contents · job work for organised retailers rentals from cold store and ware house. commission...

Detailed Project Report on RABCs in Bihar

1 IL&FS Cluster Development Initiatives Limited

Contents

1. Background and Context of RABC ........................................................................ 4

1.1 Agri input products and services ...................................................................... 5

1.2 Agri output market ........................................................................................... 5

1.3 Need for a one-stop shop ................................................................................. 5

1.4 The concept of RABC ...................................................................................... 6

1.5 Other sources of Revenue ................................................................................ 9

2. Objectives, Research Methodology - Recommended districts & locations ........... 14

2.1 Objectives ...................................................................................................... 14

2.2 Research Methodology .................................................................................. 14

3. Report Structure and Assumptions ....................................................................... 17

3.1 Report structure ............................................................................................. 17

3.2 Important Assumptions included in the RABC strategy ................................. 17

4. State Profile- Bihar .............................................................................................. 19

4.1 A brief Inter sectoral profile of Bihar ............................................................. 19

4.2 Agriculture Production and Primary Processing in Bihar................................ 21

4.3 Agriculture Input and Services market in Bihar .............................................. 26

4.4 Agricultural Products marketing in Bihar ....................................................... 27

4.5 Agricultural Warehousing and Cold storages ................................................. 32

5. RABC at Mahua, Vaishali District ....................................................................... 34

5.3 Location Analysis of Mahua .......................................................................... 40

5.4 Business Plan for the RABC in Mahua .......................................................... 43

6. RABC at Dalsinghsarai, Samastipur District ........................................................ 47

6.1 District Profile ............................................................................................... 47

6.2 Agriculture Sector .......................................................................................... 48

6.3 Location Analysis of Dalsinghsarai ................................................................ 51

6.4 Business Plan for the RABC in Dalsinghsarai ................................................ 54

7. RABC at Motipur & Bahadurpur, Muzaffarpur District ....................................... 58



7.3 Location Analysis - Motipur .......................................................................... 63

7.4 Business Plan for the RABC in Motipur......................................................... 66



7.5 Location Analysis - Bahadurpur ..................................................................... 69

7.6 Business Plan for the RABC in Bahadurpur ................................................... 73

8. RABC at Bihat, Begusarai District....................................................................... 77



8.3 Location Analysis - Bihat .............................................................................. 81

8.4 Business Plan for the RABC in Bihat ............................................................. 84

9. RABC at Bihar Sharif, Nalanda District............................................................... 88



9.3 Location Analysis – Bihar Sharif ................................................................... 93

9.4 Business Plan for the RABC in Bihar Sharif .................................................. 96

10. RABC at Fatuha, Patna District ........................................................................ 101

10.1 Distrcit Profile ............................................................................................ 101

10.2 Agriculture Sector ....................................................................................... 102

10.3 Location Analysis - Fatuha ......................................................................... 107

10.4 Business Plan for the RABC Strategy in Fatuha .......................................... 113

11. RABC at Maranga, Purnia District .................................................................... 117

11.1 District profile ............................................................................................ 117


11.3 Location Analysis - Purnia .......................................................................... 120

11.4 Business Plan for the RABC in Maranga, Purnia ......................................... 124

12. RABC at Bettiah & Ramnagar, West Champaran District ................................. 128

12.1 District profile ............................................................................................ 128


12.3 Location Analysis - Bettiah ......................................................................... 132

12.4 Business Plan for the RABC in Bettiah ....................................................... 135

12.5 Business Plan for the RABC in Ramnagar .................................................. 138

13. Business Plan and Financial Analysis ............................................................... 143

13.1 Project Cost and Means of Finance ............................................................. 143

13.2 Analysis of Business Plan ........................................................................... 146

13.3 Sensitivity Analysis .................................................................................... 150

14. Annexure .......................................................................................................... 152



14.1 Investor Profiles .......................................................................................... 152



1. Background and Context of RABC With 2.85 % of India’s geographical area and 8.07 % of population, Bihar is the third

most populous state in the country (2001 census). 90% of Bihar’s population is

dependent on agriculture.

Bihar is the third largest producer of vegetables; fifth largest producer of fruits and

eighth largest producer of grains in India.

On one front, state of Bihar is being talked of as the next big hope for the agriculture

sector, on the other this sector remains the most crucial factor for the state economy.

Degree of dependence on agriculture in terms of employment as well as income is

high.

Inspite of high volume of production and a good range of crops, the earnings from

farming are poor. The value-addition in agricultural products is negligible.

Owing to low literacy, small land holdings and poor infrastructure, the production

practices and input usage is either less or more than recommended practices. Needless

to say, if the recommended practices are followed the potential for sustainable

increase in production and productivity is huge.

A Rajendra Agriculture University study estimates post-harvest losses in horticultural

crops at Rs.2000 crore per annum. The reasons for the post harvest losses are

manifold. They include poor production practices, poor post harvest management

practices, lack of grading at farm level, poor packaging, poor transportation, multiple

handling, and poor marketing system.

Realizing the potential role horticulture can play in the development of the state

economy, Government of Bihar has accorded high priority to Horticulture and food

processing sector. The Vision 2015 for Food Processing Sector in Bihar aims at

realizing the potential of state agriculture sector by laying down a clear road map for

accelerated development of food processing sector.

The Vision Document 2015 recognizes that creating the necessary infrastructure for

post-harvest handling and food processing will increase the farm gate prices, rural

income and create additional employment. It has therefore suggested setting up of 100

Rural Agri Business Centres as one of the significant interventions to accelerate

growth of food processing sector in Bihar.



1.1 Agri input products and services

Apart from land, the inputs needed for production include water, seeds, fertilizers,

pesticides, weedicides, tilling equipment, irrigation equipment, harvesting equipment,

power (animal, electricity, fuel) finance and knowledge. This agricultural input

market in Bihar at primary level can be characterised with

♣ Different agencies providing different agri inputs

♣ Sale of fertilizers especially phosphatic fertilizers at price higher than MRP

♣ Rampant sale of spurious seeds and pesticides.

♣ Non availability of formal credit on time.

♣ High rates of interest for informal credit

♣ Non availability of power – Electricity.

♣ High capital cost of equipment like tractors, combined harvesters etc.

♣ Poor availability of information/ knowledge on production practices

♣ Poor availability of weather related information

♣ Unscientific and at times excessive use of agri inputs including water,

fertilizers and pesticides leading to sustainability and environmental problems.

1.2 Agri output market

Similarly, on the marketing front, different products have different marketing

channels. However, the agricultural product marketing system at primary level and

marketing practices adopted by the farmers can be characterised with

♣ Predominance of sales to village traders

♣ Inter-locking of credit and commodity markets

♣ Lack of storage facilities

♣ Loose carrying of produce/ poor packaging of products.

♣ Sale of ungraded produce

♣ Use of un-standardized weights and measures by buyers/traders

♣ Multiplicity of subjectively determined market charges like arhat,

Commission, dharmada and charity payable by the farmers

♣ Loss of value (both quality and quantity loss) because of multiple handling

1.3 Need for a one-stop shop

A quick review of the above characteristics of production and marketing system

shows that the farmer dealings with multiple people/ agencies renders the quality of



products and service they buy being far from desired. There exists a business

opportunity for some one who can provide all the products and services to the farmers

under one roof to be able to capture the scattered market. Rural Agri Business Centre

(RABC) is one such effort.

1.4 The concept of RABC

Rural Agri Business Centres (RABC) will be the one stop destination for all the

production and marketing needs of the farmer. RABC will strive to provide

convenience to its customers by providing products and services needed for

successful farm production and marketing. It is expected that each RABC will

strengthen the agro economy in its catchment zone by providing the following

services to the farmers and the industry -

♣ Sale of agri inputs and services

♣ Procurement and Primary processing

♣ Storage

♣ Marketing

The model of a RABC can be schematically represented as below:

RABCRABCRABCRABC

ProcurementProcurementProcurementProcurement & Primary & Primary & Primary & Primary

ProcessingProcessingProcessingProcessing

1. Procurement 2. Pre-

cooling

MarketingMarketingMarketingMarketing

1. Market intelligence

2. Market Linkages

Agri inputs & ServicesAgri inputs & ServicesAgri inputs & ServicesAgri inputs & Services

1. Seeds

2. Fertilizers

StorageStorageStorageStorage

1. Dry ware house

2. Cold storage



The table below summarizes the scope of services, source of revenue, major facilities

envisaged, key jobs in operation model, and key challenges in implementation for

each of the constituent of the RABC model.

Parameter Agri input & services

Procurement & Primary processing

Storage Marketing

Scope of products and services offered

Sale of seeds, planting material, fertilisers, pesticides, weedicides, agriculture equipment, irrigation equipment, spare parts, hiring of equipment, extension services

Procurement of various agricultural and horticultural products, Precooling of high value products, grading, sorting, cleaning and packaging for wholesale and retail sales.

Dry ware house for cereals and pulses. Cold storage for potato. Cold storage of high value fruits for reverse marketing

Marketing of products procured to both local as well as export market. Reverse marketing of products produced else where.

Source of Revenue

Retail margin from sales of inputs, Rentals from hiring out of equipment, fee for advisory services

Trading margin, Margin from storage arbitrage, Job work for organised retailers

Rentals from cold store and ware house. Commission charges from bankers for ware house receipt financing

Trading margin

Facilities*

Shop floor for sale of agri inputs, servicing of equipment, parking of equipment

Precooling facility, Reefer truck, open trucks, cleaning, grading line, weighing facilities, crate washing line

Dry warehouse, Cold store - Single/ multi chamber

Cold store, Open trucks



Operation Model - key jobs

Become registered dealers of various agri input manufacturers, hire qualified professionals for advisory services

Establish backward linkages with farmers, traders, commission agents in the local market for procurement, price fixation, Establish logistics linkages

Standard operating procedures for maintenance of ware houses and cold storage to be established and followed

Establish forward linkages with traders/ processors/ exporters in destination markets.

Key challenges

Resistance from existing agri input retailers, Credit sales, Dealer ship with all the companies

Aggregation of produce, Breaking Credit - Commodity linkage, resistance from existing traders, Price discovery, Price communication, Payment mechanism to farmers, Crate movement

Power - electricity issues, use of cold store in non- potato storage months

Price information in forward markets, credit sales, Transit losses, price discovery in forward markets

*Facilities indicated above are only indicative and may change from location to

location depending on the product mix for the location.

It is envisaged that by providing the above services RABC will help farmers and

industry in the following ways –

♣ Availability of quality agri inputs and service to the farmers

♣ Improvement in quality and quantity of production of crops in the catchment

area by providing better inputs and knowledge to the farmers.

♣ Better and fair price realization of produce to the farmers.

♣ Reduction in wastage of the crop due to handling and quality deterioration

losses.

♣ Improvement in quality and shelf life due to scientific handling and processing

♣ Efficient and transparent market linkages

♣ Consolidated procurement centers for retail and processing industry.

♣ Creation of continuous employment in catchment of the RABC



Apart from the above facilities suggested an RABC can take up few more initiatives

to meet the requirements of farmers. These initiatives are also a potential source of

revenue for the RABC.

1.5 Other sources of Revenue

Fuel Station:

Fuel (HSD) is one of the key sources of power not only for tractor based activities but

also for irrigation in Bihar. In the districts where canal irrigation is not present bore

wells are the source of irrigation. As availability of power from the grid is a constraint

farmers use diesel operated pumps for irrigation. The consumption of HSD for

irrigating one acre of land using 5 HP motor is close to 8-10 litres.

Credit Franchisee:

The rate of interest paid by the farmers for loans used for production purposes from

informal sources is as high as 36 to 48% per annum. The documentation and time

involved in taking loan from formal sources shuns them from approaching formal

sources. Similarly, bankers have problems in fulfilling their priority sector lending

targets because of the poor response from farmers. With the relationship RABC will

enjoy with farmers it can act as an intermediary between bankers and farmers. It can

help the bankers do the required documentation and charge a fee. Similarly ware

house receipt financing can be done. This is apart from the opportunities that exist in

sale of other financial products such as insurance, personal finance, vehicle finance

etc.

Nursery:

In locations where vegetable crops are focus a green house nursery with trays can be

taken up. Traditional raised bed nurseries damage the root system by as high as 60 %.

Tray nursery seedlings have better root system and establish themselves better. Tray

nursery can be a single most important intervention that can increase the yields by 15-

20 %. Vegetable farmers are generally small farmers and cannot establish a shade

house themselves. RABC can operate in one of the two models suggested as below.

One, establish the infrastructure; farmers bring their seed and get a nursery cultivated

in the green house for a fee.



Two, RABC takes up nursery production and sell the seedlings. However, in this

model the risks to RABC are higher. Similarly sale of plating material for fruit crops

can be explored.

There is a subsidy of 50 % of project cost (Max Rs. 1.5 lakhs) under national

horticulture mission which can be availed for setting up of a nursery.

A model existing in the country: Case of Hariyali Kisaan Bazaar

HARIYALI KISAN BAZAAR 1

Hariyali Kisaan Bazaar" is a pioneering micro level effort, in the farming sector in

India to improve the profitability" & "productivity" of Indian farming community.

DCM Shriram Consolidated Ltd. (DSCL) has over 35 years of experience in the agri-

input markets in India.

Hariyali Kisaan Bazaar

The "Hariyali Kisaan Bazaar" chain empowers the farmer by setting up centres, which

provide all encompassing solutions to the farmers under one roof. Each "Hariyali

Kisaan Bazaar" centre operates in a catchment of about 20 kms. A typical centre

caters to agricultural land of about 50000-70000 acres and impacts the life of approx.

15000 farmers. Each centre is engaged in:

• Bridging the last mile: Provides handholding to improve the quality of

agriculture in the area. Provides 24X7 support through a team of qualified

agronomists based at the centre.

• Quality Agri-Inputs: Provides a complete range of good quality, multi-brand

agri inputs like fertilizers, seeds, pesticides, farm implements & tools,

veterinary products, animal feed, irrigation items and other key inputs like

diesel, petrol at fair prices.

• Financial Services: Provides access to modern retail banking & farm credit

through simplified and transparent processes as also other financial services

like insurance etc.

1 (http://www.dscl.com/BusinessAgreeHarKisBzr.aspx?PID=27 accessed on 25.07.2008)



• Farm Output Services: Farm produce buyback opportunities, access to new

markets & output related services.

• Other Products and Services: Fuels, FMCG, Consumer Goods and

Durables, Apparels etc.

In the near future, Hariyali Kisaan Bazaars plan to move beyond agri to meet the other

needs of farmers as customers.

Farmer Response

So far, over 160 "Hariyali" outlets (as on 31st march 08) have been set up in different

states across India which they plan to scale up to 300 by March 09.

The ground-level agri-support is already yielding results in the farmer's fields.

Future Plans

Hariyali Kisaan Bazaar has plans to rapidly scale up the operations and create a

national footprint covering all the major agricultural markets of the country. This

would mean catering to cultivable land of over 30 million acres and touching the lives

of over 10 million farmers.



Notes on Photographs:

1. This store is located on Rajiv Gandhi Rahadari 20 Km north of Karimnagar, Near Sultanabad

2. Full view of the store, with entry gate.

3. Board showing range of services offered

4. Name board “Hariyali Kisan Bazaar”

5. Pesticides on sale well displayed as in Super markets.

6. The pests that the displayed pesticide will work on, identification of pests and dosages on the display board behind the product.

7. Tractor tyres and farm implements in display for sale

8. Fuel service station under construction

9. Demonstration plot for some new cultivar



2. Objectives, Research Methodology -

Recommended districts & locations FOOD VISION 2015 envisages establishment of 100 RABC in the state. In the first

phase it is suggested to establish 10 RABC.

2.1 Objectives

Identification of 10 potential locations for setting up of RABC involved study with

the following objectives

♣ Estimation of agri input market size and dynamics

♣ Estimation of agri output markets, size and dynamics

♣ Mapping of cold storages and warehousing – Capacities and Operations

♣ Sizing of RABC and suggesting the product mix, potential volume and

facilities that need to be established keeping in view the potential products and

volumes.

♣ Suggesting financial model for each location

2.2 Research Methodology

A modular three-phase approach was adopted.

Phase I

The first phase involved identification of potential districts for setting up of RABCs

based on secondary data analysis. Quantitative and qualitative data analysis was

carried out to identify potential districts. The following data was used for

identification of potential districts.

# Quantitative Parameter

1 Annual Production of cereals

2 Annual production of pulses

3 Annual Production of Vegetables



4 Annual Production of fruits

5 Gross Irrigated area

6 Agri input market Size

# Qualitative Parameters

1 Proximity to consumption centres

2 Investor confidence

3 Extent of damage by flood

4 Basic infrastructure

5 Law and order situation

With our understanding of Bihar and stake holder consultation, interest shown by

various stake holders the following districts were identified.

♣ Muzaffarpur

♣ Patna

♣ Vaishali

♣ Rohtas

♣ Nalanda

♣ Samastipur

♣ West Champaran

♣ Purnia

♣ Begusarai

Phase II

To identify potential location(s) for setting up of RABC in the district discussions and

consultation was carried out with various stake holders of different industries in the

district. The respondents included agri input dealers, agri input company officials, agri

output traders, commission agents, agricultural extension department, horticulture

department, cold storage owners, farmers etc.



The respondents were asked to suggest and rank various locations in the district based

on availability of products, range of products, connectivity, existing trade channels,

and size of agri input markets

Based on the discussion and consultations the following locations were selected for

further study

District Locations suggested

Muzaffarpur Bahadurpur, Motipur

Patna Fatuha – Bakhtiyarpur

Vaishali Hazipur, Mahua

Samastipur Dalsinghsarai

Nalanda Biharsharief

West Champaran Ramnagar

Purnia Maranga

Begusarai Begusarai

Phase III

Phase III involved field level study. It involved interactions with various stake

holders. The parameters as outlined in the objectives were studied in detail. During

the field level interaction qualitative information was collected to support the viability

analysis done based on quantitative data.

Structured questionnaires were administered to various stake holders including

farmers, traders, commission agents, logistics providers to understand the role played

by each of them in the chain.

The questionnaires captured the potential products, existing production and post

production practices, concerns of producers, value chain analysis, production and

seasonality issues, scope for intervention etc. Questionnaires have been appended in

Annexure.



3. Report Structure and Assumptions 3.1 Report structure

Findings of the study have been presented at three levels – State, selected district and

selected locations.

Data is documented and analysed as per the dimensions of the RABC model for the

above three levels. Therefore, firstly, agricultural production in the state/

district/location is discussed which provides cues for procurement and processing in

RABCs. Secondly, availability and consumption of inputs are discussed, along with

access to formal credit, providing an overview of the inputs market. Thirdly, agri

products markets, marketable surpluses and various marketing channels are detailed

to arrive at modus operandi of marketing. Finally, present warehousing and storage

capacities are detailed for various geographical levels, providing insights for required

infrastructure for storage etc. In addition to the above data, the location level analysis includes information and data

on current practices in the respective locations and their implications on the proposed

RABC. This is followed by the recommended RABC strategy for the location which

includes

♣ Procurement and Marketing Plan – Crop mix, Seasonality, estimated volumes

and expected margins.

♣ Agri input sales and services

♣ Facilities suggested for primary processing, storage and other services

♣ Financial model

3.2 Important Assumptions included in the RABC strategy

Apart from the various assumptions in the business model for capital costs and

variable costs, (summarized in Chapter 13) there are certain assumptions which

underline the recommendations for proposed RABCs, which are as follows:

♣ Estimated market captured by RABC for procurement and primary processing

is 10 percent of the marketable surplus. Based on our field work involving

stake holder interaction, understanding the business of some of the bigger

players in the given location, our knowledge on experience in similar business



in different locations of the country; it seems that capturing 10 percent of the

market share will be a fair target that can be achieved by an RABC.

♣ Expected margin for the various products has been suggested based on

interactions with various traders, commission agents, our understanding of the

margins being targeted / realized by other organized players such as Choupal

Fresh - Wholesale, Safal - Bangalore, Metro - Cash & Carry, Hariyali Kisan

Bazaar etc.

♣ Estimated market captured by RABC for inputs is 10 percent of the

marketable surplus, which is again based on our field work involving

interaction with various agri input dealers, farmers, agri input company sales

and marketing staff, and our knowledge on experience of various other similar

models (Hariyali bazaar, Mahindra Shubh laabh, Choupal sagar) With a

skewed input consumption pattern, extension services for imparting

knowledge should be high on the RABC agenda. However, at this stage, we

are not estimating its scope and market, which should be done once the RABC

has stabilised and the profile of customers are better known.



4. State Profile- Bihar 4.1 A brief Inter sectoral profile of Bihar AS we study Bihar, we are reminded of the classic story of two shoe salesmen who

were sent to a primitive island to determine business potential. The first sales man

wired back – “coming home immediately, no one wears shoes here.” The second sales

man responded- “send a boat load of shoes immediately. The possibilities of selling

shoes here are unlimited”

Bihar with the present state of its infrastructure, manufacturing base, agricultural

products value addition, capital formation, agricultural productivity, agricultural input

usage and power supply, among many other indicators, ranks among the lowest in the

country and hence not a preferred destination for investors. But, prospective investors

need to view Bihar from the lens of the second salesmen. Given the natural resources

she is endowed with, Bihar has unlimited opportunities.

Some facts and features of Bihar are summarized below:

♣ The topography of Bihar can be described as a fertile alluvial plain occupying

the Gangetic Valley. The plain extends from the foothills of the Himalayas in

the north to a few miles south of the river Ganges as it flows through the state

from the west to the east. Rich farmland and lush orchards extend throughout

the state.

♣ Bihar is richly endowed with water resources, both ground and surface water.

Besides high rainfall, it has considerable water supply from the rivers, which

flow through the state.

♣ Bihar is the seventh largest economy in India in terms of food production. The

economy is primarily agrarian with agriculture contributing to more than 38

per cent to the Gross State Domestic Product (GSDP).

♣ Bihar is the eighth largest producer of food grains in the country. The major

agricultural products of Bihar are cereals, pulses, oilseeds and cash crops. The

major cereals are rice, wheat and maize and major pulses are gram, red gram,

green gram and red lentils.



♣ The major cash crops are potato, sugarcane, jute, tobacco and spices. Bihar is

the third largest producer of vegetables in India and the fifth largest producer

of fruits (8.3 million MT) and (3.03 million) MT respectively.

♣ Average size of land holding is 0.75 ha, which is half of the all India average

of 1.57 ha. Over 80 per cent farms are very small (average size 0.30 ha). Small

and marginal farms together constitute 91 per cent of the total land holdings of

the state. There is high land fragmentation. Irrigation intensity of 152 per cent

and cropping intensity of 139 per cent is slightly higher than the all India

average of 133 per cent.

♣ As per a study done by International Plant Nutrition Institute, NPK use ratio

was 14.7:1.7:1 in 2004-05. The state is highly skewed towards usage of N.

This sub-optimal and imbalanced nutrient usage is causing nutrient mining

leading to depletion of inherent soil fertility.

♣ Bihar’s industrial sector is the smallest in India. The number of industrial units

is only 1.13 per cent of India’s total. Bihar’s industrial sector contributes only

about 9–10 per cent to the GSDP as against 23–24 per cent on all India basis

and employs less than 10 per cent of the workforce. The contribution of

manufacturing sector is even lower with manufacturing contributing only 3 per

cent of GSDP as against 15 per cent on all India basis. Small and medium

scale enterprises predominate in Bihar’s industrial sector.

♣ Bihar is the only major state in the country which has repealed Agricultural

Produce Market Committee Act (APMC Act), providing free market for the

producers to sell their produce and providing an opportunity for organised

buyers to buy directly from farmers.

♣ A study by Rajendra Agriculture University for Bihar estimates that the post-

harvest losses range from 10 to 50% for different products. For example, in

Banana the losses are from 15–25 %, in papaya 30–50 %, in cauliflower 41–

47%. It is estimated that just the arrest of the losses in fruit and vegetables in

the state through processing and post-harvest management will result in an

increase in income of Rs 2,000 crore to the economy.

The state of Bihar is being talked about as a sleeping giant of Indian agriculture. The

National Commission on Farmers has concluded that Bihar and Eastern India present



uncommon opportunities for becoming another “fertile crescent” even as the present

fertile crescent (Punjab, Haryana and Western Uttar Pradesh) have reached a state of

economic and ecological distress. Water, the lifeline of agriculture, is abundant in

Bihar and the real issue is not availability but management.

4.2 Agriculture Production and Primary Processing in Bihar

Agriculture is Bihar's strength. The State's fertile soil and abundant water resources

offer tremendous opportunities for a vibrant agriculture.

Bihar ranks eighth in grain production in the country. The major agricultural products

of Bihar include cereals, pulses and cash crops. Bihar ranks highly in production of

various fruits and vegetables in the country. The state has a virtual monopoly in

production of Makhana and Litchi in the country. Table below summarizes the

production of various agricultural products in the state in 2006-07

# Category Production in Lakh 1 Cereals 128.15 2 Pulses 6.28 3 Oil Seeds 1.74 4 Vegetables 76.54 5 Fruits 31.92 6 Potato 65.90

Source: Department of Agriculture, GoB

4.2.1 Cereals, Pulses and Oil seeds

Production: The major agricultural products of Bihar are cereals, pulses, oilseeds and

cash crops. The major cereals include rice, wheat and maize. Major pulses grown are

Bengal gram, Red gram, Green gram and Red Lentils. Table below summarises the

production grains and oil seeds in the state in year 2006-07.

# Crop Production in Lakh 1 Rice 52.46 2 Wheat 56.78 3 Maize 18.91 4 Cow pea 1.11 5 Black gram 0.36 6 Bengal Gram 1.22 7 Red Lentils 2.22 8 Other Pulses 2.38 9 Oil seeds 1.74




The productivity of cereals in Bihar is lower than the national average while it is

higher in case of pulses and maize and more or less at par with national average in

case of oilseeds.

Potential for Intervention: In food grains like rice, wheat, maize and pulses there

exists a large potential for scientific milling and processing.

♣ In case of rice and wheat, outdated technologies like hullers or shellers are

used for milling resulting in lower recovery and consequent lower value.

♣ Similar is the case with Pulse mills/ Dal mills. Most of the units are in Patna

district. They are all small mills with capacity of less than 5 mt per day. Our

field study shows that there are only two sorter machine based units for Dal

milling in Baarh, Patna Dist.

♣ There is no large-scale processing unit for maize and wheat in the state. There

are a couple of processing units working as registered units and there is no fair

estimate of the number of small unregistered units processing maize (poultry

feed) and wheat (flour). Such units operate at small scale as household

processing units. However, no details are available on the number of these

small units and quantity of maize and wheat processed within the state.

4.2.2 Vegetables

Production: Wide range of vegetables is cultivated in Bihar. As per the statistics

available with National Horticulture Board, Bihar is the largest producer of okra,

second largest producer of cabbage, third largest producer of Potato, Brinjal and

Cauliflower. Further, it has significant production of other vegetables like Onion,

Tomato, Pointed gourd and cucumber.

Owing to the large marketable surplus, Bihar is a prominent sourcing destination for

neighbouring states of West Bengal, Jharkhand and Eastern Uttar Pradesh. The total

vegetable production in the state is estimated to be around 13 million MT.

Production of major vegetables in the state is summarized in the table below:



# Crop Production in Lakh Mt

1 Cauliflower 9.38

2 Cabbage 5.78

3 Tomato 7.27

4 Onion 10.17

5 Okra 7.13

6 Brinjal 10.31

7 Gourds 16.02

8 Potato 65.90

Source: Dept. of Agriculture, GoB

As can be observed from the table above, the range of vegetables cultivated is good

and the volume high. The scope for value addition in products like cauliflower,

tomato and potato is high.

The major vegetable producing districts are mapped below:

Major Production Cluster - Vegetables



4.2.3 Fruits

Production: As with vegetables, the range of fruits cultivated in Bihar is high. Bihar

is the largest producer of litchi, third largest producer of pineapple and fourth largest

producer of mango in India. The state has a virtual monopoly in production of Litchi

in the country. The total fruit production in the state is estimated to be around 3

million MT. The production of major fruits in 2006-07 is summarised in the table

below

# Crop Production in Lakh Mt

1 Mango 12.20

2 Banana 9.59

3 Litchi 2.00

4 Guava 1.98

5 Pineapple 1.07

6 Citrus 1.12

Total 31.90

Source: Dept. of Agriculture, Govt. of Bihar

There is a huge opportunity for export of fresh as well as processed products in Litchi,

Banana and Guava in Bihar. However, the suitability of Mango for pulping is limited

as most of the varieties are suitable for table purposes only.

The major fruit producing districts mostly overlap with the vegetable producing ones.

The major fruit producing districts are mapped below.



Major fruit Production Clusters on the Map

Potential for Intervention: There are very few licensed fruit and vegetable

processing units in the state. Most of these units are engaged in the manufacture of

fruit juices, fruit pulps (excluding frozen), squashes, pickles, tomato ketchup/sauce,

etc. There are a few more units along similar lines in the unorganised sector also

which are involved in minimal processing. However, the industry estimates that only

about 2–3 per cent of the total produce is processed.

Farm level pre-processing facilities are absent. Cold storage facilities for fruits and

vegetables are absent except for potatoes.

The fruit and vegetable processing segment is marked by a complete absence of cold

chain along the value chain resulting in quality deterioration and degradation of raw

materials.

Similarly, even after processing, the products are kept under minimal refrigeration or

no refrigeration. A large number of these units are working on work-order basis for

larger chains and as such find that the operating margins being thin leave no scope of

either technology upgradation or expansion.



4.2.4 Spices

Garlic and Turmeric are the major spices produced in the state. Garlic accounts for

42% of the total spice production followed by turmeric, which accounts for 41%.

Table below summarized the production of major spices in year 2005-06.

# Crop Production(MT)

1 Turmeric 23592

2 Ginger 7319

3 Garlic 24102

Total spices 55013

Source: Dept. of Agriculture, GoB

4.3 Agriculture Input and Services market in Bihar THOUGH agriculture is Bihar’s strength, Bihar ranks low in various indices

indicating agricultural input consumption, including access to formal credit. A snap

shot of agri input industry in Bihar is summarised below:

♣ As per a study done by International Plant Nutrition institute NPK use ratio

was 14.7:1.7:1 in 2004-05 against a general recommendation of 4:2:1. The

state is highly skewed towards usage of N.

♣ 15.09 lakh mt of Urea valued at approx Rs. 750 crores was consumed in Bihar

in 2006-07, which is 7.4% of the national consumption.

♣ 2.56 lakh mt of DAP valued at approx Rs. 248 crores was consumed in Bihar

in 2006-07, which is 5 % of the national consumption.

♣ 1.23 lakh mt of MOP valued at approx Rs. 56 crores was consumed in Bihar in

2006-07, which is 4.5 % of the national consumption.

♣ Availability determines consumption in fertiliser. During peak sowing season

availability of phosphatic fertilisers is a constraint leading to black marketing

and adulteration.

♣ The average consumption of pesticide in the state is 0.3 to 0.4 kg per ha.

♣ As per a study done by Bihar Pesticide Dealers association, the size of

pesticide market in Bihar in 2006-7 was Rs. 106 crores.



♣ The number of pesticide molecule available in India is 194 as against 755 in

the US, 600 in Europe, 495 in Pakistan and 432 in Vietnam. Where as in

Bihar, the number molecules available in Bihar is 75-80 only.

♣ As per industry estimates there are about 12000 retailers involved in sale of

agri inputs however, only 10 % of them have a license from state government,

making the quality of agri inputs available to farmers questionable.

♣ As per industry the market size of seeds in Bihar is estimated at 300 crores

♣ Bihar is one of the largest Hybrid maize seed market in the country. Estimated

market size for Maize seed in Bihar is 10000 mt valued at Rs. 100 crores

♣ Access to formal credit is restricted. For an estimated 104 lakh farm holdings

there are only 20 lakh kisan credit cards.

♣ Bihar accounted for 4 % of market share of 2.65 lakh tractors sold in the

country in 2006-07. Still the mechanisation is low, Bihar has17 tractors per

1000 ha against 68 tractors for 1000 ha in Punjab.

♣ Diesel based irrigation system is rampant except in canals based irrigated

districts. Bore well based irrigation pumps consume 8-10 litres of diesel per

acre of land.

♣ Agricultural extension is only from the state government and is far from

desired. Very little or no extension services available to the farmers, as the

extension officials have a large area to cover and loads of desk work to do.

Potential for Intervention: The above facts and dynamics of Agri input market of

Bihar makes an interesting opportunity. Apart from the sale of agri inputs, there is a

potential for agri services including private extension.

4.4 Agricultural Products marketing in Bihar Marketing channels and corresponding value chain-There are more than 7,000

rural markets and haats in addition to erstwhile 95 APMC mandis and 32 principal

markets yards. Out of these 7,000 only about 855 rural haats have their own buildings

and premises for providing rudimentary grading and sorting facilities.

There are different channels used by farmers to market their produce. As is the case

with agricultural products across the country, the marketing channels in Bihar are also

long and multi layered.



Based on the product, size of the farmer, volume of production, distance to Mandi,

risk taking ability of the farmer different marketing channels are used by different

farmers to market their produce. However, the prominent marketing channels can be

summarised as follows:

1. Farmer to local haat to trader/ retailer to consumer as by small farmers in most

vegetable crops.

2. Farmer to village level aggregator (VLA) to Commission agent to Trader/

wholesaler to processor/ retailer to consumer in grain crops like maize

3. Farmer to Contractor to Commission agent to Wholesaler to Retailer to Consumer

as in Mango and Litchi (Orchard crops)

4. Farmer to Commission agent to Wholesaler/ retailer to Consumer as done by large

farmers in any crop.

The various marketing Channels can be summarised in the picture below.

Broadly three kinds of markets can be observed in Bihar other than direct selling of

produce by the farmers at farm gate. The comparative characteristics of each market

and the associated dynamics are summarised in the table below:

Farmer

VLA

Commission

Wholesaler/ Semi

Retailer



Parameter Haat Seasonal Market Wholesale markets

Location

Generally in a cluster of 3-4 villages - Could be production or consumption pockets

Located near major production pockets. Generally operated in open area on road sides with good connectivity to other towns

Mostly located in cities and district head quarter

Example

Vegetable market in Motipur, Muzzafarpur Dist. Biweekly market - Wednesday and Saturday.

Water melon market near Ismailpur, Hajipur block Vaishali dist in the months of April to June

Mussalahpur Whole sale market in Patna

Periodicity Mostly weekly Seasonal - During peak arrival seasons

Throughout the year

Customers Village level traders, retailers& end consumers

Local traders & traders from outside markets

Local traders, retailers, traders from other markets

Modus Operandi

Farmers bring the produce to the mandi and sell it themselves. NO intermediaries involved. Farmers weigh the product themselves. Some times kaantawalas present, who charge a fee. In privately owned locations sellers are charged Rs 5- 20 per day. Kaantawaals charge Rs 1 per packet of 40- 70 kg.

Farmers/ local traders who consolidate the product from small farmers bring the produce to the sale point. Mostly there are no commission agents, sometimes commission agents present. Farmers sell the produce to the traders

Farmers bring the produce or send the produce to the commission agents (CA) in the mandi. CA charge commission depending on the product. It could be a fixed amount based on volume or a % of price realised. Generally it ranges from 1 to 10 %. Commission is collected from seller or buyer or both. Different markets and different products have different commission charges. Other incidentals like weighing, loading, unloading charges to buyer and seller.

Price discovery

Negotiation Negotiation Negotiation/ Open auction/ Closed auction (Hatta)

Volume of products

Per capita volume of product brought by farmer for sales

Per capita volume of product brought by the farmer is high. Generally

Per capita volume of product brought by the farmer is



traded is low. Generally less than a quintal.

in the range of 3-5 mt. medium to high.

Cash credit Sales

All transactions happen in cash. Buyer pays cash to the seller at the spot.

Mostly transactions happen in cash. Buyer pays cash to the seller at the spot. However, some credit sales (2-5%) can be observed.

Transactions happen on cash as well as credit. In case of grains generally 15 days is the credit period. However, farmers can take immediate cash with a cash discount of 2 %. The buyers also take credit from the commission agents. The cash credit sales vary from product to product. In case of vegetables credit sales are in the range of 30-40 %.

Quality determination

The quality of the produce is determined manually and visually. Typically, the buyer dips his hand inside the basket/gunny bag in which the farmer brings his produce and takes out a handful of product. Based on the quality of the produce in his hand, the quality of the entire basket is determined. Visual checks are also used for determining the moisture levels in the produce and the farmers are often at the receiving end due to such practices. Quality assessment is based on experience, no scientific methods used, putting farmer’s interest at jeopardy.

Entry – Exit barriers

No regulation. However, in privately owned land entry of sellers regulated by the owner. No entry barrier for buyers.

NO regulation for sellers. No entry barriers for buyers.

Though the APMC act has been repealed, the existing traders do not allow new entrepreneurs to set up commission agency in the market. It is regulated informally. No entry barriers for buyers

Infrastructure

Generally operated in open area either privately owned or community owned. No infrastructure exists.

NO infrastructure exists. Weighment done by estimation or by truck loads at weigh bridges.

Depending on the location some infrastructure exists. Infrastructure present includes concrete trading platforms, internal roads, weighing facilities, temporary storage of variable capacity, power connection, public toilets, canteens etc



Wastage along the value chain:

One of the most critical aspects in the value chain, wastage happens at all levels in the

value chain. However, the factors responsible for wastage vary at different levels and

are shown by the chart below:

Wastage

Farmer/ VLA Level

Crop Damage

Improper Harvesting Techniques

Poor Packaging

Poor Transportation

Wholesaler/ Semi wholesaler Level

Moisture Loss

Poor Handling

Poor Transportation

Multiple handling

Storage

Grading sorting by retailers

Retailer Level

Poor handling

Poor Transportation

Handling by customers

Moisture Loss

The table below summarizes the wastage in the various crops in a dip stick study done

by IL&FS CDI during the field survey.

Crop Cumulative Wastage (%)

Potato 18-20

Cauliflower 18-24

Cabbage 18-24

Tomato 25-30

Banana 25-30



It can observed from the above findings that wastages are low in case of bulk and

robust crops like Potato and cabbage, while it is significantly high in delicate crops

like Tomato and Banana (Ripened). Also, there is a significant difference in the cost

of wastage at Pre-Wholesale and wholesale level which is primarily on account of

time spent in the value chain.

Potential for intervention: As can be observed from the above dynamics, the

existing trade is unorganized. Insufficient infrastructure is leading to loss in quality

and quantity. The farmers are at the receiving end and many times the village level

aggregators and traders have similar experience with large buyers in destination

markets. There exists a clear opportunity for an organized intervention that not only

provides infrastructure but also an alternative market to the farmers.

4.5 Agricultural Warehousing and Cold storages

Existing methods and Potential for intervention:

TRADITIONAL storage methods are in vogue for grains. Most of the grain producing

farmers store grains for self consumption as well for sale at a later date in traditional

ways only. Use of scientific storage by farmer for grains is absent.

Traditional grain storage is a unit having an

aboveground retaining wall structure, and a

polythene liner. The wall structure is preferably

formed from bamboo strips and typically has a

circular shape. The roof is made of wild grass and

bamboo strips. The area enclosed by the retaining

wall structure is covered with a floor liner on top of

which the grain is deposited. There is a small

opening for removing of grains on need basis. The

structure is also used for storage of husk for cattle.

Bihar has a total food grains storage capacity of 13.4 lakh tonne which caters to only

12 per cent of the total produce in the state. Besides, there are only about 120–130

rural godowns as against 7,000 rural markets. There is an urgent need to construct

rural godowns for the benefit of small and marginal farmers.



Bihar has 215 cold stores of which only 5.6 per cent are in the cooperative sector, rest

belonging to the private sector. Most of the cold storage space (76.75 per cent) is

being used to store potatoes.

The capacity of cold storage is estimated at 7.7 lakh mt which is sufficient for just 12

% of the potato produced in the state. The existing capacity in the State is extremely

inadequate to cope up with the production and hence there is urgent need to create

warehousing infrastructure at vantage point.



5. RABC at Mahua, Vaishali District 5.1 District Profile

Vaishali is centrally located in Bihar and spread over an area of 2036 Sq. Km. The

district is bordered by River Ganga on the south which separates Vaishali from Patna

District. River Gandak in the west separates it from Saran district while on the east

and north it is bounded by Samastipur and Muzaffarpur districts respectively.

The district constitutes of 16 development blocks and the head quarter is located at

Hajipur. The population of the district is about 23.42 Lakh (2001 census) with a

population density of 1222 persons per sq km. The ratio of rural population is very

high with only 7.3% of the population staying in urban areas. The literacy rate is

48.55% which is lower than the national average.

Paddy, wheat, vegetables, banana, watermelon, litchi and potato are the major crops

cultivated in the district.

The district has fertile alluvial soil. The sole source of irrigation is private tube wells.

In 1998-99 about 0.75 lakh ha is irrigated from tubewells.

Mahua is the location suggested for setting up RABC in Vaishali.



5.2 Agriculture Sector

5.2.1 Area and production:

With a total area of 1.8 lakh ha under grain crops, Vaishali produces close to 3 lakh

MT of various grains. The fruit and vegetable production is close to 7.5 lakh MT. The

following table summarizes the area and production of different crop categories in

2005-06.

Category Area (ha) Production (MT) Cereals 159660 280904 Pulses 21049 12441 Total grains 180709 293345 Vegetables 29373 475936 Fruits 13230 277960 Potato* 13230 277960 Total fruits and vegetables 55833 1031856 Source: Dept of Agriculture, GoB

5.2.2 Comparison of Crop Mix - Vaishali Vs Bihar:

A comparison of the % of area occupied by a principle category of crops in the district

to that of the state shows that the district has a crop mix skewed towards horticultural

crops.

Fig: Percentage of Area Under different crops in the district Vs % state

Smaller land holding patterns bring down the marketable surplus in grains. With

proximity to Patna, good connectivity and suitability of land and climate for

66

9

12

7

5

76

11

6

4

4

0 10 20 30 40 50 60 70 80

Cereals

Pulses

Vegetables

Fruits

Potato

Vaishali Bihar



production of horticultural crops greater area is under cultivation of commercial and

cash crops. Smaller land holding pattern has resulted in intensive cultivation using

high input usage and high cropping intensity. The reported cropping intensity of the

district is 222 % although our field survey shows that the cropping intensity is higher

than 250 %.

5.2.3 Block wise crop wise Acreages of Major Crops:

The block wise area under major crops in Rabi 2007 is summarized in the table

below.

# Block Wheat Maize 1 Hajipur 3505 1936 2 Lalgunj 3444 1739 3 Bhagwanpur 2212 1598 4 Vaishali 3313 1685 5 Velsar 2122 1461 6 Vidupur 1689 1571 7 Raghopur 4094 2108 8 Mahua 3807 1736 9 Rajapakar 2452 1291

10 Patepur 7392 2236 11 Guraul 3490 1815 12 Cheharkala 1580 1493 13 Jandaha 5146 2032 14 Mahnaar 1756 1537 15 Sahdoi 1122 1546 16 Desari 875 1216

Total 48000 27000 Source: Dept of Agriculture, Vaishali Dist; Department of Horticulture, Vaishali Dist

5.2.4 Agricultural Produce of Vaishali

5.2.4.1 Cereal and Pulses

The marketable surplus for grains in the district is very less, lying in the range of 30-

40 % of the production and it comes to about 0.8 to 1 lakh MT in total. There are no

sizable or large mandis; however, Sarai, Gola, Bhagwanpur and Phulwara bazaar are

few smaller mandis dealing with grains.



5.2.4.2 Fruits and Vegetables

The major horticultural crops of the district are banana, mango, litchi, cauliflower,

water melon, potato and okra. The major mandis and the products handled have been

summarized in the table below.

Mandi Major produce Katarmala Banana, Litchi and Vegetables Jandaha Mango, Chilli, Vegetables Mahua Mango and Vegetables Lalgunj Vegetables Hazipur Banana, Cauliflower, Litchi, Mango, Water melon Source: IL&FS -CDI field study

The details of market dynamics have been discussed in detail later.

5.2.5 Agricultural Inputs of Vaishali

The agri input market of Vaishali district is summarized in the table below:

Agri input Particulars Remarks

Number of wholesalers 35

15-18 active, 72 Primary Agricultural Co-operative Societies and 25 MACS active in the district.

Fertilisers (MT)

Urea 59899 Shortage of fertilizer in peak season rampant. Better availability can increase consumption. Sale of fertilizer at higher than MRP seen in villages.

DAP 15540

NPK 6862

MOP 4815

SSP 139

Seeds (MT)

Paddy -HYV 4000 Hybrid paddy seed consumption is on an increasing trend. Government distributed hybrid paddy seeds last year. Hybrid Seed market estimated to grow to 150 MT next year.

Paddy hybrid 50

Wheat 3000

Maize 750

Vegetables Rs. 2.00 crores



Pesticides

(Rs.)

8-10 crores

Characterized by sale of generic molecules like Monocrotophos, Endosulfan, Profenopos, Cyper methrin, Mancozeb, Metalxyl etc. Weedicides include 2-4D, Glyphosate and Butachlor. Scope for introduction of new and better molecules.

Tractor Dealers

8 Nos.

All most all major tractor manufactures have a dealer in the district. Tractor penetration is 3-5 tractors per panchayat area.

Source: Department of Agriculture and IL&FS -CDI field survey

5.2.6 Agricultural Warehousing and Cold storages - Vaishali

In case of cereals, farmers have very low marketable surplus hence the storage of

grains in organized warehouses is extremely low. In fact, there are no warehouses for

storage of grains in the district. The Bihar state warehousing corporation has a

warehouse of 4000 MT at Hazipur which is used for storage of fertilizers only.

The district has 18 cold storages with an installed capacity of 1 lakh metric tonnes.

Almost all the cold storages are involved in the storage of potato only. Only one cold

storage (namely Licchvi Cold Storage Pvt. Ltd having 8 chambers) stores other

products such as apples, oranges, grapes and litchi.

The charges for cold storage are Rs 140 to 150 per quintal per season. The storage

season is from March to October. Apart from the rentals, loading and unloading

charges are collected from the farmers which are in the range of Rs 2 to 2.75 per

quintal for each loading or unloading operation. Many cold store owners lend money

to farmers in the tune of upto 60 % of the product value at an interest rate of 24% per

annum.



Focus Product – Banana

1. Stretches of banana Cultivation in Hazipur

2. Banana ready for harvesting

3. Movement from farm to the transport vehicle

4. Transport in bullock carts

5. Transport in thela and Bicycle

6. Banana stocked on road side

7. Banana traders with the produce



5.3 Location Analysis of Mahua

Mahua is located about 40 km north east of Hajipur and it is the block head quarter of

Mahua Block. The present road connecting Mahua to Hajipur is in bad condition;

however work is in progress for relaying a BT road connecting to Patna. Mahua is

also well connected to Samastipur.

5.3.1 Agri Output Market in Mahua

The various crops that are produced and traded in the catchment of Mahua are

tobacco, wheat, brinjal, cauliflower, okra, cabbage, potato, onion, mango and litchi.

Parsunia is the major mandi involved in trade of vegetables.

Parsunia

Parsunia is 3km from Mahua on Mahua – Patna road. It is a private mandi spread in

an area of less than one acre. There is no infrastructure

except for the flooring made of bricks and 6 small units

for stocking of products. Only vegetables are handled in

this mandi. Onion, potato and mango are sold either from

the farm gate or from farmer’s house.

Farmers from Jandaha, Mahua, Patepura, Cheharkala,

Rajapakar and Guraul blocks bring produce to this

mandi.

There are no commission agents in the mandi. Farmers sell the produce themselves.

Mostly traders from Patna buy the products directly from the farmers. Farmers pay Rs

20 per day as rent in the mandi. There is a temple attached to the mandi and the

proceeds from rentals are used for maintenance of the temple. Price discovery is

through negotiation.

Farmers transport the produce themselves in thela, small three wheelers or by bicycle.

Many farmers own their thela. Transportation costs are Rs.10-20 per packet of 50-70

kg. Unloading costs are Rs.2 per packet and are borne by the farmer.

Weighing is done by kaantawalas. Weighing charges are Rs. 5 per quintal, which are

borne by the buyers. Loading charges are Rs. 2 per packet and are borne by the buyer.



Traders transport the material in vehicles of various capacities. The cost of

transportation to Patna in a 3 MT Tata pickup is about Rs. 600.

The various products traded in the mandi, season and estimated volume per day in the

season is summarized in the table below.

Product Estimated volume handled per day (MT) Brinjal 10 Cauliflower 20 Okra 10 Cabbage 20 Gourds 20 Source: IL&FS -CDI field study

The various products that are traded outside mandi (directly at farm), estimated

volume and season are summarized in the table below:

Product Estimated volume (MT) Potato 30000 Onion 20000 Mango 5000 Source: IL&FS -CDI field study

5.3.2 Agri Input Market of Mahua:

The table below summarizes the size of agri input market of Mahua.

Number of dealers of inputs 20 Estimated Urea market 1000 MT Rs. 50 lakh Estimated DAP and complex market 450 MT Rs. 45 lakh Estimated MOP market 150 MT Rs. 7.5 lakh Estimated Seed market Rs. 100 lakhs Estimated Pesticide market Rs. 200 lakhs Number of Dealers for tractors 0 Cash credit sales More than 90 % of transactions on cash

The estimated market size of agri inputs excluding tractors and irrigation equipment

and the associated services is close to Rs. 400 lakhs.



5.3.3 Existing dynamics of Production, Agri input markets, Agri output markets

and Storage – Implications on Mahua RABC

# Parameter Implication for RABC

A Production and harvesting – Affecting Procurement

1 Small Land holding Smaller lot size. Challenges in consolidation and standardization

2 Production of cash crops like

vegetables, tobacco

Higher cost of , higher risk taking capability of the producers, higher

scope for value addition, larger and spread agri input market size

3 Packaging in bamboo baskets,

Gunny bags

These affect the quality and also increase the cost of packaging to farmers. Introducing crates and encouraging the farmers to use the crates will be very beneficial. In fact, this can be the single most

important intervention to maintain quality and reduce wastages.

B Agri Input market

1 Non-availability of complex

fertilizer on time

Leads to black marketing - Ideal opportunity for an organized player

to induce foot falls.

2 Use of generic molecules in

Pesticides Scope for intervention and use of new pesticides high

3 Cash Sales - 90 %

Easy to enter the market as credit sales cannot be entertained by organized players. And the RABC can target larger market by

providing credit sales.

C Marketing

1 Transportation by thela,

bullock cart etc

Location of RABC within the catchment of the production or setting of village level consolidators or centres may be needed. May need to

provide transportation some times.

2 Price discovery - many

unknowns

Price discovery is by negotiation. Price setting will be very difficult as the possibility of finding model price will be difficult, at least in the

initial period.

3 Sales of products like

cauliflower in numbers

Extremely difficult for organized player, planning to deal in hundreds of tonnes, using numbers. Difficulty in arriving buying price. Need to

educate the farmers.

4 No commission agents

This is a good as well as bad. Good because, the farmers are used to

selling the produce to the buyers directly and hence there will be ready takers for RABC. Bad – the marketing costs are lower for the farmer

and the disintermediation margin does not exist.

5 Cash payments to farmers

most of the time

Need to make cash payments. Payments by cheques may not be acceptable. Need to develop a mechanism to make payments to

farmers in cash.



6 Cash purchase by traders most

of the time Receipts will be in cash. Need to consider this in the business plan.

7 Loading and Unloading

charges

Borne by the buyer as well as sellers. Need to incorporate in the

pricing appropriately.

D Storage

1 No storage facility for grains Grain production is mostly for self consumption in the immediate

catchment. Grain storage not recommended.

5.4 Business Plan for the RABC in Mahua

Based on the above analysis on various aspects of RABC model, the following

strategy is suggested

5.4.1 Procurement and Marketing Plan – Products and Expected Margin

The focus products in Mahua are vegetables and fruits. The catchment area for this

RABC consists of the blocks of Mahua, Patepur, Jandaha, Guraul, Lalgunj and

Bhagwanpur. Based on the production details of grains, vegetables and fruits in the

above mentioned blocks and estimated market surplus and linkages from field study,

it is estimated that the RABC will be able to handle the following products and

quantities.

Table below summarizes the focus products, estimated volume per annum and

expected gross margins per MT of product.

Product Estimated Qty (MT) Expected margin Rs. per MT Vegetables 8000 500 Mango 3500 2000 Litchi 300 5000 Banana 300 500

Seasonality: The products selected are well spread throughout the year as can be

observed from table below.

Product Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Onion Litchi Banana



Mango Potato Cauliflower Brinjal Okra

Peak Arrivals Off peak arrivals

5.4.2 Agri Input sales:

The estimated agri input sale and estimated margin from sale of agri inputs are

summarized in the table below:

Product Estimated Sales Estimated margin Urea 200 MT Rs.100 per MT DAP/ Complex 100 MT Rs. 200 per MT MOP 50 MT Rs. 100 per MT Seeds Rs. 05 lakhs 30 % Pesticides Rs. 20 Lakhs 20 %

5.4.3 Facilities Suggested for Primary processing, Storage and Other Services

Apart from the shop floor for selling of agri inputs, the following facilities are

suggested at Mahua for handling of agri output. Justification for setting up the facility

and the individual capacity is summarized in the table below.

# Facility Capacity Justification

1 Multi product

grading line

3 MT per

hour

Since a range of products will be handled,

multi product handling line will be ideal.

2 Pack house cold

room 250 MT For transit storage and storage of produce.

3 Primary processing

hall 500 sq m

For transit storage of cauliflower, okra, brinjal

- All the products are high volume low density

products, hence more handling space needed.



4 Crate washing line 1 Since it is proposed that all products except

onion and potato will be handled in crates.

5 Shop floor for sale

of agri inputs 150 sq m

For display and sale of agri inputs and

administration

6 Godown for

fertilizer 100 sq m For storage of fertilizer

7 Fumigation Line-2

MT/ Hr 1 For enhancing the shelf life of Litchi

8 De-saping/

Fungicide tank 1 For Mango

9 Weighing line 1 Since it is proposed that all products will be

purchased by weight.

5.4.4 Project Cost:

Description Amount (Lakh Rs) Land (2 Acres @ Rs. 10 Lakh/Acre) 20.00 Land Development (2 Acres @ Rs. 10 Lakh/Acre) 20.00 Buildings (Approx 1100 sq. m) 61.25 Plant & Machinery* 67.00 Miscellaneous Fixed Assets* 21.44 Preliminary and Pre-Operative Expenses* 5.21 Contingencies (5% of the above costs) 8.48 Margin Money for Working Capital* 4.02 Total Project Cost 207.40 * Assumptions and details given in Chapter 13.

5.4.5 Means of finance:

Particulars Amount (Lakh Rs) Equity 30% 62.22 Grant from GoB 35% 52.59 Debt Remaining 92.59 Total 207.40



5.4.6 Profit and Loss statement#

Year 1 2 3 4 5 6 7 Capacity Utilization 50% 60% 75% 90% 90% 90% 90% (Lakhs Rs) Revenue 409.79 491.75 614.68 737.62 737.62 737.62 737.62 Expenses Raw Material (Agri Inputs) 343.24 411.88 514.85 617.82 617.82 617.82 617.82 Water 0.39 0.47 0.59 0.70 0.70 0.70 0.70 Power & Fuel 4.32 5.18 6.48 7.78 7.78 7.78 7.78 Employee Cost 13.58 14.26 14.97 15.72 16.51 17.33 17.33 Insurance 0.75 0.75 0.75 0.75 0.75 0.75 0.75 Admin & Selling Overheads 4.10 4.92 6.15 7.38 7.38 7.38 7.38 Total Expenses 366.37 437.46 543.78 650.15 650.93 651.76 651.76 EBITDA 43.42 54.29 70.90 87.47 86.69 85.86 85.86 Interest on term loan 12.96 12.96 12.48 11.18 9.88 8.59 7.29 Interest on working capital borrowings 1.81 2.17 2.72 3.26 3.26 3.26 3.26 Depreciation 11.61 11.61 11.61 11.61 11.61 11.61 11.61 PBT 17.04 27.55 44.10 61.43 61.94 62.41 63.70 Tax 4.21 8.53 14.79 21.23 21.87 22.43 23.21 Net Profit (PAT) 12.83 19.02 29.31 40.20 40.07 39.98 40.50

# Assumptions are given in Chapter 13.

5.4.7 Financial Performance Indicators

Year 1 2 3 4 5 6 7 EBITDA Margin 10.59% 11.04% 11.53% 11.86% 11.75% 11.64% 11.64%

PAT margin 3.13% 3.87% 4.77% 5.45% 5.43% 5.42% 5.49% Debt-Equity Ratio 0.73 0.63 0.47 0.34 0.25 0.19 0.14

Debt to EBITDA ratio 2.41 1.97 1.43 1.10 1.00 0.90 0.79 Interest Coverage Ratio 2.65 3.02 3.69 4.59 4.93 5.35 5.94

DSCR 2.65 3.02 2.29 2.80 2.89 3.01 3.16 Average DSCR 2.76

Project IRR 15.97%



6. RABC at Dalsinghsarai, Samastipur District

6.1 District Profile

Samastipur is located centrally in Bihar and it covers an area of 2904 sq. km. The

district is bordered by River Bagmati on the north separating it from Darbhanga

district. River Ganges forms the southern border of the district while on the east it is

bounded by the districts of Begusarai and parts of Khagaria and on the west by

Vaishali and some parts of Muzaffarpur. Apart from Ganges and Bagmati, other rivers

that flow through the district are Budhi Gandak and Kamala Balaan.

The district has 20 blocks and the head quarter is located at Samastipur town. The

population of the district is 33.94 lakhs (2001 Census) with a population density of

1196/sq. km. The ratio of rural population is very high with only 3.64% of the

population staying in urban areas. The literacy rate is 45.13% which is lower than the

national average.

Samastipur has rich fertile alluvial soil and agriculture is the major economic activity

of the district. The major crops which are grown in the district are paddy, wheat,

mango, banana and potato. In 1997-98, the gross irrigated area in Samastipur was

1.07 lakh ha although the main source of irrigation is tube wells.

Dalsinghsarai has been identified as the potential location for setting up RABC in

Samastipur.




6.2.1 Area and production

In 2005-06, Samastipur produced about 5.19 lakh MT of grains from a total area of

about 2 lakh hectares under grain cultivation. The fruit and vegetable production

(including potato) was over 6.5 lakhs MT. A brief summary of various crops in

Samastipur is given below.

Category Area (ha) Production (MT) Cereals 197381 508896 Pulses 2024 10589 Total grains 199405 519485 Vegetables 29373 475936 Fruits 17486 234250 Potato 13270 274424 Total fruits and vegetables 60129 984610 Source: Department of Agriculture, GoB

6.2.2 Comparison of Crop Mix - Samastipur Vs Bihar

The comparison of area of crop mix for Samastipur and Bihar shows a skewed pattern

towards fruit and vegetable production. While cereals in Samastipur occupy almost

same percentage of area as compared to Bihar but pulses occupy much less area.

Fruits, vegetables and potato cover more area than that of Bihar as a whole thus

showing more stress on horticultural crops in comparison to the state.




The block wise area in Ha under major crops is summarized in the table below.

Blocks Paddy Wheat Turmeric Mango Litchi Banana Samastipur 6325 3253 290 725 50 76 Pusa 3115 2499 172 1530 60 98 Kalyanpur 7945 2951 125 845 75 87 Warisnagar 3095 2933 60 450 30 65 Khanpur 3195 2497 42 360 25 27 Morwa 3595 2567 115 570 40 90 Tajpur 3668 2553 30 425 35 25 Patori 4315 1062 50 360 105 60 Mohanpur 845 1498 60 200 45 15 Sarairanjan 4995 2967 90 600 70 80 Dalsinghsarai 3895 2491 195 327 25 107 Vidyapatinagar 3295 1928 105 463 35 85 Ujiyarpur 5295 2991 165 540 40 86 Mohiuddinnagar 3395 3200 40 270 40 85 Rosara 3595 3206 105 795 65 65 Shivajinagar 3915 2498 65 400 30 70 Hasanpur 5268 2925 50 360 55 50 Bithan 4395 1499 55 150 25 25 Bibhutipur 5668 3912 85 900 85 109 Singhia 4668 2100 8 565 33 67

Total 84482 51530 1907 10835 968 1372

6.2.4 Agricultural Produce of Samastipur


The marketable surplus in the district is very less which is in the range of 40-50% (i.e.

about 0.8 to 1 Lakh MT) of the production. There are no large mandis although there

are some dealings in grain in Samastipur, Dalsinghsarai and Tajpur mandis.


The major horticultural crops of the district are mango, banana, litchi, cauliflower,

potato and cabbage. The major mandis and the products handled have been




Mandi Major produce Dalsinghsarai Potato, Vegetables, Mango Samastipur Cereals, Potato, Mango Tajpur Turmeric, Vegetables Rosra Mango, Litchi, Vegetables Singhia Potato, Vegetables, Mango Source: IL&FS -CDI field study

The details of market dynamics for the selected locations have been discussed in

detail later.

6.2.5 Agriculture Inputs of Samastipur

The agri input market of Samastipur district is summarized in the table below.


Number of wholesalers

20 Wholesaler-retailer-farmer is the supply chain as in other parts of the state. Each panchayat of 4-5 villages has 3-4 retailers

Fertilizers (MT)

Urea 55734 Shortage of fertilizer in peak season rampant. Better availability can increase consumption. Sale of fertilizer at higher than MRP seen in villages. Highly skewed use of Urea. DOC consumption also present for Tobacco.

DAP 9223

NPK 5832

MOP 5410

SSP 510

Seeds (MT)

Paddy -HYV 5000 Hybrid paddy seed consumption on an increasing trend. One of the largest maize seed markets in the state.

Paddy hybrid 200

Wheat 1800

Maize 4000

Vegetables 30

Pesticides ( KL)

Endosulphan 5 KL Characterized by sale of generic molecules like Monocrotophos, Endosulfan, Profenopos, Cyper methrin, Mancozeb, Metalxyl etc. Weedicides include 2-4D, Glyphosate and Butachlor. Scope for introduction of new and better molecules. Estimated market size is Rs. 6-8 crores.

Chloropyriphos 4-5 KL

Trizophos 4 KL

Cypermethrin 3-4 KL

Quinalphos 3 KL

Profenophos 2-3 KL

Mancozeb (MT)

100



MZ + Metalaxyl

20 MT

Tractor Dealers

8-10 All most all major tractor manufactures have a dealer in the district. Tractor penetration is 3-5 tractors per panchayat.

6.2.6 Agri Warehousing and Cold storages - Samastipur

There are 13 operational cold storages in the district and 4 are under construction. The

total installed capacity is about 378503 cu. M or 1.25 lakh MT. Potato is the only

product stored in most of the cold storages. Only few cold storages which are near

Samastipur sometimes stock fruits such as apple, oranges etc. The usual storage

season for potato is from March to October/November. For the rest of the year, cold

storages remain empty.

Cold storage charges range between Rs. 140 and Rs. 150 per quintal of produce per

season. Loading and unloading charges are similar to other parts of the state. Cold

storeowners provide credit facilities to the farmers/traders against the produce stored.

6.3 Location Analysis of Dalsinghsarai

Dalsinghsarai is located 30 km south-west of Samastipur on NH- 28. It is the second

most important commercial centre in the district after Samastipur. It is well connected

by road and rail to other parts of the state. The various crops that are produced and

traded include cauliflower, brinjal, okra, potato, yam, maize, turmeric and tobacco.

6.3.1 Agri Output Market in Dalsinghsarai:

Dalsinghsarai has a mandi in the town dealing with fruits

and vegetables only. It is a private mandi spread in about

5 acres of land. The internal roads are lined with bricks,

but the condition of road turns very bad in rainy season.

There are no concrete platforms for trading. There are

about 100-125 commission agents in the mandi. The

individual commission agents have built their own shops.

The commission agents pay a rent of Rs. 600 per month

to the land lord. The produce arrivals are from

surrounding blocks of Samastipur and Begusarai districts.



The major blocks/villages in the catchment area are Jamunataal, Mukhtiyarpur,

Tajpur, Salkhoni, Basarai. Farmers bring the produce using their own mode of

transportation depending on the distance and volume of product. The usual destination

markets are Luckisarai, Begusarai, Siliguri, Navada and some parts of UP. For maize

there are 4-5 traders who also deal in wheat and other crops.

The major products traded in the mandi, season and estimated volume per day in the

season are summarized in the table below.

Product Estimated volume handled per day( MT) Brinjal 20 Cauliflower 30 Okra 10 Cabbage 20 Gourds 30 Mango 20 Source: IL&FS -CDI field study

The various products that are traded outside mandi (directly at farm) in the catchment

area, their estimated volume and season are summarized in the table below:

Product Estimated volume (MT) Potato 20000 Mango 3000 Turmeric 2000 Maize 40000

6.3.2 Agri Input Market of Dalsinghsarai:

The table below summarizes the size of agri input market of Dalsinghsarai.

Number of dealers of inputs 15 Estimated Urea market 4000 MT 200 Estimated DAP and complex market 1500 MT 150 Estimated MOP market 800 MT 40 Estimated Seed market Rs. 200 lakhs Estimated Pesticide market Rs. 300 lakhs Number of Dealers for tractors 0 Cash credit sales More than 90 % of transactions on cash Organised Warehousing for Fertilisers 0




and the associated service is close to Rs. 900 lakhs.


and Storage – Implications on Dalsinghsarai RABC.



1 Production of cash crops

Higher cost of production, higher risk taking capability of the producers, higher scope for value addition, larger and well spread agri

input market.


Gunny bags



B Agri input Markets

1 Non - availability of complex

fertilizer on time

Leads to black marketing - Ideal opportunity for an organized player to induce foot falls. Excessive use of Urea. Scope for extension

services


Pesticides High scope for intervention and use of new pesticides

3 Cash purchases > 90 %




C Agri output Marketing

1

Transportation by thela,

bullock cart in case of

vegetables etc

Location of RABC within the catchment of the production or setting

of village level consolidators or centres may be needed. May need to

provide transportation for some time (at least a couple of seasons).

2 Purchase of maize from farm

gate/ farmers home

The village level traders complete the sale transaction, makes forward sale with a trader based at Dalsighsarai. This trader in turn closes the sale at a destination market. The trader sends the vehicle directly to the farmers place for loading. The produce is handled only once and it reaches the final customer. Extremely efficient logistics– No handling charges, no sunk cost of transportation for farmer as in mandi sales. However, price discovery is the key. Understanding of destination

markets’ price movement extremely important for RABC.


unknowns Price discovery is by negotiation. Buying Price fixation will be very difficult as the possibility of finding model price is difficult. Need to



work with traders for a couple of seasons.

4

Commission charges in vegetables @ of Rs. 50 per

quintal.

The commission charges are fixed on volume and not on price.

Extremely competitive, disintermediation margin is Only Rs. 50 per quintal. Commission agent has no incentive to increase the price and hence the chances of getting good price for the farmer are limited. Need to find other differentiators like service to get produce from

farmers.


most of the time


farmers in cash.




charges

Borne by the buyer as well as seller. Need to incorporate in the pricing

appropriately.

D Storage

1 No storage facility for grains Due to large volumes of maize and other gains and pulses the grain

storage is recommended at Dalsinghsarai.

6.4 Business Plan for the RABC in Dalsinghsarai

The focus products in Dalsinghsarai are grains, vegetables and mango. The catchment

area for this RABC consists of the blocks of Morwa, Patori, Tajpur, Rosara, Vidyapati

nagar, Sarai ranjan, Dal Singhsarai and Ujiyarpur. Based on the production details of

grains, vegetables and fruits in the above mentioned blocks and estimated market

surplus and linkages from field study, it is estimated that the RABC will be able to

handle the following products and quantities.


expected gross margins per MT of product.

6.4.1 Procurement Plan – Products and Expected Margin

Product Estimated volume (MT) Expected margin Rs. per MT Grains 10000 1000 Vegetables 2500 750 Mango 200 2000 Seasonality: The products selected are well spread throughout the year as can be




Product Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Brinjal Cauliflower Okra Cabbage Potato Mango Grains


6.4.2 Agri Input Sales

Table below summarizes the estimates sales and expected margins from sale of agri

inputs.

Product Estimated Sales Estimated margin Urea 400 MT Rs. 100 per MT DAP/ Complex 150 MT Rs. 200 per MT MOP 80 MT Rs. 100 per MT Seeds Rs. 20 lakhs 30 % Pesticides Rs. 30 lakhs 20 %

6.4.3 Facilities Suggested for Primary Processing, Storage and Other Services:


suggested at Dalsinghsarai for handling of agri output. Justification for setting the

facility and the individual capacity is summarized in the table below.


1 Multi product

grading line

2 MT per

hour

Since a range of products will be handled, multi

product handling line will be ideal.

2 Multi chamber

Cold storage 100 MT Transit storage and storage of unsold produce.



3

Primary

processing

hall

200 sq MT

For transit storage of Cauliflower, Okra, Brinjal -

All the products are high volume low density


4 Crate Washing

line 1

Since it is proposed that all products except maize

and grains will be handled in crates.

5

Shop floor for

sale of agri

inputs

150 sq m For Display and sale of agri inputs and

Administration

6 Godown for


7 Storage for

grains 5000 MT For storage of grains, transit storage



6.4.4 Project Cost

Description Amount (Lakhs Rs) Land (2 Acres @ Rs. 5 Lakhs/Acre) 10.00 Land Development (2 Acres @ Rs. 5 Lakhs/Acre) 10.00 Buildings (Approx 3500 sq. m @ Rs.6500/sq. m) 216.25 Plant & Machinary* 38.00 Miscellaneous Fixed Assets* 14.34 Preliminary and Pre-Operative Expenses * 6.23 Contingencies (5% of the above costs) 13.93 Margin Money for Working Capital* 12.29 Total Project Cost 321.04 * Assumptions and details are given in Chapter 13.



6.4.5 Source of Finance

Particulars Amount Equity 30% 96.31 Grant from GoB 35% 102.36 Debt Remaining 122.36 Total 321.04


Year 1 2 3 4 5 6 7

Capacity Utilization 40% 50% 75% 90% 90% 90% 90%

(Lakhs Rs)

Revenue 539.74 674.68 1012.01 1214.42 1214.42 1214.42 1214.42

Expenses

Raw Material (Agri Inputs) 454.73 568.41 852.62 1023.14 1023.14 1023.14 1023.14

Water 0.26 0.33 0.50 0.59 0.59 0.59 0.59

Power & Fuel 3.46 4.32 6.48 7.78 7.78 7.78 7.78

Employee Cost 11.85 12.44 13.07 13.72 14.41 15.13 15.13

Insurance 1.34 1.34 1.34 1.34 1.34 1.34 1.34

Admin & Selling Overheads 5.40 6.75 10.12 12.14 12.14 12.14 12.14

Total Expenses 477.04 593.59 884.12 1058.72 1059.40 1060.12 1060.12

EBITDA 62.70 81.08 127.89 155.70 155.01 154.29 154.29

Interest on term loan 17.13 17.13 16.49 14.78 13.06 11.35 9.64

Int. W. Cap Borrowing 5.53 6.91 10.37 12.44 12.44 12.44 12.44

Depreciation 12.87 12.87 12.87 12.87 12.87 12.87 12.87

PBT 27.16 44.16 88.16 115.61 116.63 117.63 119.34

Tax 8.30 14.59 29.99 39.70 40.39 41.02 41.86

Net Profit (PAT) 18.87 29.58 58.18 75.91 76.25 76.61 77.48

# Assumptions given in Chapter 13


Year 1 2 3 4 5 6 7 EBITDA Margin 11.62% 12.02% 12.64% 12.82% 12.76% 12.71% 12.71% PAT margin 3.50% 4.38% 5.75% 6.25% 6.28% 6.31% 6.38% Debt-Equity Ratio 0.56 0.50 0.36 0.26 0.19 0.14 0.10 Debt to EBITDA ratio 2.54 2.08 1.40 1.16 1.09 1.01 0.93 Interest Coverage Ratio 2.40 2.77 3.65 4.26 4.49 4.76 5.09 DSCR 2.40 2.77 2.50 2.94 3.04 3.14 3.28 Average DSCR 2.83 Project IRR 15.35%



7. RABC at Motipur & Bahadurpur,

Muzaffarpur District 7.1 District Profile Muzaffarpur is located in North-west alluvial plain zone and it covers an area of 3122

sq. km. This district is bounded in the north by Sitamarhi and East Champaran, in the

south by Vaishali and Chapra, in the east by Darbhanga and Samastipur and in the

west by Saran and Gopalganj. The important rivers of the district are Baghmati, Burhi

Gandak, its tributary the Lakhandai and the Baya.

The district has 16 blocks and the head quarter is located at Muzaffarpur town. The

population of the district is 41.80 lakhs (2001 Census) with a population density of

1340/sq. km. The ratio of rural population is very high with only 6.5 % of the

population staying in urban areas.

Muzaffarpur has a natural river system which has formed distinct tracts. These tracts

are richest, most fertile and productive tracts of the district consisting of large blocks

of upland, midland and chaurs (waterlogged lowland).

The major crops which are grown in the district are mango, litchi, banana, potato,

vegetables, paddy, maize and wheat. The total effective irrigated area in this district is

1.21 lakh ha and private tube wells accounts for more than 90 % of irrigated area. The



canal irrigation accounts for 4% only and is fed from the canal system of Gandak

command in the west and south west part of the district.

Motipur and Bahadurpur (Gaighat Block) have been identified as potential locations

for RABCs in Muzaffarpur.



With a total area of just under 3 lakh hectares, Muzaffarpur produced 4.7 lakh mt of

grains in 2005-06. The fruit and vegetable production (including potato) was over 10

lakh mt in 2005-06. A brief summary of various categories crops in Muzaffarpur is

given below.

Category Area (ha) Production (mt) Cereals 267718 453912 Pulses 30035 19383 Total grains 297753 473295 Vegetables 27865 444894 Fruits 25253 346009 Potato 11.79 228250 Total fruits and vegetables 53130 1019153 Source: Dept. of Agriculture, GoB

7.2.2 Comparison of Crop Mix - Muzaffarpur Vs Bihar

The percentage area under fruits is almost double the percentage of state’s coverage

under fruits. Vegetable coverage is slightly higher than that of the state. Coverage of

74

8

8

7

3

76

11

6

4

4

0 10 20 30 40 50 60 70 80

Cereals

Pulses

Vegetables

Fruits

Potato

MZFR Bihar



pulses and grains is lower than that of the state.

7.2.3 Land Holding pattern in the district:

76 % of the farmers in Muzaffarpur are small and marginal. This pattern of smaller

land holding has implications on marketable surplus, production practices and crop

mix.

Land Holding Number of Farmers % of farmers Very large 913 1 Large 4266 4 Medium 18126 19 Small & Marginal 73317 76 Total 96622 Source: Department of Agriculture, Muzaffarpur

Smaller land holding patterns bring down the marketable surplus in staple grains.

Owing to the suitability of land and climate for cultivation of fruits crops, large areas

have been brought under fruit crops cultivation even by small farmers. This makes

Muzaffarpur the largest producer of horticultural crops in the state. During the field

study intensive cultivation was observed in non- flood affected regions of the district.

7.2.4 Block wise crop wise acreages of major crops:


Block Paddy Maize Wheat Mango Litchi Banana Mushahari 7600 2000 7000 860 1002 369 Muraul 6000 2000 5000 620 413 387 Sakara 7700 2500 3500 807 367 293 Bandara 6000 2450 5000 NA NA NA Gaighat 7200 2500 7500 776 491 288 Bochahan 7700 2900 7000 367 420 385 Aurai 8000 2300 7000 770 264 312 Katara 6000 2400 7000 635 283 348 Minapur 7000 2300 7000 518 895 379 Sahebgunj 7500 2300 3000 344 319 393 Motipur 8000 2700 7000 468 317 486 Kanti 8000 2500 7000 1246 1053 206 Paroo 9000 2800 7000 530 456 329 Saraiya 8105 2500 6000 603 648 387 Madwan 5000 2124 3000 NA NA NA



Kudhani 10500 3500 6000 697 500 288 Total 119305 39774 95000 9241 7428 4850 Source: Department of Agriculture & Dept of Horticulture, GoB

7.2.5 Agricultural Produce of Muzaffarpur


Our assessment is that the marketable surplus in the district is very less and is in the

range of 35-40% (i.e. about 1 to 1.2 lakh mt) of the production. Bulk of the

marketable surplus is of maize and wheat. There are no sizable or large mandis and

Muzaffarpur, Turki, Motipur, are few mandis dealing with grains.


Muzaffarpur is the litchi capital of the country. The major horticultural crops grown in

the district are litchi, banana, mango, cauliflower, tomato, potato, okra and gourds.

The major mandis and the products handled have been summarized in the table below.

Mandi Major Products Handled Minapur Banana, Litchi and Vegetables Dholi Litchi, Mango and Vegetables Mashodi Litchi, Mango and Vegetables Sarain Mango, Vegetables especially Pointed Gourd & Okra Turki ( Gaighat) Litchi, Cauliflower, Vegetables Motipur Vegetables, Mango Source: IL&FS -CDI field study

Market dynamics for the selected locations have been discussed in detail later.

7.2.6 Agriculture Inputs of Muzaffarpur

The agri input market of the district is summarized in the table below:



Characterized by large wholesalers unlike other districts.

Fertilizers (MT)

Urea 45000 Shortage of fertilizer in peak season rampant. Major trading centre. Government figures of sale likely to be higher, since inter district movement to Northern

DAP 20000



NPK 10000 Bihar is very high. Sales of fertilizer at a price higher than MRP seen at village level retailers.

MOP 7500

SSP 500

Seeds (MT)

Paddy –HYV 6000

Hybrid paddy seed consumption on an increasing trend. One of the largest maize seed markets in the state

.

Paddy hybrid 200

Wheat 4000

Maize 1000

Vegetables Rs. 2 crores

Pesticides Rs. 8-10 Crores Characterized by sale of generic molecules like other parts of the state.

Tractor Dealers 7

All most all major tractor manufactures are present. Tractor penetration is 3-5 tractors per panchayat

Source: IL&FS -CDI field study

7.2.7 Agri Warehousing and Cold storages – Muzaffarpur


grains in organized warehouses is extremely low. In fact, there are no warehouses for

storage of grains.

The district has 10 cold storages with an installed capacity of 0.4 lakh metric tonnes.

Most of the cold storages are involved in the storage of potato only. There are few

small cold stores that stock Litchi for a short time.

The charges for cold storage are Rs 140 to 150 per quintal per season. The storage

season is from March to October. Apart from the rentals, loading and unloading

charges are collected from the farmers which are in the range of Rs 2 to 2.50 per

quintal for each loading or unloading operation. Many cold store owners lend money

to farmers which may amount up to 60 % of the product value at an interest rate of

24% per annum.



In the middle of the storage period, the positions of the sacks are interchanged to

facilitate better storage and the operation is locally called “Palti”. The labour cost for

“Palti” is about 70 paisa per sack and is borne by the cold storage owner.

7.3 Location Analysis - Motipur

Motipur is located about 30 km northwest of

Muzaffarpur on NH-48 and it is well connected by a four

lane road to Muzaffarpur. It is the second most important

commercial centre in the district after Muzaffarpur town.

It is well connected by road and rail to other parts of the

state. The various crops that are produced and traded in

Motipur include litchi, mango, cauliflower, okra, potato,

tomato, cabbage and gourds.

7.3.1 Agri Output Market in Motipur:

Motipur has a mandi in the middle of the town

dealing with fruits and vegetables only. It is

community owned mandi and the mandi is

spread in about 1 acre of land. Under the

PURA scheme 16 concrete platforms have

been constructed in the mandi last year. The

mandi has an attached retail market for the

local consumers. It is a biweekly market operating on Wednesdays and Saturdays.

However, small volumes are traded on the other days also. There are no commission

agents in the mandi for vegetables. There are 8-10 commission agents dealing with

fruits. The arrivals of produce are from surrounding blocks of Kanti, Madhukar

Chhapra, Mehsi and Motipur.

Farmers bring the produce using their own mode of transportation depending on the

distance and volume of product. Many farmers own their thela, by which they

transport the produce to the mandi.

This is one of the largest mandi for trading of litchi and mango in Muzaffarpur.

The major products traded in the mandi, season and estimated volume per day in the




Product Peak arrivals Season Estimated volume handled per day( mt) Tomato Aug – Dec 30 Cauliflower Nov- Feb 20 Okra May – June, Oct – Nov 10 Cabbage Nov-Jan 20 Gourds All through year 40 Litchi Apr- May 30 Mango June- July 30 Source: IL&FS -CDI field study

The various products that are traded outside mandi (directly at farm) in the catchment

area, their estimated volume and season are summarized in the table below:

Product Peak Season Estimated volume (mt) Potato Mar – Oct 20000 Mango June – July 3000 Litchi Apr – May 10000 Cauliflower Nov – Feb 500 Source: IL&FS -CDI Field survey

7.3.2 Agriculture Input Market of Motipur

The table below summarizes the size of agri input market of Motipur.

Number of dealers of inputs 16

Estimated Urea market 4500 mt 220

Estimated DAP and complex market 2000 mt 200

Estimated MOP market 1000 mt 50

Estimated Seed market Rs. 150 lakhs

Estimated Pesticide market Rs. 200 lakhs

Number of Dealers for tractors 0

Cash credit sales More than 90 % of transactions on cash

Organized warehousing for Fertilizers 0

Source: IL&FS -CDI Field survey






and Storage – Implications on Motipur RABC


A Production and Harvesting – Affecting procurement

1 Small land holding Smaller lot size. Challenges in consolidation and standardization.



input market.

3

Harvesting and post harvest handling by labour contracted

by the trader as in litchi

Will need some extension work to motivate the farmers to keep the produce till harvesting stage, harvest the produce and market it on their own. To start with some contractors may have to be hired by

RABC as well.


Gunny bags, Wooden boxes.

These affect the quality and also increase the cost of packaging to farmers. Introducing crates and encouraging the farmers to use the

crates will be very beneficial. In fact, this can be the single most


B Agri input Market


fertilizer on time



2 Cash purchases - 80 %



C Marketing

1 Pre-harvest sale of litchi

70-80 % of the trade happens through these traders, who are in turn attached to wholesaler/ CA in Delhi, Lucknow, and Mumbai. This is primarily a risk mitigation strategy to reduce risks associated with

litchi marketing as the harvesting window (and hence trading window) for litchi is just one month. Assured buy back to the farmers at a pre-agreed price and extension work to help them in upkeep of farm during flowering to harvesting needed to give confidence to the

farmers.


bullock cart etc




unknowns

Price discovery is by negotiation. Buying Price fixation will be very difficult as the possibility of finding model price is difficult. Need to


4 No commission agents in This is a good as well as bad. Good because, the farmers are used to



vegetables selling the produce to the buyers directly and hence there will be ready takers for RABC. Bad – the marketing costs are lower for the farmer



most of the time


farmers in cash.



D Storage

1 No storage facility for grains

Huge scope for intervention in flood affected areas. However, the per

capita volumes are low hence grain storage not recommended at

Motipur.

7.4 Business Plan for the RABC in Motipur


strategy is suggested.

7.4.1 Procurement and Marketing Plan – Products and Expected Margins

The focus products in Motipur are mango and litchi. The catchment area for this

RABC consists of the blocks of Motipur, Kanti and Minapur. Based on the production

details of the fruits in the above mentioned blocks and estimated market surplus and

linkages from field study, it is estimated that the RABC will be able to handle the

following products and quantities. Table below summarizes the focus products,

estimated volume per annum and expected gross margins per MT of product.

Product Estimated volume per annum Expected margin Rs. per mt Litchi 2000 7500 Mango 3000 2000

Seasonality: The seasonality of the products can be observed from table below.

Product Ja Feb Ma Ap Ma Ju Jul Au Sep Oct No DeMango Litchi





Table below summarizes the estimates sales and expected margins from sale of agri

inputs.

Product Estimated Sales Estimated margin Urea 450 mt Rs.100 per mt DAP/ Complex 200 mt Rs. 200 per mt MOP 100 mt RS. 100 per mt Seeds Rs. 15 lakhs 30 % Pesticides Rs. 20 Lakhs 20 %

7.4.3 Facilities Suggested for Primary Processing, Storage and Other Services

The RABC will have facilities for sale of agri inputs and handling of agri output. The

following facilities are suggested at Motipur. Justification for setting the facility and

the individual capacity is summarized in the table below.


1 Pre- cooling 10 mt Litchi is perishable. It will respond to precooling very well. Since it is a high value crop, the associated costs can be absorbed by the product.

2 Fumigation Line for litchi

2 mt per hour

Increases the shelf line of litchi up to 3–4 months under refrigerated conditions

3 Multi product grading line

2 mt per hour

Since both litchi and mango will be handled, multi product handling line will be ideal.

4 Pack House- Cold Room

1000 mt For storage of mango and litchi.

5 Primary processing hall

200 sq mt

For transit storage of mango and litchi.

6 Crate Washing line

1 Since it is proposed that all products will be handled in crates.



7 Shop floor for sale of agri inputs

150 sq mts

For display and sale of agri inputs and Administration.

8 Godown for fertilizer

100 sq mts

For storage of fertilizer.

9 Weighing line 1 Since it is proposed that all products will be purchased by weight.

7.4.4 Project Cost

Description Amount Land (2 Acres @ Rs. 8 Lakhs/Acre) 16.00 Land Development (2 Acres @ Rs. 5 Lakhs/Acre) 10.00 Buildings (Approx 2000 sq. m @ Rs.6500 per sq. m) 128.25 Plant & Machinery* 226.00 Miscellaneous Fixed Assets* 55.53 Preliminary and Pre-Operative Expenses* 11.26 Contingencies (5% of the above costs) 20.99 Margin Money for Working Capital* 3.45 Total Project Cost 471.48 * Assumptions and details are given in Chapter 13

7.4.5 Means of Finance



Year 1 2 3 4 5 6 7


(Lakhs Rs)

Revenue 333.04

416.30

624.45

749.34

749.34

749.34

749.34 Expenses

Raw Material (Agri Inputs) 245.62

307.03

460.54

552.65

552.65

552.65

552.65 Water 0.14 0.18 0.27 0.32 0.32 0.32 0.32



Power & Fuel 4.52 5.64 8.47 10.16 10.16 10.16 10.16

Employee Cost 8.01 8.41 8.83 9.27 9.74 10.23 10.23

Insurance 2.05 2.05 2.05 2.05 2.05 2.05 2.05


Total Expenses 263.67

327.47

486.40

581.95

582.41

582.90

582.90 EBITDA 69.37 88.83 138.0

5 167.3

9 166.9

3 166.4

4 166.4

4 Interest on term loan 25.34 25.34 24.39 21.86 19.32 16.79 14.26

Interest on working capital borrowings

1.55 1.94 2.91 3.49 3.49 3.49 3.49

Depreciation 34.72 34.72 34.72 34.72 34.72 34.72 34.72

PBT 7.75 26.82 76.02 107.32

109.39

111.44

113.97 Tax 0.00 3.97 25.14 37.50 39.67 41.61 43.54

Net Profit (PAT) 7.75 22.85 50.88 69.82 69.72 69.83 70.43 # Assumptions are given in Chapter 13.

7.4.7 Financial performance Indicators

Year 1 2 3 4 5 6 7

EBITDA Margin 20.83% 21.34% 22.11% 22.34% 22.28% 22.21% 22.21%

PAT margin 2.33% 5.49% 8.15% 9.32% 9.30% 9.32% 9.40%

Debt-Equity Ratio 0.61 0.56 0.44 0.33 0.25 0.19 0.14

Debt to EBITDA ratio 2.76 2.18 1.32 1.00 0.90 0.79 0.68

Interest Coverage Ratio 2.58 3.11 4.14 5.12 5.58 6.15 6.92

DSCR 2.58 3.11 2.49 2.99 3.11 3.25 3.43

Average DSCR 2.92

Project IRR 13.38%

7.5 Location Analysis - Bahadurpur

Bahadurpur, in Gaighat block is located 30 km south east of Muzaffarpur on the east

west corridor. It is well connected by a four lane road to Muzaffarpur. The various

crops that are produced and traded in the district include litchi, mango, cauliflower,

okra, potato, tomato, cabbage, gourds and maize. A private entrepreneur (Amrapali

foods Pvt. Ltd) has established a pack house for litchi and mango last year in an area

of 1 acre with primary processing facilities. It is proposed that the above mentioned

pack house may be converted to a RABC.

7.5.1 Agri Output Market in Bahadurpur

The nearest mandi is in Gaighat, but the volume of vegetables traded is limited.

Farmers in the catchment take their produce to Bazaar Samithi Muzaffarpur or trade

from farm gate. The immediate catchment of Bochan, Bandra, Museri, Mudhol, and



Katra and adjoining areas of Darbhanga districts has high production of various crops

as summarized below.

Product Peak arrivals Estimated production (mt) Mango June- July 15000 Litchi 15 Apr -15 May 10000 Cauliflower Nov – Feb 5000 Okra Sept- Nov 4000 Gourds All through the year 6000 Maize Oct – Jan 20000 Source: IL&FS -CDI field study

The present facilities include – Forced air

precooling, grading lines of various capacities,

two chamber cold storage of 1000 mt, floor area

of 10000 sq. ft for temporary storage, electronic

weighing facilities, backup generator of 72 KVA

and pickup trucks.

The unit is operational since March, 2008. In the first season they

have handled 200 mt of litchi and exports worth Rs. 5 crores are

likely to happen. An estimated 500 mt of mango is also likely to be

handled this season at the facility.

They have provided extension services to the farmers in the last

season for better management of litchi orchards. The farmers who were associated

with them benefited by not only increase in yield but also by improvement of quality

and thereby increasing the net realization.

Transportation from farm gate was provided to the

farmers. Farmers who delivered the produce at factory gate

were given a better price.

They have tied up with processing units in Hajipur for sale

of second and third quality materials which are not suitable

for fresh sale.

They are in the process of acquiring 1.5 acres of land adjacent to the existing facilities

to provide other facilities to the farmers.



7.5.2 Agriculture Input Market - Bahadurpur

The table below summarizes the size of agri input market of Bahadurpur.

Estimated Urea market 3000 mt 150

Estimated DAP and complex market 1500 mt 150

Estimated MOP market 800 mt 40





Source: IL&FS -CDI Field survey




and Storage – Implications on Bahadurpur RABC


A Production and Harvesting – Affecting procurement


2

Some regions in

the catchment area

are flood affected

Poor sale of agri inputs in the affected region. Scope for extension services in

the second crop.

3

Self harvesting in

vegetables Ideal scenario.

4

Harvesting and

post harvest handling by labour contracted by the

trader

Will need some extension work to motivate the farmers to harvest the produce

and market it on their own. To start with some contractors may have to be

hired by RABC as well.

5

Packaging in bamboo baskets, wooden boxes,

Gunny bags

These affect the quality and also increase the cost of packaging to farmers. Introducing crates and encouraging the farmers to use the crates will be very beneficial. In fact, this can be the single most important intervention to

maintain quality and reduce wastages.



B Agri input Sales

1

Non - availability

of complex

fertilizer on time

Leads to black marketing - Ideal opportunity for an organized player to induce

foot falls.

2

Use of generic

molecules in

pesticides Scope for intervention and use of new pesticides high

3

Cash purchases -

80 %

Easy to enter the market as credit sales cannot be entertained by organized

players. And the RABC can target larger market by providing credit sales.

C Marketing

1

No fruit and vegetable mandi in

the immediate

catchment

Potential opportunity as the farmers take the produce to different mandis for

sale.

2

Pre-harvest sale of

litchi

70-80 % of the trade happens by these traders, who are in turn attached to

wholesaler/CA in Delhi, Lucknow, and Mumbai. This is primarily a risk mitigation strategy to reduce risks associated with litchi marketing as the

harvesting window (and hence trading window) for litchi is just one month.

Assured buy back to the farmers at a pre-agreed price and extension work to help them in upkeep of farm during flowering to harvesting needed to give

confidence to the farmers.

3

Price discovery -

many unknowns

Price discovery is by negotiation. Different farmers get different prices and hence price fixation and communication will be difficult. May need to work

with traders for a couple of seasons.

4

Cash payments to farmers most of

the time

Need to make cash payments. Payments by cheques may not be acceptable.

Need to develop a mechanism to make payments to farmers in cash.

5

Cash purchase by traders most of the

time Receipts will be in cash. Need to consider this in the business plan.

6

Loading and

Unloading charges


appropriately.

D Storage

1

No storage facility

for grains

Huge scope for intervention in flood affected areas. However, the per capita

volumes are low hence grain storage not recommended at Bahadurpur.



7.6 Business Plan for the RABC in Bahadurpur


strategy is suggested:

7.6.1 Procurement Plan – Products and Expected Margins

The focus products in Bahadurpur are mango and litchi. The catchment area for this

RABC consists of the blocks of Gaighat, Bochahan, Kudhani, and Paroo. Based on

the production details of the fruits in the above mentioned blocks and estimated

market surplus and linkages from field study, it is estimated that the RABC will be

able to handle the following products and quantities. Table below summarizes the

focus products, estimated volume per annum and expected gross margins per mt of

product.

Product Estimated volume mt Expected margin Rs per mt Mango 2500 8000 Litchi 1500 15000

Seasonality: The seasonality of the products can be observed from table below.

Product Ja Feb Ma Ap Ma Ju Jul Au Sep Oct No DeMango

Litchi



Table below summarizes the estimated sales and expected margins from sale of agri

inputs.

Product Estimated Sales Estimated margin Urea 300 mt Rs.100 per mt DAP/ Complex 150 mt Rs. 200 per mt MOP 80 mt Rs. 100 per mt Seeds Rs. 10 lakhs 30 % Pesticides Rs. 15 Lakhs 20 %





suggested at Dalsinghsarai for handling of agri output. Justification for setting the

facility and the individual capacity is summarized in the table below.


1 Pre- cooling 10 mt Already present.

2 Fumigation line for litchi

2 tons per hour As Litchi is a major product.

3 Multi product grading line

2 mt per hour

As mango and litchi both will be handled, multi product handling line will be ideal.

4

Pack House- Cold Room

500 mt

For the storage of mango and litchi

5

Primary processing hall

200 sq mts

For transit storage of mango and litchi

6

Crate Washing line

1

Since it is proposed that all products except grains and potato will be handled in crates.

7 Shop floor for sale of agri inputs

150 sq mts

For Display and sale of agri inputs and Administration

8 Godown for fertilizer

100 sq mts For storage of fertilizer

9 Weighing line 1 Since it is proposed that all products will be purchased by weight.



7.6.4 Project Cost

Description Amount Land (2 Acres @ Rs. 10 Lakhs/Acre) 20.00 Land Development (2 Acres @ Rs. 5 Lakhs/Acre) 10.00 Buildings (Approx 1200 sq. m @ Rs. 6500/sq. m) 76.65 Plant & Machinery* 131.00 Miscellaneous Fixed Assets* 31.23 Preliminary and Pre-Operative Expenses* 7.31 Contingencies (5% of the above costs) 12.44 Margin Money for Working Capital* 2.62 Total Project Cost 291.26 * Assumptions and details are given in Chapter 13.




Year 1 2 3 4 5 6 7


(Lakhs Rs)

Revenue 258.60

323.25

484.88

581.85

581.85

581.85

581.85 Expenses


238.96

358.44

430.13

430.13

430.13

430.13 Water 0.12 0.15 0.23 0.27 0.27 0.27 0.27

Power & Fuel 3.98 4.97 7.46 8.95 8.95 8.95 8.95

Employee Cost 6.62 6.96 7.30 7.67 8.05 8.45 8.45

Insurance 1.19 1.19 1.19 1.19 1.19 1.19 1.19



255.46

379.47

454.03

454.41

454.82

454.82 EBITDA 52.93 67.79 105.4

0 127.8

2 127.4

4 127.0

3 127.0

3 Interest on term loan 17.07 17.07 16.43 14.72 13.02 11.31 9.60


1.18 1.47 2.21 2.65 2.65 2.65 2.65

Depreciation 20.09 20.09 20.09 20.09 20.09 20.09 20.09

PBT 14.59 29.15 66.67 90.35 91.68 92.98 94.69

Tax 2.04 8.35 22.26 31.30 32.60 33.76 34.95





Year 1 2 3 4 5 6 7

EBITDA Margin 20.47% 20.97% 21.74% 21.97% 21.90% 21.83% 21.83%

PAT margin 4.85% 6.44% 9.16% 10.15% 10.15% 10.18% 10.27%




DSCR 2.79 3.20 2.70 3.26 3.40 3.57 3.77

Average DSCR 3.16

Project IRR 17.47%



8. RABC at Bihat, Begusarai District 8.1 District Profile Begusarai is located centrally in North Bihar with an area of 1918 sq km. It is

bounded on the north by Samastipur, on the south by River Ganga and the Lakhisarai

district, on the east by Khagaria and Munger and on the west by the Samastipur and

Patna districts.

The district constitutes of 18 development blocks and the head quarter is located in

Begusarai town. The population of the district is about 21.46 Lakh (2001 census) with

a population density of 1335 per sq km. The ratio of rural population is very high with

only 4.78 % of population staying in urban areas.

Paddy, wheat, vegetables, banana, watermelon, litchi and potato are the major crops

cultivated in the district.

The district has fertile alluvial soils. The sole source of irrigation is private tube wells

and as on 1998-99, 0.84 lakh ha is irrigated from tubewells.

Bihat is the location suggested for setting up RABC in Begusarai.





With a total area of 1.56 lakh hectares under cereals, Begusarai produces about 3.14

lakh MT of grains. The fruit and vegetable production (including potato) was over 5

lakhs MT. A brief summary of various categories of crops is given below (the figures

are an average of 2002-06 data).

Category* Area (ha) Production(MT)

Cereals 150700 308869

Pulses 6242 5522

Total grains 156943 314391

Vegetables 18442 294363

Fruits 7502 85925

Potato 6120 122522

Total fruits and vegetables 32064 502810

Source: Dept. of Agriculture, GoB; * Average of 2002-06

8.2.2 Comparison of Crop Mix - Begusarai Vs Bihar

The area under vegetables is almost double the percentage of state’s coverage.

Coverage of cereals is higher than that of state. Potato and pulses cover lesser

percentage of area than that of state.

80

3

10

4

3

76

11

6

4

4

0 10 20 30 40 50 60 70 80 90

Cereals

Pulses

Vegetables

Fruits

Potato

Begusarai Bihar





#. Block Mango Litchi Cauliflower Tomato Okra Potato 1 Begusarai 425 65 240 250 300 600 2 marihani 400 45 100 100 100 605 3 Balia 350 70 100 100 150 320 4 Barauni 305 32 80 100 200 425 5 Teghada 220 28 75 100 150 520 6 Bachwada 305 32 100 100 150 410 7 Bhagwanpur 415 30 150 100 150 400 8 Cheriyabariyapur 375 25 80 150 150 380 9 Khodhavandapur 280 22 80 80 150 300

10 Bhakhari 280 26 80 100 150 530 11 Sahebpurkamaal 280 25 60 70 150 310 12 Dandari 205 23 75 100 150 415 13 Navkhothi 200 20 75 100 150 310 14 Gadhpura 217 18 100 100 150 360 15 Choudohi 170 15 75 100 150 400 16 Virpur 175 20 100 150 150 350 17 Mansurachak 155 27 80 100 150 325

Total 4757 523 1650 1900 2700 6960 Source: Dept. of Agriculture, GoB

8.2.4 Agricultural Produce – Begusarai


The marketable surplus in the district is higher than that of the state and it is in the

range of 55-60% (i.e. about 1.6 to 1.8 lakh MT) of the production. The bulk of the

marketable surplus is of maize and wheat. There are no sizable or large mandis as

most of the grains get sold from farmer’s house.


The major horticultural crops include mango and various kinds of vegetables.

The major mandis and the products handled have been summarized in the table below.

Mandi Major Products Handled Begusarai Vegetables, Mango, Maize Bihat Vegetables Barauni Tomato, Gourds



Rajwada Vegetables Manjhaul Vegetables, Mango, Grains Baliya Vegetables, Mango, Grains Source: IL&FS -CDI field study

Market dynamics for the selected location has been discussed in detail later.

8.2.5 Agriculture Inputs - Begusarai

The agri input market of the district is summarized in the table below:



16 Characterized by large wholesalers unlike other districts.

Fertilizers (MT)

Urea 50000

With increase in area under maize, more fertilizer consumption is likely. Availability is a constraint.

DAP 30000

NPK 10000

MOP 10000

SSP 1000

Seeds (MT)

Paddy –HYV 3000

Hybrid paddy seed consumption on an increasing trend. One of the largest maize seed markets in the state and the market is likely to grow next year.

Paddy hybrid 100

Wheat 5000

Maize 1000


Pesticides Rs. 4 crores Characterized by sale of generic molecules like other parts of the state.

Tractor Dealers

7 All most all major tractor manufactures are present. Tractor penetration is 3-5 tractors per panchayat



8.2.6 Agri Warehousing and Cold storages – Begusarai

In case of cereals, farmers have marketable surplus however, the storage of grains in

organized warehouses is extremely low. It is estimated that 2 lakh sq. ft of private

warehousing for grains and fertilizers are present in Begusarai town. The existing

rents are in the range of Rs 2.5 to Rs 3.0 per sq. ft. With the price of maize touching

Rs 900 per quintal this year, it is expected that more grains will be stored in the next

few years.

The district has 7 cold storages with an installed capacity of 0.65 lakh mt and 5 cold

storages are under construction. Most of the cold storages are involved in the storage

of potato only.

The rental charges, season of storage, and handling charges are similar to other

districts where potato is stored.

8.3 Location Analysis - Bihat

Begusarai is located on NH-31. It is well connected by rail as well as road to other

parts of the state and the country. Three rake points- Barauni, Begusarai, Bakrisalona

are in the radius of 20 km from Begusarai.

8.3.1 Agri Output Market in Bihat

The various crops that are produced and traded are wheat, maize, mentha, potato,

mango, turmeric and vegetables. Barauni and Bihat are the major mandis involved in

trade of vegetables.

Bihat:

Bihat is located on NH-31, 10 km from Begusarai. There are 8-10 commission agents

who have set up small shops on either side of the road near Bihat Bus stand. Gourds

and cauliflower are the major crops. The estimated daily arrival of all vegetables is 10

MT. Local traders and traders from surrounding regions buy the produce from the

commission agents.

Barauni:

Barauni is located 15 km from Begusarai. There are 15-20 commission agents in the

mandi dealing with vegetables. Tomato and gourds are the major vegetables traded in



the mandi. The estimated daily arrival of all vegetables is 30 MT per day. During

peak arrivals, tomato is sent to other cities such as Jamshedpur, Kolkata, and Patna.



Product Estimated volume (MT) Potato 30000 Maize 30000 Wheat 20000 Mentha 400 KL

8.3.2 Agri Input Market of Bihat

The table below summarizes the size of agri input market of Bihat.

Number of dealers of inputs 40 Estimated Urea market 4500 MT 225 Estimated DAP and complex market 2000 MT 200 Estimated MOP market 800 MT 40 Estimated Seed market Rs. 300 lakhs Estimated Pesticide market Rs. 100 lakhs Number of Dealers for tractors 8 Cash credit sales 70- 80 % of transactions on cash




and Storage – Implications on Bihat RABC


A Production and harvesting – Affecting procurement

1 Production of maize and

wheat.

High scope for value addition in both maize and wheat. Large export and domestic market. Actual productivity in maize is 8 MT per ha

against reported 4.5 MT per ha (Rabi 2006-07). Hence the marketable

surplus is very high.

2 Low production of fruits and

vegetables

Because of the low production, fruits and vegetables have not been

recommended. Only mango trading has been recommended.



3 Diversification to mentha

Estimated acreage of 1000 ha and the area is growing year aafter year. High value product. High scope for value addition and need for an

organized consolidator felt in the market. Ideal opportunity for RABC.

4 Second cutting - affected

because of monsoon

Onset of monsoon results in two way loss – firstly, loss in quality of leaf and secondly, non–availability of fuel for steam production. RABC can establish state of the art processing unit using electricity.

Buying of leaf based on scientific analysis and extraction done.

5

Processing of mentha

The estimated number of steam distillation units in the district for mentha is 500-600. Because of the high upfront capital cost of processing unit (Rs.50 to 60 thousand) only large farmers are venturing into mentha cultivation. It is estimated that with the present processing technology 20-30 % of the essential is lost. Scope for

RABC to set up a mentha extraction unit

B Agri Input and Services


fertilizer on time




Pesticides Scope for intervention and use of new pesticides high.





1 Transportation from farm gate

in maize and wheat

The village level traders complete the sale transaction, makes forward sale with a trader based at Begusarai or Khagariya. This trader in turn closes the sale at a destination market. The trader sends the vehicle directly to the farmers place for loading. The produce is handled only once and it reaches the final customer. Extremely efficient logistics– No handling charges, no sunk cost of transportation for farmer as in mandi sales. However, price discovery is the key. Understanding of

destination markets price movement extremely important for RABC.


unknowns

Price discovery is by negotiation. Price setting will be very difficult as the possibility of finding model price will be difficult, at least for

some time.


3 Mentha – collective sales by

farmers -

The major markets are Barabanki, Banaras and Kolkata. Once the mentha is collected in plastic cans, the farmers seal the cans with wax and store them in dark and shady place at home. Farmers find the

price in the destination markets from different traders over phone and aggregate the produce from 3-5 farmers and take the product in train. Cases of prices being lower after the product is transported to these markets seen often. Opportunity for RABC to purchase from these farmers and market it to user industries directly. If processing unit is



established, contract farming of mentha can be taken up.

4 No commission agents – All

traders in the chain

This is a good as well as bad. Good because, the farmers are used to

selling the produce to the buyers directly and hence there will be ready takers for RABC. Bad – the marketing costs are lower for the farmer



most of the time


farmers in cash.




charges


appropriately.

D Ware housing and Cold Storage

1 No organized storage facility

for grains

This year with the prices of maize reaching Rs. 900 per quintal in July from Rs. 600 per quintal in April, many traders are likely to store

grains from next season. However, no organized storage service provider available. Ideal opportunity for RABC to establish storage

both for renting out and arbitrage opportunity.

8.4 Business Plan for the RABC in Bihat

The focus products in Bihat are grains, vegetables, menthe and mango. The catchent

area for this RABC consists of the blocks of Begusarai, Barauni, Balia, Marihani,

Teghada and Sahebpur Kamal.

8.4.1 Procurement and Marketing Plan – Products and Expected Margins

Based on the production details of the grains, vegetables, mentha and fruits in the

above mentioned blocks and estimated market surplus and linkages from field study,

it is estimated that the RABC will be able to handle the following products and

quantities. Table below summarizes the focus products, estimated volume per annum

and expected gross margins per mt of product.

Product Estimated Qty (MT) Expected margin Rs per MT Mango 1500 500 Vegetables 7500 250 Grains 11000 250 Mentha 40 KL 10000/KL





Product Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Maize

Wheat Mango

Vegetables

Mentha



The estimated agri input sale and estimated margin from sale of agri inputs is


Product Estimated Sales Estimated margin Urea 450 MT Rs. 100 per MT DAP/ Complex 200 MT Rs. 200 per MT MOP 80 MT Rs. 100 per MT Seeds Rs.30 lakhs 30 % Pesticides Rs. 10 Lakhs 20 %



suggested at Bihat for handling of agri output. Justification for setting up the facility



1 Cold storage 100 MT For transit storage and storage of unsold 2 Primary processing hall 400 sq m For grading, sorting, packaging operation

of vegetables 3 Weigh bridge 20 MT High volume of maize and wheat planned

for the location. 4 Shop floor for sale of

agri inputs 150 sq m For display and sale of agri inputs and

administration



5 Godown for fertilizer 100 sq m For storage of fertilizer

6 Storage for grains 10000 For storage of grains, transit storage

7 Weighing line 1 Since it is proposed that all products will

be purchased by weight.

8.4.4 Project Costs

Description Amount (Lakhs Rs) Land (3 Acres @ Rs. 6 Lakhs/Acre) 18.00 Land Development (3 Acres @ Rs. 5 Lakhs/Acre) 15.00 Buildings (Approx 6300 sq. m @ Rs.6500/sq. m) 406.25 Plant & Machinery* 29.00 Miscellaneous Fixed Assets* 14.91 Preliminary and Pre-Operative Expenses* 9.99 Contingencies (5% of the above costs) 23.26 Margin Money for Working Capital* 16.67 Total Project Cost 533.08 * Assumptions and details are given in Chapter 13.



8.4.6 Profit and Loss Statement#

Year 1 2 3 4 5 6 7


(Lakhs Rs)

Revenue 749.52 936.90 1405.35 1686.42 1686.42 1686.42 1686.42

Expenses

Raw Material (Agri Inputs) 630.87 788.59 1182.88 1419.45 1419.45 1419.45 1419.45

Water 0.26 0.33 0.50 0.59 0.59 0.59 0.59

Power & Fuel 6.64 8.30 12.46 14.95 14.95 14.95 14.95

Employee Cost 13.77 14.46 15.18 15.94 16.74 17.58 17.58

Insurance 2.25 2.25 2.25 2.25 2.25 2.25 2.25


Total Expenses 661.29 823.30 1227.32 1470.05 1470.85 1471.69 1471.69

EBITDA 88.23 113.60 178.03 216.37 215.57 214.73 214.73




Int. W Cap Borrowing 7.50 9.38 14.06 16.88 16.88 16.88 16.88

Depreciation 18.32 18.32 18.32 18.32 18.32 18.32 18.32

PBT 33.77 57.27 118.09 156.47 158.54 160.57 163.43

Tax 10.70 19.20 40.33 53.78 54.84 55.85 57.11



Year 1 2 3 4 5 6 7 EBITDA Margin 11.77

% 12.13

% 12.67

% 12.83

% 12.78

% 12.73

% 12.73

% PAT margin 3.08% 4.06% 5.53% 6.09% 6.15% 6.21% 6.30% Debt-Equity Ratio 0.58 0.53 0.39 0.29 0.21 0.16 0.12 Debt to EBITDA ratio

2.89 2.35 1.56 1.28 1.19 1.10 1.00 Interest Coverage Ratio 2.15 2.48 3.31 3.91 4.15 4.43 4.78 DSCR 2.15 2.48 2.22 2.62 2.72 2.82 2.95 Average DSCR 2.52 Project IRR 12.80

%



9. RABC at Bihar Sharif, Nalanda District 9.1 District Profile

Nalanda district is located in south of the Patna, the state capital of Bihar and it is

spread over an area of 2367 sq. Km. Nalanda district is bounded by Patna district in

the North, Jehanabad on the west, Gaya and Nawada on the south and Sheikhpura and

Lakhisarai on the east. The rivers Phalgu, and Mohane flows through the district of

Nalanda.

Nalanda district has a population of 23.68 lakhs with a population density is about

1006 per sq. km. There are 20 blocks in Nalanda and Bihar Sharif is the district head

quarter. The literacy rate of the district is 53.64%.

Agriculture is the main source of occupation. Paddy, potato, onion and other

vegetables are the major crops cultivated in the district.





With a total area of 2.3 lakh ha under grain crops, Nalanda produces close to 4.4 lakh

mt of various grains. The fruit and vegetable production (including potato) is close to

11.2 lakh mt. Nalanda is the largest producer of potato in the state. The following

table summarizes the area, production of different crop categories in 2005-06.

Category Area (ha) Production (mt) Cereals 223500 640586 Pulses 15550 13790 Total grains 239050 654376 Vegetables 25833 445521 Fruits 6094 54429 Potato 27600 686136 Source: Department of Agriculture, GoB

9.2.2 Comparison of Crop Mix – Nalanda Vs Bihar

The comparison of area of crop mix for Nalanda and Bihar shows a clear skewness

towards vegetables and potato. While cereals in Nalanda have almost same percentage

of area as compared to Bihar but pulses occupy much less area. Fruits also cover

much less percentage area than that of Bihar. On the other hand, vegetables and potato

occupy much higher percentages of land in comparison to the state as a whole. The

comparison shows a distinct stress on vegetables and potato in the district.




The block wise cultivation area in Ha of different major crops in Kharif 2007-08 is


Blocks Paddy Maize Pulses Oilseeds

Bihar Sharif 8204 1056 458 90.5

Asthawan 6768 600 295 52

Bind 1825 200 260 30

Harnaut 9978 600 432 19

Sarmera 7535 202 147 3

Nursarai 6580 580 212 38

Rahui 6860 765 254 36

Rajgir 4240 950 415 188

Silao 5742 660 275 55

Ben 4465 200 210 -

Giriyak 3500 400 557 172

Katrisarai 2182 100 120 22

Hilsa 7795 450 255 29

Karaiparsurai 2725 100 165 -

Chandi 8271 150 317 32

Tharthari 3295 100 57 -

Nagarnausa 3195 198 75 -

Ekangarsarai 7735 195 277 34

Parwalpur 3970 130 140 10

Islampur 12160 914 409 63.5

Total 117025 8550 5330 874




9.2.4 Agricultural Produce of Nalanda

9.2.4.1 Cereals and Pulses

Our assessment is that the marketable surplus for grains in the district is very less in

the range of 20-30% (i.e. about 1.2 to 1.8 lakh mt) of the production. Ramchadrapur

in Bihar Sharif is a large mandi dealing with grains.


Nalanda is a major producer of vegetables and potato. The major vegetables are

brinjal, onion, gourd, okra, cauliflower and cabbage. The area and production of fruits

in the district is limited. Ramchandrapur in Biharsharief is the major mandi dealing

with vegetables and potato.

9.2.5 Agri Warehousing and Cold Storages in Nalanda

Presently there are 15 operational cold storages in Nalanda district and 3 under

construction. The total installed capacity of cold storages in Nalanda district is about

0.5 lakh MT. Most of the cold storages store only potato except few storages near the

town of Bihar Sharif which store fruits such as apple and orange. The storage period

and rentals are similar to that of other districts.

Nalanda district is major potato growing area and the number of cold storages is not

sufficient for the proper storage of potato in the district. During the potato season

sometimes the farmers carry out distress selling in want of more cold storage space. In

Nalanda, only 10-20% of the stored potato is used as seeds and the rest are sold in the

market in the off season. Cold storage owners give loans to the farmers at an interest

rate of 18-24% per annum in lieu of the amount of potato kept in the storage. Cold

storage owners also facilitate bank loans for the farmers by becoming guarantors of

the loan based on the value of the potato stored by the borrower farmers. In Nalanda,

the cold storage receipts are also traded in the market.

9.2.6 Agriculture Inputs - Nalanda

The agri input market of Nalanda district is summarized in the table below.





17 Wholesaler-retailer-farmer is the supply chain as in other parts of the state. Each panchayat of 4-5 villages has 3-4 retailers

Fertilizers (mt)

Urea 60000 Shortage of fertilizer in peak season rampant. Better availability can increase consumption. Sale of fertilizer at higher than MRP seen in villages. Highly skewed use of Urea.

DAP 4500

NPK 4000

MOP 4000

SSP 3500

Seeds (mt)

Paddy –HYV 6500 Hybrid paddy seed consumption on an increasing trend. One of the largest vegetable seed markets in the state.

Paddy hybrid 300

Wheat 5000

Maize 400

Vegetables 60

Pesticides ( KL)

Fenvorolate 10 KL Characterized by sale of generic molecules. Estimated market size is Rs. 8-10 crores.

Furadon 80 MT

Acephate 5 MT

Cypermethrin 10 KL

Hexaconazole 5 KL

Profenophos 8 KL

Mancozeb 50 MT

Tractor Dealers

10 All most all major tractor manufactures have a dealer in the district. Tractor penetration is 3-5 tractors per panchayat.



9.3 Location Analysis – Bihar Sharif

Bihar Sharif is the district head quarter of Nalanda District. It is well connected to

other parts of the states and cities in Jharkhand, UP and West Bengal by road and

railways.

The major crops that are produced and traded in Bihar Sharif are potato, brinjal,

onion, cauliflower, bottle gourd, okra and paddy. Ramchandrapur Mandi (Bazar

Samithi, Bihar Sharif) is the largest and most important mandi for trading agricultural

produce in Bihar Sharif.

9.3.1 Agri Output Market

Ramchandrapur Mandi (Bazar Samithi Bihar Sharif)

Before the APMC Act was repealed in Bihar, Ramchandrapur Mandi was the

erstwhile APMC mandi of Bihar Sharif. The

mandi is spread in 40 acres with well laid

concrete platforms and roads.

The major products traded in the mandi are

potato, brinjal, onion, cauliflower, bottle

gourd, okra and paddy. Apart from these small volumes of fruits especially

mango and banana are traded. There are about 15-16 commission agents dealing

in cereals, 250 commission agents dealing in vegetables and 100 commission

agents dealing with onion and potato. The mandi is a well established market and

traders from different locations buy agricultural products from the commission

agents.

The various products traded in the mandi, season and estimated volume per day

in the season is summarized in the table below.

Product Peak arrivals Season Estimated volume handled per day (mt) Potato Jan-March 600 Onion April/May - Nov 70 Brinjal April-July/Aug 125 Bottle Gourd Mar-Aug 50 Cauliflower Nov-Feb 50 Okra July- Sep, Apr- June 20 Source: IL&FS -CDI field study



The commission charges vary from crop to crop. The details of market dynamics and

the implication for RABC have been discussed in detail later.

9.3.2 Agri Input Market of Bihar Sharif

The following table summarizes the profile of agri input market of Bihar Sharif

Number of dealers of inputs 25-30

Estimated Urea market 8000 mt 400 lakhs

Estimated DAP and NPK market 2000 mt 200 lakhs

Estimated MOP market 500 mt 50 lakhs


Estimated Pesticide market Rs. 300-400 lakhs

Number of Dealers for tractors 6-8

Cash credit sales Around 80 % of transactions on cash




and Storage – Implications on Bihar Sharif RABC



1

Production of vegetables and

potato

Developed market, farmers are aware of market trends, easy to offer

extension services

2 Huge potato producing belt

Well known and developed market already exists. Easy to form

forward linkages.

3 Packaging in gunny bags,

paper, cardboard cartons

These affect the quality and also increase the cost of packaging to

farmers. Introducing crates or other suitable packing material and

encouraging the farmers to use the crates will be very beneficial.



B Agri Input market

1

Non - availability of complex

fertilizer on time


to increase induce foot falls.

2

Use of generic molecules in



Easy to enter the market as credit sales cannot be entertained by

organized players. And the RABC can target larger market by


4

Potato seeds kept in cold

storages

Scope of providing cold storage facilities as the number of present

cold storages not sufficient.

C Marketing

1 Transportation by small

trucks, vans, pick up cars, etc

Easy for RABC to capitalize on the existing backward linkages. Not

much effort is needed to get products from the farms

2

Price discovery - many

unknowns

Price discovery is by negotiation. Price setting will be very difficult as

the possibility of finding model price will be difficult, at least for a

couple of seasons.

3

Sales of products like bottle

gourd and cauliflower in

numbers

Extremely difficult for organized player planning to deal in hundreds

of tonnes using numbers. Difficulty in arriving buying price. Need to


4

Commission charges of 3 %

on vegetables from farmer and

5% from Buyer

Different pricing mechanism for different products. Difficulty in

finding the farmer realization. 5 Commission charges of 2 %

on Potato

6 Commission charges of 1-2%

on grains from buyer


most of the time

Need to make cash payments. Payments by cheques may not be

acceptable. Need to develop a mechanism to make payments to

farmers in cash.




of the time

Receipts will be in cash. Need to consider this in the business plan.


charges


appropriately.

10 Weighing charges Borne by the commission agents. Need to incorporate in the pricing

appropriately.

11

Packaging charges are

different for different products

such as brinjal, onion, bottle

gourd, etc.

Borne by the buyer. Need to incorporate in the pricing appropriately.

D Storage

1

No storage facility for grains

The district has a huge production of grains, in the tune of 6.4 lakhs

MT. Hence there is an opportunity to set up a grain warehouse.

2

Cold storage capacity of

50000 mt

The district has a production of over 6 lakh mt of potato, but the cold

storage capacity is low leading to distress selling. Potential cash cow

in the business model.

9.4 Business Plan for the RABC in Bihar Sharif




The focus products in Bihar Sharif are potato, grains, vegetables and mango. The

catchment area for this RABC consists of the blocks of Bihar Sharif, Asthawan,

Noorsarai, Rajgir, Silao, Giriyak, Chandi and Parwalpur. Based on the production

details of the grains, vegetables and mango in the above mentioned blocks and

estimated market surplus and linkages from field study, it is estimated that the RABC

will be able to handle the following products and quantities. Table below summarizes



the focus products, estimated volume per annum and expected gross margins per mt

of product.

Product Estimated Qty (mt) Expected margin Rs per mt Potato 10000 750 Grains 10000 750 Vegetables 9000 750 Mango 400 2000



Product Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Potato Onion Brinjal Cauliflower Bottle Gourd Okra Mango Grains


9.4.2 Agri Input sales



Product Estimated Sales Estimated margin Urea 2000 mt Rs. 100 per mt DAP/ Complex 200 mt Rs. 200 per mt MOP 50 mt Rs. 100 per mt Seeds Rs. 30 lakhs 30 % Pesticides Rs. 30 Lakhs 20 %



9.4.3 Facilities Suggested for Primary processing, Storage and Other Services

The RABC will have facilities for sale of agri inputs and handling and trading of agri

outputs. For handling of agri output the following facilities are suggested.

Justification for setting the facility and the individual capacity is summarized in the

table below.


1 Multi product

grading line

2 mt per

hour

Since a range of products will be handled, multi product

handling line will be ideal.

2

Potato cold

storage

3000 mt.

For storage of potato. The present storage patterns,

power availability, existing rentals this is the minimum

capacity that needs to be installed.

3 Grain

warehouse 2000 mt. For paddy storage mainly.

4

Primary

processing hall

800 sq.

mt

For transit storage of onion, brinjal, bottle gourd,

cauliflower, okra - All the products are high volume low

density products, hence more handling space needed.

5

Shop floor for

sale of agri

inputs

150 sq

mts For display and sale of agri inputs and Administration

6 Godown for

fertilizer

200 sq

mts For storage of fertilizer

7

Crate Washing

line 1

As all proposed horticultural products except Onion and

Potato will be handled in crates.

8

Weighing line 1

Since it is proposed that all products will be purchased

by weight.



9.4.4 Project cost

Description Amount Land (3 Acres @ Rs. 6 Lakhs/Acre) 18.00 Land Development (3 Acres @ Rs. 5 Lakhs/Acre) 15.00 Buildings (Approx 4000 sq. m @ Rs. 6500/sq. m) 256.25 Plant & Machinery* 91.00 Miscellaneous Fixed Assets* 17.72 Preliminary and Pre-Operative Expenses* 9.19 Contingencies (5% of the above costs) 19.00 Margin Money for Working Capital* 18.78 Total Project Cost 444.94 * Assumptions and details are given in Chapter 13



9.4.6 Profit and loss statement#

Year 1 2 3 4 5 6 7


(Lakhs Rs)

Revenue 763.81

954.76

1432.14

1718.57

1718.57

1718.57

1718.57 Expenses


804.40

1206.60

1447.92

1447.92

1447.92

1447.92 Water 0.55 0.69 1.04 1.24 1.24 1.24 1.24

Power & Fuel 5.84 7.30 10.94 13.13 13.13 13.13 13.13

Employee Cost 22.84 23.99 25.19 26.44 27.77 29.16 29.16

Insurance 1.82 1.82 1.82 1.82 1.82 1.82 1.82



847.74

1259.91

1507.75

1509.07

1510.46

1510.46 EBITDA 81.59 107.0

2 172.23 210.82 209.50 208.11 208.11



8.45 10.56 15.85 19.01 19.01 19.01 19.01

Depreciation 20.27 20.27 20.27 20.27 20.27 20.27 20.27

PBT 28.56 51.87 112.71 150.56 151.67 152.72 155.15

Tax 7.75 16.66 38.19 51.79 52.80 53.71 55.01




9.4.7 Financial Performance indicators

Year 1 2 3 4 5 6 7

EBITDA Margin 10.68% 11.21% 12.03% 12.27% 12.19% 12.11% 12.11%

PAT margin 2.72% 3.69% 5.20% 5.75% 5.75% 5.76% 5.83%




DSCR 2.25 2.59 2.37 2.77 2.85 2.94 3.06

Average DSCR 2.66

Project IRR 13.88%



10. RABC at Fatuha, Patna District 10.1 Distrcit Profile

Patna district is situated on the highly fertile southern bank of river Ganga. On other

three sides, it is bounded by Jahanabad and Nalanda districts in the south, in the east

by Lakhisarai district and in the west by Bhojpur district. The total geographical area

of the district is 317236 ha. Two main rivers surround Patna, Ganga in the north and

Sone in the west which meets Ganga at its northwestern boundary. A third river,

Punpun traverses to a significant stretch from southwest to northeast.

The district has 23 development blocks. Patna is the capital of Bihar and it is also the

largest consumer market in the state. It is well connected by rail, road and air with

almost all the district headquarters and the major cities of the country. The population

of the district is about 47.18 Lakh (2001 census) with a population density of 1471 per

sq km. While the ratio of urban population is very high at 41.57% as compared to

other districts of Bihar, literacy rate is also quite high at 63.82 %.

The net area sown in the district is 65.16 % of the total geographical area and

cropping intensity is reported to be 200%. The total irrigated area in the district is

about 60545 ha out of which canal irrigation accounts for the highest proportion

(being as high as 60%) although some areas do not receive irrigation water at proper



cropping time particularly at the tail ends. Sometimes the Sone canal system does not

provide irrigation during entire year.

Due to diversified agro-ecological conditions, Patna district has variety of cultivated

crops. Tal2 area is mainly for pulses, whereas Diara3 and Jalla4 areas are known for

their vegetable cultivation. In the western part of the district on irrigated land, grains

are produced. Paddy, maize, wheat, pulses, oilseeds, vegetables and potato are the

major crops cultivated in the district.

Fatuha is the location suggested for setting up of RABC in Patna district.



With a total area of 2.66 lakh ha under grain crops, Patna produced close to 6 lakh

MT of various cereals and pulses in 2005-06. The fruit and vegetable production is

close to 8.7 lakh MT including potatoes. The following table summarizes the area,

production of different crop categories in 2005-06.

Category Area (ha) Production (MT) Cereals 197845 529724 Pulses 67508 66846 Total Grains 265353 596570 Vegetables 22701 353692 Fruits 7587 71084 Potato* 18060 445000 Total Fruits and Vegetables 48348 869776 Source: Dept of Agriculture, GoB

10.2.2 Comparison of Crop Mix - Patna Vs Bihar

A comparison of the % of area occupied by a principle category of crops in the district

to that of the state shows that the district has a crop mix skewed towards pulses. The

above clearly depicts that Patna district has a diversified crops. The area under pulse

cultivation is very high as compared to the state average which makes the Tal area the

2 Tal: At the eastern end of the district, a basin shaped low-lying area separated from the river Ganga by its natural levee is known as Tal. 3 Jalla land are similar to Tal lands but a bit shallower getting partial and short duration inundation in parts by the river Punpun and its tributaries 4 Diara: There are natural levees or abandoned channels of river Ganga



pulse bowl of Bihar. Further, vegetables and potato cultivation is also more than the

state average.

There is large surplus in grains, both cereals and pulses in the district. More than 25%

of pulses production in the state comes from Patna district. Pulses cultivation is

mainly in the Tal area where the land holding size is relatively larger and there is

always a marketable surplus for the products whereas production of horticultural

crops is in Diara and Jalla land. Here the smaller land holding pattern has resulted in

intensive cultivation using high input usage and high cropping intensity. The reported

cropping intensity of the district is about 200 %. For horticultural crops, the largest

available market in Patna is well connected by rail and road.

10.2.3 Block wise crop wise acreages of major crops

The block wise area under major vegetable crops in Rabi 2007-08 is summarized in

the table below.

# Block Potato Onion Tomato Cauliflower Others vegetables 1 Patna Sadar 2600 2500 20 50 50

2 Phulwarisharif 1500 500 50 15 50

3 Sampatchak 250 1000 5 10 10

4 Fatuha 1500 2000 20 50 20

5 Khusrupur 500 300 200 50 50

6 Daniyanvan 50 50 5 4 5

7 Danapur 600 500 20 50 200

8 Bihta 300 50 25 50 200



9 Maner 1000 50 2 5 5

10 Naubatpur 1000 50 2 1 5

11 Masaurahi 50 10 3 2 2

12 Dhanarua 500 25 2 1 5

13 Punpun 100 50 2 1 2

14 Bikram 800 1500 5 50 50

15 Dulhinbazar 600 1500 10 50 50

16 Paliganj 300 1100 20 50 50

17 Bakhartiyarpur 1000 1000 100 50 500

18 Athmalgola 100 25 2 - 2

19 Belchi 500 400 50 30 200

20 Pandarak 1000 150 800 20 800

21 Barh 500 800 50 15 700

22 Mokama 300 300 10 5 200

23 Ghoswari 50 50 1 - 10

Total 15100 13910 1404 559 3166


10.2.4 Agricultural Produce - Patna

10.2.4.1 Cereal

Paddy, wheat and maize are the major crops of the district. Paddy production is

highest at 3.2 lakh tonnes followed by wheat at 2 lakh tons. Paddy is cultivated

mainly in the irrigated Sone command area in the western part of district and the main

blocks of paddy cultivation are Bikram, Paliganj, Naubatpur, Bihta and Masaudhi.

With such a large quantity of cereal production, there is sizable marketable surplus for

cereals. The major markets for grain trading are Bihta, Paliganj and Masaudhi. The

field estimate of the marketable surplus in the district is in the range of 60-70 %.

10.2.4.2 Pulses

There are two main regions for pulse production in the district- the famous Tal area

where the main crops are pulses and the irrigated western part of the district where

pulses are cultivated with other cereal crops. In Tal area, main blocks are Mokameh,

Pandarak, Ghoswari and Bakhtiyarpur while the other region consists of Vikram,

Dulhinbazar, Paliganj, Masaudhi, Naubatpur, Dhanarua, Punpun blocks. The

marketable surplus for pulses is in the range of 80-90 %. There are two main trading

centers for Pulses- Barh and Barbigha where a number of dal milling units are also

located.




The major horticultural crops of the district are cauliflower, potato, tomato and

vegetables of cucurbits family. The major mandis and the products handled have

been summarized in the table below.

Major Mandi in the district Major produce Bihta Rice, wheat Barh Pulses (Lentil, Lathyrus and Gram) Barbigha Pulses and grain Khusrupur Vegetables Fatuha Vegetables, Potato, Grains Source: IL&FS -CDI field study


10.2.5 Agricultural Inputs - Patna

The agri input market of Patna district is summarized in the table below.

Agri input Particulars Remarks Number of wholesalers

32 15-18 active wholesaler, 185 retailers,

Fertilizers (MT)

Urea 72000 Shortage of fertilizer in peak season rampant. Better availability can increase consumption. Sale of fertilizer at higher than MRP seen in villages.

DAP 15000 NPK 8000 MOP 9000 SSP 6000

Seeds (MT)

Paddy -HYV 7000

Hybrid paddy seed consumption on an increasing trend. Large market for Vegetable seeds

Paddy hybrid 250 Wheat 8000 Maize 600


Pesticides Rs. 6-8 crores

Characterized by sale of generic molecules like Monocrotophos, Endosulfan, Profenopos, Cyper methrin, Mancozeb, Metalxyl etc. Weedicides include 2-4D, Glyphosate and Butachlor. Scope for introduction of new and



Tractor Dealers 10 All most all major tractor manufactures have a dealer in the district. Tractor penetration is 8-9 tractors per panchayat

10.2.6 Agricultural Warehousing and Cold storages - Patna

10.2.6.1 Warehouses

There are about 8 warehouses of different agencies such as Central Warehousing

Corporation, State Warehousing Corporation and FCI with a combined capacity of

166238 MT. They are situated in different places- two in Fathua, one each in

Musallapur Patna, Patna City, Danapur, Digha, Phulwari Sharif and Mokama. These

warehouses are used for storage of both input products and output products. During

procurement of grains, FCI takes on CWC/ SWC godowns on rent where the procured

grain is stocked.

Since FCI doesn’t have its godowns, and CWC/ SWC has storage facilities, 70% of its

business comes from FCI in procurement season. In off season, CWC/SWC rents out

its facilities to private players for storing fertilizers, seeds, pesticides etc and farmers

bodies for storing their produce. It also gives 30% discount to farmers for storing the

produce with them. A warehouse receipt is given to the farmer specifying the amount

of produce which can be used as collateral by the farmer to avail credit facilities from

banks.

In volume terms, the charges for warehouses vary from Rs. 24 to Rs. 44 per tonne per

month for fertilizers and grains. Area wise, gross area rate is Rs. 57 per sq. meter per

month while net area rate is Rs. 79 per sq. meter.

Given the potential of area in terms of production of cereals and pulses, the available

storage facilities meet the demand. There is a shortage of warehousing facilities in the

districts.

10.2.6.2 Cold Storages

The district has 25 cold storages with an installed capacity of 0.95 lakh MT. About

50% the capacity is for potato while rest is having multipurpose facilities. Most of the

multi-chambers cold stores are located nearby Patna, the consumption market and are



used for storing finished products of different consumer goods companies. Currently,

there are no storage facilities for vegetables. The major products stored in these

facilities are dairy products, chocolates, ice-cream, butter, chocolates etc. The charges

of storing are Rs. 10 per sq. ft per month for sub-zero temperature and Rs. 12-15 per

sq. ft per month for deep freezing.

Potato cold stores are located in Digha, Phulwari Sahrif and Fatuha. The charges for

potato cold storage are Rs 140 to 150 per quintal per season. The storage season is

from March to October. Apart from the rentals, loading and unloading charges are

collected from the farmers which are in the range of Rs 2 to 2.75 per quintal for each

loading or unloading operation. Many cold store owners lend money to farmers up to

60 % of the product value at an interest rate of 24% per annum.

10.3 Location Analysis - Fatuha

Fatuha is strategically located at a distance of 24 Km from Patna towards east on NH

31 and is on the main rail head. It is well connected by road and rail to other parts of

the state and other cities in UP, Jharkhand and Delhi.

10.3.1 Agri Output Market in Fatuha

The various crops that are produced and traded in the area include wheat, pulses and

vegetables. Fatuha, Baikatpur, Khusrupur are the main markets for vegetables and

Bazar Samiti in Station road is the main market for grains. Apart from the above,

because of the proximity to Patna, the various mandis in Patna are also fed by Fatuha.

Fatuha Market

This mandi is on the main road of Fatuha. The mandi is spread inside towards the two

sides of road. The vegetables also come from Diara i.e. from the other side of Ganga

by boat. This is an old mandi having 12-15 traditional commission agents trading in

vegetables.

The volume of vegetables handled is low in this mandi. The main reason could be

attributed to the fact that it provides a locational advantage to the farmers. Farmers

have access to the larger consumer market, Patna, and they send their produce directly

to different mandis in Patna by trucks or rail. Generally, traders from other markets do



not visit this mandi. The following table summarizes the different produce traded in

the mandi and their estimated volumes in the peak season.

Product Estimated volume handled per day( MT) Cauliflower 10 Potato 20 Gourds 10 Brinjal 10 Source: IL&FS -CDI field study

Bazar Samithi, Fatuha:

It is the erstwhile APMC mandi of Fatuha, before the APMC Act in Bihar was

repealed. The mandi is spread in an area of about 15 acres with reasonably well laid

roads and platforms for trading of various products.

At present the products handled in the mandi are wheat, pulses, onion and potato.

There are close to 20 commission agents dealing with Potato and Onion.

Khusarupur Market

This mandi is adjacent to the railway station of Khusrupur and very near to the NH

31. It is situated in the private plots of number of people who act as commission

agents. There are total 13 mandis owners and about 21 commission agents. All

seasonal vegetables are traded here.

The commission agents buy the produce from the farmers on cash. However, they

extend credit to the farmers for production.



The commission charges are 3% each from farmers and buyers. The product is

weighed for buying after sorting. Weighing charges are Rs. 3 per 100 kg. Both

retailers and wholesale buyers come to this market. Retailers mostly buy the produce

in the morning and then go to consumer markets such as Patna, Danapur and Fatuha

by train and come back by same day evening. The following table summarizes the

different produce traded in the mandi and their estimated volumes in the peak season.

Product Estimated volume handled per day (MT) Gourd 10 Cauliflower 6 Cabbage 5 Brinjal 10 Source: IL&FS-CDI, Field Study

Baikatpur

It is a small roadside mandi where farmers from surrounding area come to sell their

produce. It is on private land and there are about 4-5 commission agents present in the

market. Vegetables are purchased by traders and loaded on trucks for sending in Patna

market. Farmers are charged in kind (½ -1 kg) per 40 kg while buyers are charged at a

rate of 2%. The various products handled in the mandi and estimated volume handled

during peak months is summarized in the table below.

Source: IL&FS -CDI field study

Bakhtiyapur

Bakhtiyarpur mandi is similar to the Khusrupur mandi

and is located adjacent to the railway station. The major

products are gourds, cauliflower, cabbage, brinjal and tomato. Farmers from

catchment bring their produce to the market. There are 10-12 commission gents in the

mandi. The various products handled in the mandi and their estimated volume

handled during peak months is summarized in the table below.

Product Estimated volume handled per day (MT) Tomato 5 Cauliflower 2 Gourd 10



Source: IL&FS -CDI field survey

Musallahpur

Located in Patna, Mussalahpur market is the biggest of all the mandis in the state both

with respect to its area and throughput. The market is spread over an area of 35 acres.

Around 200 commission agents operate in this market having strong trade linkages

both within and outside the state. The market, apart from arrivals from its catchment

which is spread in a radius of 100 km, also witnesses huge quantity of fruits and

vegetables from other parts of the country, which are not locally produced.

The produce coming locally include pointed gourd, okra, brinjal, tomato, bitter gourd,

ridge gourd, chilli, cucumber, radish, carrot, cabbage and cauliflower among

vegetables and mango, litchi and banana among fruits. Being among top handler of

fruits such as mango, litchi and banana, the mandi has established linkages with

various other mandis like Azadpur in Delhi, Ranchi and Jamshedpur in Jharkhand and

even with southern state capitals like Hyderabad and Bangalore. The estimated daily

arrivals in this mandi is around 150-200 MT with the peak arrival sometimes crossing

400 MT during the season of mango and litchi.

The mandi has well laid shops and counters with clearly marked roads. However,

most roads are filled with the dump and packaging waste and hence are in a non-

motorable condition. The production of Fatuha-Bakhtiyarpur region is mostly

marketed in Musallahpur in Patna. However, once the RABC is present, it is expected

that RABC will be able to buy some produce from this catchment. The estimated

production in the catchment of Fatuha–Bakhtiyarpur is summarised in the table

below.

# Product Estimated production (MT) 1 Potato 58232 2 Onion 31513 5 Other Vegetables 85201

Product Estimated volume handled per day (MT) Tomato 10 Cauliflower 8 Gourd 12



11.3.2 Agri Input Market of Fatuha

The table below summarizes the size of agri input market of Fatuha.

Number of dealers of inputs 20 Estimated Urea market 3000 MT Rs. 150 lakhs Estimated DAP market 600 MT Rs. 60 lakhs Estimated MOP market 200 MT Rs. 10 lakhs Estimated Seed market Rs. 200 lakhs Estimated Pesticide market Rs. 400 lakhs Number of Dealers for tractors 0 Cash credit sales More than 90 % of transactions on cash Organised Warehousing for Fertilisers CWC/SWC 12826 MT



10.3.3 Existing dynamics of Production, Agri input markets, Agri output

markets and Storage – Implications on Fatuha RABC



1 Small Land holding Smaller lot size. Challenges in consolidation and standardization.

2 Proximity to Patna Farmers are used to bench marking to Patna market for prices. In fact

large volumes of product are sent to Patna directly.

3 Flood affected Many times vegetable growing areas are also inundated by flood

water. Volatility in prices can be high at such times.

4 Self harvesting for vegetables Ideal scenario.

5 Sorting and grading by traders

Since the volume bought by local traders is small, they grade the produce in the mandi and buy only the graded produce. Farmers are used to sorting grading operation by trade. Good in short term, but

RABC need to train the farmers to grade the produce at farm.


gunny bags






B Agri input sales


fertilizer on time




Pesticides High scope for intervention and use of new pesticides




C Agri output marketing


bullock cart, boats etc



2 Price discovery – Multiple

bench marks

Price discovery is by negotiation. Different farmers send produce to different mandis and hence bench mark price is different. This has problems in arriving at model price. With Patna in close proximity,

prices in Patna mandis may also need to be tracked.

3

Sales of products like bottle gourds and cauliflower in

numbers

Extremely difficult for organized player planning to deal in hundreds of tonnes using numbers. Difficulty in arriving buying price. Need to


4

Commission charges of Rs 20 for 100 pieces in cauliflower

and bottle gourd

Commission agent has no incentive to increase the price and hence the chances of getting good price for the farmer are limited. Scope for

RABC to buy.

5

Commission charges of 6 % in Khusrupur - 3 % both from

farmer and buyer


finding the farmer realisation. Buying price fixation is a challenge.

6 Commission charges of 3 %

on potato

7 Commission charges 2 % in

from seller in baikatpur


most of the time


farmers in cash.




charges


appropriately.



D Storage

1 Cold storage capacity of

94645 MT

The district has a production of over 4.4 lakh MT of potato, but the

cold storage capacity is low leading to distress selling.

10.4 Business Plan for the RABC Strategy in Fatuha


The focus products in Fathua are mainly vegetables (including potato and onion). The

catchment area for this RABC consists of the blocks of Fathua, Bakhtiyarpur, Patna

Sadar, Punpun, Khusrupur and Daniyanvan. Based on the production details of the

vegetables in the above mentioned blocks and estimated market surplus and linkages

from field study, it is estimated that the RABC will be able to handle the following

products and quantities. Table below summarizes the focus products, estimated

volume per annum and expected gross margins per mt of product.

Product Estimated Qty (MT) Expected margin Rs per MT Potato 5000 1000 Onion 3000 2500 Vegetables 8000 750



Product Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Potato Onion Tomato Cauliflower Gourds Cabbage Brinjal







Product Estimated Sales Estimated margin Urea 300 MT Rs. 100 per MT DAP/ Complex 60 MT Rs. 200 per MT MOP 20 MT Rs. 100 per MT Seeds Rs. 20 lakhs 30 % Pesticides Rs. 30 Lakhs 20 %


The RABC will have facilities for sale of agri inputs and handling and trading of agri

outputs. For handling of agri output the following facilities are suggested.

Justification for setting the facility and the individual capacity is summarized in the

table below.


1

Multi

product

grading line

5 MT per

hour

Since a range of products will be handled, multi


2

Potato Cold

storage 4000 MT

For storage of potato and onion. For onion storage a

dehumidifier will be installed.

3

Primary

processing

hall 700 sq m

For transit storage of, cauliflower, cabbage, gourd,

okra - All the products are high volume low density


4

Shop floor

for sale of

agri inputs

150 sq m For display and sale of agri inputs and administration

5 Godown for


6

Weighing

line 1

Since it is proposed that all products will be purchased

by weight.



10.4.4 Project Costs

Description Amount Land (3 Acres @ Rs. 7 Lakhs/Acre) 21.00 Land Development (3 Acres @ Rs. 5 Lakhs/Acre) 15.00 Buildings (Approx 3800 sq. m @ Rs.6500/sq. m) 244.25 Plant & Machinery* 123.00 Miscellaneous Fixed Assets* 18.53 Preliminary and Pre-Operative Expenses * 9.83 Contingencies(5% of the above costs) 20.04 Margin Money for Working Capital* 3.39 Total Project Cost 455.04 * Assumptions and details in Chapter 13.


Particulars Amount (Lakhs Rs) Equity 30% 136.51 Grant from GoB 35% 138.26 Debt Remaining 180.26 Total 455.04


Year 1 2 3 4 5 6 7 Capacity Utilization 40% 50% 75% 90% 90% 90% 90% (Lakhs Rs) Revenue 354.5

6 443.2

0 664.8

0 797.7

6 797.7

6 797.7

6 797.7

6 Expenses Raw Material (Agri Inputs)

260.18

325.23

487.85

585.41

585.41

585.41

585.41 Water 0.46 0.57 0.86 1.03 1.03 1.03 1.03

Power & Fuel 5.84 7.30 10.94 13.13 13.13 13.13 13.13 Employee Cost 17.42 18.29 19.21 20.17 21.17 22.23 22.23 Insurance 1.93 1.93 1.93 1.93 1.93 1.93 1.93 Admin & Selling Overheads

3.55 4.43 6.65 7.98 7.98 7.98 7.98 Total Expenses 289.3

7 357.7

5 527.4

3 629.6

5 630.6

5 631.7

1 631.7

1 EBITDA 65.19 85.45 137.37

168.11

167.11

166.05

166.05 Interest on term loan 25.24 25.24 24.29 21.77 19.24 16.72 14.20



Interest-W. cap borrowings

1.53 1.91 2.86 3.43 3.43 3.43 3.43 Depreciation 23.38 23.38 23.38 23.38 23.38 23.38 23.38 PBT 15.04 34.93 86.84 119.5

3 121.0

5 122.5

1 125.0

4 Tax 2.56 10.57 29.29 41.33 42.64 43.82 45.27 Net Profit (PAT) 12.48 24.36 57.55 78.21 78.41 78.69 79.77 # Assumptions are given in Chapter 13.

10.4.7 Financial Performance indicators

Year 1 2 3 4 5 6 7

EBITDA Margin 18.39% 19.28% 20.66% 21.07% 20.95% 20.81% 20.81%

PAT margin 3.52% 5.50% 8.66% 9.80% 9.83% 9.86% 10.00%




DSCR 2.34 2.76 2.39 2.93 3.06 3.20 3.39

Average DSCR 2.80

Project IRR 14.23%



11. RABC at Maranga, Purnia District 11.1 District profile

Purnia District is about 3202.31 sq. km in area, bordering Araria district in north,

Katihar and Bhagalpur district in South, West Dinajpur district of West Bengal and

Kishanganj district of Bihar in east and Madhepura and Saharsa District in the west.

The district is connected through National Highway No. - 3 and the nearest railway

station is Katihar which is well linked to other parts of the state and country. It is

expected that by March, 2009, Purnia railway station will be operational, connecting

it to Kolkata, Siliguri, Patna and Delhi.

The total population of the district as per 1991 census is 18.78 lakhs. The literacy rate

of the district is 28.52 % which is way below the national average. The district

consists of 4 sub divisions and 14 Blocks.

The river Kosi and Mahananda and their tributaries, which include Parman, Kankai,

Soura and Faryani, cross different parts of the district. The soil of the district can be

called alluvial or Sandy loam. As the river Kosi, popularly known as "River of

sorrow", flows in the plains of the district freely and changes its course frequently, the

soil in the district has rich tracts of recent alluvial deposits.



The principal crops that are grown in the district are paddy, jute, wheat, maize,

moong, masoor, mustard, linseed and potato. Jute is the most important and major

cash crop of the district. The soil and climate of the district is suitable for fruit plants

like banana, mango, guava, lemon, makhana and jack Fruit.



With a total area of 6.8 lakh ha under grain crops, Purnia produces close to 7.5lakh mt

of various grains. The fruit and vegetable production is close to 5.7 lakh mt. The

following table summarizes the area and production of different crop categories in

2005-06.

Category Area (ha) Production (mt) Cereals 595700 723700 Pulses 68800 12800 Oil seed 13550 11180 Total grains 678050 747680 Vegetables 13550 237481 Fruits 9290 131586 Potato 70600 201300 Total fruits and vegetables 95410 570367 Source: Dept of Agriculture, GoB

11.2.2 Block wise crop wise acreages of major crops

The block wise sowing area of major crops in Ha in 2005-06 is summarized in the

table below.

# Block Cereals Pulses Oilseeds Vegetables Fruits 1 Purnea East 38010 4995 1180 1542 1200 2 Kasba 38007 5170 665 1401 1000 3 K Nagar 35973 5308 665 1833 610 4 Banmankhi 58126 5864 1280 1109 600 5 Rupauli 61711 6486 1575 1088 263 6 Dhamdaha 60711 6300 1130 1001 635 7 Bhawanipur 56911 5812 1225 900 612 8 B Kothi 59211 5950 1325 883 680 9 Amour 32305 3905 1025 721 600



10 Bayasi 30403 4700 538 675 700 11 Baisa 31105 3645 1025 1100 690 12 Srinagar 30906 4002 765 301 800 13 Daghrua 26516 3655 487 296 500 14 Jalalgarh 35805 3008 665 700 400 Total 595700 68800 13550 13550 9290 Source: Dept of Agriculture, Purnia Dist; Department of Horticulture, Purnia Dist

11.2.3 Agricultural Produce - Purnia


The marketable surplus for grains in the district is very less and is in the range of 30-

40% (i.e. about 2.2 to 2.9 lakh mt) of the production. There is one large mandi named

Gulab bagh mandi which is the biggest in Bihar.


The major horticultural crops of the district are mango, banana, pineapple and potato.

The major mandi and the products handled have been summarized in the table below.

Mandi Major produce Purnia (Gulab Bagh) at Bazaar Samiti All cereals, fruits and Vegetables Source: IL&FS -CDI field study


11.2.4 Agricultural Inputs - Purnia

The agri input market of Purnia district is summarized in the table below.



Characterized by large wholesalers unlike other district

Fertilizers* (MT)

Urea 50000

Shortage of fertilizer in peak season rampant. Better availability can increase consumption. Sale of fertilizer at higher than MRP seen in villages.

DAP 16000

NPK 7000

MOP 6000

SSP 4000



Seeds (MT)

Paddy -HYV 3000

Tremendous demand of good hybrid seeds of corn throughout the year.

Paddy hybrid 30

Wheat 1000

Maize 4600

Vegetables Rs.

1crores

Pesticides Rs. 2 crores Characterized by sale of sugarcane & potato based pesticide.

Tractor Dealers 8 Nos.

All most all major tractor manufactures have a dealer in the district. Tractor penetration is 1tractor per panchayat

Source: IL&FS -CDI field survey and *Department of Agriculture 11.2.5 Agricultural Warehousing and Cold storages - Purnia

In case of cereals, farmers have very low marketable surplus. The storage of grains in

organized warehouses is poor. The SWC has 10000 mt of dry warehouse mainly used

to store fertilizer.

The district has 7 cold storages with an installed capacity of 14000 MT. All the cold

storages are involved in the storage of potato only. The charges for cold storage are

Rs 140 to 150 per quintal per season. The storage season is from March to October.

Apart from the rentals, loading and unloading charges are collected from the farmers

which are in the range of Rs 2 to 2.75 per quintal for each loading or unloading

operation. Many cold store owners lend money to farmers up to 20 % of the product

value at an interest rate of 24% per annum.

11.3 Location Analysis - Purnia

Purnia town is the head quarter of Purnia District and is located on National Highway

31.

11.3.1 Agri Output Market in Purnia

The various crops that are produced and traded include mango, potato, litchi, banana,

pineapple and maize. Gulab Bagh Mandi is the only mandi in Purnia district where

the agricultural products are traded.



There are close to 80 commission agents dealing mainly with maize. Traders from

different parts of the country buy from these commission agents. However, bulk

trading happens through rail rake at Katihar railway station.

The various products that are traded in Gulab bagh mandi, season and estimated

volume per day in the peak season is summarized in the table below.

Product Peak arrivals Season Estimated volume handled per day (mt) Wheat April-May 20 Mango May-July 50 Litchi May-June 10 Banana Aug-Feb 90 Maize April-June 450-1000 Source: IL&FS -CDI field study


the implication for RABC have been discussed in detail in the next section.



Product Peak Season Estimated volume (mt) Potato Mar – Oct 60000 Mango June- July 25000 Pineapple Jan-Mar 70000 Maize April-June 100000 Source: IL&FS -CDI field study

Gulab bagh Mandi, Purnia:

Gulab Bagh mandi has a storage capacity of

12000-15000 MT. It is spread in an area of 4.88

acres and is located just along NH 31 and is about

12 km from district headquarter of Purnia. The

mandi is widely known for maize arrivals and is

an important sourcing destination for buyers of the

neighbouring state. Maize from this mandi is mainly bought by starch and poultry

units located outside the state. Apart from Maize, the other major crops coming to this

market are wheat and banana.



It is observed that Banana is traded in raw stage form and ripening of it takes place at

destination markets. There is no ripening facility and cold storage in the market yard.

As per the feedback from the traders, it is estimated that total annual throughput of

maize in this mandi is around 90,000 MT.

This mandi has also got dry warehousing facility with a total capacity of around

10000 MT. A few of these godowns are owned by APMC while rests are owned by

traders operating in the mandi. The system of sale in this mandi is through open

auction as well as bidding system.

11.3.2 RABC site selection

Maranga is the location suggested for setting up of RABC in Purnia. Maranga, in

Purnia East Block, holds an advantageous position of being 6km away from Purnia

town. It is on the Patna-Purnia highway. BIADA has acquired 3 acres of land for

industrial development. There is a plan to establish a mushroom unit in one acre and

the remaining two acres can be used for RABC.

11.3.3 Agri Input Market of Maranga

The table below summarizes the size of agri input market of Maranga.


Estimated Urea market 1000 mt Rs. 50 lakhs

Estimated DAP market 1000 mt Rs. 100 lakhs

Estimated MOP market 500 mt Rs. 25 lakhs







11.3.4 Existing dynamics of Production, Agri input markets, Agri output markets and Storage – Implications on Maranga RABC



1 Small Land holding Smaller lot size. Challenges in consolidation and standardization.



input market.

3

Harvesting and post harvest handling by labour contracted

by the trader

Will need some extension work to motivate the farmers to harvest the produce and market it on their own. To start with some contractors

may have to be hired by RABC as well.

B Agri input markets


fertilizer on time





3 Cash Sales - 80 %

Easy to enter the market as credit sales cannot be entertained by organized players. And the RABC can target wider market by



1 Sale of mango, banana and

litchi before harvesting

This is primarily because the entire produce does not come for harvesting at once. Hence, a trader buys the produce from many farms, harvests it as per his requirement and price. There is credit - product lock arrangement which may be difficult to break straight away. Purchase from traders and working with farmers simultaneously

may be needed.


bullock cart etc

Location of RABC within the catchments of the production or setting of village level consolidators or centres may be needed. May need to



unknowns



4 No commission agents in

procuring maize

Ideal scenarios in potato & maize as the entrepreneur sells seed, tractor and implements locally to farmers directly and can take up

contract farming model.

5

Commission charges of 5 % on mango - 2 % from farmer

and 3 % from Buyer


finding the farmer realization. Buying price fixation is a challenge.




on Potato


most of the time

Need to make cash payments. Payments by cheques may not be acceptable. Need to develop a mechanism to make payments to traders

in cash.




charges


appropriately.

D Storage

1 Poor storage facility for grains Opportunity for storage of grains.

11.4 Business Plan for the RABC in Maranga, Purnia




The focus products in Purnia are grains, vegetables and fruits. The catchment area for

this RABC consists of the blocks of Purnia East, Kasba, K Nagar, and Jalalgarh.

Based on the production details of the grains, vegetables and fruits in the above

mentioned blocks and estimated market surplus and linkages from field study, it is

estimated that the RABC will be able to handle the following products and quantities.


expected gross margins per mt of product.

Product Estimated Qty (mt) Expected margin Rs. per mt Mango 1100 2000 Litchi 350 5000 Banana 1800 750 Grains 13000 750 Vegetables 6000 750 Pineapple 350 1000 Source: IL&FS -CDI survey





Product Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Mango Pineapple Litchi

Banana

Maize

Arrivals Off season/no arrival




Product Estimated Estimated margin Urea 1000 mt Rs.100 per mt DAP/ Complex 1000 mt Rs. 200 per mt MOP 500 mt Rs. 100 per mt Seeds Rs. 20 30 % Pesticides Rs. 30 20 % Agri-implements hiring

Tractor with implements

Approx Rs.400 per hr depending on implement


The RABC will have facilities for sale of agri inputs and handling of agri output.


suggested at Maranga for handling of agri output. Justification for setting the facility



1 Multi product

grading line 2 mt per hour

Pineapple & mango will be handled, multi product

handling line will be ideal.

2 Pack house-

Cold room 100 mt For fruits ripening & pre-cooling of litchi



3 Dry

warehouse 5000 mt For maize

4

Shop floor for

sale of agri

inputs

150 sq mts For display and sale of agri inputs and administration

5 Godown for

fertilizer 100 sq mts For storage of fertilizer, pesticide & seeds

6 Weighing line 1 Since it is proposed that all products will be purchased

by weight.

11.4.4 Project Cost

Description Amount Land (3 Acres @ Rs. 2.5 Lakhs/Acre) 7.50 Land Development (3 Acres @ Rs. 5 Lakhs/Acre) 15.00 Buildings (Approx 3300 sq. m @ Rs.6500/sq. m) 224.25 Plant & Machinery* 46.00 Miscellaneous Fixed Assets* 13.21 Preliminary and Pre-Operative Expenses* 6.54 Contingencies (5% of the above costs) 14.92 Margin Money for Working Capital* 15.23 Total Project Cost 342.65 * Assumptions and details in Chapter 13.






Year 1 2 3 4 5 6 7


(Lakhs Rs)

Revenue 700.96

876.19

1314.29

1577.15

1577.15

1577.15

1577.15 Expenses


751.40

1127.10

1352.52

1352.52

1352.52

1352.52 Water 0.29 0.36 0.54 0.65 0.65 0.65 0.65

Power & Fuel 4.76 5.95 8.93 10.71 10.71 10.71 10.71

Employee Cost 14.92 15.67 16.45 17.28 18.14 19.05 19.05

Insurance 1.42 1.42 1.42 1.42 1.42 1.42 1.42



783.56

1167.58

1398.35

1399.21

1400.12

1400.12 EBITDA 71.43 92.63 146.71 178.80 177.94 177.03 177.03



6.85 8.57 12.85 15.42 15.42 15.42 15.42

Depreciation 13.87 13.87 13.87 13.87 13.87 13.87 13.87

PBT 32.87 52.35 102.81 134.12 135.04 135.91 137.70

Tax 10.11 17.30 34.95 46.02 46.71 47.33 48.22



Year 1 2 3 4 5 6 7

EBITDA Margin 10.19% 10.57% 11.16% 11.34% 11.28% 11.22% 11.22%

PAT margin 3.25% 4.00% 5.16% 5.59% 5.60% 5.62% 5.67%




DSCR 2.48 2.85 2.61 3.05 3.14 3.24 3.37

Average DSCR 2.93

Project IRR 16.11%



12. RABC at Bettiah & Ramnagar, West

Champaran District 12.1 District profile

West Champaran is located in north-west Bihar and spread over an area of 5228 Sq.

Km. The district is bordered by Gorakhpur, UP on the west, Nepal on the north,

Gopalganj district on the south & East Champaran district on the east. The district

constitutes of 18 development blocks and the head quarter is located in Bettiah. The

population of the district is about 30.43 Lakh (2001 census) with a population density

of 582 per sq km. The ratio of rural population is very high with only 11 % of

population staying in urban areas. The literacy rate is quite low at 39.63 %.

Paddy, wheat, sugarcane, maize and potato are the major crops cultivated in the district.

Fertile silt-clay soils are present in the district. Tirhut, Tribeni & Done canals are the most

prominent canals operating in this district. They irrigate 1.32 lakh ha of land. They get their

water supply from the Gandak River at Balmikinagar, the northern most part of the district

which borders Nepal.



Bettiah and Ramnagar are two locations selected for setting up of RABCs.



With a total area of 3.4 lakh ha under grain crops, West Champaran produces close to

6.4 lakh mt of various grains. The fruit and vegetable production is close to 8.2 lakh

mt. Area under sugarcane is 0.54 lakh ha with a total production of 23.66 lakh MT.

The following table summarizes the area, production of different crop categories in

2005-06.

Category Area (ha) Production (mt) Cereals 303319 612000 Pulses 24800 19879 Oil seed 13860 10865 Total grains 341979 642744 Vegetables 20513 320919 Fruits 13230 277960 Potato 11930 229650 Total fruits and vegetables 45673 828529 Source: Dept of Agriculture, GoB

With proximity to Nepal, good connectivity and suitability of land and climate for

production of cereal crops and potato, greater area is under cultivation of cereals and

potato. Smaller land holding pattern has resulted in intensive cultivation using high

inputs and high cropping intensity. The reported cropping intensity of the district is

250 % in irrigated areas and 150% in dry-land conditions. The overall cropping

intensity is just below 200%.


The block wise sowing area in Ha under major crops in 2004-05 is summarized in the

table below.

# Block Ceraels Pulses Oilseeds Vegetables Fruits Potato 1 Bettiah 3340 538 231 1619 1025 2828 2 Maujhaulia 22690 1618 798 800 555 15090 3 Nautan 20075 1650 891 1234 612 9941 4 Bairia 18050 1508 791 1400 732 12313 5 Chanpatia 21950 1518 894 1011 978 13199 6 Jogapatti 19070 1488 795 1322 907 11546



7 Lauria 21830 1568 891 998 798 10734 8 Narkatiaganj 27610 1892 866 1077 335 17610 9 Gaunaha 19670 1592 860 1110 600 16428 10 Ramnagar 25310 1528 895 968 822 17865 11 Mainatand 19420 1590 851 909 761 5173 12 Sikta 19620 1550 947 911 580 10325 13 Bagha-1 27270 1860 1057 755 310 18417 14 Bagha-2 22270 1838 1046 987 380 30108 15 Thakraha 4405 618 474 1367 900 15020 16 Bhitha 3755 608 529 1212 935 3273 17 Madhubani 3835 1068 471 1333 1050 15861 18 Piprasi 3149 768 573 1500 950 3919 Total 303319 24800 13860 20513 13230 229650 Source: Dept of Agriculture, West Champaran Dist; Department of Horticulture, West Champaran Dist

12.2.3 Agricultural Produce - West Champaran


The marketable surplus for grains in the district is very less and it is in the range of

30-40 % (i.e. about 0.8 to 1 lakh mt) of the production. There are no sizable or large

mandis; however, Bettiah, Lauriya, Narkatiyaganj & Ramnagar are few smaller

mandis dealing with grains.


The major horticultural crops of the district are mango, potato and cucurbits. The

major mandis and the products handled have been summarized in the table below.

Mandi Major produce Bettiah (Meena Bazaar) at Bazaar Samiti Mango, potato and Vegetables Lauriya Chilli, Vegetables Ramnagar Potato Narkatiyaganj Vegetables, maize & potato Source: IL&FS -CDI field study


12.2.4 Agricultural Inputs - West Champaran

The agri input market of West Champaran district is summarized in the table below.





8 PACS presently dealing with sale of fertilizer and other inputs

Fertilizers* (mt)

Urea 80000

Shortage of fertilizer in peak season rampant. Better availability can increase consumption. Sale of fertilizer at higher than MRP seen in villages.

DAP 18000

NPK 4700

MOP 8000

SSP 10000

Seeds (mt)

Paddy -HYV 2000 Basmati rice is on heavy demand. Farmers keep good quality seed with them & replace it once in four years.

Paddy hybrid 20

Wheat 9000

Maize 1900

Vegetables Rs. 0.75 crores

Pesticides Rs. 15 crores Characterized by sale of sugarcane & potato based pesticide.

Tractor Dealers 15 Nos.

All most all major tractor manufactures have a dealer in the district. Tractor penetration is 8 tractors per panchayat

Source: IL&FS -CDI field survey and *Department of Agriculture, GoB

12.2.5 Agricultural Warehousing and Cold storages - West Champaran


grains in organized warehouses is extremely low. The Bihar state warehousing

corporation has a warehouse of 6182 mt at Bettiah which is mostly (about 80%) being

used this year mainly by fertilizers & essential goods like sugar, paddy and wheat.

The district has 6 cold storages with an installed capacity of 10000 metric tonnes.

One cold store was closed in 2006 due to heavy rotting inside the cold store. All the

cold storages are involved in the storage of potato only. The charges for cold storage

are Rs 140 to 150 per quintal per season. The storage season is from March to



October. Apart from the rentals loading and unloading charges are collected from the

farmers which are in the range of Rs 2 to 2.75 per quintal for each loading or

unloading operation. Many cold store owners lend money to farmers’ up to 20 % of

the product value at an interest rate of 24% per annum.

12.3 Location Analysis - Bettiah

Bettiah is the district head quarter of West Champaran and is located on National

Highway 28B which cris-crosses this district. It is well connected by rail to other parts

of the state and other cities in Uttar Pradesh, West Bengal and Delhi.

12.3.1 Agri Output Markets in Bettiah

The various crops that are produced and traded include mango, potato, coriander,

chillies, tomato and cucurbit vegetables like bitter gourd, gourds, pointed gourd,

pumpkins, bottle gourd and plain gourd. Bazar Samithi Bettiah (Meena Bazaar) is one

of the main mandis/points in West Champaran districts where agricultural products

are traded.

There are close to 20 commission agents dealing with potato. Traders from different

locations in the state buy from these commission agents.

The various products traded in the mandi, season and estimated volume per day in the


Product Peak arrivals Estimated volume handled per day( Potato Mar-April 70 Mango June-Aug 25 Cucurbits Whole year 10 Other Nov-April 10 Source: IL&FS -CDI field study


the implication for RABC have been discussed in detail in the next section.

Meena Bazaar, Bettiah:

This mandi is in the heart of the town at the APMC land. There is no particular place

allocated for mandi as the APMC land itself has been encroached by many non-agri

shops. The commission agents have set up their offices at different places.



There are 4-5 commission agents dealing with mango and vegetables. The volume of

banana, potato and other cucurbits handled is low in this mandi. The various products

handled in the mandi, season and estimated volume handled during peak months is


Product Peak arrivals Season Estimated volume handled per day (mt) Mango June-July 50 Vegetables August - April 30 Source: IL&FS -CDI field study

12.3.2 Existing dynamics of Production, Agri input markets, Agri output

markets and Storage – Implications on Bettiah and Ramnagar RABCs






input market.


& gunny bags

These affect the quality and also increase the cost of packaging to farmers. Introducing crates and encouraging the farmers to use the crates will be very beneficial. This can be the single most important

intervention to maintain quality and reduce wastages.

B Agri input markets

1 Non – availability of complex

fertiliser on time





4 Cash sales - 80 %




1 Sale of mango before

harvesting

This is primarily because the entire produce does not come for harvesting at once. Hence, a trader buys the produce from many farms, harvests it as per his requirement and price. There is credit - product lock arrangement which may be difficult to break straight away. Purchase from traders and working with farmers simultaneously

may be needed.




bullock cart etc




unknowns



4 No commission agents in milk

collection

Ideal scenarios in milk as the farmers sell either locally or to Sudha

dairy at Bettiah.

5

Commission charges of 5 % on mango - 2 % from farmer

and 3 % from buyer Different pricing mechanism for different products. Difficulty in

finding the farmer realization. Buying price fixation is a challenge.


on potato


most of the time

Need to make cash payments. Need to make cash payments. Payments by cheques may not be acceptable. Need to develop a mechanism to

make payments to traders in cash.




charges


appropriately.

D Storage

1 No storage facility for grains Opportunity for setting up a warehouse for storage of grains.

2 Cold storage capacity of 3000

MT

The district has a production of 2.3 lakh MT of potato, but the cold

storage capacity is low leading to distress selling.

12.3.3 Agri Input Market of Bettiah

The table below summarizes the size of agri input market of Bettiah.









Number of Dealers for tractors Nil


12.4 Business Plan for the RABC in Bettiah


strategy is suggested


The focus products for this RABC are grains, fruits and vegetables. Based on the

production details of grains, vegetables and fruits in the surrounding blocks and

estimated market surplus and linkages from field study, it is estimated that the RABC

will be able to handle the following products, quantities and the expected gross

margins per MT of product.

Product Estimated Qty Expected margin Rs. per mt Grains 15000 750 Mango 4000 2000 Vegetables (Cucurbits) 8500 750

Source: IL&FS-CDI survey



Product Ja Fe Ma Ap Ma Ju Ju Au Se Oc No DeGrains Potato Mango Vegetables

*Except for the dry season, West Champaran produces different types of cucurbits for

nine months.







Product Estimated Sales Estimated margin

Urea 450 mt Rs.100 per mt

DAP/ Complex 200 mt Rs. 200 per mt

MOP 80 mt Rs. 100 per mt

Seeds Rs. 30 lakhs 30 %

Pesticides Rs. 10 Lakhs 20 %

Agri-implements hiring






suggested at Bettiah for handling of agri output. Justification for setting the facility



1 Multi product

grading line

2 mt per

hour

Potato & Mango will be handled, multi


2 Multi chamber Cold

storage 100 mt Transit storage for fruits and vegetables

3 Shop floor for sale

of agri inputs

150 sq

mts

For Display and sale of agri inputs and

Administration

4 Godown for

fertilizer

100 sq

mts For storage of fertilizer, pesticide & seeds



5 Warehouse 8000 MT For Storage of Grains



12.4.4 Project Cost

Description Amount (Lakhs Rs) Land (4 Acre @ Rs 4 Lakhs/ Acre) 16.00 Land Development (4 Acre @ Rs 5 Lakhs/ Acre) 20.00 Buildings (About 5100 Sq m @ Rs 6500/ Sq m) 332.25 Plant & Machinery* 29.00 Miscellaneous Fixed Assets* 15.14 Preliminary and Pre-Operative Expenses* 8.70 Contingencies (5% of sum of above costs) 19.82 Margin Money for Working Capital* 19.17 Total Project Cost 460.09 * The assumptions and details are given in Chapter 13.




Year 1 2 3 4 5 6 7


(Lakhs Rs)

Revenue 907.35

1134.18

1701.27

2041.53

2041.53

2041.53

2041.53 Expenses


968.59 1452.88

1743.45

1743.45

1743.45

1743.45 Water 0.38 0.48 0.72 0.86 0.86 0.86 0.86

Power & Fuel 4.76 5.95 8.93 10.71 10.71 10.71 10.71

Employee Cost 18.19 19.10 20.05 21.05 22.11 23.21 23.21

Insurance 1.88 1.88 1.88 1.88 1.88 1.88 1.88



1007.34

1501.47

1798.38

1799.44

1800.54

1800.54 EBITDA 98.19 126.84 199.80 243.14 242.09 240.99 240.99





8.63 10.78 16.17 19.41 19.41 19.41 19.41

Depreciation 15.87 15.87 15.87 15.87 15.87 15.87 15.87

PBT 48.91 75.40 143.90 186.49 187.91 189.28 191.76

Tax 15.84 25.33 49.04 63.90 64.72 65.48 66.59

Net Profit (PAT) 33.07 50.07 94.86 122.59 123.19 123.80 125.17 # Assumptions are given in Chapter 13. 12.4.7 Financial performance Indicators

Year 1 2 3 4 5 6 7 EBITDA Margin 10.82 11.18 11.74 11.91 11.86 11.80 11.80PAT margin 3.64% 4.41% 5.58% 6.00% 6.03% 6.06% 6.13% Debt-Equity Ratio 0.56 0.48 0.35 0.24 0.18 0.13 0.09 Debt to EBITDA 2.39 1.96 1.34 1.11 1.05 0.98 0.90 Interest Coverage 2.46 2.85 3.77 4.39 4.63 4.90 5.23 DSCR 2.46 2.85 2.61 3.06 3.17 3.28 3.42 Average DSCR 2.94 Project IRR 16.87

12.5 Business Plan for the RABC in Ramnagar

12.5.1 Land availability

Ramnagar holds an advantageous position of being close to the Nepal international

border and the major vegetable growing village Rampuwa (Chapwa) is about 40km

away. This block has been studied in detail as an interested entrepreneur has more

than 6 acres of land on the main road near Harinagar-Nepal border (which is about

1km from Ramnagar/Harinagar). Ramnagar/Harinagar is well connected through rail

to Gorakhpur-Kolkata.

12.5.2 Agri Input Market of Ramnagar

The table below summarizes the size of agri input market of Ramnagar.









Number of Dealers for tractors nil



The main focus products in Ramnagar are grains, vegetables and mango. The

catchment area for this RABC consists of the blocks of Ramnagar, Sikta, Mainatand,

Lauria, Gaunaha, Bagaha and Narkatiaganj. Based on the production details of grains,

vegetables and fruits in the in the above mentioned blocks and estimated market

surplus and linkages from field study, it is estimated that the RABC will be able to

handle the following products, quantities and the expected gross margins per MT of

product.

Product Estimated Qty Expected margin Rs. per mt Grains 17000 750 Mango 2500 2000 Vegetables (Cucurbits) 5500 750 Source: IL&FS-CDI survey



Product Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Grains Mango Vegetables* *Except for the dry season, West Champaran produces different types of cucurbits for nine months.







Product Estimated Sales Estimated margin

Urea 1000 mt Rs.100 per mt

DAP/ Complex 500 mt Rs. 200 per mt

MOP 250 mt Rs. 100 per mt

Seeds Rs. 20 lakhs 30 %

Pesticides Rs. 70 Lakhs 20 %

Agri-implements hiring






suggested at Ramnagar for handling of agri output. Justification for setting the facility



1 Multi product

grading line

2 mt per

hour

Potato & mango will be handled, multi product handling

line will be ideal.

2 Pack house-

Cold room 100 mt Transit storage for fruits and vegetables

3

Shop floor for

sale of agri

inputs

150 sq

mts For display and sale of agri inputs and administration

4 Godown for

fertilizer

100 sq

mts For storage of fertilizer, pesticide & seeds

5 Weighing line 1 Since it is proposed that all products will be purchased

by weight.

6 Crate washing

line 1

Most of the proposed fruits and vegetables will be

handled in crates



12.5.6 Project Cost

Description Amount Land (4 Acres @ Rs. 4 Lakhs/Acre) 16.00 Land Development (4 Acres @ Rs. 5 Lakhs/Acre) 20.00 Buildings (Approx 6200 sq. m @ Rs. 6500/sq. m) 402.25 Plant & Machinery* 29.00 Miscellaneous Fixed Assets* 23.31 Preliminary and Pre-Operative Expenses* 10.17 Contingencies (5% of the above costs) 23.73 Margin Money for Working Capital* 20.63 Total Project Cost 545.09 * Assumptions and details given in Chapter 13.




Year 1 2 3 4 5 6 7


(Lakhs Rs)

Revenue 886.88

1108.59

1662.89

1995.47

1995.47

1995.47

1995.47 Expenses


952.65 1428.98

1714.77

1714.77

1714.77

1714.77 Water 0.26 0.33 0.50 0.59 0.59 0.59 0.59

Power & Fuel 4.76 5.95 8.93 10.71 10.71 10.71 10.71

Employee Cost 15.31 16.07 16.88 17.72 18.61 19.54 19.54

Insurance 2.27 2.27 2.27 2.27 2.27 2.27 2.27



988.36 1474.18

1766.03

1766.91

1767.84

1767.84 EBITDA 93.28 120.23 188.71 229.44 228.56 227.63 227.63



9.28 11.60 17.41 20.89 20.89 20.89 20.89

Depreciation 19.11 19.11 19.11 19.11 19.11 19.11 19.11

PBT 35.93 60.56 124.33 164.47 166.48 168.45 171.34

Tax 11.29 20.24 42.43 56.53 57.61 58.63 59.94





Year 1 2 3 4 5 6 7

EBITDA Margin 10.52% 10.85% 11.35% 11.50% 11.45% 11.41% 11.41%

PAT margin 2.78% 3.64% 4.93% 5.41% 5.46% 5.50% 5.58%




DSCR 2.14 2.47 2.22 2.60 2.69 2.78 2.90

Average DSCR 2.51

Project IRR 12.52%



13. Business Plan and Financial Analysis

13.1 Project Cost and Means of Finance

13.1.1 Project Cost

The cost estimates are validated by IL&FS CDI on the basis of quotations

received from suppliers as well as secondary data from industry sources.

(i) Land

The standard cost mentioned on web site of BIADA for industrial area

for the major cities has been taken as the land cost per acre. In case for

a given location the cost of land is not available on the web site the

cost of nearest location or district is taken as benchmark for calculation

of project cost.

(ii) Land Development

Cost of land development includes boundary wall, road, water drainage

etc. The cost of development is taken as Rs 5 Lakhs/ Acre.

(iii) Buildings

The cost of buildings in the projects includes Dry warehouse, Pack

house- processing hall, Cold Storage, Shop floor area and agri inputs

warehouse (as applicable in different locations). The cost of

construction for various facilities is taken as follow:

• Warehouses, shop floor area etc.: Rs 6500/ Sq m

• Cold Stores: Rs 5000/ MT of storage capacity for Potato Store

• Pack House Cold room: Rs 10000/ MT of storage capacity

(iv) Equipments



The break-up of the estimated cost of major machinery is provided

below.

Table 1: Machinery Cost Rs in Lakhs Plant & Machinery Unit Rate/ Unit (Lakhs Rs) Pack House-Cold Room MT 0.12 Ripening Equipments (MT/ day) MT/Day 7.00 Sorting Grading Line-2 MT/ Hr 12.00 Weighing Line 2.00 Fumigation Line-2 MT/ Hr 10.00 Fungicide treatment tank 5.00 Pre-cooling-10 MT, Blowers only 2.00 Crates washing line 3.00

The requirement of machinery depends on the business model or

commodities traded at a particular location.

(v) Miscellaneous Fixed Assets / Utilities

The breakup of the estimated cost of the miscellaneous fixed assets and

utilities are provided below:

Table 2: Miscellaneous Fixed Assets / Utilities Particulars Rate/ Unit (Rs.) Racks for Cold Store 500 Crates 170 DG-Set-70 KVA 300000 Transformer 100000 Water Supply-6 KLD Rate/KL (Rs) Overhead tank 7000 Underground reservoir 2300 Pipe Lines-100 m 1850 Tube well with 2 HP Motor 40000 Misc Fixed Assets 200000

(vi) 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 completed 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 1% of cost of fixed assets other than land and civil

work.

(vii) Working Capital Requirement

There will be two major revenue streams for the project:

1. The rental charged from users for storing their products in the

warehouses and cold stores.

2. The trading of fruits, vegetables and grains.

As according to the common practice of trade in agri commodities

there is a significant time lag between selling the produce and

collection of money from buyers. Therefore, a significant investment

in working capital will be required for the purchase of commodities

comprising of different fruits, vegetables, grains and agri inputs. The

RABC’s working capital requirements are calculated by taking into

consideration the holding period for various commodities and products

and the corresponding investment required in each holding period. The

holding period varies from 60 days in case of agri inputs (fertilizers,

pesticides & seeds) and grains (wheat, maize, rice and paddy) to 7 days

in case of highly perishable crops like (tomato, brinjal, banana etc.).

For the rental facility, raw materials have not been considered for

calculation of working capital requirement.

(viii) Contingencies

The amount is calculated at 5% of cost of site development, plant &

machinery and other fixed assets.


The cost of the project is proposed to be financed through a mix of equity,

debt and grant from Government of Bihar.



The grant is envisaged under the proposed Scheme for Integrated

Development of Food Processing Industries of Government of Bihar. The

grant and promoter’s equity are assumed to be 35% and 30% respectively of

the project cost and the remaining funds will be sourced through bank loan.

13.2 Analysis of Business Plan

13.2.1 Business Plan

RABC is visualised as a one stop shop and service providing center to farmers,

agri commodity traders and retailers. The business model of RABC is

explained below.

(i) RABC will procure fruits, vegetables and grains from farmers. These

produce will be stored in technologically suitable and hygienic

conditions for sale in the consumption market directly, through

retailers or through pre contracted potential buyers after proper sorting,

grading and packaging.

(ii) RABC will also sell agri inputs (Fertilizers, Pesticides and Seeds).

(iii) RABC will provide facilities like (depending on the requirements):

i. Cold Storage (50% capacity for trading purpose and 50%

for rental)5

ii. Modified atmospheric cold storage for perishable crops

(Transit store)6

iii. Ripening facility for Banana and Mango

iv. Dry Warehouse (50% capacity for trading purpose and

50% for rental) for agri commodities like grains, pulses

and agri inputs.

v. Sorting, grading and preservation facilities.

5 Rental Purpose- The space will be rented out to users to store agricultural commodities. Trading Purpose- The space will be utilized by RABC itself to store purchased commodities for selling on a later date to gain time arbitrage. 6 Transit Store- The produce will be stored for small period of time before dispatching to the consumption market



13.2.2 Key Operating Assumptions

The key operating assumptions underlying RABC’s business plan are

described below.

1. Cost Assumptions:

i. 240 working days per annum are assumed for operations.

ii. Buying Cost of major Crops and Inputs: The raw material cost

is estimated below.

Table : Cost of Major Crops Crops Average Price/ Kg (Rs) Potato 2.5 Onion 4.0 Litchi 15.0 Mango 9.0 Grains 8.0 Other vegetables* 4.0 Total

*Others include Brinjal, Okra, Watermelon, Carrots etc.

The buying costs have been estimated in consultation with

different players in the supply chain, which include farmers,

traders, commission agents etc. While estimating the costs,

seasonality of the commodity prices for the last two years has

been considered

iii. Power & Fuel Cost

The total connected load of the facilities would range from 50

to 150 KVA depending on the installed facilities in the RABC.

The power tariff has been assumed at the prevailing rate of Rs

4.25 per unit. Average daily requirement of power would range

from 320 KWH to 1200 KWH based on the facilities installed.

Taking into account the current power supply scenario in the

state it has been assumed that the facilities would run on DG set

for about 8 hrs/ day. Fuel cost for DG set is assumed as average

diesel consumption of 10 liters/ hr. The cost of diesel is

assumed at Rs 35/ litre.

iv. Water Cost



Daily requirement of water is estimated to be 60 litres / person /

day & 1000 litres/ day for operating use. The charges are

assumed at Rs 20 / KL/ Month.

v. Employee Cost

The employee cost has been assessed by taking into account the

requirement of managerial and support staff for RABC’s

proposed level of operations. The estimated employee costs are

tabulated below.

Table 3: Estimate of Employee Cost Workforce Assumptions Salary p.a. (Rs) Managerial Manager 120000 Marketing Manager 72000 Accountant 50000 Plant operator 60000 Security 36000 Temp workforce* Rs/ Day Labour 80

*The number of workforce will depend on the scale of operations. Note: Escalation in wages assumed at 5% p.a.

vi. Cost of Insurance

The cost of insurance has been assumed as 0.5% of cost of

plant & machinery and miscellaneous fixed assets.

vii. Admin & Selling Overheads

Admin & Selling overhead Cost has been assumed @ 1.0% of

revenues

2. Financial Assumptions:

(i) Taxes

Income Tax rate is assumed as flat 33.99% (Prevailing

Corporate Tax Rate)

(ii) Depreciation Rates



Depreciation has been calculated on straight-line method, as

per the Companies Act, 1956, for book purposes, whereas for

tax purpose, written down value method is employed. The rate

of depreciation for plant & machinery and miscellaneous fixed

assets is taken as 10% for book purposes and 15% for tax

purposes

(iii) Interest

Interest rate has been assumed as 13.00% p.a. for Term Loan

and 13.50% p.a. for working capital loan.

3. Revenue Assumptions

(i) Proposed Margin assumptions

Depending on the location, the selling margins for various

products are assumed as:

Crop/ Product Unit Margin/ Unit (Rs) Potato MT 500-1000 Vegetables MT 750-1000 Banana MT 500-750 Mango MT 2000 Litchi MT 5000-7500 Grains MT 500-1000 Agri Inputs Urea Bag 5 DAP Bag 10 MoP Bag 5 Pesticides Litre 100 Seeds MT 30000 Rentals Warehouse* MT/ Month 100 Cold Store# MT/ Month 250

*The rentals are estimated based on discussions with market players (warehouse owners, traders and farmers). At present CWC7 and SWC8 are charging Rs 75/ MT/ Month. But they are providing services for a limited period of day (9:00 a.m. to 5:00 p.m.). As RABC will provide warehousing services 24 hours, so a premium will be charged. Also many private warehouses in and around Patna are charging even about 140-150 Rs/ MT/ Month.

# The estimated rentals are equivalent to prevalent market rates.

7 Central Warehousing Corporation 8 State Warehousing Corporation



(ii) Capacity Utilization

The estimated capacity utilizations are shown in the table

below.

Table 10: Estimated Capacity Utilization Year Capacity utilization Year I 40% Year II 50% Year III 75% Year IV and Onwards 90%

13.3 Sensitivity Analysis

The prices and volume of agri commodities are highly volatile in nature and hence

any business related to agriculture is many times quite unpredictable. Keeping in view

the prices and volume volatilities, the sensitivity analysis of major financial indicators

for all the proposed locations has been done. As examples, the sensitivity analysis of

financial performance indicators of RABCs at Fatuha and Motipur (w.r.t. procurement

costs and selling prices of commodities) are given below.

13.3.1 Sensitivity Analysis of the RABC at Fatuha:

Description DSCR Project IRR Int Cover Most Likely Scenario (See Chapter 11) 2.80 14.23% 4.15

Pessimistic Scenario Decrease in selling price 5% 2.30 10.03% 3.41 Increase in raw material cost 5% 2.38 10.68% 3.53 Both of above 5% 1.88 6.20% 2.79 Decrease in selling price 10% 1.80 5.49% 2.67 Increase in raw material cost 10% 1.95 6.90% 2.90 Both of above 10% 0.78 -3.63% 1.16

Optimistic Scenario Increase in selling price 5% 3.30 18.16% 4.89 Decrease in raw material cost 5% 3.22 17.58% 4.78 Both of above 5% 3.72 21.33% 5.52 Increase in selling price 10% 3.79 21.89% 5.63 Decrease in raw material cost 10% 3.64 20.77% 5.41 Both of above 10% 4.64 27.83% 6.88

The above table shows that the project looks bankable even in the moderately adverse

condition (Decrease in selling price by 5% and increase in raw material cost by 5%).

But in a highly adverse condition (Decrease in Selling Price by 10% and increase in

raw material cost by 10%), the project will face problems in repayment of debt



liabilities. But this case is highly unlikely due to the economic traits of agri trade (Sale

price and purchase price of the same commodity very rarely move in opposite

directions simultaneously).

13.3.2 Sensitivity Analysis of RABC at Motipur:

Description DSCR Project IRR Int Cover Most Likely Scenario (See Chapter 8) 2.92 13.38% 4.33

Pessimistic Scenario Decrease in selling price 5% 2.44 9.04% 3.62 Increase in raw material cost 5% 2.52 9.82% 3.74 Both of above 5% 2.04 5.13% 3.03 Decrease in selling price 10% 1.96 4.28% 2.91 Increase in raw material cost 10% 2.13 5.98% 3.15 Both of Above 10% 0.93 -5.71% 1.38

Optimistic Scenario Increase in selling price 5% 3.40 17.36% 5.04 Decrease in raw material cost 5% 3.32 16.69% 4.92 Both of Above 5% 3.80 20.46% 5.63 Increase in selling price 10% 3.88 21.08% 5.75 Decrease in raw material cost 10% 3.71 19.82% 5.51 Both of Above 10% 4.67 26.82% 6.93

Analysis of the above table shows that in the highly adverse scenario (Decrease in

Selling Price and increase in Raw Material cost by 10%), the project will face

problems in repayment of debt (Interest and Principle) obligations, but it will be easily

able to meet all the interest payments due. The Project IRR in this case will be

negative, making it an unviable investment from the investor’s point of view. A

proper buy back agreement with farmers and take off agreement with buyers will

equip investor in nullifying the fluctuations in prices and in avoiding the highly

adverse scenario. Proper value addition and quality up gradation by efficient handling

of produce will lead to premium prices (Optimistic Scenario), making it a highly

attractive investment proposal for the investor.



14. Annexure 14.1 Investor Profiles

14.1 Muzaffarpur

1) Amrapali Group of Companies.

Amrapali Group consists of two companies- Amrapali Agro Foods Pvt. Ltd. and

Amrapali Foods Pvt. Ltd. Amrapali Group is primarily engaged in the processing of

fruits and vegetables and owns a processing plant at Hazipur Industrial Area & and

an integrated pack house at Bahadurpur, Muzzaffarpur. The group has an annual

turnover of around Rs. 4 Crores. Mr. K.P.S Kesari, is the MD of M/s Amrapalli Foods

Ltd.

2) Radha Krishna Ibex Pvt. Ltd.

Radha Krishna Nivas, Sikandarpur,

Muzaffarpur- 842001

The company has rich experience in F&V processing and has a processing unit at

Muzzaffarpur. It is primarily into Litchi processing and export having a turnover of

Rs. 25 Crores. The products are sold under the brand name “Kedia Fresh”. The

registered office of the company is located at Muzaffarpur with the corporate office at

New Delhi. The company has plans to scale up its operations by entering into new

segments.

14.2 Samastipur

1) Amrapali Foods Pvt. Ltd

(Details given earlier)



14.3 Begusarai

1) Pharmafine Chemical Industries Pvt. Ltd,

Village Bihat, Barauni Industrial Area, Begusarai

Ph: 0624-3264196

The promoter of Pharmafine Chemicals Industries Pvt. Ltd. is Mr. Yogendra Prasad

Singh. He is an experienced entrepreneur having 40 years of experience in the

chemical industry. He started Pharmafine in 1980 at Barauni and Maratha Chemicals

Limited in 1990 in Aurangabad, Maharashtra. Maratha Chemicals, which employs

about 100 people, is a basic drug manufacturing company with an annual turnover of

about Rs. 80 crores in 2007-08 and having a gross profit of Rs. 8 Crores. Pharmafine

is planning an investment to the tune of Rs. 5 crores in the proposed RABC.

14.4 West Champaran

1) Bharatiya Beej Bhandar, Admin Office Lal Bazar, Betiah, West Champaran

Registered Office: Bharatiya Agro Products Pvt. Ltd, A/4, 4th Floor, Omkar

Apartment, Sheikhpura, Patna- 800014

Bharatiya Beej Bhandar is the one of the largest input dealers in Champaran area

dealing in seeds and pesticides for the last thirty five years. Its operations are spread

in two districts of West and East Champaran and also to some parts of Nepal. In

2006-07, the turnover was about Rs. 9 crores with net profit of about Rs. 36 Lakhs.

Mr. Bholanath Sikaria is the founder and director of Bharatiya Beej Bhandar. He has

close to 35 years of experience in the industry.

2) P & M Infrastructure Pvt. Ltd

P & M Infrastructures Pvt. Ltd. is a private company having objective of setting up chain of malls, multiplex & hotels (popularly also called Family Entertainment Centers) across Bihar & Jharkhand. The total book value of capital of P & M Infrastructures Pvt. Ltd. is about Rs.44 Crores. Maurya Sugar Pvt. Ltd is a sister company of P & M Infrastructure Pvt. Ltd. Maurya Sugar is setting up a 3500 TCD sugar plant with a 120 KLPD distillery and a 16 MW power co-generation at Guruwalia, Bettiah, West Champaran, Bihar at a projected capital cost of Rs. 250



crores. Mr. Prakash Jha, Mr. Manmohan Shetty, Mr.Prabhat Jha and Mr. Chander Gidwani are the promoters of the company and their total net worth is about Rs. 431.57 Crores.

14.5 Purnia

1) Owners and dealers of Kiran Cold Storage and Swaraj Tractors & Implement

(National Sales Corporation) respectively at Nayak Campus, near Jail Chowk, NH31

Purnia, Kiran

The above mentioned entrepreneurs are Mr.Pankaj Kumar Nayak and his father, Mr.

Kamta Prasad Nayak. The Cold Storage has a capacity of 6000 MT. The total

turnover of these entrepreneurs is about Rs. 9 crores.

14.6 East Champaran

1) Mr. U. K. Jaiswal

2) Uma Puri

3) Chandra Sekhar Giri

4) Rohit Chandra

5) Santosh Kumar Jaiswal

The above mentioned group of investors is planning to form a company for investing

in setting up of a RABC in Narkatiya Bazar, West Champaran. The investors are

experienced entrepreneurs and their combined net worth is around Rs. 2 Crores. Mr.

Jaiswal has more than 10 years of experience in FMCG marketing and export. Before

that he was the Managing Director of Texking Textile Pvt. Ltd.

14.7 Other potential investors:

1) Riddhi siddhi Gluco Biols Ltd (RSGBL)

Registered Office: 701, Sakar - I (Opposite Ghandhigram Railway Station) Ashram Road, Ahmedabad, Gujarat – India



Riddhi siddhi Gluco Biols Ltd (RSGBL) is India’s leading corn processors with a

market share of about 30 percent in starch manufacturing. RSGBL is the starch and

glucose manufacturing arm of the Riddhi Siddhi Group and is the largest wet milling

plant of the Indian Sub Continent having the highest crushing capacity of about 2

Lakh MT with four processing units located at prime locations in the states of

Uttaranchal, Karnataka, Pondicherry and Gujarat. Riddhi Siddhi has grown from Rs.

332.65 Crores of turnover in 2006-07 to about Rs. 550 crore in 2007-08,

strengthening margins, earnings and value creation for all the stakeholders.

2) Sukhjit Starch and Chemicals Limited (SSCL)

Registered Office: Sarai Road, Phagwara, Punjab - India

SSCL is India’s leading corn processors with a market share of about 20 percent in

starch manufacturing. It has the largest corn crushing capacity in the Indian Sub

Continent having a capacity of more than 1.5 Lakh MT with four processing units

located in the states of Punjab, Andhra Pradesh, West Bengal and Himachal Pradesh.

SSCL stands as the largest manufacturing plant producing the starch of various types,

liquid glucose, dextrose monohydrate, maltodextrin, dextrose syrup, High Maltose

Corn Syrup and the byproducts like Corn Gluten meal and Enriched fiber which are

used in various applications. SSCL is currently catering to different industries in

Food, Textile, paper, Pharmaceuticals, Confectionaries and many more and has

around twenty per cent of market share in starch manufacturing industry. The total

book value of capital of SSCL is about Rs. 150 Crores.

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