chapter role of agro processing industries in rural development...

CHAPTER IV

ROLE OF AGRO PROCESSING INDUSTRIES IN RURAL

DEVELOPMENT

Agro industry has historically been given high priority in Indian

Policy of development programmes. The focus on agro-industry as an

agent of rural development and employment generation was present in

Mahatma Gandhi's emphasis on village-based agro-industry during

India's independence movement and is today a central component of the

national development plan. There is optimism concerning its continuing

development. The FAIDA report of the confederation of Indian Industry

(CII) and Mackinsey & company (1997) both show that there is great

potential for development of food processing and other agro-industries in

India.

However, India's agro-industry, development is today faces tough

challenges, including costly raw material, supply chain inefficiencies and

market demand constraints? There is skepticism about whether and

market multinational firms contracting small farmers will help or hurt

small farmers and local small agro-industrial firms? This debate is

generalized in developing countries. There is skepticism whether the

cooperative movement can effectively promote agro-industrial

development for small firms?

The private sector as well as government is at cross-roads in the

choice of the best models for agro-industrial development. The crucial

questions pertain to of institutional and organizational

arrangements/models which are appropriate for overcoming current

constraints, and maximizing their contribution to rural development and

safeguarding the small farmer interests?

90

4.1 Approaches To Agro-Industry Development In India

The movement for political independence up to the late 1940s under

the leadership of Mahatma Gandhi included the strategy and

encouragement of village agro-based industries. The objective was to

involve rural people in development and the independence movement

and to reduce extemal dependence. The ideology was economic, social

and political. Though the model involved the rural poor in development

action, it later failed because it became a blanket basis for nationalists to

favour less efficient techniques of production and oppose modem

industry, which did not meet consumer' needs and demands.

Between 1950 and 1980 agro-industry policy was dominated by

Prime Minister Nehru and his economic think-tank led by Mahanalobis.

They argued that India needed larger capital goods industries for the

capital goods sector, while the consumer goods sector was primarily for

small scale rural agro industries which are labour intensive and capital

saving. This was consistent with the need to reduce demands on limited

capital and savings, and to expand employment. However, such small

scale agro industries, because of old technology, inadequate

management and weak capacity to invest, often failed to meet the

expanding and changing market demands for quality goods, coming

from the rapid production and rising incomes.

Starting in 1980s, there has been a new effort for promotion of

agro industries in India with emphasis on market demand, state of the

art technology and efficient management of the supply chain. There

has been a substantial relaxation of govemment restrictions of

technology import and private foreign direct investment. However, these

current trends towards large private agro industrial units have risks of

bypassing small farmers and the rural poor.

Rudrani Bhattacharya in her paper "Agro-industry, inequality and

sectoral growth" concludes that the impact of agricultural development

on industrialization in the presence of a third sector namely, agro-

91

industry which directly interface with both agriculture and industry and ............... ,_ <"" -· - ,--- ....__

thereby provides a link between the two sectors. Rudrani also concludes

that an agricultural productivity gain promotes industrialization in a

small open economy while it may not promote industrialization in a

closed economy. We also find that in the presence of agro-industry, a

small primary exporting country can develop comparative advantage in

manufacturing through agricultural productivity increase. These are

more empirically plausible results for developing countries, which are

indeed small open economies.

Table 4.1

Importance of agro-industrial Sector in India

Percentage Share

Industries No. of Factories Employment Net Value

( 1996/ 1997) ( 199211993) ( 1996/ 1997)

Agrobased food industries 16.69 13.67 5.85

Agrobased non food industries 29.09 29.23 15.74

Total agrobased industries 45.78 42.89 21.59

Other (non-agro) industries 54.22 57.11 78.41

All Industries 100.00 100.00 100.00

Source: Annual Survey of Industnes 1994 and 1998

4.2 Characteristics of the Agro-Industrial Sector In India

Data from annual survey of industries show that 46 percent of all

factories in India are agro-industrial (Table 4.1), and they contribute 22

percent of the manufacturing value added and nearly 43 percent of

manufacturing industry employment. Table 4.1 indicates that 37 percent

of the agro industrial firms produce food and 63 percent produce

nonfood products. Table 4.2 show that 44 percent of the food related

factories are in milling (mainly grain), another 13 percent are in edible

oil, 10 percent are in sugar, and 33 percent in other foods such as

92

higher value food with higher income elasticity of demand. The "other

food" category accounts for 49 percent of total net value added and 20

percent of employment comes from grain milling.

Table 4.3 shows that only 18percent of total industrial fixed capital

is in agro-industry, compared to agro-industry's 43 percent share in

industrial employment. Thus, agro-industry continues to be relatively

labour-intensive and capital saving. The labour share of value added is

48 percent in agro-industry versus 35 percent in other industries. Agro

industry, on average, generates employment for 14 percent per

investment of Rs.100,000.

Table 4.2

Performance of agro-industry: comparing pre-reform with post-reform

periods

Indus ties Growth Of Value Added (Gdp) By Industry

1984/1985 to 1989/1990 1990/1991 to 1995/1996

Agro-based food industries 10.45 10.27

Agro-based non food industries 3.70 7.70

Total Agro-based industries 5.15 8.30

Other (non-agro) Industries 12.00 7.20

All manufacturing industries 9.23 7.60

Agriculture 5.67 2.68


Currently, over a quarter of the world's population lives on less

than a dollar a day. The sustainable reduction of this number to half of

its 1990 level is the primary goal of development agencies around the

world. "Pro-Poor" development has become the current mantra of poverty

reduction, and it is this notion that it is possible to find economic and

public policy strategy which will unlock the capabilities inherent in the

poor that they might produce, process, market and trade their way out of

poverty.

93

Backed by the overwhelming evidence that education plays a

central role in sustainable poverty reduction, donors and policymakers

alike pay much attention to the development of education sectors in

developing countries. In a large number of developing countries,

education retains the greatest proportion of national budgets. The goal

of achieving universal primary education by the year 2015 has

dominated the policy debate and has narrowed the focus of policy

strategies to this area.

In addition the policy discourse on skill development has been

largely influenced by the challenges and opportunities brought about by

globalization. Inspired by the access of the East Asian "Tigers",

strategies out of poverty emphasise the importance of moving away from

traditional comparative advantages in resource based activities to new

'technological' comparative advantages in niche production, implying the

massive up grading of skill levels for advanced technology sectors.

The rapid industrialization experiences made by a few countries in

East Asia, however, are not necessarily replicable in other developing

counties, as the increasing gap in development between Asia and Africa

highlights. Rather than favoring skill strategies to move into new

technology sectors, donor and government interventions need to support

strategies to exploit the full potential of that sector in which most

developing countries have a traditional comparative advantage,

"agriculture".

Agriculture is the single most important sector in many low-income

countries, where a large number of people depending directly or

indirectly on it for their livelihoods. In about two-thirds of the low-income

countries, agriculture accounts for GDP shares of between 30 to 60

percent and about three-fourth of all poor people in the developing world

live in rural areas. Agriculture, thus, represents a key target for any

successful poverty reduction strategy. For instance, promoting

agricultural growth does not only increase farmers income, but it also

94

creates new employment opportunities in the farm and off-farm sectors

and can contribute positively to increased food security on the national

level. In addition, globalization opens up new opportunities in the sense

of providing new markets and inflows of foreign direct investments, but,

at the same time, it also poses important challenges and dangers.

4.3 Poverty and Agro-processing in India

India is a large country, which is characterized by spatially uneven

economic and social development. Poverty is still a widespread problem,

especially in rural areas. More than 44percent of the population has to

live with less than a dollar a day, 2/3 of whom are situated in rural

areas. With a human development index of 0.577, India ranks 124 out of

173 counties in the year of 2005 and in terms of human development,

India shares the same low ranks as many African states.

The data on agriculture indicates that agriculture is an important

economic sector. In 2000, it contributed a quarter of the country's GDP.

In 1998, nearly 2/3 of the population is dependent on agriculture, which

in only a moderate decrease compared to 1970 (71 percent).

Agricultural growth rates were much higher throughout the 1980s

than in the 1990's, but still positive, which is also outcome of increased

farm intensification. The importance of the agricultural sector in also

reflected in the size of agro-based industries. More than 45 percent of all

industries are agro-based, with a value added of nearly 22 percent, food

processing industries account for 16.69 percent of all industries in India.

Traditionally, Indian agriculture is largely an activity of rural areas.

Consequently, India's development efforts focus on strengthening the

village economy as an instrument to increase food security and to reduce

rural poverty and creating new employment opportunities.

In the 1980s increased attention was paid to the promotion of

agro-industries in India. The main argument was that inspite of high

poverty in India, there is an upper middle class of around 80-100 million

population with high demands for processed food products, Rs. 100,000

95

for other industries. Moreover, these figures do not include added

employment generated in agriculture and input supply through

backward linkages. Finally, agro-industry requires less fixed capital and

more working capital compared to other industries. On average, agro

industry annually generates 51 percent value added over fixed capital, as

compared to only 39percent in other industries.

India launched significant economic liberalisation reforms in 1991. What

effect have reforms had on agro-industry? Available data give a

preliminary idea of agro-industry's response. Table 4.4 shows pre reform

and post reform, GDP growth by sub-sector before and after liberalization

in constant prices, and in non-food agro-industry growth rates doubled

from 3.7percent to 7.7percent. For the agro-industrial sector as a whole

there was an increase in the growth rate from 5.2percent to 8.3percent,

indicating a positive impact of the reforms. Interestingly, other industries

actually show a deceleration from 12percent to 7 .2percent.

Table 4.3

Importance of Selected Food Industries in the Agro-food Industry Sector

Percentage Share

Industries No of factories Employment Net value add 1-

(1996/97) (1992/93) ( 1996/97)

Grain Milling 44.38 20.30 7.05

Edible Oils 13.11 7.74 21.48

Sugar 9.58 28.57 23.03

Other foods 32.93 43.40 48.45

Total foods 100.00 100.00 100.00


Employment growth differs over agro-industrial sub-sectors.

Table 4.5 provides data for 1984 to 1990 and 1990 to 1996, showing

employment is growing fastest in dairy, fish canning and presentation,

96

edible oils, chocolate, and cashew processing. In aggregate terms, with

some exceptions, a positive trend is evident for food agro-industry

employment in the recent period just before and during early

implementation of the economic reforms. Again this does not include

employment generated in the agriculture/fishery I cattle-rising sectors

through backward demand linkages, which typically adds significantly to

total employment creation in the food chain.

Table 4A

Some Structural And Financial Features Of Agro-Industry In India

Description of Share of Total fixed Emolument percent of Net value

Industry fixed persons Capital per s as a Physical Added

Capital Employed factory percent of working fixed

per (Rs. net Value capital to Capital

Factory million) added invested

( 1996/97) Capital

( 1996/97) (1992/93) (1992/97) (1996/97) (1996/93)

Agro based 4.40 55.60 8.07 45.16 57.24 54.9

Agro based non 13.15 70.82 13.82 49.13 31.30 49.5

Food industries

Total 17.55 65.14 11.73 47.75 41.01 51.3

Agrobased

Industries

Other (nonagro) 82.85 79.96 46.50 35.31 23.39 39.4

industries

All industries 100.00 72.85 30.58 38.21 27.22 41.3


Also, it was judged that India had a competitive advantage for processed

foods would contribute more value added to the economy than

unprocessed raw materials. This new interest for agro-based industries

97

to

was accompanied by the gradual and controlled opening of India's

huge internal market for foreign food processors, mainly with the aim of

establishingjoint-ventures and linkages leading to spin -offs for domestic

firms.

Table 4.5

Structural And Financial Features Of Agro-Industry In India

Labour to fixed Capital ratio Materials consumed to value of output

(per Rs. I 00,000) (1996/97)

( 1992/93)

14.83 74.68

14.18 55.57

14.38 64.00

2.98 51.34

4.51 55.03


India's agro-industrialization is already more advanced than in

many African countries. As a consequence, skill requirements are more

diverse and also have to take into account the challenges brought about

by the gradual opening of markets.

The role of agriculture in economic development is long debated

issue. From time immemorial there is an emphasis is the literature, on ,_.c::'

the positive linkages between agriculture and industrialization. Three

channels are recognized. First the income elasticity of demand for the

agricultural goods being less than one, an increase in the agricultural

productivity in a closed economy releases labour for manufacturing

employment and thus contributes towards }llOdemization and growth of

the manufacturing sector. Second, higher income raises the demand

for manufacturing products. Third, aggregate savings increase and

finance industrialization.

98

Moreover, these theoretical analyses of the process of development .. have viewed agriculture and industry as two separate sectors in terms of

their characteristics. Apart from the demand side, two sectors are linked

only through the labour market. There is a common pool of labor, which

is allocated between two sectors. However in more recent decades

another prominent sector in a developing economy has emerged,

namely the agro-industry, which directly interfaces with both the

agriculture and industry and thereby provides a link between the two

sectors. This industry, as the name suggest, refers to the subset of

manufacturing that processed raw materials and intermediate products

derived from the agricultural sector. For instance, it transforms products

originating from the agriculture, forestry and fisheries, and processes

them into canned food, beverages, fruit juice, meat and dairy products,

textile and clothing, leather wood and rubber products, animal feed etc.

The relative importance of the agro-industry sector compared to

manufacturing as well as overall GDP, contributes to coverage,

37.6percent of the total manufacturing value added and 30-40percent of

GDP of the developing countries for instance, agro-industries in Asia and

Pacific account for 36percent of the total manufacturing value added.

Data from the annual survey of industries show that 46 percent of all

factories in India are agro-industrial and they contribute 22 percent of

the manufacturing value added.

4.4 ORGANISED AND UNORGANISED FOOD PROCESSING IN

UTTAR PRADESH

Food processing industry has always been an important part of our

industrial set up. Two most important reason that led it to be identified

as the thrust area is its labour intensities and its strong backward

linkages with agriculture and equally important forwards linkages with

modem markets.

Food processing industry comprises of three groups:

99

1. Primary Food Processing

2. Unorganised cottage scale industries

3. Organised processed food industries

The first group was made up predominantly of industries like rice,

pulses, floor chakkies, dal mills and oil mills, beside scores of simple

small scale dehydration and processing industries in rural and semi

urban areas. The small bakeries, pasta food units, traditional food units,

poha making units, fruits, vegetable and spice processing units dominate

the unorganized sector. The organized food processing industry produces

variety of products and contributes significantly in the industrial output.

Organised food processing always formed an important component

of our industrial structure. Table 4.6 brings out the importance of food

processing industry with respect to all industries. Analyzing the table, we

find that after 1990 the share of factories in food processing industry has

come down mainly due to faster growth in the factories in other sectors

than in the F.P.I. However, in the case of proportion of fixed capital in

F.P.I., there was constant increase except in the periods 1995-96 and

1996-97 as some decline is noticed. The average fixed capital per factory

in F.P.I. in 1980s was Rs. 10.81 lakhs which increased to Rs. 22.82

lakhs during 1990s. The proportion of value of output has shown

constant increase with the exception of years 1992-93 and 1995-96. This

increase in the proportion of value of output is significant as there has

been decrease in the proportion of number of factories and increase in

the proportion of fixed capital.

This implies there is greater efficiency with which few larger

factories are operating in the food-processing sector as compared to all

other factories.

Though there has been overall increase in the number of workers

but the growth in employment always lagged behind the growth in fixed

100

capital. With the exception of the year 1996-97 which showed decrease

in number of the factories and number of workers and also low growth in

fixed capital, rest of the period recorded very high growth in the fixed

capital.

Table: 4.6

Food Processing Industry Proportion Of All Industries

Net No. of Fixed No. of No. of Value Value of

Years Factories Capital Workers Employes Added Output

1980-81 17.69 4.04 16.56 16.72 6.11 6.8 1981-82 17.48 3.82 11.5 16.74 7.66 6.53 1982-83 18.37 3.64 15.61 15.41 6.7 6.09 1983-84 18.12 3.94 13.19 12.93 7.31 6.95 1984-85 18.01 3.71 12.74 12.66 7.18 7.16 1985-86 17.55 3.63 13.06 12.8 7.1 7.14 1986-87 17.66 3.74 12.8 12.53 6.86 7.58 1987-88 17.87 3.58 13.11 12.81 6.82 8.27 1988-89 17.86 3.68 13.09 12.84 7.18 8.26 1989-90 17.91 4.35 13.65 13.31 8.43 9.43 1990-91 17.93 4.15 13.82 13.41 6.84 8.69 1991-92 17.56 4.24 13.79 13.37 7.01 8.83 1992-93 17.91 4.16 14.17 13.67 5.71 8.58 1993-94 17.67 4.35 13.98 13.65 6.73 9.85 1994-95 17.18 4.58 13.53 13.25 7.36 9.38 1995-96 17 4.55 13.25 12.8 5.82 8.79 1996-97 16.37 4.44 13.44 13.11 6.71 10.01 1997-98 16.82 5.05 13.82 13.44 6.31 10.08 1998-99 16.99 5.12 13.91 13.12 6.45 10.58 1999-00 17.01 5.23 13.98 13.01 6.87 10.96

Source: Calculated from data prov1ded by Annual Survey of Industnes

Food processing industry in the unorganized sector: It constitutes

significant part of the total food processing. According to approach paper

of Eighth Five Year Plan of Ministry of Food Processing Industry,

unorganized sector constituted about 42 percent of total enterprises in

the food processing sector.

A comparison of unorganized and organized food processing sector

in Table 4. 7 shows the dominance of unorganized sector in terms of both

the number of enterprises and number of employees. However, the

101

number of employees per enterprise in the unorganized sector is much

less as compared to organized sector.

Small number of employees per enterprise invokes some

skepticism as whether unorganized one in the employment generation

but this skepticism is removed to some extent by the fact that an over

whelming large proportion of unorganized manufacturing is concentrated

in terms of own account manufacturing which are more efficient in

generating self-employment than creating large employment.

Another important fact, which comes out from tables 4. 7 and 4.8 is

that there has been constant decrease both in number of enterprises and

number of employees over the period. This decrease in unorganized food

processing is occurring at the time when organized food processing is

growing. This indicates that organized food processing sector may be

driving out the unorganized food processing sector.

Table: 4.7

Unorganized & Organised Food Processing Sector As Percent Of Total

Food Processing Sector

Unorganized sector Organized sector No. No. No. No.

Years Enterprise Employed Enterprise Employed

1984-85 99.47 86.86 0.53 13.14 1989-90 99.25 84.1 0.75 15.9

1994-95 98.13 81.4 1.87 18.6 Source: NSS report No. 363/1, 39611 & 433

The purpose of the study is to analyze the change in food

processing industry in Uttar Pradesh over time. The analysis is on the

basis of the data provided by Annual Survey of Industries for two time

periods i.e. 1990-91 and 2000-01.

Analysing the percentage of the number of factories, fixed capital,

number of workers and the value of output of the food-processing

102

industries to total industries in the state, we find that F.P.I. forms an

important part of the 8.3 percent, indicating a positive impact of the

reforms. Interestingly, other industries actually show a deceleration from

12 percent to 7.2 percent.

0

Table: 4.8

Employees per Enterprise in Unorganized Food Processing Sector

Uttar Pradesh

Years Rural Urban Total 1984-85 2.00 0.485 0.497 1989-90 0.46 0.389 0.445 1994-95 0.437 0.376 0.424

Source: NSS report No. 363/ I, 396/ I & 433

Table: 4.9

Proportion Of Food Processing Industry In Uttar Pradesh As

Percentage Of All India

No. of Factories Fixed Capital No. of Workers Value of Output

Uttar Pradesh 1990-91 2000-01 1990-91 2000-01 1990-91 2000-01 1990-91 2000-01

22.96 22.37 6.82 6.63 26.13 23.14 19.48 15.27

India 17.96 16.97 4.14 5.16 13.85 14.35 13.57 12.77

Source: Calculated from vanous Issues of Annual Survey of Industnes

In terms of distribution of food processing industry, Uttar Pradesh

occupied first position in terms of number of workers employed during

1990-91 and second position in 2000-01 at all-India level. Decrease in

the percentage share of workers in F.P.I of Uttar Pradesh can be

attributed to the decrease in the overall importance of F.P.I in the state.

103

Table: 4.10

Distribution of Food Processing Industry In State As Percen~ Of ~llnd~

No. of Factories Fixed Capital No. of Workers Value of Output

Uttar Pradesh 1990-91 2000-01 1990-91 2000-01 1990-91 2000-01 1990-91 2000-01

12.13 10.40 18.14 13.66 18.62 12.48 14.07 10.58

India 100 100 100 100 100 100 100 100

Source: Calculated from vanous 1ssues of Annual Survey of Industnes

The capital intensity has increased from Rs. 0.343 Lakh in 1990-

91 to Rs. 0.739 lakh in 2000-01which is above the national average of

Rs. 0.352 lakh (1991) and Rs. 0.675 lakh (2001). In the post-reform

period there is tremendous increase in capital intensity. This increase in

capital intensity is accompanied by decrease in the number of workers

(Table 4.9).

Table: 4.11

Productivity In Food Processing Industry

Capital Productivity Labour Productivity (Rs Lakhs)

1990-91 2000-01 1990-91 2000-01

Uttar Pradesh 5.47 5.27 1.88 4.00

India 5.95 7.04 2.48 4.71

Source: Calculated from vanous 1ssues of Annual Survey ot Industnes

8.3percent, indicating a positive impact of the reforms. Interestingly,

other industries actually show a deceleration from 12 percent to 7.2

percent.

The labour productivity is increasing but the capital productivity is

on a decline in Uttar Pradesh while both are increasing at India level.

Increase in labour productivity is due to decrease in number of workers.

104

39%

Composition of Food Processing Sector Share of Factories of Subsectors

(1990-91 )

2% D Meat and Fish Produc ts

1% 10% 11 Fru~s and Vegetables

D Oil: Vegetable and Animal

D Dairy Products

• Grain Milling and Stare h Production

0 Animal Feeds

• Bakery Products

0 Sugar

• Cocoa and related 1% Products

11 Other Food Products

Figure: 4.1

Composition of Food Processing Sector Share of Factories of Subsectors

(2000-01)

1%

2%

53%

Figure: 4.2

105

D Meat and Fish Products

11 Fruits and Vegetables

D Oil: Vegetable and A nirra l

D Dairy Products

• Grain M lling and Starch Production

D A nirra l Feeds

• Bakery Products

D Sugar

• Cocoa and related Products


Composition of Food Processing Sector Share of Fixed Capital of Subsectors

(1990-91)

6%

Figure: 4.3

D flfleat and Rsh Products

• Fruits and Vegetables

D Oil: Vegetable and Anirml

D Dairy Products

• Grain Mlling and Starch Production

D Anirml Feeds

• Bakery Products

D Sugar


• Other Food Products

Composition of Food Processing Sector Share of Fixed Capital of Subsectors

(2000-01)

D Meat and FISh Products

• Frurts and Vegetables 10%, 6% 4% o Oil : Vegetable and

Anirml o Dairy Products

• Grain Milling and Starch Production

8% o Anirral Feeds

• Bakery Products

o Sugar


3% • Other Food Products

---

Figure: 4.4

106

21%

3%

Composition of Food Processing Sector Share of Output of Sub Sectors

(1990-91 )

1%

Figure: 4.5

0 tv1eat and Fish A-oducts

II Fru~s and Vegetables

0 Oil: Vegetable and Anirral

o Dairy A-oducts

• Grain Mlling and Starch A-oduction

0 Anirral Feeds

• Bakery A-oducts

o Sugar

• Cocoa and related A-oducts

11 Other Food A-oducts

Composition of Food Processing Sector Share of Output of Sub Sectors

(2000-01)

o Meat and Rsh A-oducts

11% 4% 111 Fruits and Vegetables

o Oil: Vegetable and Animal

o Dairy Products

• Grain Mlling and Starch Production

o Animal Feeds

• Bakery Products

o Sugar 22%



Figure: 4.6

107

Composition of Food Processing Industry has undergone

significant change in the post reform period .Most of the factories in the

1990-91 were accounted by grain milling about 40 percent of total

number of factories in Food Processing Industry.Sugar and related

products accounted for about 39percent of total factories. However in

terms of fixed capital and value of output, Sugar and allied products

accounted for 65percent and 54percent of the total in Food Processing

Industry respectively. This points out the fact, that large factory

production dominated in manufacturing and refining of sugar. Vegetable

oils and fats and grain milling accounted for 13percent and 1 Opercent of

fixed capital of Food Processing Industry. In terms of Value of output

Sugar and allied product's share is 54percent and Vegetable oil and fats

account for 25percent of total value of output of Food Processing

Industry.

The composition of Food Processing Industry, as shown in Figure

4.1 and 4.2 has undergone change in post reform period, where, new

sectors increased their relative position and old sectors lost their

dominant position. Grain milling maintained its position and the share to

total Food Processing Industry increased from 40 percent to 52 percent.

Oil industry's share increased and attained the second dominant

position. Sugar industry lost its share in number of factories and

accounted for mere 4.6 percent in 2000-01. Though the absolute number

had increased but due to more increase in number of other Food

Processing Industries the share of sugar factories had declined

drastically from 39 percent and to 4 percent. Its share in fixed capital

and value of output has also declined. Similar is the case of oil industry

both in terms of fixed capital and value of output.

Agriculture in Uttar Pradesh forms the backbone of economy. The

Sugar and Oil industry in Uttar Pradesh hold important place in the

agro-industrial sector. These two agro-processing activities are area

... ~ .. 108

specific in the State. Sugar industry is setup right in the vicinity of sugar

cane fields, where as oil ghanis and spillers are set up near the mustard

growing region but the large oil mills are set up near urban areas

(market). The study area is chosen keeping in mind the setting up of

these agro-processing units.

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chapter role of agro processing industries in rural development...

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