and diversification Understand the potential for certification/labeling for niche markets e.g. organic cultivation Demand versus supply of value added produce (crop wise) at local, regional, and national levels. Activity 2: Conducting an institutional analysis This needs to be done with a view to understand the social capital of the farmer, how they operate, what/who influences them, interactions and linkages that exist with external stakeholders such as marketing intermediaries and other service providers. It will be useful to
know if the tribal farmers are a part of any association, network or some socially mobilized group, how such groups operate, their interaction and dependence levels, benefits received or not received as members of groups, cohesiveness, conflict management, etc. Such an analysis will also help in identifying specific interventions that could potentially be taken up by village level groups whether the need is to collectively market their produce, add value by group level processing or even to avail institutional credit. What this analysis will most importantly reveal is the potential to involve the private sector in value addition and processing as well as output linkages. Since the project has been designed to facilitate value addition to horticulture produce, the role of the private sector becomes paramount. Output 2: Identification of appropriate technology for value addition to horticulture produce/fiber In order to involve the private sector players in this business, the project will need to assess the technology options and the business model. It is expected that on completion of this, the project will be able to communicate the need as well as the market potential of such a venture. This is expected to attract private entrepreneurs to invest in such a unit and/or allied services. Activity 1: Conduct a technology market analysis or technology scan Based on market analysis findings in Output 1, we would undertake a market analysis of technologies that exist and/or can be adapted to add value to: Fresh produce Semi-processed produce Processed produce By-products Private sector processing units could act as a market for fresh or semi-processed produce from tribals. If not, there is a need to identify appropriate technologies for processing that could be adapted for the project. A technology scan will help us identify the various types of technologies that could fall within the realm of options such as: Drying technology solar or forced drying? Juices type of packaging: canned, bottled, tetra-packs Pulps/pastes/jams By-products/fiber technology
The technologies short listed will then need to be appraised. The role of our partner, OUAT, with their knowledge and expertise in post harvest technologies will be of importance and high relevance to this output. Activity 2: Technology appraisal Short listed technologies will need to be appraised at various levels for appropriateness. This will include: Technological feasibility Equipment availability Equipment costs Ease of maintenance Ease of use Infrastructure and energy requirements such as water, electricity, etc. Economic feasibility Investment/costs Profitability Pay-back periods Competition that may exist or is planned External factors that may effect profitability Operational appraisal of technologies For whom is it appropriate and at what scale of operation. For e.g. Individual Community NGO Individual entrepreneur Extension of an existing processing unit Food systems appraisal This will be done to estimate requirements of food safety, packaging, storage, installation, labeling, food laws, etc. Such a review will also help us identify which technologies have potential to be adapted for small farmers, especially for grading, cleaning, etc., and what has constrained their uptake so far, how such constraints can be overcome and which of these have potential for uptake. Activity 3: Technology review discussions Group discussions will be held with key stakeholder groups to review the technology options identified and developed. The in-depth understanding of the business model developed will
further help in marketing the uptake to private entrepreneurs. It will be essential to involve private entrepreneurs from the area who will be willing to set up a small processing unit in the area as well as suppliers of equipment and other services. It has been assessed that such a unit in a rural area will attract funding from various domestic sources such as the Department of Science and Technology (DST), CAPART, the ministry for small scale industry, etc. Output 3: Prototype business, marketing and implementation plan developed using a multi agency inclusive approach bringing various stakeholders together Output 1 and 2 would lead to the development of an understanding of: Crop(s) to work with Technology(ies) to work with Our business environment Activity 1: Identification of service providers and key stakeholders The project will then identify all key stakeholders who will be involved in the project to include: private entrepreneurs equipment suppliers business support units and financing firms such as NGOs, banks, government schemes, etc technology trainers covering manufacturing processes, packaging, food safety, etc agronomic trainers for improved varieties of fruit marketing support such as traders, marketing groups for final goods, exporters, etc. farmer groups Activity 2: Product development and market testing The project with the help of the technology partner may make sample products at the laboratory level. These will need to be tested in the market and customer feedback sought in order to refine products. Thereafter the project will facilitate the establishment of the processing and business unit and validate the: raw material supply systems production process product quality environmental impact The market testing phase will also establish market linkages with output markets for the value added horticulture produce of the tribal farmers. Only when the produce is purchased by a consumer will the project be able to validate the market performance of the process in terms of profitability, pay-back, price sensitivity, market channels and likely demand for the produce. PROJECT APPROVAL AND PROGRESS
This project was sanctioned by DFID through NR International in 2003 as an action research project and is presently under way. The following activities have been undertaken to date. Crop Post Harvest Technology Scan, Appraisal, Review and Field Trials: The subsector market assessment provided information on the crops grown and the value addition options. A team of experts from OUAT visited the area to gain first hand knowledge of the area and processing alternatives. Based on the quality of the pineapples grown in the area, it was felt that the best value added alternatives were osmo-dehydrated pineapple slices with by-products such as pineapple squash and RTS (Ready to Serve Drinks). Guava, lemon, citrus, and cashew apple are also found in the area though in smaller quantities. It was felt that the project could also consider developing similar options for these fruits. A small batch of the value added products were made in the OUAT laboratory and tested for consistency, taste, colour, life span, etc. Some tests are still under way. Product testing: The project decided to get some market feedback on the products. The project initiated discussions with a private sector distributor of food products in Bhubaneswar, the state capital. He was shown the samples. He expressed keenness in these products which were rather new for the Orissa market. After judging his level of interest, IDE asked him to undertake a customer feedback based on these samples. His feedback would then be used to refine the products. Once the final products would be ready and taken up by a private company for production, he could be given rights for selling these in Bhubaneswar. The distributor further conducted a market test and received response from high, middle and low income groups in the twin cities of Cuttack and Bhubaneswar. The response was quite encouraging and respondents even suggested some improvements in the product. The respondents felt that the products were best suited for children and would be a good alternative to candy and aerated drinks. Value Chain linkage for bulk procurement: The information collected during the subsector market assessment phase on identification of processing units helped in the implementation phase to develop a value chain linkage with such units for bulk procurement of horticulture produce. M/s Arren Foods Pvt. Ltd and M/s OMFED (two large food processing units in the state) have agreed to purchase bulk quantities of the horticultural crops grown in the area. CCD, the local NGO is helping the SHGs and their federations to execute the supply of the required fruit crops during the harvest time to these private sector processors. Processing Unit
With the work being initiated in the area, the lab production and market tests have resulted in much curiosity and interest being generated in the district. Several individuals have approached CCD and have expressed an interest in setting up a processing unit in the project area. These were small entrepreneurs with limited capacities and limited access to funds. It is fairly clear that it is highly unlikely that a large unit will be set up in this very backward district. Yet, a small unit for meeting local demand can be feasible. With this scenario, the project has been in talks with a firm that helps in setting up micro processing units in remote areas. The rationale being that these units can tap the local potential and access raw materials at a good price without having to incur transportation and marketing costs. With low overheads and smaller breakeven volumes, these units can produce products at a much lower cost. In addition such units provide local employment opportunities and control migration. The final products can thus be sold in local and regional markets without the large investment of building national brands. Centre for Technology Development (CTD) is one such firm that has facilitated the setting up of over 20 such units in remote areas of India over the last 10 years. Most of these units have broken even and are making healthy profits. The project through CCD has put some of the potential entrepreneurs in touch with CTD who is currently helping in development of plans for a processing unit in the area. Farmer Exposure: A group of lead farmers were exposed to the best agronomic practices for growing pineapples. The training was imparted by staff of SAMBHAV, an NGO in Nayagarh district of Orissa that specializes in organic farming. The farmers through training and fieldwork could learn the skills required for adopting improved practices, which reduces costs of production, improves quality of products, improves the life of plants and gives more returns. After the exposure some of these farmers have adopted such practices in their respective fields. LEARNING DURING THE SUBSECTOR MARKET ASSESSMENT EXERCISE: Staff Orientation: Orientation of staff in stakeholder interview questionnaires, interpretation of the questions to arrive at a common understanding, assessment methodologies, observation techniques, etc. helped in collecting correct information from different stakeholders. Sample exercises on focus group discussions and individual interviews in which the staff were involved were very useful. Similarly, at the end of the day, the discussion among the group members on responses and observations helped in cross-checking information and understanding facts under different situations. Area Pre-visits: Particularly in the tribal areas where road communication is poor and the people are suspicious and generally fear outsiders, it is important to pay pre-visits to have familiarity with the area and the people. Taking the help of local level NGOs, educated youths, teachers, and postmasters while visiting the area not only helps in terms of knowing the area and people well but also aids in conducting the assessment exercise and the subsequent programme intervention. Interviewing the tribals: Interviewing tribals was very interesting. The meeting time was in the evening, the only suitable time after their return from the fields. We faced problems in understanding their language. The representatives of the NGO or an educated local youth,
postmaster, or school teacher were very helpful in the interpretation. The poor tribals were afraid of people taking notes. We had to avoid writing in front of them. FGD was found to be an effective tool for discussion, however, moderating discussion for receiving desired information was important. Therefore, the moderator must have the skills to initiate discussion and extract relevant information. Interviewing requires special skills. Given the initial orientation and the role-play, the skill improves based on applying the skills in different situations. Interview with the Intermediaries: At the time of the Subsector Market Assessment exercise outside traders could not be available since the harvest season for the pineapple was already over. Contacts with the growers and the wholesalers at higher market levels helped us reach the traders who are involved in seasonal business. IDENTIFICATION OF HIDDEN BDS Except for some interventions from government agencies and NGOs, Business Development Services are practically nil. Commercial BDS does not exist. Some BDS exists in an embedded form and is provided by agri-input dealers or traders who sell agri-inputs and essential commodities to the growers and purchase horticultural produce from them. However, some of these tend to be exploitive. For example, the traders advance money to the growers to purchase inputs but on inability to repay the entire amount, they take the lands for the next several seasons until the farmers can repay. In several cases it was found that the farmers were working as labourers in their own fields. However, an interesting observation was that a school teacher, post master or educated youth in the village could help the illiterate in counting money and understanding the transaction. In this informal manner, many such services exist but not in a commercial form. The need has not been explicit. Given a scope to introduce such services for higher economic returns, it can be expected that people might be ready to receive some of these services commercially. On the other hand, traders also need BDS in terms of packaging facilities and supplies, transportation services and the storage and preservation facilities to improve their business. However the felt need for these services are explicit in this case compared to the growers. ADVANTAGES OF COMBINING SSA AND BDS MARKET ASSESSMENT: In IDEI s subsector analysis and BDS market assessment exercise we found several advantages by combining the two. They are as follows: First, it was a systematic process which logically led to design of project interventions. For instance it has different steps such as a) subsector selection, b) subsector analysis, c) identification of constraints, d) identification of business services, e) selection of business services, f) assessment of business services, g) identification of interventions, h) selection of interventions.
Second, though we focused more on the tribal farmers, it also helped us look at the specific needs and problems of all the actors, the dynamics of their relationships and the opportunities to address needs. Third, we found this concept easy to understand and apply. Therefore the staff capacity could also be developed since we worked as a team. This also helped us in the programme design and implementation since we were involved in the assessment. Fourth, since it is a systematic process there is integration of information and knowledge. Therefore chances of knowledge gaps are rare. Fifth, we found it cost effective and time efficient in terms of human resources, finance and time. One does not require two separate studies. LEARNING WHILE DESIGNING PROGRAMME AND INTERVENTIONS At the time of designing the program, it was felt that the scope for intervention must be broadened to include other horticulture produce of the farmers. The market linkage end made it quite clear that this was going to be necessary for two reasons. One, while linking with agro processors for purchase, they consider all their production lines and try to procure a range of raw materials. Similarly, the private sector entrepreneurs who have shown interest in setting up a unit are considering a range of products as they will prefer to set up a unit that will be operational round the year. With fruits being seasonal they will thus prefer a unit which can process multiple products. Several rounds of visits were also made while designing the programme to collect additional information as per the guidelines of the donor agency. DFID requires a livelihood analysis, a gender analysis and a stakeholder analysis to be completed for submission. While the stakeholder analysis was a part of the SSA/BDS MA, the other components were only partially done. In this process, we could cross verify a lot of information besides collecting additional information. The programme implementation has been accelerated since the same assessment team was involved in the implementation exercise. The contacts, relationships established with NGOs, government authorities, processing units, and the small tribal growers during the assessment phase helped in terms of their assuming ownership and involvement in the smooth implementation of the programme. The business development services in the form of value addition trainings for supply of semi processed or graded material to the units needs to be provided. It is expected that private sector buyers will soon start providing these in an embedded form. More and more opportunities are coming up in the light of technology innovations to involve the private sector players in the dissemination of BDS on a commercial basis. For example the concept of a low cost storage system, grading and cleaning devices and the osmo-dehydrated technology have attracted private players to work. Agri-input dealers have shown interest to gain
knowledge and skills on agronomy practices, integrated pest management, etc., to be able to impart the same knowledge and skills to the farmers who purchase inputs from them. They are confident this will increase their business. One important learning is the importance of SHGs and their federations. These have the potential to provide a platform to deliver need-based BDS to the growers as well as obby for essential business services. However, to ensure effective functioning of SHGs, it requires close guidance and monitoring support from the local NGO. The NGO targeted developing the capacity of the SHGs so that they would be able to manage on their own. The federation of the SHGs has put pressure on the district level authorities for development of roads, electricity, etc. Recently NABARD has taken up a scheme for developing the market places in the area. People s forums like this have the potential to form a lobby with the government or the private sector bodies like chambers of commerce for the infrastructure development in the area that is no doubt the key to economic development of the area. CONCLUSION The subsector market assessment approach leading to programme design of the pineapple subsector in Orissa has given IDEI tremendous satisfaction starting from analysis to the programme implementation. The knowledge and experience gained prompted IDEI to conduct similar exercises in other programme areas. In fact another subsector market assessment was done on the vegetable subsector in Maharastra. Though this project has not been designed as a typical BDS project (keeping in mind donor requirements) it has made use of some very distinct BDS principles. Given the market situation which is very weak in terms of demand and supply of BDS, the execution of this action research project could open up many opportunities for spreading BDS through private and government institutions. There is an attempt is introduce services through the private sector and gradually introduce the tribal growers to such services in an embedded form. Introducing the concept of commercial BDS may not perhaps go a long way since demand and supply sides do not perceived as substantial benefits at this point of time. The role of the facilitating agencies like IDEI is to initiate the process and set the ball rolling with the help of grassroots NGOs, technical institutions like OUAT and the private sector players. The interventions the project has already initiated and more activities planned will definitely put a system in place wherein different players will have role clarity, exchange of skills and resources and effective coordination mechanisms to open up different avenues for BDS. Even after the duration of the project, the grassroots NGOs, people s institutions which are already in place, will carry forward the activities. What is important is that the small entrepreneurs realize the value of BDS and create demand and services. The process might take long, but it is important to make a beginning.