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VALUE CHAIN ANALYSIS OF ARECANUT - A BUSINESS MANAGEMENT PERSPECTIVE
VINAYA KUMAR, B. S
MBA 728
DEPARMENT OF AGRICULTURAL MARKETING, CO-OPERATION AND BUSINESS MANAGEMENT
UNIVERSITY OF AGRICULTURAL SCIENCES GKVK, BENGALURU-560 065
2009
VALUE CHAIN ANALYSIS OF ARECANUT- A BUSINESS MANAGEMENT PERSPECTIVE
VINAYA KUMAR, B.S
MBA 728
Project report submitted to the
UNIVERSITY OF AGRICULTURAL SCIENCES,
BENGALURU
in partial fulfillment of the requirement for the award of the Degree of
Master of Business Administration
in
Agri Business Management BENGALURU July, 2009
Affectionately dedicated
to APPA, AMMA,VISHU
&
My Guide
DEPARTMENT OF AGRICULTURAL MARKETING, CO-OPERATION AND BUSINESS MANAGEMENT
UNIVERSITY OF AGRICULTURAL SCIENCES G.K.V.K., BENGALURU-560 065
CERTIFICATE
This is to certify that the Project Report entitled, “Value Chain Analysis of
Arecanut- A Business Management Perspective” submitted by Mr. Vinaya
Kumar, B. S., ID NO. MBA728 in partial fulfillment of the requirement for
the degree of Master of Business Administration (MBA) in AGRI
BUSINESS MANAGEMENT to the University of Agricultural Sciences,
Bangalore is a record of research work done by him during the period of his
study in this University under my guidance and supervision and the Project
Report has not previously formed the basis of the award of any degree,
diploma, association ship, fellowship, or other similar titles.
BANGALORE Dr. T. N. Prakash July, 2009 MAJOR ADVISOR
APPROVED BY : Chairman :
( T.N. PRAKASH) Members :
1.
(S. SURYAPRAKASH)
2.
(D. NUTHAN)
3.
(B. M. RAMACHANDRA REDDY)
4.
(M. T. RAJASHEKHARAPPA)
ACKNOWLEDGEMENT
It is my pleasure to glance back and recall the path one traveled during the
day of hard work and perseverance. Interdependence is definitely more valuable than independence. This Project is the result of two years of work whereby I have been accompanied, supported and guided by many people. I would thus like to thank everyone who, knowingly or otherwise, has provided support, encouragement and assistance along the way.
First and foremost, I express my deep sense of reverence and gratitude to Dr. T. N. Prakash, Professor, Department of Agricultural Economics and esteemed chairman of my advisory committee for his constant encouragement, sustained interest and generous assistance at every stage of investigation and for his esteemed stewardship, enabling guidance, cherishable counseling and personal affection for which I am greatly indebted to him. It was really a great pleasure and privilege for me to be associated with him during my MBA (ABM) Degree Programme.
I am overwhelmed with sincere feeling of indebtedness to the member of my Advisory Committee Dr. D. Nuthan, Associate Director of Research, UAS, GKVK, Bangalore, who has gone through my Project meticulously with immense patience and also for his constant encouragement, inspiration and support since from my UG.
I would like to thank the members of my advisory committee Dr. S. Suryapraksh, Professor, Department of Agricultural Economics, Dr. B. M. R. Reddy Professor, Department of Agricultural Marketing, Co-operation & Business Management, University of Agricultural Sciences, GKVK, Bangalore and Mr.Rajeshekarappa, Statistician, New India Corporation, Bangalore, Who provided all kind of support to me in completion of post-graduate study. I feel no words to express my heartfelt gratitude and respect to all her/his kindness.
I had a great privilege to have Dr. P. K. Mandanna, Professor and Head, Principal coordinator, Department of Agricultural Marketing, Co-operation & Business Management, for creating a flexible high performance learning environment throughout my post graduate programme. I thank him for his valuable suggestions, creative comments, financial help and encouragement throughout the period of study.
I greatly acknowledge the cooperation and financial help extended by my teachers Dr. G. N. Nagaraja, who is favorite in all time to me, Mr. P. V. Ramegowda, PG Coordinator, who is kind and friendly, Dr. B. M. Shashidar,
Academic coordinator who is always encouraging, supportive for creative ideas and taking care. I am indebted to their care during my MBA degree.
No words could ever fathom my deep sense of gratitude and indebtedness to my lovely and respectful madam Dr. C. P. Gracy for her all kind of care and concern in time. My sincere Thanks to Mr. T. N. Venkata Reddy, Dr. M. S. Jayaram, Dr.M R. Girish (Placement coordinator) and Dr.M.S. Ganapathy, Department of Agricultural Marketing, Co-operation & Business Management, for their kind advice and concern throughout my MBA course. I also thank Dr. P.G. Chengappa, Vice Chancellor, UAS, Bangalore, for their concern about the first batch.
I am thankful to all my teachers, of Agricultural Economics department Dr. M.V. Srinivasa Gowda, Dr. G. S. Ananth , Dr. Umesh K. B., Dr. M. G. Chandrakanth, Dr. N. Nagaraj, along with special regards to Mr. G. Nanjundagowda, Professor (Retd.) Department of Agricultural Marketing, Co-operation & Business Management, University of Agricultural Sciences, GKVK, Bangalore for being the lighthouses in this hard journey.
I express my sincere gratitude to Pavithra madam, Sumathi madam, Adarsha, Raju, Special scheme on cost of cultivation of arecanut in Karnataka, department of agricultural economics, for their kind co-operation, homely environment, concern, friendship and happiness shared during my Project work.
I am indebted to Kashinath uncle SOURCE HUB, Mariswamy uncle CANARA
BANK, Narayana swamy uncle,Sandyamma, Srikantaih, Srinivas gowda, Dr.Byrappa, Harish, Ravindra, Ramdas, Vasanth, RAMU, VENKATESH, SURESH, Sathyanaraya sir canara bank for being the lighthouses in this hard journey.
Words seem worthless when it comes to acknowledge my friends circle. I use
this opportunity to sincerely thank my dearest classmates Ramu, Suri, Sathya, Guru, Darshan, Suppu, Nagendra, Nagarj, Gnani, Mafeez, Zingi, Manas, Ashoka, Balu, Govind, Ganesh, Mamu, Sanju, Chitra, Gawai, Chidu, Battery, Vidya, Yashas, Shankar and Ajay for their lovely friendship, love, help and care and for making the two year study very much enjoyable and memorable.
It is with great pride and joy that I extend my heartiest thanks to my ever-encouraging friends circle viz, heartily friends Raghu, Shivu, Pani, Madura,KP, AshaRani, Nagu, Hc & Sara,,Evergreen lights of life Yathi, Babujja & Avi, lovely
friends Sripad, Thiru, Navada, Kiran, Nuthan, LokeshBkMh, Raj, Shivabasappa, Monda, Nataraj, Sudarshan Supportive seniors Sunitha, Srishyala, Nikil, Shruthi, Kempanna, Manjanna, Gkvk Hostel dearests Kanta, Chandra, Athik, Kambe, Venkata, Raju, Girisha, Navina, Devaraj, Gowda, Mohana, Nandish, Dearest-Juniors Abhijith, Sura, Srikanth, Bhuvan, Manjunath ,Nandini^2, Nuthan, Narayana, Prasanna, Poonacha, Sampad, Roopa , Shanmuga ,Ravi, Shashikumar, Srinivas, Vinitha, Ramalinge gowda, Harisha.
My sincere gratitude towards care and support by Dr, Harini kumar, chief
warden and Dr. Mahadev Murthy, Warden PG Boys Hostel, Staff Kumar sir, Puttaswamy, Laxminarayana, Gowdru CT, and all Mess workers for their help rendered to me during the course of my study.
I remain ever thankful to the non-teaching staff Mr. Veerappa, Smt. Jayalaxmi, Mr. Zubbair and Smt. Sumitramma, Mr. Nagesh. Mr. D. K , Vishwanath, Mr. M. Arun, Mr. Suresh K., Mr. Shivakumar C., Ms.Ashwini.A., and Ms. Renuka H., of Department of Agricultural Marketing, Co-operation and Business Management, for providing me the necessary materials during my research work.
There are no words to express my feelings of adoration, love, respect and obligation to my beloved parents, who moulded me to what I am. I owe all my success to my beloved Mother Padmavathi and Father Shivappa gowda my brother Vishranth and my sisters Vinutha & Savitha and all one near and dear ones.
I am thankful to Principal Investigator for providing financial support for the research study by rendering JRF in Special scheme on cost of cultivation of arecanut in Karnataka sponsored by Ministry of Agriculture, GOI
My sincere gratitude to CAMPCO, MASS, KRAMCO and all the farmers and traders in Shimoga and Mangalore markets for their kind cooperation during my study.
I am thankful to Manager (2007), Syndicate Bank, Agumbe for availing Educational Loan facility to complete My MBA Successfully.
Most of all, I thank lord almighty for the blessings showered and the helps received which enabled me to complete this Project work. Bengaluru July, 2009 (Vinaya Kumar, B.S.)
VALUE CHAIN ANALYSIS OF ARECANUT - A BUSINESS MANAGEMENT PERSPECTIVE
VINAYA KUMAR, B. S.
ABSTRACT
Arecanut an important traditional commercial crop of India. In spite, the value
addition in arecanut is not up to the expectations so far. Hence, an attempt was made
to study the value chain in arecanut with a business management perspective, by
focusing on Shimoga (for red boiled type) and Dakshina Kannada districts (for white
chali type) in Karnataka. A sample of 60 farmers, 60 market intermediaries, 40 beeda
shops and 06 cooperatives were selected for the study. The data was pertaining for
the year 2007-08. Analysis was done by employing the Multiple Regression, Lorenz
curve, Hirschman’s Index, Gini Ratio, Growth Rate, Instability Index and other
relevant techniques. The study highlighted some disquieting features in value chain
management of arecanut in Karnataka. Most of the value added branded arecanut
products especially from RBT contain tobacco as main ingredients, which are
manufactured mainly from outside the Karnataka. The study also highlighted a high
growth rate in import compared to export of arecanut products in post liberalization
period. Study came out with a cost estimation of preparing one Kilo gram of Pan
masala products of arecanut around Rs.550 and Rs.1046 for products with tobacco.
Total return from one kilogram of pan masala products was Rs.724 and Rs.1482 for
products having tobacco. This highlights that small beeda shops are getting a good
return in the value chain management of arecanut in Karnataka. The study showed
that the exports grew at 20 per cent rate where as import at a whopping 33 per cent
rate during this period. Keeping the above results in view the study came out with the
policy recommendations to create a separate areca value chain zone, strengthening
cooperatives like CAMPCO to undertake more value added products, establishing
vertical integration and modernization of retail beeda shops and to make use of the
opportunities under trade liberalization to produce and export of socially accepted
areca products having nutraceutical properties. The study strongly recommended the
curbing of the illegal import of areca products to India.
Vinaya Kumar, B.S Major Advisor MBA 728 (T. N. PRAKASH)
CONTENTS
Chapter No. Title Page No.
I Introduction 01-10
II Review of Literature 11-26
III Methodology 27-39
IV Results 40-63
V Discussion 64-78
VI Summary and Policy Implications 79-85
VII References 86-93
Appendices 94-105
LIST OF TABLES
Table No. Title Page
No.
1.1 Nutrient Contents in Arecanut 06
3.1 Socio Economic Details of Shimoga District 29
3.2 Socio Economic Details of Dakshina Kannada District 30
3.3 Sample Details 32
4.1 General Characteristics of Farmer Respondents 41
4.2 General Characteristics of Market Intermediaries 41
4.3 General Characteristics of Cooperative Societies 43
4.4 General Characteristics of Beeda Shops (Panwallahs) 43
4.5 Value Added Products of Arecanut Marketed / Consumed at Shimoga and Mangalore Markets 45
4.6 Price Spread Analysis- Scented Supari and Pan beeda 49
4.7 Market Competitiveness Study in the Sample Markets 52
4.8 Costs Incurred by the Market Intermediaries in Shimoga and Mangalore markets 54
4.9 Details of Costs and Returns Incurred for Preparation of Beeda from One Kilo Gram of Arecanut 56
4.10 Factors Responsible for Branded Value Added Products (Gutkha & Scented Supari Packs) Sale per Week in Beeda Shops
58
LIST OF TABLES
Table No. Title Page
No.
4.11 Production and Marketing Cost Incurred by the Farmers 59
4.12 Factors Influencing Processing cost for the Farmers 61
4.13 Growth Rate and Instability of Arecanut Trade 63
LIST OF FIGURES
Figure No. Title Between
Pages
1.1 Flow Chart Showing Preparation of RBT Arecanut 03-04
1.2 Flow Chart Showing Preparation of WCT Arecanut 03-04
3.1 Map Showing Study Areas in Karnataka 27-28
4.1 Major Marketing Channels Followed by the Respondents 46-47
4.2 Lorenz Curve in Shimoga APMC Market 52-53
4.3 Lorenz Curve in Mangalore APMC Market 52-53
4.4 Graph Showing Distribution of Total Marketing Cost Among the Different Activities 54-55
4.5 Major Value Added Products of Arecanut 45-46
LIST OF APPENDICES
Appendix No. Particulars Page
No.
I Arecanut World Area, Production and Productivity in comparison with India 94
II State wise area and production of arecanut in India for the year 2007-2008 95
III District wise area and production of arecanut in Karnataka (2003-04) 96
IV Grades in case of White Chali Type Arecanut in Mangalore Market 97
V Grades in case of Red Boiled Type arecanut in Shimoga Market 98
VI Export and Import of arecanut from India 99
VII Mapping of value chain in Red boiled type of arecanut 100
VIII Mapping of Value Chain in White Chali Type of Arecanut 101
IX Description of Value Addition in Arecanut 102
X Identified Value Added Products in Shimoga and Mangalore 104
ABBREVIATIONS USED IN PROJECT REPORT
APMC- Agriculture Produce Market Committee
CAMPCO – Central Arecanut and Cocoa Marketing and Processing Cooperative
Limited
EP- Emerging products
HAPCOS – Hassan Arecanut Producers Cooperative Society Limited
KRAMCO – Karnataka Rajya Arecanut Marketing Cooperative Limited
MAMCOS- Malnad Aarecanut Marketing Cooperative Society Limited
MASS – Mangalore Agriculturist Cooperative Society Limited
RBT – Red Boiled Type
SKACMS – South Kannada Arecanut Cooperative Marketing Society Limited
WCT – White Chali Type
WOT- Without tobacco
WT- With tobacco
Introduction
CHAPTER I
INTRODUCTION
Arecanut commonly known as betel nut or commercially named, as supari is
the fruit of arecanut palm (Areca catechu L.,) of Palmae family. It has a record history
of use for nearly 3500 years in India. It plays a prominent role in the religious, social
and cultural functions and the economic life of people in India. The habit of chewing
arecanut is typical of the Indian sub continent and its neighbourhood. It is an
important and traditional and customary product, used largely by Indians as Tamboola
and consumed after food as a religious custom as masticatory. As days passed on
people began to chew betel leaf and nut along with tobacco then later it got a new
name as Pan masala. At present it is commercialized and popularly known as Gutkha.
Eventhough production is concentrated in few regions, the commercial
products of arecanut are widely distributed and consumed all over the country. It is
estimated that nearly ten million people in India are engaged in production,
processing and trade of arecanut. Its value addition into branded products (Gutkha,
Scented supari etc) encourages not only big entrepreneurs, but also small business
enterprises called pan shops.
1.1 Arecanut on Natural Economics
Arecanut is grown principally in the hot and humid regions of the world. The
production of arecanut in the world in 2007-08 was about 9,11,600 tonnes from an
area of 7,29,395 hectares. India alone contributes 5,59,200 tonnes from 3,96,800
hectares which is approximately 61 percent of the world production and 55 per cent of
world area. Other countries, which produce arecanut in the world, are Indonesia (16%
in area and 6.07% in production), China (9.82% in area and 18 % in production),
Bangladesh (7.7% in area and 6.5 % in production), Myanmar (04% in area and 6.7%
in production), Thailand (2% in area and 3% in production) and Srilanka (1.5% in
area and 3% in production). The world productivity of arecanut is 1249 kg/ha. China
ranks first in arecanut productivity with 2885 kg/ha. India ranks fourth in terms of
productivity (1409 kg/ha) (Appendix I).
India is the largest producer and consumer of arecanut in the world. Among
the arecanut producing states Karnataka stands first with a share of 40 per cent
(2,24,000 tonnes) followed by Kerala (20 %), West Bengal (19 %) and Assam (12 %)
of total India’s production. Remaining nine per cent of production is distributed
among the western states of India. In India productivity ranges from 915 kg per
hectare (Assam) to 6500 kg per hectare (Nagaland). Though Karnataka contributes
significantly to the arecanut sector, its productivity is low (1333 kg/ha) compared to
national average (1409 kg/ha) (Appendix II).
Karnataka is the largest producer of arecanut in India by contributing 42.34
per cent area (1,68,000 ha) and 40.06 per cent production (2,24,000 tonnes). In
Karnataka the major production is from Dakshina kannada (18 % area and 24 %
production) and Shimoga (19 % area and 22 % production), which contributes 46 per
cent of the state production and other districts like Davanagere, Tumkur, Uttara
kannada and Chikkamagalur which contribute 38% and rest from Udupi, Hasan,
Bangalore rural, Mandya and others. Even though Dakshina kannada and Shimoga
contribute significantly to production, the productivity is very low (550 kg/ha)
compared to Karnataka state average (1333 kg/ha) (Appendix III).
Arecanut brings some foreign exchange and contributes considerable amount
to GNP. In addition, it brings revenues to the state and central governments in the
form of sales tax, custom duty and agricultural income tax.
Arecanut cultivation has generated employment to about 8 million people
including 1.35 million panwallhas. About three-fourth of the farmers engaged in
arecanut cultivation belongs to the small or medium category and the remaining one-
fourth are large farmers. Areca gardens provide work almost throughout the year,
since various operations need to be carried out in all the three seasons of the year.
According to Krishnaraja (1981) the total labour employment in man days in small,
medium and large gardens was 454.15, 366.49 and 490.13 per hectare respectively.
1.2 Arecanut Processing
The quality and price of arecanut depends upon processing of raw arecanut
from the plantations. In India, both unripened fruits and ripened fruits are harvested to
prepare two type of arecanut viz., Red Boiled Type (RBT) and White Chali Type
(WCT) respectively. RBT arecanut is obtained when unripened fruits are dehusked,
Figure 1.1: Flow Chart Showing Preparation of RBT Arecanut
Figure 1.2: Flow Chart Showing Preparation of WCT Arecanut
boiled with chogaru (coloring material from jam trees) and sun dried for about week.
WCT is obtained when ripened fruits are sundried for 50-60 days and then dehusked.
Processing of WCT arecanut can be carried out leisurely, as per the grower’s
convenience; whereas the RBT needs to be processed within a week’s time. It needs
relatively more skill as well (Mallikarjunaiah and Prakash, 1988). Processing at the
farmer level is shown in flow chart Fig 1.1 and Fig 1.2.
The important factors affecting the quality of RBT arecanut are varieties
grown, colour, tenderness, proper boiling, drying and nut weight. In case of WCT
arecanut varieties grown, ripeness, drying method, storage method, size, flavour and
weight are important factors influencing the quality. In Karnataka, 90 per cent of the
total production of arecanut is processed as compared to Kerala’s 70 per cent and
Assam’s 10 per cent (Khan, 2006).
In Karnataka, WCT accounts for about 40 per cent of total production. It is
mainly produced in Dakshina kannada district, parts of Uttara Kannada and
Chikkamagalur districts. WCT is used in the preparation of scented supari and
panwallhas due to its pleasant flavor which has good demand in north India.
RBT arecanut accounts for about 60 per cent of the total production and is
prepared in the Malnad regions of Shimoga, Chikkamagalur districts and maidan
regions of Chitradurga, Tumkur etc. This variety is used for chewing along with the
betel leaves as Tamboola and also raw material for Gutkha and Pan masala industry.
This type has a greater demand in Southern India for masticator purpose.
1.3 Arecanut Marketing
In Karnataka, marketing of arecanut is better organized compared to other
producing states. About 93 per cent of arecanut is the marketable surplus, and is
marketed through the co-operative societies, regulated markets and the private traders
(Khan, 2006).
Arecanut has been declared as a notified commodity in about 32 regulated
markets. There are more than 15 co-operative marketing societies handling arecanut
in Karnataka. The co-operative societies have been fairly successful in their
functioning and about 30 per cent of the marketable surplus in the state being handled
by them. All these co-operatives are functioning as the agencies of CAMPCO Ltd.,
Mangalore.
The CAMPCO Ltd., a joint venture of Karnataka and Kerala state
governments, was established in 1973 with its head quarters at Mangalore. The main
objective of the CAMPCO was to procure arecanut from the growers at reasonable
prices and supply the same to the consumers minimizing the number of intermediaries
and their margins. The CAMPCO is playing an important role in maintaining
favorable prices for arecanut.
Arecanut is marketed as unhusked whole fruit, dehusked and dried nuts boiled
and dried whole kernels or their cuts. Marketing of semi-ripe, fully ripe or fermented
arecanut is of commercial importance only in Kerala, Assam and West Bengal. Nearly
one-third of the total arecanut production in India reaches the consumers as raw fruit
and the remaining in processed form. Marketing of processed arecanut is more
popular and better organized in most of the producing states.
Three or four types of primary grading depending upon the arecanut size and
shape (Bazar/Rasi, Fator, Karigotu, Lali, and Ulli) are done by the growers. The
secondary traders who are involved in the business of interstate marketing does
further grading by size and oldness viz,. Mora, Moti, Sevarthan, Jam, Jini, Lindi,
Fator by using automatic sizer or by manually. Pricing is depends upon the grade in
case of WCT arecanut. Grading at the APMC market level for both type is given in
Appendix IV & V.
In case of RBT arecanut, growers or processors bring their produce to the
market and sell it through commission agents or marketing societies to the traders.
Saraku, Bette, Api, Edi, and Gorabalu are the three or four types of grading done by
the processors while bring the produce to the market. Traders do further grading based
on quality, size, color etc demanded by the consumer markets. Marketing is regulated
by Agriculture Produce Market Committee’s located at regional levels. These playing
a vital role in Karnataka by controlling about 75 per cent of the total marketed
commodity.
1.4 Arecanut Trade
Arecanut is a commodity, which has a very limited export potential. The bulk
of arecanut is consumed within the country. However a small quantity of arecanut is
exported mainly meant for the Indian settlers abroad. The main countries to which
arecanut are exported are Nepal, UK, Singapore, Maldives, Saudi Arabia, Russia,
Thailand, Australia, USA etc. Quantity of export was at a range of 330 to 823 tonnes
during the period 1994-95 to 2000-01. But the export increased substantially during
the last couple of years. During 2006-07 India exported 5336 tonnes which is valued
at Rs.2293 lakhs. Arecanut is mainly exported in the form of betel nut whole, betel
nut split, betel nut grounds, pan masala and other betel nuts. During the year 2006-07,
major share of our arecanut export was in the form of betel nut ground and that was
mainly to Vietnam. Other major destinations of our arecanut export are Indonesia,
Malaysia, UAE, Maldives, UK, Singapore etc.
During fifties, arecanut production in the country was not sufficient to meet
the internal requirements and huge quantities were imported. Thereafter the imports
gradually declined due to the decision of Government of India to restrict the import
with a view to give incentive to the arecanut farmers. From 1974-75 to 1993-94 there
was no import of arecanut into the country. However, since 1994-95 India started
importing arecanut due to meet the domestic demand. During 2006-07, import of
arecanut in the country reached at all time high of 76,768 tonnes valued at Rs.11,065
lakhs. The imported arecanut were in the form of betel nut whole and betel nut splits.
Major source of our arecanut import is Indonesia, with a share of 77 per cent,
Bangladesh, Thailand, Myanmar etc are other sources.
1.5 Consumption of Arecanut in India
Consumption of arecanut in the country steadily increased from 0.114 million
tonnes during 1956-57 to 0.336 million tonnes during 1998-99. Similarly domestic
production increased from 0.07475 million tonnes to 0.330 million tonnes for the
same period. The gap between production and consumption was very wide during late
fifties and early sixties and thereafter production was sufficient enough to meet the
consumption up to 1993-94 and thereafter consumption requirement was satisfied
through import in moderate quantities varying from 545 tonnes during 1994-95 to
10,823 tonnes during 1997-98. Up to august import data available, the domestic
consumption requirement was satisfied through moderate quantity of imports
(Rethinam, 2001).
During 1956-2004 average consumption of arecanut was 88,309 quintals, with
3.18 per cent growth rate and average production was 82,711 quintals, with a growth
rate of 4.10 per cent. The forecasted demand of arecanut in 2005-06 was 1.69 lakh
quintals, that will increase 1.92 lakh quintals in 2010-11 and 2.24 lakh quintals in
2014-15. The forecasted production of arecanut in 2005-06 was 1.93 lakh quintals
and will increase 2.26 lakh quintals in 2010-11 and 2.27 lakh quintals in 2014-15. The
gap between the demand and production will reach a peak of 52,340 quintals during
2014-15 (Shruthi, 2008).
1.6 Medicinal and Nutritive Values of Arecanut
Arecanut is rich in several essential nutrients such as calcium, phosphorous
and vitamins. The details of nutrient contents in arecanut are given in Table 1.1.
Table 1.1: Nutrient Contents in Arecanut
Every 100 gm of arecanut contains
Carbohydrate 46.2 g.
Protein 4.2 g.
Fat 4.2 g.
Calcium 48 mg.
Phosphorus 119 mg.
Iron 1.4 mg.
Vitamin A Trace
Vitamin B6 Trace
Digestive Time 3 hours
Calories 245
Source: Prakash, 2006
1.7 Alternative Uses of Arecanut
At present, arecanut is mainly used for chewing with betel leaves, lime with or
without tobacco. The value added form of consumption is by way of Pan masala and
Gutkha. The trade, commerce and economy of the country are depending on arecanut
production and its price structure. The area under arecanut cultivation is being
expanded and the production is increasing sharply. Arecanut has got some medicinal
properties as reported in several Ayurvedic literatures. Arecanut is health activator,
mouth freshener and has digestive properties. Arecanut can be used for the following
purposes: Masaj powder, Toothpaste and powder, soaps and shampoos, cosmetics,
athelmintic and anti-diabetic, Ayurvedic type of tamboola for chewing purpose, ulcer
healing combination, hair oil and dyes, food colors and skin ointments (Prakash,
2006).
1.8 Arecanut Demand
Demand for value added products is fast growing globally also. Our
neighboring Pakistan, Middle East and other neighboring countries became an assured
destination for arecanut products. As result of which the export of value added
arecanut products from India has almost doubled in a span of just five years.
Interestingly, the demand is increasing gradually in the developed world including
US, UK, Canada and France that too for the value added products such as Ghutka and
Panmasala. Given its capacity to generate income, employment and the precious
foreign exchange, arecanut is seen as having all the potential to emerge as an ideal
Swadeshi traditional industry.
Arecanut promises to be a lucrative enterprise in view of its increasing
consumption, particularly among the youth and middle age groups for varieties like
scented supari, zarda and gutka, which are prepared from ripe arecanut and are made
available under different brand names in the market (Anita, 1997). About 90 per cent
of the arecanut produced in India is consumed domestically. The consumption is
increasing at the rate of three per cent annually, while the production is rising by 1.25
per cent. The per capita availability of arecanut is around 1.58 grams per day
(Vigneshwara, 1990).
1.9 Value Chain in Arecanut
It is management concept wherein different factors of supply chain are linked
by value creation process ultimately to meet the consumer requirement. The term
value chain refers to relationships established between actors involved directly and
indirectly in a productive activity with the aim of adding value in each stage of the
value chain.
Arecanut value chain involves alliances among producers, processors,
distributors, traders, regulatory and support institutions, which, departing from a
market demand for their products and services, establish a joint vision to identify
mutual needs and work jointly in the achievement of goals, willing to share the
associated risks and benefits, and invest time, energy, and resources in meeting these
goals. Arecanut is one from which varied multi level value addition will carried out in
the market. It influenced by varied factors among the different stake holders of the
chain (Appendix VII & VIII).
1.10 Background of the Study
Emergence of the value chain in arecanut has given a real boost to arecanut
economy as well as other governance involved in India. There are two main types of
arecanut called boiled red type (red supari) and white chali type (white supari)
prepared by the farmers in Karnataka. During the 80s, as arecanut was consumed
mostly in the raw forms (like tambool or beeda), the price realized by the farmers was
not that remunerative. When the era of “value addition” through the large scale
industrial processing of arecanut began diversified products in attractive packets and
labeling such as the scented supari, panmasala, herbal supari, khaju supari and ghutka
had virtually flooded the Indian retail market. This enhanced the choice and
convenience of the consumers as a result of which the consumption of arecanut
especially in the northern states such as Uttara Pradesh, Gujarat, Delhi and
Maharashtra, increased to many folds. At present, of the annual production of around
five lakh tons of arecanut in India, 50 percent goes towards the preparation of Ghutka
and scented supari, 47 percent for beeda and paan making and remaining three percent
is retained for home consumption (Prakash, 2006). Pan is named popularly by the
place of consumption like Banaras, Madras, Bombay, Kolkatta etc., where existence
of majority of the domestic consumption. The legal intervention to ban some of the
value added arecanut products like Ghutka has compounded the problems in arecanut
economy. In this background the market intermediaries involved for value creation
process in arecanut were analyzed for price spread. Management in marketing or to
meet the consumer demand of value added products, arecanut value chain stake
holders play important role.
Economic studies in the past have focused on production and marketing of
arecanut in Karnataka. However, studies on value chain of arecanut with business
management prospective were lacking. The past studies on marketing and processing
of arecanut were also confined to supply chain upto primary assembling market
levels. Value addition enhances above primary assembling market till arecanut
reaches ultimate consumers. Present study focuses more on these aspects of arecanut
processing and value chain management in Karnataka. Hence keeping this
background in view, the present study was undertaken with the following specific
objectives.
1. To ascertain different value added products from White Chali and Red
Boiled types of arecanut in Karnataka.
2. To estimate and analyze the price spread of major value added products
in arecanut developed by different agencies.
3. To study the impacts of trade on value chain management of arecanut
in Karnataka.
1.11 Hypotheses of the Study
1. Most of the RBT is used for the preparation of value added arecanut
products with tobacco.
2. Producer share in consumer rupee highest when marketed through
cooperative channel
3. Profit for processors is more in Scented Supari compare to Sweet Beeda.
4. After liberalization of economy, import is increasing at a faster rate than
export of arecanut.
1.12 Limitations of the Study
The present study is based on the primary data collected from different stake
holders of arecanut value chain. Data collection involves interview method so it is
memory based information of respondents. As majority of the market intermediaries
and beeda shops owners did not maintain records of business, they had to give
information from their memory and hence there is some possibility of recall bias.
However, efforts were made to minimize such bias through cross validation of data
when collected. Study involves only two major value added products viz, Supari and
Pan beeda. Other products were identified but due to unavailability of data not taken
into consideration.
1.13 Presentation of the Study
The project report is organized into six chapters. The first chapter provides a
brief introduction along with the specific objectives. In second chapter, pertinent
reviews are presented in consonance with the study objectives. Chapter III describes
main feature of the study area, sampling framework, database and analytical tools
employed in the analysis of data. The empirical results are presented in chapter IV,
followed by critical discussion in chapter V. Finally; chapter VI summarizes the
major findings of the study and policy implications.
Review of literature
CHAPTER II
REVIEW OF LITERATURE
The review of past studies gives directions for framing objectives, developing
research design, variable selection and for interpretation of results to draw meaningful
conclusions. In accordance with the objectives of the study, a brief review of earlier
work is presented here under the following headings.
2.1 Economics of arecanut
2.2 Marketing channel, marketing cost and price spread
2.3 Studies related to supply chain management
2.4 Studies related to the growth rate analysis
2.5 Studies related to the instability Analysis
2.6 Studies related to the buyers concentration
2.1 Economics of Arecanut
Vidyashankar (1973) conducted a survey in the villages of Kasaragod taluk of
Kerala. Arecanut yield per acre ranged from 5 to 8 quintals and the cost of production
varied from Rs. 3 to 6 per kilogram. The cultivators had an opnion that the existing
output price of Rs.3 per Kg barely covered the cost of production.
Mruthyunjaya (1975) estimated the crop expenditure for arecanut farms of
malnad region in Karnataka. He classified the holdings into three categories viz., large
farms having 4.50 acres and above, medium farms having 1.75- 4.49 acres and small
farms having less than 1.75 acres. The estimated crop expenditures were Rs.1350,
Rs.1544 and Rs.1551 per acre for large, medium and small farms, respectively.
Krishnaraj (1981) found that the establishment costs for small, medium and
large arecanut growers in Dakshina Kannada district were Rs.30505.09, Rs.30085 and
Rs.28864.22 per ha, respectively. Similarly the operational costs were Rs 7481.88, Rs
7030.92 and Rs 21974.62. The net returns were Rs.16436.52, Rs 18363.99 and Rs
21,974.86 per ha respectively for small, medium and large farms.
Chinnappa and Umesh (1997) worked out the establishment and production
costs of arecanut for the canal irrigated areas of Bhadravathi and Channagiri taluks of
Shimoga district in Karnataka. The per acre establishment cost (up to 7 years) and
production costs were found to be Rs150581.98 and Rs31429.30 respectively. The net
returns over cost of production were Rs.35, 473.70. They also discovered that the
majority of arecanut farmers were averse to fertilizers application, which formed just
1.63 per cent of the total cost of production.
Preeti (1998) analysed the price linkages of arecanut with other crops. The
derived supply elasticities indicated that arecanut and the annual crops grown in
Channagiri and Theerthahalli taluks of Shimoga district were compliments. Arecanut
supply responded positively to its own price in Channagiri and Theerthahalli taluks,
as also maize. But the supply of ragi and paddy responded negatively to their prices.
Rajashekarapppa (2001), reported that average per acre establishment cost was
high among the large farms (Rs.315304.03) compared to small (Rs.247312.70) and
medium farms ((Rs.270935.75) in Sringeri taluk of Chickmagalore district. This could
be attributed to the larger investment on labour, manure and seedlings.
Padmavatamma (2004) found that per acre establishment cost of arecanut was
higher under ground water irrigated area compared to canal and tank command area
and per acre investment cost was higher under ground water irrigated area compared
to canal command and tank command area.
Shruthi (2008), reported in the detail study on emerging value added products
from arecanut, that respondents consume arecanut product with tobacco are willing to
consume nutriceutical products. This is a very good signal in the sense that the people
who are consuming tobacco products are also aware of nutriceutical properties of
arecanut and ready to pay for it. Same time forecasted demand shows a wide gap
between production and consumption in India.
Nikhil (2008) studied the marketing structure in Shimoga market and
forecasted the prices by comparing the cooperative and private traders’ price for
arecanut. Import of arecanut during the post liberalization period, growth rates and
instability index were found to be 27.95 and 51.80 respectively. Similarly study
shows cooperative prices are two percent higher than private traders in the market.
2.2 Marketing Channel, Marketing Cost and Price Spread
Sidhu and Kahlon (1967) identified three marketing channels for apples in
Kulu valley as contract system, sale in the market through agents and direct sale to
consumer. It was found that 62.2 per cent of the orchard owners sold their fruits on
contract basis, 34.1 per cent sold in the market and only 3.6 per cent sold directly to
consumer.
Thakur and Johl (1969) studied marketing of apples in Himachal Pradesh and
reported that sales through commission agents was the most commonly used system
(30 %). The study also indicated that the growers share seldom exceeded 53 per cent
of the retail price. They also stated that the middlemen obtained handsome profits
because of the inadequate knowledge of the grower about markets and marketing
channels, absence of cold storage facilities, lack of transportation and other facilities.
Singla and George (1969) identified the marketing channels for oranges in
Punjab. They found that most of the producers sold their oranges through pre-harvest
contract system (77.7 %) and the less important channels used were sale in the local
market to retailers (0.24 %) and direct sale to consumers (0.10 %).
Mehta and Gupta (1970) studied the co-operative marketing of apples in Kulu
valley and found that sale of apples through commission agents was inefficient as
compared to sale through co-operatives. It was not possible for a small orchardist to
cut down the marketing costs on grading, packing, transportation etc. The producer’s
share in consumer’s rupee could be increased when apples were marketed through a
co-operative marketing society.
Kochar and Thakur (1971) studied the marketing of apples in Himachal
Pradesh and reported that sale through commission agent was the most popular
system used by 60.2 per cent of the growers followed by the contract channel being
used by 39.7 per cent of the growers.
George (1974) studied the marketing pattern of citrus fruits in Nagpur and
Cuddappa. He found that farmers depended heavily on the pre-harvest contractor and
other agents. They sold four per cent of their produce through the pre-harvest
contractors and 52 per cent by auction in the market. Uncertainties in the wholesale
market and its imperfections left the farmer with no other alternative.
Rao (1974) studied the marketing of arecanut in Karnataka and found that
34.66 per cent of the producers sold exclusively through the co-operative, 10.6 per
cent exclusively through commission agents and 54.6 per cent through both. The co-
operatives were popular because growers realized higher prices and incurred lower
the marketing expenses incurred by them.
Dhar et al. (1976) who studied marketing of apples in Kashmir reported that
the pre-harvest contractors were the intermediary most commonly used by the grower.
Nearly 52 per cent of the growers sold their apple through the pre-harvest contractors.
While 33 per cent sold through the commission agent (CA). About eight per cent of
them sold through the whole-saler and five per cent directly to the consumer. Only
one per cent sold through a co-operative society.
Qadri (1976) studied some aspects of marketing of apples in Jammu and
Kashmir and reported that commission agents also acting as pre-harvest contractors
handled 95 per cent of production. Another four per cent as sold through the
commission agents by the pre-harvest contractors. The remaining one per cent was
handled by the pre-harvesting agents, co-operatives and other channels.
Rao and Naidu (1979) while studying the marketing of sour lime in Tennali
market in Andhra Pradesh found that the agents involved in marketing were brokers,
exporters, commission agents and retailers.
Prakash et al. (1991) analyzed market margin for Indian coffee. They found an
inverse relationship between farm price and margin at all centers, indicating profit
maximization margin model being followed. The study also indicated that the
wholesale price was more responsive to price change than the retail margins as
indicated by larger coefficients of wholesale than that of retail margins. The
wholesale prices at Coimbatore and Madras had a base price of Rs. 421.5 and Rs.
434.5 which reduced at the rate of Rs. 0.79 and Rs. 0.62 per unit rise in pool auction
price respectively. Thus clearly, indicating a profit maximization mark up being
employed in the coffee market. This type of mark up means competitiveness traders.
Gummagolmath (1994) studied the marketing and price spread in the
marketing of mango in Dharwad district. The results revealed that producer’s share in
consumers rupee was 65.70 per cent in channel-I (producer→ commission agent →
retailer→ consumer) and it was 58.40 per cent in channel- II (producer→ pre-harvest
contractor cum wholesaler→ retailer →consumer).
Saraswat (1996) studied the economics of orange in Himachal Pradesh by
using the primary data collected from 200 farmers of Kangra and Sirmour districts.
The major component of marketing costs incurred by the orchard owners were
picking, grading, packing, transportation cost, commission charge and state tax. The
costs of marketing per basket incurred by the orchardist on these items depend mainly
on the distance of market from the producing area and the charges levied by the
intermediaries. The orchard owners of Kangra district incurred by a marketing cost of
Rs.31.20, 29.75, 22.19 and 29.75 in Ambala, Chandigarh, Pathankot and Jammu
markets, respectively whereas for those of Sirmour district the same worked out to
Rs.22.82, 25.46, 23.48, 25.24 and 23.29 in Dehradun, Jagdhari, Saharanpur, Ambala
and Chandigarh markets respectively.
Singh (1996) studied about the marketing of citrus fruits in Rajouri district of
Jammu and Kashmir by surveying 60 citrus growers in the region and identified two
channels of marketing namely,
Channel-I: producer→ pre-harvest contractor →retailer→ consumer
Channel-II: producer→ retailer→ consumer
The producer’s share in the consumer’s was found to be highest (75 per cent) in
channel-II as compared to channel –I (35.71 per cent).
Dongat et al. (1997) studied the marketing and export of grape from
Maharashtra and found that the cost of grape marketing per kg basis. The cost was
lowest (Rs.0.11) when sold in the garden itself. It was Rs.6.08, Rs.6.82, Rs.19.33, and
Rs.23.45 for sale of grapes in Mumbai, Delhi, Dubai and England markets,
respectively. The average net price realized was Rs.10.39, Rs.11.77, and Rs.12.82 for
sale in garden, Mumbai and Delhi markets. The net price realized in sale of grape in
foreign market was Rs.33.77 and Rs.31.46kg in Dubai and England markets,
respectively.
Shah Deepak and Narayanamoorthy (1998) studied the marketing pattern of
horticultural crops in Maharashtra. The grape orchardists marketed their produce
either through forwarding agents in wholesale markets or through commission agents
or directly to the wholesaler. The per box (4 kg) total marketing cost was estimated to
be highest when the produce was sold through forwarding agents in the wholesale
markets compared to the produce sold through other marketing channels.
Pujari (1998) studied the marketing of pomegranate and Ber and found that
marketing cost of pomegranate and Ber were Rs.3.32 and 2.49 per kg, respectively in
Sholapur district. The price spread between minimum and maximum prices were
Rs.6.50 and Rs.2.78 in the case of pomegranate and Ber.
Shellikeri and Mundinamani (1999) studied the post harvest losses and price
spread in the selling of perishables in Bijapur district, Karnataka. The main findings
of the study were on an average, the grape growers lost 362.80 kg of grape out of
32,347.20 kg produced per hectare, the monetary worth of which was Rs. 5,548.83.
The post harvest dropping water berries, shot berries and mummification were the
main factor causing the loss on farm. The extent of loss estimated at pre harvest
contractor level was 1, 264.20 kg valued at Rs.14, 778.50, whereas that the
commission agent cum wholesaler level was 3, 762.60 kg valued at Rs.62, 534.40.
The retailers lost 131.40 kg of grape (worth of Rs.1, 307.84) due to weight loss, loose
berries and spoilage of berries in the process of handling. The producer’s share in the
consumer’s rupee was found to be 58.13 per cent in channel-I (producer→ pre-harvest
contractor → retailer →consumer) and 74.79 per cent in channel-II ((producer
→commission agent cum wholesaler → retailer →consumer) which clearly indicated
that efficiency of the latter.
Shah Deepak (2000) studied the marketing pattern of grapes in Maharashtra.
Since majority of the orchardist sold their produce in the domestic market, the
estimation of the marketing cost was attempted for domestic market only. The
following channels were visualized in marketing of grapes in the domestic market.
Channel-I: producer → forwarding agent →wholesaler
Channel-II: producer → commission agents→ wholesaler
Channel-III: producer → wholesaler
Channel-IV: producer → pre harvest contractor→ wholesale
Srivastava and Mishra (2001) studied the price spread and marketing channels
of mango in Varanasi district in Uttar Pradesh. The study reveals that two channels
were identified for the marketing of mango.
Producer →harvest contractor →wholesaler→ retailer→ consumers.
Producer →wholesaler→ retailer→ consumers.
The producer’s share in the consumers rupee was 43.86 per cent when the
mango marketed to distant market of Calcutta (channel I) against 62.93 per cent in
case of sale of mango in local markets (channel II). Comparatively higher returns in
channel II was observed than channel I. the marketing cost incurred in performing
different market functionaries in channel I was Rs. 56 and in channel II was Rs.23 and
marketing cost is comparatively low in channel II.
Shaheen and Gupta (2002) worked out the economics of apple marketing in
Kashmir province. The study reveals that the varieties such as Delicious, American
and Bahari were sold through seven marketing channels existing in the Kashmir
province. Among them, the highest percentage (51.37 per cent) of the total produce is
transacted through channel- I (producer→ commission agent → wholesaler
→retailer→ consumer), where 23.25 per cent of farmer transacted their produce
through channel- II (producer→ forwarding agent→ commission agent→ wholesaler
→retailer→ consumer), while channel –III and IV account for 19.75 per cent and 5.63
per cent of the total produce transacted by the growers, respectively. The highest
marketing cost incurred by producer on packing (about 13.00 per cent), followed by
commission charges (7.00 per cent of the consumer price). The marketing cost
incurred accounts 30 per cent for Delicious and American varieties while it was
Rs.36.14 per cent for Bahari varieties. The producer’s share in consumer’s rupee was
found to be about 54.00 per cent for Delicious and American varieties and Rs. 33.63
per cent in case of Bahari varieties.
Namasivayam and Paul (2006) studied the price spread marketing of coconut
in Tamil Nadu with the reference to Theni district which is the prominent producer of
coconut in the state. They identified the following three marketing channels:
Channel-I: producer → pre harvest contractor →commission agents→
wholesalers’ →retailers→ consumers
Channel-II: producer →commission agents→ wholesalers→ retailers→
consumers
Channel-III: producer → wholesalers→ retailers→ consumers
The channel III was the most favoured channel as maximum (47 per cent)
quantity was passed through this channel.
The producer’s share in consumer’s rupee was maximum in channel- III
(58.73) followed by channel-II (58.32) and channel-I (50.20).
It is revealed that the marketing efficiency was higher in channel-III (3.17)
followed by channel –II (2.87) and channel-I (2.81).
2.3 Studies Related to Supply Chain Management
Wilson (1996) in his study on supply chain of perishable products in northern
Europe found that, the super market chain was more important in the retail marketing
of fresh products and he suggested that the increased use of supply chain management
techniques could increase the margins of the innovative and competitive firms that
remain in the chain. Also he found that the inherent cost of distribution networks and
channels of fresh produce could be reduced substantially by using supply chain
management. The fruit and vegetable supply chain has traditionally been fragmented.
Some links have performed well but others have caused bottle necks.
Ricks et al. (2000) in his study on chain management and marketing
performance in fruit industry revealed that the important area of need for fruit
industry supply chain was consistent but not excessive supply of products to meet the
market demand. This involved the supply of products balanced with demand in the
same seasonal year and over a period of several years.
Glenn et al. (2001) in his study on Florida dairy marketing co-operative
(FDMC) found that, the supply chain improvement reduced the inventories, wastes
and costs incurred in the co-operative and so it increased the efficiency with in the
firm and in the market channel.
Wermund et al. (2002) in his study on key challenges facing the cherry supply
chain in the U.K found that irregular cropping, sophistication of export countries
specification, high investment costs are the key challenges faced by the growers,
irregular cropping pattern, too many sales desks, lack of response interims of uniform
marketing strategies, lack of cooperation with the retailers and growers were the key
challenges based by the marketing agents. Five weeks of U.K cherry season,
unreliable supply and customer pay premium for U.K cherries were the key
challenges faced by the retailers and differences in purchase and consumption
behaviour were the key challenges based by the consumers in the U.K cherry supply
chain.
Subha (2004) examined the ways of managing a supply chain and reported
that the requisites to manage a supply chain were creation of a logistics vision,
tackling conventional organizational problems and developing a supply chain. She
also indicated that open communication with the advent of information technology
between supply chain partners would help in better management of supply chain.
Kledal and Rye (2005) studied the retailer growth prospects for organic food
chains in Denmark and concluded that for the organic vegetable chain the retailers
were in search for new products, and new ways of creating outlets that can enhance or
boost their image in an increasing international competitive environment. The organic
products had a well-respected brand of trust and quality, and thereby a very strong
position to create new possibilities of gaining store space and growth among
supermarkets and discounters.
Monteny et al. (2005) observed that the organic sector needed to grow in a
balanced fashion, by matching supplies to consumer demand. Further, it was reported
that new chain structures would be required to supply products efficiently at a low
cost price, and with sufficient attention to quality and food safety. These were
precisely the aspects that were focused on in the 28 projects of the Dutch co-
innovation programme ‘Professionalizing organic sales chains’, which ran from 2001
through 2005.
Singh (2006) studied organic cotton supply chains in India with the example
of Pratibha Syntex’s organic project which was a completely verticallty coordinated
supply chain from raw cotton production to garment manufacture in Madhya Pradesh.
He reported that 80 per cent farmers shifted to organic farming due to land
improvement and least 36 per cent due to assured market. As per company perception,
the major problem in the organic market was lack of regular supply and quality
besides the problem of storage. He further added that for the sustainability of
company-farmer partnership schemes, it was important for the company to
successfully market its products so that the farmers do not suffer from lack of
markets. He concluded that market access for small producers depended on
understanding the markets, organization of the firm or operations, communication and
transport links and an appropriate policy environment.
Kottila, et al. (2006) conducted a study in Finland and found that the lengths
of organic supply chains had been increased by the emergence of intermediaries
between consumers and organic farmers. The small segment of organic products and
consumers created a challenge for the performance of the organic chain. Considering
the nature of food as commodity, it was rather difficult to increase the flexibility of
the supply chain. The quality of organic produce decreased the flexibility even further
due to the required conversion period, great fluctuation of yields, relatively high price
of organic raw material, as well as restrictions and requirements set by the regulation
concerning organic. Due to the low flexibility of the organic chain, it was important to
create long term commitment as well as collaborative forecasting concerning the
volume and quality of the demand. Growth in demand of the organic might increase
commitment, but growth cannot take place without the availability of good quality
organic products to the consumers. If company image was the main reason for being
involved with the organic chain, performance measures other than profitability was to
be seriously considered for the organic products.
Singh (2007) examined the organic basmati paddy contract farming operations
of the three players (Agrocel, Satlej and UOCB) in the northern region of India
(Punjab, Haryana and Uttaranchal) in terms of the nature of contracts, pricing
mechanism, quality and certification issues, input supply and networking among
agencies, based on case studies of the entire supply chains of organic basmati rice.
These chains like their conventional basmati counterparts excluded small and
marginal growers everywhere except when it was a developmental project run by an
international or national agency. It was found that prices offered were in reference to
conventional produce price, certification was with the agencies and the governance of
the chain was totally with the companies. The contracts protected the company’s
interest at all costs to the farmer and did not cover farmer’s production risks, e.g.,
crop failure.
2.4 Studies Related to the Growth Rate Analysis
Growth rates are the measure of past performance of economic variables and
are commonly used as summaries of trends in time series data. They are not
developed to predict, but to describe the trends in a variable over time. Policy
decisions are often based on such growth rates, which depend on the nature and
structure of data.
Achoth et al. (1988) studied the growth of pulse production in Karnataka, for
the period 1965-66 to 1985-86 and sub-periods; period I (1965-66 to 1974-75) and
period II (1975-76 to 1985-86). Their study revealed that the production of pulses in
Karnataka has registered a significant increase during the decade following the Green
Revolution period. Most of this increase was contributed by the increase in production
in Gulbarga district. In four, out of the eleven districts studied, the increase in
production had been largely yield induced, these districts being Bidar, Raichur,
Dharwar and Chitradurga. Incidentally in all these districts, barring Dharwar, the area
has diminished during the second period.
Gemtessa (1991) compared the performance of Ethiopian coffee exports
during the pre-revolution and post-revolution periods. The exponential growth model
of the form Yt = a bt eu was employed. The results showed that, the export growth in
the pre-revolution period was lower (1.51 %) when compared to the post-revolution
period (1.77 %).
Krishnan et al. (1991) worked out trends in growth rates of area, production
and productivity of major crops in Kerala for the period 1970-71 to 1986-87 and
compared them with the corresponding trends at the all-India level. Negative growth
rates of output were registered by four out of the ten crops studied viz., rice, tapioca,
arecanut and coconut. Growth rates of production were positive and significant for
only two crops namely, dry ginger and rubber. Negative and significant growth rates
of area of rice and tapioca indicated a shift in cropping pattern in favour of
cash/plantation crops.
The growth of Indian coffee exports for the period 1965 to 1990 was analysed
by Veena (1992) using an exponential function of the form Y = a bt. She found that
exports of plantation type of coffee exhibited a compound growth of 3.6 per cent per
annum, while, Arabica grew at a growth rate of 3.0 per cent. Robusta exports
registered a marked compound growth rate of 10 per cent per annum.
Lakhana (2003) in his study production, price behaviour and export of
groundnut in India with special reference to Gujarat state, has studied the growth rates
of area, production and productivity for pre-TMO (1970-71 to 1985-86), post-TMO
(1986-87 to 2001-02) and for over all period (1970-71 to 2002-02) of selected
markets Rajkot, Junagadh, Kalawad and Amrelin. The post-TMO period has
witnessed positive growth rates in area, yield and production. Growth of all the
variables was found to be positive in over all period, however, they were not
significant. Growths rates of area for Junagadh and Rajkot districts as well as for the
state of Gujarat as a whole were positive and significant. However, growth rates of
yield were negative throughout the study area during pre-TMO. During post-TMO
growth rates of all variables were found to be positive.
Varghese (2004) worked out the trend in area, production and productivity of
cardamom in Kerala for a period from 1970-71 to 2002-03 using semi-logarithmic
growth equation. The area under cardamom registered a negative growth rate (-
1.216%) which is significant. The output grows at an average annual trend growth
rate of 4.14 per cent and yield registered an average annual growth rate of 5.51 per
cent.
Lathika et al. (2005) analyzed the growth trends in area, production and
productivity of coconut for different coconut producing states/union territories in
India. The period has been divided into two sub-periods as phase I (1951 to 1995)
and phase II (1996 to 2002). Area shows positive growth in both phases for selected
states except for the Andaman and Nicobar Islands, where the growth was negative (-
9.69) in II phase. Production also showed a positive growth in all the states in both the
phases and Andhra Pradesh has highest growth in II phase (16.69%). The growth rate
of productivity shows negative growth in Kerala and Orissa in the I phase, Karnataka
in the II phase.
Khan (2007), studied growth rates in arecanut prices before MIS (1994-95 to
2001-02) and MIS (2002-03 to 2004-05) periods. In the period before MIS the growth
rate was positive for both White chali variety and Edi variety 4.87 per cent and 1.49
per cent respectively. Whereas for saraku and bette varieties it was negative -0.49 per
cent and -0.67 per cent respectively. During the MIS period the growth rate was
positive for all varieties 0.36, 3.64, 4.06 and 6.24 per cent respectively for white chali,
saraku, bette and edi varieties. In over all period the growth rate was negative for
saraku and bette varieties -0.54 and -0.58 per cent with 84.69 and 86.04 per cent
respectively.
2.5 Studies Related to the Instability Analysis
Hazell et al (1991) in their study on the relationship between World price
instability and the farm prices in developing countries indicated that World prices for
agricultural commodities were traditionally unstable, but they were particularly
turbulent during the late 1970’s and early 1980’s. They used the available post war
data on individual commodity prices to test whether World price instability was
increasing and to examine its impact on the producer prices in developing countries. It
was found that the recent turbulence was more of a statistical fluke than the beginning
of any long-term increase in market instability.
Gemtessa (1991) compared the variability in export of Ethiopian coffee over
two periods. The first period covered thirteen years (1961-74) preceeding the
revolution and the second period thirteen years (1975-83) after the revolution. The
change in price variance of exports earnings accounted for 137.57 per cent increase in
the variance of total earnings from coffee.
Veena (1992) identified the price instability as the single largest source (60%)
contributing to the instability in the total Indian coffee export earnings. The abolition
of the International coffee agreement was observed as one of the main reason causing
instability in prices, which were expected to increase in future also.
Jalajakshi (1994) studied the instability in export of shrimps from India for the
period of 1961-91. The frozen shrimps export to Japan and USA were found to be
stable but dried and canned shrimps to Japan, USA, UK and EEC showed high
variability due to the decreased demand in importing countries and high cost of
production in India.
Ramakrishna (1995) studied the instability of Indian export commodities using
the measure suggested by Cuddy and Dellavalle. The instability indices were
calculated for the period ranging from 1960-61 to 1986-87 and for subperiods (1960-
61 to 1971-72) and (1973-74 to 1986-87). The results indicated that the instability
index of exports for the whole period was the highest 86.59 followed by 41.19 for
period II and 35.16 for period I. The export instability magnitude was higher for
manufactured goods compared to primary commodities in all the periods. However,
the instability index has increased for primary commodities and it came down for
manufactured goods in the second period. The notable feature was that all the sections
of exports relating to manufactured goods have shown a decline in their instability
indices.
Wirtu (1999) analyzed the extent of instability and the components of change
in variance of export earnings of Sub-Saharan African Countries. The results showed
that exports of LIFDSSACS were unstable as compared to non-LIFDSSACS. The
analysis of components of change in variance of export earnings showed that change
in quantity variance had contributed greatly to changes in the variance of export
earnings of most countries. The change in quantity – price covariance also attributed
for a larger share in the variability in export earnings of sample countries.
Khan (2007) studied instability in Arecanut prices before MIS (1994-95 to
2001-02) and MIS (2002-03 to 2004-05) periods. Prices of White chali, saraku, bette
and edi varieties were found to have an instability indices of 20.94, 9.75, 15.79 and
20.12 per cent respectively. During MIS period the instability index for white chali
and bette varieties were, 14.71 per cent and 9.05 per cent respectively. In the overall
period the instability indices were 36.89, 13.03, 17.58 and 11.81 per cent respectively
for white chali, saraku, bette and edi varieties.
2.6 Studies Related to the Buyers Concentration
Achoth (1985), while studying the structure of tea export trade by means of
Hirschman's index and Theil's entropy index indicated that the market concentration
has decreased progressively as the distribution of the export trade became more and
more equitable. Further, he indicated that after sixties, a structural change in the export
trade had resulted. The share of four largest exporters had fallen to 71 per cent which
further declined to 66 percent in the later part of the seventies. During these two
periods, the market had moved towards moderately concentrated oligopoly.
Laxminarayana (1993) analysed the market share and market concentration in
the silk exports. International markets were more competitive as indicated by the
decline in the Hirschman's index from 0.54 to 0.48. The reduction in concentration
was due to greater degree of equitable distribution of market share, partly because of
the significant increase in their supply of silk goods by countries like France, Hong
Kong, India and partly because of decrease in export share of Japan, Italy and
Republic of Korea as a result of stagnated or decline in production.
Nagaraja (1997) examined the market share and concentration for horticultural
commodities exported from India during the year 1970-71 to 1992-93 by using
Hirschman's index and Theil's entropy. It was evident that the market concentration
had increased progressively from 1981-84 to 1990-93. The Indian horticultural
commodities trade more or less approximated a monopoly in a few commodities and
the Hirschman's index had increased from 0.50 in 1981-84 to 0.64 in 1990-93,
suggesting that there was a concentration towards few products. In the beginning of
the 1980's, the export trade in horticultural commodities was concentrated oligopoly
as the largest six commodities, viz., Mango, grapes, onion, garlic, mango juice and
mango pickles and chutney accounted for over 67 per cent of the total horticultural
trade.
Prakash (1997) studied buyers concentration in at SKACMS, Mangalore by
using Lorenz curve and Gini ratio. The results indicated that there was inequality in
buying pattern of arecanut at SKACMS especially during high concentration months.
But buying at the market exhibited some degree of competiveness.
Nagaraja (1998) studied market structure, market share and market potential
for sunflower seed in Raichur district of Karnataka state. Dominating the trade, the
market share of individual brands and their switching pattern indicated that local
unbranded seeds had the major share. A very high degree of brand switching was
noticed among the different varieties of seed.
Bhuvaneshwari (2007) studied buyers’ concentration in Bangalore Flower
market. The value of Hirschman Index was found to be 0.24 implying near equitable
buying pattern by market intermediaries. The degree of buyers’ concentration was
further analyzed through the technique of Lorenz curve and the magnitude of
concentration or size distribution of the buyers was analysed by Gini concentration
ratio. When category wise buying was taken into consideration there appeared to be
inequality in buying pattern as the bigger traders made proportionately more
transactions. This inequality was depicted by the wide gap between the line of
equality. The Gini ratio that measures the magnitude of inequality was highest 0.72.
Methodology
CHAPTER III
METHODOLOGY
The source and nature of data for the study and the analytical tools employed
in the study are presented in this chapter. The details of methodology are presented in
the following sub headings.
3.1 Description of the study area
3.2 Database and sampling procedure
3.3 Analytical tools used
3.1 Description of the Study Area
The overall objective of the study is to analyzing the value chain and to know
the factors which driving the arecanut economy. Thereby to identify the business
opportunities in value creation process of arecanut.
The study is based on both primary as well as secondary data in the producing
center. The study is focusing two major arecanut markets viz, Shimoga (for RBT) and
Mangalore (for WCT) in Karnataka (Fig 3.1). The primary data will be collected from
farmers, traders, processors and others agencies involved in value chain of arecanut
from these two areas. In addition, 40 beeda shops will also be considered from both
the markets for ascertaining different value added products and to analyze price
spread in Karnataka. In addition to these markets, the data on all aspects of processing
and marketing of major value added products like Scented supari was collected from
major processor, CAMPCO limited Mangalore.
Shimoga and Dakshina Kannada districts were purposively selected for the
study as they are the major traditional arecanut growing regions in the state as well as
consisting of two major arecanut markets. Primary data on arecanut marketing is
collected from market intermediaries (traders, commission agents and cooperatives) in
Shimoga and Mangalore APMC market yards. Secondary data pertaining to area and
production of arecanut was collected from the DES, Karnataka regional office from
1998 to 2005. A preliminary survey of the districts was undertaken during the month
of December to find out the nature and availability of data from different arecanut
Figure 3.1: Map Showing Study Areas in Karnataka
growers. During the course of visit various aspects on marketing of arecanut was
perceived. The preliminary discussion helped in the conceptualization of the problem.
The study was undertaken during the month of December to February 2009
and information was collected with the aid of a pre-tested schedule from different
arecanut traders and Panwallahs (Beeda Shops) by personnel interview method.
3.1.1 Shimoga District
Shimoga district is situated in the mid southwestern part of the Karnataka state
between 13° 27’ and 14° 39’ North latitude and between 74° 38’ and 76° 4’ East
longitude. The district is bounded on East by Chitradurga district, by Chikkamagalur
district in the south and the districts of Uttara Kannada and Udupi on the west and
Haveri and Davanagere districts on the North. The western parts of the district consist
of mountainous terrains, covered by dense tropical forest, while the eastern side is
characterized by a striking transition from malnad to maidan. Soils range from
laterites to red loams.
The main plantation crops grown in the district are arecanut, coffee, banana
etc., among the commercial crops; sugarcane, cotton, groundnut and chilli are also
popular. The socio economic situation of Shimoga district was given in table 3.1.
3.1.2 Dakshina Kannada District
Dakshina Kannada is situated on the western coast of India, about half way
between Mumbai and Cape comorin. From north to south, it is a long strip of territory
and from east to west it is a broken low plateau, which spreads from Western Ghats to
the Arebian Sea. The district lies between 12° 27’ and 13° 38’ north latitude and 75°
35’ and 75° 40’ east longitude, having a geographical area of 8,441 square kilometers.
The district is essentially an agricultural district with about 62.2 per cent of the
population depending on agriculture for their livelihood. The major crops grown are
paddy, arecanut, coconut, banana, cashew, cocoa, pepper and pineapple.
The climate of this district is characterized by high rainfall, high humidity and
little seasonal variation in temperature. The southwest monsoon season is the coolest
part of the year with the mean daily temperature below 29° C and April-May may be
Table 3.1: Socio Economic Details of Shimoga District
Sl. No. Particulars
1. Number of Taluks 7
2. Hoblies 40
3. Villages 1533
4. Grama Panchayath 258
5. Towns/Urban Agglomeration 12
6. Municipalities / Corporations 8
7. Per Capita Income (1998-99) (Rs) 15,246
8. Employment Exchanges (as on 31.3.2001) 1
9. Police Stations (2000-2001) 25
10. Fire Stations (2000-2001) 4
11. Area (Sq. Kms) 8,465
12. Population - Male 829,365
13. Population - Female 810,230
14. Density 193
15. Sex Ratio (No. of females per 1000 males) 977
16. Actual rainfall for the year 2000 (mm) 1,957
17. Number of Factories (as on 31-3-2001) 141
18. Banks 158
19. Post Offices 363
20. Telephone Exchanges 133
21. Literacy Rate (%) 74.86
Source: 2007 Directorate of Economics and Statistics, Govt. of Karnataka.
Table 3.2: Socio Economic Details of Dakshina Kannada District
Sl. No Particulars
1. Number of Taluks 5
2. Hoblies 17
3. Villages 371
4. Grama Panchayath 208
5. Towns/Urban Agglomeration 6
6. Municipalities / Corporations 6
7. Per Capita Income (1998-99) (Rs) 29,962
8. Employment Exchanges (as on 31.3.2001) 1
9. Police Stations (2000-2001) 27
10. Fire Stations (2000-2001) 5
11. Area (Sq. Kms) 4,843
12. Population - Male 937,651
13. Population - Female 958,752
14. Density 416
15. Sex Ratio (No. of females per 1000 males) 1,023
16. Actual rainfall for the year 2000 (mm) 3,303
17. Number of Factories (as on 31-3-2001) 475
18. Banks 310
19. Post Offices 486
20. Telephone Exchanges 125
21. Literacy Rate (%) 83.47
Source: 2007 Directorate of Economics and Statistics, Govt. of Karnataka.
considered as the hottest months of the year. The humidity is high all through the year
and particularly in southwest monsoon months. The average rainfall in the district
amounts to about 3930 mm per year.
The soil is of a laterite type characterized by high iron and aluminium content.
The soils are suitable for the cultivation of crops like paddy, arecanut, sugarcane and
plantation crops like cardamom and plantains. The soil pH ranges from 5.6 to 6 i.e. on
the acidic side. Socio economic situation of Dakshina Kannada district were given in
table 3.2.
3.2 Data Base
The source of data for study was the sample farmers chosen from the selected
Shimoga taluk of Shimoga and Puttur taluk of Dakshina Kannada Districts. Sample
data regarding Market Intermediaries (traders, commission agents and cooperative
societies) were collected from APMC market yard of Shimoga and Mangalore. Beeda
shops were interviewed randomly in Shimoga and Mangalore town. Secondary data
pertaining to monthly average arrivals and prices of different varieties of arecanut was
collected from the Shimoga and Mangalore Agricultural Produce Co-operative
Market Committee (APMC). The secondary data regarding the area and production of
arecanut for the study period was collected from the DES regional office and
Horticulture department of respective regional office. Secondary data on India’s
export and import of arecanut was collected from DGCI & S, Kolkatta.
3.2.1 Sample Design
Sampling involved both purposive (farmers) and random (traders, commission
agents, cooperatives and beeda shops) design. Progressive and large farmers always
have better knowledge about value chain in arecanut compared to small and medium
farmers. So keeping in view of this large farmers were selected. The data for the study
were collected by the personal interview method for the agricultural year 2007-08.
The total samples were divided into two, based on the types of arecanut
processing viz., Red Boiled Type (RBT) and White Chali Type (WCT). Separate
sample was collected for these types because value chain varies with type of arecanut
produced. Sample size selected from each study area is comprises of 30 farmers,
Table 3.3: Sample details
Sl. No.
Study area/ samples Farmers Market
intermediaries Cooperative Societies
Beeda shops (panwallahs)
1. Shimoga 30 30 03 20
2. Dakshina Kannada 30 30 03 20
Total 60 60 06 40
30 market intermediaries, 20 beeda shops and 03 cooperative processors. The detail of
sample size was given in the table 3.3.
3.3 Analytical Tools and Techniques
The analysis of the data was done using different analytical tools, keeping in
view of the objectives of the study. The same are detailed here under.
3.3.1 Tabular Analysis
3.3.2 Marketing channel, marketing cost and price spread
3.3.3 Market competitiveness study by buyer’s concentration analysis
3.3.4 Regression analysis
3.3.5 Growth rate analysis
3.3.6 Instability analysis
3.3.1 Tabular Analysis
The data has been analyzed using measures of central tendency and measures
of dispersion and appropriate descriptive statistics has been worked out. The data
were presented in tabular form to facilitate easy comparison. In order to analyze the
economics of arecanut processing and its value addition at different stage appropriate
ratios, percentages were worked out, return and profit in case of market
intermediaries. Net profit and B:C ratio was worked for farmers in the study area by
using simple formula given below.
Net Profit/ Loss = Total return – Total cost …………………………. (1)
B:C Ratio = Total annual benefits / Total annual Cost ……………… (2)
Where, Total cost includes cost of cultivation (Amortization establishment and
maintenance cost), processing cost and marketing cost.
B:C ratio is interpreted as units of benefit realized by one rupee of cost incurred to
produce arecanut.
3.3.2 Marketing Channel, Marketing Cost and Price Spread
An attempt was made to study some aspects of marketing from the viewpoint
of producer to seller. The aspects include the marketing channels, marketing costs and
price spread.
Marketing channel refers to the alternate routes of product flow from the
producer to final destiny. Arecanut is marketed in the form of RBT and WCT.
However in this study, the marketing channel is limited only up to the point of sale of
value added products to wholesalers or retailers.
Marketing cost is the cost incurred by the producer-seller from the point of
production up to sale. The cost per quintal was worked out by adding different
component namely grading, packing, loading and unloading, packing material, and
transportation cost and commission charges paid.
Price spread was worked out by computing the differences between the prices
received by the producers and prices paid by the consumer.
Price spread = Pp-Pf …………………………………………………. (3)
Where,
Pp = prices paid by the consumer
Pf = prices received by the producer
3.3.3 Market Competitive Study by Buyer’s Concentration
In arecanut Agricultural Produce Marketing Committee (APMC) play
prominent role by giving platform to farmers and buyers. In order to study the market
competitiveness in terms of quantity handled by the intermediaries, following buyer
concentration tools are used.
3.3.3.1 Market Share of Top Few Buyers in the Market
Market competitiveness in the study area is analyzed by calculating the market
share of individual market intermediaries. Market share is the per cent share of
individual buyer in the market to the total quantity handled in the respective markets.
Top ten buyers share and top ten bottom buyers share is compared.
Market share of buyers = X 100 ……………………. (4)
Where,
Iq = Individual buyer quantity
Tq = Total quantity handled by the all the buyers in the market
3.3.3.2 Hirschman's Index
The concentration of the market was studied by computing the Hirschman's
index [H(x)]
The Hirschman's index H(x) is computed by means of the formula
n
H (x) = √ ∑ Pi2 ………………………..(5)
i =1
Where, ‘Pi’ is the share of buyer ' i ' in the trade of arecanut,
'n ' is the number of buyers,
Pi = Xi /∑Xi ……………………….. (6)
Where, Xi is the trade of arecanut from buyer i
ΣXi is the total sales of arecanut.
The index which ranges between 0 and 1 helps to identify the structure of
markets. An index value of 1 indicates a high degree of concentration and a value of 0
represents a widely distributed market.
3.3.3.3 Gini Coefficient
To assess the inequality in buying of arecanut in Shimoga and Mangalore
markets, Gini coefficient this varies between 0 and 1. If the Gini coefficient is zero, it
indicates perfect equality where as if it is one, it implies perfect inequality.
Gini coefficient was calculated using the formula,
nYnYYYynn
G ++++−+= ........32[111 3212 ] ………………….. (7)
Where,
G = Gini coefficient
y = Mean sales
Y1………Yn = Individual buying quantity of arecanut in descending order in
quantity buying
n = total number of buyers.
3.3.3.4 Lorenz Curve
The inequity in the quantity buying by different buyers was studied by plotting
Lorenz curve. Here the cumulative proportion quantity buying of arecanut by different
buyers was plotted on the Y-axis, and the cumulative proportion of buyers was plotted
on the X-axis.
3.3.4 Regression Analysis
This analysis was done to know the factors which are responsible for sale of
branded arecanut value added product packs in beeda shops of Shimoga and
Mangalore towns. Multiple regression model was fitted with explanatory variables
viz., year of experience, location dummy, investment made, region dummy, pan beeda
sales (unbranded).
The fitted regression model for sale of branded value added products (Gutkha,
Scented supari etc) is
Av = β0 + β1Y +β2L + β3I + β4R + β5P ....................... (8)
Where,
Av = sale of value added product packs per week (No.)
β0 = Constant
β1.......... β5 = Slope of respective variables
Y= Year of experience in beeda business
L = Location Dummy
I= Investment made in Rs.
. R = Region Dummy
P = Pan beeda sales per week (No.)
Similar multiple regression model was fitted to study the factors influencing the
processing cost of farmers. The variables include Experience in arecanut farming,
yield of arecanut, area under arecanut and region dummy. The fitted model was,
Ap = β0 + β1E +β2Y + β3A + β4R ……………………….. (09)
Where, Ap= Processing cost (Rs. per acre)
β0 = Constant
β1.......... β4 = Slope of respective variables
E= Experience in arecanut farming (Years)
Y= Yield of arecanut (Quintals per acre)
A= Area under arecanut (Acres)
1 = Hotels 0 = others
1 = Shimoga 0 = Mangalore
. R = Region Dummy
3.3.5 Growth Rate Analysis
Estimation of growth rates help in measuring the rate of change in export and
import of the crop over ten years. Thus the compound growth rates of export and
import of arecanut for the period 1995 to 2007 were calculated using the exponential
growth function of the form,
ut)t( eaby = ……………………………………. (10)
Where, Y(t) = Dependent variable for which growth rate is estimated
a = intercept
b = regression co-efficient
t = time variable
e = error co-efficient
u = disturbance term
The growth rate co-efficients (b’s) were computed by transforming equation (10) to
the log linear form as
Ln =)t(y ln a +t ln b+ u ……………………………… (11)
The method of ordinary least squares was adopted to estimate the co-efficients. The
compound growth rates (g’s) in percentage were computed using the relationship,
g = {(Anti ln of ln b)-1} x 100 …………………........ (12)
The significance of the regression co-efficient was tested using the Student’s t-test as,
)b(SE
bt
i
i= ………………….….………. (13)
Where, bi = regression co-efficient
1 = Shimoga 0 = Mangalore
SE (bi) = standard error of the regression co-efficient bi
t = calculated t- value.
The pattern of growth rates over the years was identified using the ‘b’
coefficient.
3.3.6 Instability Analysis
In order to study the variability in the export and import of arecanut, an index
of instability was used as a measure of variability. Data on export and import of
arecanut for the period 1998 to 2007 were calculated. The coefficient of variation
(CV) was calculated using the formula
Standard Deviation
CV = X 100 ……... (14)
Mean
The formula suggested by Cuddy and Delle Vale (1978) was used to compute the
index of instability.
Standard Deviation
Instability Index= X 100 X 1- R 2 .…… (15)
Mean
Coefficient of variation was multiplied by the square root of the difference
between unity and coefficient of determination (R2) in the cases where R2 was
significant.
Results
CHAPTER IV
RESULTS
Keeping in view of the objectives of the study, the results are presented under
the following headings.
4.1 General characteristics of the respondents
4.2 Value added products from arecanut
4.3 Estimation of price spread for Scented supari and Sweet pan/beeda
4.4 Market competitiveness in Shimoga and Mangalore markets
4.5 Cost incurred by the market intermediaries, beeda shops and farmers
4.6 Growth rate and instability in arecanut trade
4.1 General Characteristics of the Respondents
General characteristics of respondents was studied separately for farmers,
market intermediaries, cooperatives and beeda shops for two different markets viz.,
Shimoga and Mangalore in Karnataka. The details of the results of each category of
respondents are given below.
4.1.1 General Characteristics of Farmer Respondents
The general characteristics of sample farmers in both the study area was
presented in Table 4.1. The examination of table reveals that average holding size in
the Shimoga region was 5.52 acres, which was lower by 15.4 per cent in Dakshina
kannada compared to Shimoga. Out of total holding, average of 61 per cent area was
under arecanut which was 58 per cent and 64 per cent in Shimoga and Dakshina
kannada respectively. Sample farmers were having above matriculation in their
education. More or less similar average income of 3.6 lakhs per annum for a family
size of five to six in the study area was found, where in respondents average age was
33 years.
4.1.2 General Characteristics of Market Intermediaries
The details of market intermediaries that include private traders and
wholesalers operating in Shimoga and Mangalore APMC market are presented in
Table 4.2. Among the market intermediaries the private traders actually procures
arecanut from the farmers, where as the wholesalers facilitate the further trade. A total
Table 4.1: General Characteristics of Farmer Respondents
Sl. No.
Particulars Shimoga
(N=30)
Dakshina
Kannada
(N=30)
1. Average age (years) 32 34
2. Average family size (years) 05 06
3. Average annual family Income (Rs. lakh) 3.64 3.61
4. Average education (in years) 11.4 13.6
5. Holding size (acres) 5.52 4.78
6. Area under arecanut (acres) 3.25 3.08
Table 4.2: General Characteristics of Market Intermediaries
Sl. No. Particulars Shimoga
APMC
(N=30)
Mangalore
APMC (N=30)
1.
Type of business
a) Private traders/purchasers 21 (70) 24 (80)
b) Wholesalers 09 (30) 06 (20)
2. Average of annual turnover of arecanut
quantity handled (quintals) 1872 1653
3. Average year of experience in
marketing of arecanut 16 17
* Figures in parenthesis indicate percentage to total sample size
of 21 (70 %) private traders and nine (30%) wholesalers were chosen for the study in
Shimoga and that of 24 (80 %) and six (20 %) in Mangalore. Average annual quantity
handled by Shimoga market intermediaries was slightly higher (1872 quintals)
compared to Mangalore (1653 quintals). In both the market these intermediaries had
an average of 16.5 years trading experience.
4.1.3 General Characteristics of Cooperative Societies
Cooperative societies are playing a major role in arecanut value chain as they
presence from producing centre to consuming centre in Karnataka. The general
characteristics of the main cooperatives operating in these two markets are given in
Table 4.3.There are about six cooperatives in Shimoga and Mangalore market create
value chain of arecanut in Karnataka. Among them two namely MAMCOS and
SKACMS were functioning as commission agencies and other four HAPCOS,
KRAMCO, MASS and CAMPCO were functioning as purchaser as well as
processors. In Shimoga market the MAMCOS was facilitating arecanut trade since 70
years. Similarly, in Mangalore market SKACMS functioning from 90 years. In the
study area these cooperative societies were selected which were having experience in
trading from three years to 90 years. Annual quantity handled by the cooperatives
varies from 1200 to 12,255 tonnes as it was based on nature of business and year of
experience of cooperatives. Apart from commission agent, cooperative societies carry
out processing/garbling of the arecanut purchased from farmers and are making
products like Super fine grades of arecanut, Slices of supari, Chur, Areca powder,
Customized mixtures of areca pieces, Scented supari, Fadch supari etc based on the
demand of consuming centre. The products are varying from type of arecanut used for
processing.
4.1.4 General Characteristics of Beeda Shops (Panwallahs)
Arecanut value chain has a unique intermediary called Pan shops / Beeda
shops where value addition takes place in unbranded form. About 20 beeda shops
were selected for the study in confined Shimoga and Mangalore markets. Average
experience in beeda business was 11.31 years in Mangalore and just 08.12 years in
Shimoga markets. Majority have got own shops which was 80 per cent in Shimoga
Table 4.3: General Characteristics of Cooperative Societies
Sl.
No. Particulars
Shimoga Mangalore
MAMCOS HAPCOS KRAMCO CAMPCO MASS SKACMS
1. Average years
of experience 70 07 03 36 07 90
2. Quantity
handled in
2008 (Tonnes)
12,255 5295 1800 42,483 1200 2770
3. Nature of
business CA PS, PR PS, PR PS,PR PS,PR CA
4. Products Nil Super fine grades
of arecanut, Slices
of supari, Chur,
Areca powder,
Customized
mixture of pieces.
Scented Supari
(Branded), Fadch
of supari,
Superfine grades,
Betel nut slices.
Nil
CA- Commission agent, PS- Purchaser, PR- Processor
Table 4.4: General Characteristics of Beeda Shops (Panwallahs)
Sl. No Particulars Shimoga (N=20) Mangalore (N=20)
1. Average years of experience in Beeda/Pan making 08.12 11.31
2. Shops (In No.)
a) Hired b) Own
04 (20) 16 (80)
05 (25) 15 (75)
3.
Source of arecanut a) Wholesalers b) Retailers c) Own plantation
14 (70) 05 (25) 01 (05)
13 (65) 04 (20) 03 (15)
4.
Location of shops (In No.) a) Near Hotels b) Near Theatres c) Near Bus stand
13 (65) 03 (15) 04 (20)
15 (75) 02 (10) 03 (15)
5. Average monthly turnover (Rs) 54,650 62,540 * Figures in parenthesis indicate percentage to total sample size
and 75 per cent in Mangalore remaining shops were hired to do business. Majority of
sample beeda shops in Shimoga were located near to hotel (65 %) and few were near
to bus stand (20 %) and theatres (15 %). Similarly in Mangalore, 75 per cent of shops
were located near to hotels and remaining located near to bus stands (15 %) and
theatres (10 %). Average monthly turn over in beeda business was found to be
Rs.62,540 per month in Mangalore market which is14.5 per cent higher compared to
Shimoga (Rs.54,650 per month). Beeda shops in Shimoga have purchased nearly 70
per cent of arecanut from wholesalers, 25 per cent from retailers and remaining five
per cent sourced from their own plantation. Similarly in Mangalore major source of
buying from wholesalers (65 %) and retailers (20 %) and remaining from own garden
(15 %) where the beeda shops own.
4.2 Value Added Products from Arecanut
In general value addition and final consumption of arecanut products takes
place in five mutually exclusive ways. They are:
a) Production and consumption of arecanut in the raw form without tobacco
(WOT) called as Beeda or Pan.
b) Production and consumption of arecanut in the raw form with tobacco
(WT) called as Zarda.
c) Production and consumption of arecanut in the processed form without
tobacco (WOT) called as Scented Supari.
d) Production and consumption of arecanut in the processed form with
tobacco (WT) called as Gutkha.
e) Production and consumption of arecanut in processed form with a
medicinal and nutritive value called as Emerging products (EP). These are
also called as nutraceutical products.
Among the above five categories, there are all both branded and unbranded
products supplied by different manufacturers and processors. Those products
available in the two different markets namely Shimoga and Mangalore are given in
Table 4.5 and details of the products along with price are given in Appendix X.
There were 25 products prepared from the RBT. Out of 25 products 21 (84 %)
were branded type and remaining four (16 %) Pan or unbranded type. Among the
Figure 4.5: Major Value Added Products of Arecanut
Table 4.5: Value Added Products of Arecanut Marketed / Consumed at Shimoga
and Mangalore Markets
Sl.
No. Particulars
RBT Arecanut WCT Arecanut
Branded Beeda/Pan Branded Beeda/Pan
1. Without Tobacco 06 (24) 03 (12) 04 (33) 03 (26)
2. With Tobacco 12 (48) 01 (04) 00 (00) 01 (08)
3. Emerging Products 03 (12) 00 (00) 04 (33) 00 (00)
Sub total 21(84) 04 (16) 08 (66) 04 (34)
4. Manufacturing
places:
Within Karnataka
a. WOT
b. WT
c. EP
03 (12)
02 (08)
01 (04)
03 (12)
01 (04)
00 (00)
03 (25)
00 (00)
02 (17)
03 (25)
01 (08)
00 (00)
Outside Karnataka
a. WOT
b. WT
c. EP
03 (12)
10 (40)
02 (08)
00 (00)
00 (00)
00 (00)
01 (08)
00 (00)
02 (17)
00 (00)
00 (00)
00 (00)
Grand Total 25 (100) 12 (100)
Note: 1) Figures in parenthesis indicate percentage to grand total
2) WOT- Without tobacco, WT- With tobacco, EP- Emerging products
3) RBT- Red Boiled Type, WCT- White Chali Type
branded areca products prepared from RBT, 12 were products containing tobacco, six
products without tobacco and three nutraceutical products. It is very important to note
that here among the 25 products available from RBT almost 60 per cent (15 products)
were manufactured outside Karnataka. Even in those ten (40 %) products
manufactured within Karnataka, four were unbranded or Pan prepared from
panwallahs. It indicates that majority of the branded products including gutkha, pan
masala, scented supari etc manufactured outside the Karnataka.
It can be seen from the table that nearly 48 per cent (12 products) of the
branded value added products from the RBT were Gutkha. Within that more than 80
per cent were manufacture outside Karnataka. Only two products namely super and
shanthi gutkha were manufactured within Karnataka. On the other hand the scented
supari which is free from tobacco manufactured in equal proportion (03 each) within
and outside Karnataka.
There were 12 value added products identified in WCT arecanut. Among them
eight (66 %) branded and four (34%) were unbranded or Pan type. Branded products
include four products without tobacco and four were emerging nutraceutical products.
Unbranded products (04 no.) were Pan or Beeda, among them three without tobacco
and one containing tobacco. It is important to know that 75 per cent (09 products) of
value added products from WCT were manufactured within Karnataka. Remaining 25
per cent that include one product without tobacco and two emerging products were
manufactured outside Karnataka. Here branded value added products with tobacco
were not found in markets.
In both type of arecanut Pan or beeda or unbranded value added products
were manufactured throughout India. Emerging products are those, which are having
nutraceutical and medicinal valued properties derived from arecanut. These were
manufactured from farmer level (Syrup) to industry level (Tooth paste) and
distributed throughout India. These products still in emerging form which have good
scope to enter in to future market.
4.3 Estimation of Price Spread for Scented Supari and Sweet Pan Beeda
Price spread is the difference between the consumer paid price and producer
receiving price. The price spread indicates the share of different intermediaries in the
value chain of arecanut. It is estimated for two value added products (Scented supari
and Sweet beeda) by using market channels. These are tobacco free products and each
representing one type of arecanut (RBT in Scented supari and WCT in Sweet beeda)
used. The results of price spread of these products are given in Table 4.6.
4.3.1 Marketing Channels
There were two main marketing channels identified as they followed by
majority of the respondents are shown in Figure 4.1. These include:
Channel I: The private traders purchase the arecanut from farmers through APMC and
then they sold to wholesalers in the market yards. Here producer incur very less
marketing cost and price received also comparatively less. Farmer risk in marketing
was minimized to a large extent. The intermediaries rendered several services in the
process of marketing of arecanut with a view to earn profit. Pan Beeda shops or
Scented supari manufacturers buy arecanut from the traders or wholesalers.
Channel II: Farmer themselves sold their produce to cooperative marketing societies
by incurring marketing cost to realize the higher price and to get the benefits from the
cooperatives. In arecanut marketing, cooperatives have played a major role by helping
both for producer and value addition agencies by supplying quality arecanut. The size
of margin, as an indicator of the efficiency of the marketing system was studied in
each cases.
4.3.2 Estimation of Price Spread
Price spread analysis as mentioned earlier was done only for two products
namely Sweet beeda and Scented supari. Though majority of the branded value
products identified were Gutkha, these were manufactured outside the Karnataka.
Hence study was confined to Sweet beeda and Scented supari which were
manufactured within the Karnataka. For Scented supari, the CAMPCO was major
processor in Karnataka. Being a cooperative, the data was accessible easily. All the
Sweet beeda was prepared in the Beeda shops in study area. Hence the study was
Figure 4.1: Major Marketing Channels Followed by the Respondents
Channel I: Farmer Traders Wholesalers Pan beeda shops
Channel II Cooperatives
Channel I: Farmer Traders Wholesalers Scented supari
Channel II Cooperatives
confined to these products. Average price of arecanut for the year of 2008, was taken
from APMC office and costs incurred for processing was collected from Beeda shops
and CAMPCO for respective products. For each product two channels were followed
among which channel I comprises of market intermediaries which in turn reaches the
processing agency. Channel II have cooperative net work which in turn reaches the
processing agency.
4.3.2.1 Sweet Beeda Product
For sweet beeda preparation WCT arecanut was used. In channel I, producer
share in consumer rupee was 10 per cent whereas 12 per cent in channel II. The
details of value addition were given in the table 4.6. The price spread in channel-I for
sweet beeda was Rs. 66,000 per quintal which was higher by two per cent compared
to channel-II (Rs. 64,700 per quintal). Producer receiving price or traders paid price
was Rs.7500 per quintal (10 % of total retail price), Wholesalers purchase price Rs.
10,400 per quintal and finally Beeda shop owner pay 11,900 per quintal for getting
good quality WCT arecanut. It was found that six per cent price spread across market
intermediaries till arecanut reaches to Pan or Beeda shops. It was multi level value
addition where in ingredients fetches high cost. In Channel II producer receiving
Rs.8800 per quintal from cooperatives and it forms 12 per cent of total retail price. It
can be seen that share of producer in consume rupee was higher by two per cent
compared to channel I. For making one quintal sweet pan / beeda, cost incurred other
than WCT arecanut was Rs. 42,600 and it forms 58 per cent of total retail price.
Margin or profit for Beeda shops accounts Rs. 19,000 per quintal and it forms 26 per
cent of total retail price.
In channel I, consumer rupee was distributed in the proportion of 10 percent to
farmers, four per cent to traders, two per cent to wholesalers, 58 per cent towards
processing cost and 26 per cent towards margin to processors. In channel II, consumer
rupee was distributed in the proportion of 12 per cent to farmers, four per cent to
cooperatives, 58 per cent towards processing cost and 26 per cent towards profit
margin for processors.
Table 4.6: Price Spread Analysis- Scented Supari and Pan Beeda
Sl.No. Particulars
Sweet Beeda or Pan
(Rs. per Quintal)
Scented Supari
(Rs. per Quintal)
Channel I Channel II Channel I Channel II
1. Price received by
producer
7500 (10) 8800 (12) 13,650
(31)
14,550
(33)
2. Traders purchase price 7500 - 13,650 -
Marketing cost and
margin
2900 (04) 2550 (06)
3. Wholesalers purchase
price
10,400 - 16,200 -
Marketing cost and
margin
1500 (02) 1300 (03)
4. Co-operative purchase
price
- 8800 - 14,550
Marketing cost and
margin
- 3100 (04) - 2950 (07)
5. Beeda shops/Processors
purchase price
11,900 11,900 17,500 17,500
6. Cost incurred for value
addition/processing cost
42,600
(58)
42,600
(58)
22,000
(50)
22,000
(50)
7. Margin for processor 19,000
(26)
19,000
(26)
4500 (10) 4500 (10)
8. Retail price of value
added product
73,500
(100)
73,500
(100)
44,000
(100)
44,000
(100)
9. Price spread 66,000 64,700 30,350 29,450
10. Producer share in
consumer rupee (%) 10 12 31 33
*Figures in parenthesis indicate percentage share to total retail price
4.3.2.2 Scented Supari (Kaju Supari)
CAMPCO was the nodal agency to start scented supari in 1996 by using RBT
arecanut as major ingredient. The details of price spread were given in the table 4.6.
As it can be seen from the table that channel-I have distributed 31 per cent to producer
where as it was 33 per cent in channel-II of consumer rupee. Producers on an average
have received Rs. 13,650 per quintal in channel I and Rs. 14,550 per quintal in
channel II. In channel-I, the private traders sold to wholesalers at Rs. 16,200 per
quintal and processors in turn paid Rs. 17,500 per quintal to wholesalers. In channel-II
cooperative paid a price of Rs. 14,550 per quintal to farmers and their selling price to
processor was Rs.17,500 per quintal. In channel I the private traders have realized six
per cent share where as wholesalers realized three per cent share of the consumer
rupee. In channel II cooperatives realized seven per cent share of total price spread.
For the preparation of one quintal of Scented supari, the cost incurred other than
arecanut was Rs. 22,000 (50 % of total retail price) and agency margin was Rs.4500
(10 % of total retail price). Price spread in this regard was Rs. 30,350 and Rs. 29,450
in channel-I and channel-II respectively. This clearly demonstrates the efficiency of
cooperative channel compared to private channels in the processing of value added
arecanut products like Scented supari.
In channel I consumer rupee for Scented supari was distributed in the
proportion of 31 per cent to farmers, six per cent to traders, three per cent to
wholesalers, 50 per cent towards processing cost and 10 per cent towards profit
margin to processors. In channel II consumer rupee was shared in proportion of 33
percent to farmers, seven per cent to cooperatives, 50 per cent towards processing cost
and 10 per cent towards profit margin to processors.
Examination of table 4.6 reveals that channel-II was efficient by giving two
per cent more share to farmers compared to channel-I for both the products. In case of
sweet Pan / Beeda preparation, processor’s margin was 26 per cent where as it was 10
per cent in the preparation of scented supari. For both the products, type of arecanut
used was different and hence price realized per unit of arecanut was also different.
In order to analyze the value chain in arecanut for different value added
products, market competitiveness, market intermediary’s costs, costs and returns of
Beeda shops, production and marketing cost of farmers were studied. The detail are
provided under the below headings.
4.4 Market Competitiveness in Shimoga and Mangalore Markets
After studying the price spread it is essential to analyze the competitiveness in
the market and business of intermediaries as these influences the price spread. Thirty
market intermediaries each from Shimoga and Mangalore APMC markets were
chosen for the study.
4.4.1 Market Share
Market intermediaries share to total quantity were calculated by arranging
individual quantity handled by them in an order. As it is indicated in Table 4.7, top
ten buyers contributed 41 per cent in Shimoga and 38 per cent in Mangalore to the
total quantity handled in the market. But bottom 10 buyer’s contribution was just
three per cent and four per cent respectively in these two markets. Average annual
quantity handled by individual buyer was 6000 tonnes that was higher by 23 per cent
in Mangalore market compared to Shimoga market where it was 4853 tonnes. The
analysis of the market share shows that prevalence of inequality in the trade of
arecanut in the two main areca markets in Karnataka.
4.4.2 Hirschman’s Index
The magnitude of buyer’s concentration or size distribution was analyzed by
Hirschman’s Index (HI). It is a specific measurement that represents the extent to
which a number of firms account for respective proportion of output. The HI was used
as one possible indicator of market power or competition among firms. It measures
market concentration by adding the squares of the market shares of all firms in the
industry. Hirschman Index was found to be 0.30 in Shimoga and 0.32 in Mangalore
market (Table 4.7). As a HI value nearing zero represents perfect distribution, the
above results imply a moderately well distributed market shares by the intermediaries
in Shimoga and Mangalore markets.
4.4.3 Gini Coefficient
It is a measure to study the equality or otherwise in buying / selling in a
market. The buying of arecanut in Shimoga market has show a Gini ratio of 0.82 and
it was 0.83 in Mangalore market (Table 4.7). As a value in Gini ratio near to zero
Table 4.7: Market Competitiveness Study in the Sample Markets
Sl.
No. Particulars
Shimoga
market (N=30)
Mangalore
market (N=30)
1. Top ten buyers contribution 41% 38%
2. Bottom ten buyers contribution 03 % 04%
3. Average annual quantity handled by
buyers (Quintal) 4853 6000
4. Hirschman’s Index (Hx) 0.30 0.32
5. Gini Coefficient (G) 0.82 0.83
implies equality in marketing, the results reveal that in both the market the ratio was
closer to one and hence, indicates an inequality in the quantity handled by buyers.
4.4.4 Lorenz curve
Lorenz curve also explains the equality or otherwise in the buying pattern by
working out cumulative per cent of buyers to cumulative per cent of the quantity
handled by them. The Lorenz curve as shown in the Fig.4.2 explains a high degree of
inequality in buying pattern in Shimoga arecanut market depicted by a wide gap
between the line of equality and the Lorenz curve. Similarly Fig. 4.3 depicts also high
degree of inequality in the Mangalore market.
4.5 Cost Incurred by Market Intermediaries, Beeda Shops and Farmers
After estimating the price spread, the study made an attempt to understand
cost items incurred by different intermediaries and farmers in the study area.
4.5.1 Costs Incurred by Market Intermediaries in Shimoga and Mangalore markets
Marketing involve agencies that perform various marketing functions in a
sequence from producers to the ultimate consumers. Market intermediaries in the
present study include wholesalers, private traders or purchasers and cooperative
societies who are handling arecanut in two different markets. Market intermediaries
were studied separately in Shimoga and Mangalore as the type of arecanut handled in
these market differ (RBT in Shimoga and WCT in Mangalore). The details of the
costs of individual intermediaries were given in Table 4.8.
In Shimoga market wholesalers incurred costs of Rs. 1600 per quintal arecanut
handled where as the private traders incurred Rs. 2500 per quintal and cooperatives
incurred Rs. 2200 per quintal while marketing RBT arecanut. In Mangalore market
cost incurred for a quintal WCT arecanut by wholesalers was Rs.1400, private traders
Rs.2200 and by cooperatives was Rs. 2100.
Pooled average of marketing costs for various activities in both the markets
was Rs.2001 among which 21.8 per cent for grading and garbling (Rs.436 per
quintal), 18.8 per cent for sales tax (Rs.375 per quintal), 13.4 per cent for processing
cost (Rs.267 per quintal), 11.5 per cent for storage cost (Rs.230 per quintal), 11.2 per
Figure 4.2: Lorenz Curve in Shimoga APMC Market
Figure 4.3: Lorenz Curve in Mangalore APMC Market
Table 4.8: Costs Incurred by the Market Intermediaries in Shimoga and Mangalore Markets
Sl. No. Particulars
Market intermediaries in Shimoga market Market intermediaries in Mangalore market
Pooled Average Wholesalers Traders Cooperatives Wholesalers Traders Cooperatives
1. Transportation cost 12.8 (0.8) 15.6 (0.6) 13.4 (0.6) 11.2 (0.8) 14.5 (0.6) 10.2 (0.5) 13 (0.6)
2. Grading/ garbling cost 386 (24) 670 (26.8) 547 (24.8) 276 (19.8) 354 (16) 385 (18) 436 (21.8)
3. Weighing loading & unloading cost 10.5 (0.6) 12.4 (0.5) 15.4 (0.7) 15 (1.1) 18 (0.8) 12 (0.6) 14 (0.7)
4. Packing material cost 85.4 (5.4) 110 (4.5) 76 (3.5) 32 (2.3) 65 (03) 54 (2.5) 70 (3.5)
5. Processing cost 0.00 (00) 532 (21.3) 430 (19.5) 0.00 (00) 321 (14.5) 320 (15.2) 267 (13.4)
6. Storage cost 187 (11.6) 178 (7.2) 135 (6.2) 232 (16.5) 344 (15.6) 305(14.5) 230 (11.5)
7. Tax (VAT) 400 (25) 400 (16) 400 (18.2) 350 (25) 350 (16) 350 (16.7) 375 (18.8)
8. Rent charges paid in yard 132 (8.3) 112 (4.5) 125 (5.6) 112 (08) 240 (11) 186 (09) 151 (7.5)
9. Market fee in market yard 200 (12.5) 267 (10.6) 230 (10.4) 195 (14) 225 (10.2) 205 (10) 220 (11)
10. Commission charges 186 (11.8) 210 (08) 245 (10.5) 185 (12.5) 250 (12.3) 272 (13) 225 (11.2)
Total 1600 (100) 2500 (100) 2200 (100) 1400 (100) 2200 (100) 2100 (100) 2001 (100)
*Figures in parenthesis indicate percentage to the total
(Rs. per Quintal)
Figure 4.4: Graph Showing Distribution of Total Marketing Cost Among the
Different Activities
cent for commission charges paid (Rs.225 per quintal), 11 per cent for market fees
paid (Rs.220 per quintal), 3.5 per cent for packing material (Rs.70 per quintal), 0.7 per
cent for loading and unloading (Rs.14 per quintal) and 0.6 per cent towards
transportation cost (Rs.13 per quintal).
4.5.2 Cost and Return of Beeda Shops
Beeda or Pan was very an unique value addition to arecanut with a lot of
socio-cultural fervor cutting across casts, region, religion, age and gender in India. A
sample of 40 Beeda shops was selected in Shimoga and Mangalore market to study
the costs and returns by each shop.
Table 4.9 reveals that WCT arecanut was one of the main ingredients for pan
beeda with in which there are mainly two types. They are beeda without tobacco
called as Sweet beeda and beeda with tobacco called as Zarda beeda. Beeda shop
owners in Shimoga were preparing 164 beeda (sweet beeda) or 179 beeda (zarda
beeda) from one Kilo gram of arecanut. Average price per beeda varies from Rs. 4.34
(sweet beeda) to 8.65 (zarda beeda). Return from one kilogram pan was 712 rupees
(sweet beeda) and 1548 rupees (zarda beeda). Average margin per kilo gram of Pan
/beeda was ranging from 168 rupees (sweet beeda) to 504 rupees (zarda beeda).
In Mangalore, beeda shop owners were preparing 155 sweet beeda or 181
zarda beeda for every kilo gram of arecanut used. Price per beeda was varying from
Rs. 4.74 (sweet beeda) to Rs.7.81 (zarda beeda). Return realized was Rs. 735 (sweet
beeda ) and Rs. 1414 ( zarda beeda) per kilo gram of pan. Margin or profit for the
beeda owners range from Rs. 180 (sweet beeda) to Rs.367 (zarda beeda) per kilo
gram of pan beeda.
Pooled average of cost incurred to prepare one kilogram of arecanut pan beeda
without tobacco was Rs.550 that include the value of Rs.182 towards the cost of betel
leaves (33 % of total), arecanut (WCT) Rs. 108 (20 % of total), sweetened supari
Rs.71 (13 % of total) and other flavoring ingredients Rs.189 (34 % of total). Similarly
for beeda with tobacco cost incurred was Rs.1046 that include Rs. 241 towards the
cost of betel leaves (23 % of total), arecanut (WCT) Rs. 131 (12 % of total), zarda Rs.
500 (48 % of total) and other flavoring ingredients Rs.175 (17 %). On an average
return from one kilo gram pan/ beeda without tobacco was Rs. 724 and that of beeda
Table 4.9: Details of Costs and Returns Incurred for Preparation of Beeda from One Kilo Gram of Arecanut
Sl. No. Particulars Shimoga Mangalore Pooled Average
WOT WT WOT WT WOT WT
1. Average No. of Beeda per Kg of arecanut 164 179 155 181 160 180 2. Average Price per beeda in Rs. 4.34 8.65 4.74 7.81 4.5 8.2 3. Return from one Kg of arecanut pan beeda in Rs. 712 1548 735 1414 724 1482
4.
Preparation of one Kg arecanut Pan (value in Rs.)
4 Betel leaves
5 Chali arecanut
6 Sweetened supari
7 Zarda
8 Flavoring & other ingredients
185(34)
112(21)
064(12)
000(00)
183(34)
243(23)
134(13)
000(00)
500(48)
167(16)
178(32)
104(19)
078(14)
000(00)
195(35)
238(23)
127(12)
000(00)
500(48)
182(17)
182(33)
108(20)
071(13)
000(00)
189(34)
241(23)
131(12)
000(00)
500(48)
175(17)
TOTAL 544(100) 1044(100) 555(100) 1047(100) 550(100) 1046 (100)
5. Margin Rs/ Kg of pan beeda 168 504 180 367 174 436
Note: 1) Figures in parenthesis indicate percentage to total 2) WOT – Without tobacco, WT- With tobacco
with tobacco was Rs. 1482. Average margin per kilo gram of pan was Rs.174 (sweet
beeda) and Rs. 436 (zarda beeda).
4.5.2.1 Factors Influencing the Sale of Branded Value Added Products
Table 4.10 gives the results of multiple regressions for sale (packs per week)
of branded value added products in both Shimoga and Mangalore markets. Branded
value added packs includes scented supari, sweet supari, supari packs, Gutkha etc.
These are priced from Rs. 0.5 to 03 per pack. As revealed through the results, factors
that significantly influencing with positive co-efficient on the sale of branded value
added product packs were year of experience in beeda business, investment, location
of shops expressed through dummy variable (1 = near to hotel , 0 = others) and
number of pan beeda sold. The region expressed through dummy variable
(1=Shimoga, 0= Mangalore) emerged as a non significant variable in explaining the
selling pattern of value added branded arecanut product. The co-efficient of multiple
determination (R2) was 0.84 indicating goodness of fit. The results showed a model
fitted with a dependency of 84 per cent and intercept value of 70.25. Beeda shops
located near to hotel have registered sale of 35 more number of value added products
compared to other location like bus stand, theatre etc. The respective variables were
compared with P value to know significance level at five per cent (P value less than
0.05) and one per cent (P value less than 0.01).
4.5.3 Production and Marketing Cost Incurred by the Farmers
Producers in value chain of any agricultural commodity incur a major share of
costs both while producing as well as marketing. Table 4.11 reveals that farmers in
Shimoga region growing RBT arecanut incurred a cost of Rs.55,107 per acre towards
cultivation which was higher by 27 per cent compared to farmers of Dakshina
kannada farmers (Rs. 43,382 per acre) while producing WCT arecanut. This cost
included the amortized and maintenance costs per acre. The marketing cost incurred
was Rs.262.5 per quintal and Rs. 308.5 rupees per quintal in Shimoga and Dakshina
kannada respectively. In Shimoga the cost of grading and cleaning was Rs. 86.5 per
quintal forming highest share in the total marketing costs where as it was the cost of
storage (Rs.140 per quintal) in Dakshina kannada. The average price received by the
farmers in Shimoga market for RBT was Rs.13,650 per quintal and it was Rs. 7500
Table 4.10: Factors Responsible for Branded Value Added Products (Gutkha &
Scented Supari Packs) Sale per Week in Beeda Shops
(N=40)
Dependent variable- No. of Branded arecanut value added packs sale per week
Sl. No. Variables Co-efficient P value
1. Year of experience in beeda business
2.70*
0.04367
2.
Location
1- Near to Hotels
0- others (street, theatre etc)
35.28* 0.00198
3. Investment made in Rs. 0.011* 0.03363
4.
Region
1- Shimoga
0- Mangalore
-3.93NS 0.60485
5. Pan beeda sales per week (No.) 0.65** 0.0021
6. Intercept 70.25*
7. R2 0.843
8. Adjusted R2 0.820
Note: * Significant at 5 per cent
** Significant at 1 per cent & 5 per cent
NS Non Significant
Table 4.11: Production and Marketing Cost Incurred by the Farmers
Sl.
No. Details of farmers/units
Average
Shimoga
farmers
(RBT)
Dakshina
kannada farmers
(WCT)
1. Cost of cultivation per acre* 55,107 43,382
2.
Yield (Qtl. per acre)
1. Raw arecanut
2. Processed arecanut
49.21
6.89
48.90
9.78
3.
Price in market (Rs. per Qtl.)
f) Raw arecanut
g) Processed arecanut
1150
13,650
1025
7500
4. Season of sale (Month) February December
5. Processing cost (Rs. per Qtl.)
Processing cost (Rs. per Acre)
1250
8613
491
4800
6.
Marketing cost (Rs. per Qtl.)
a) Grading & cleaning
b) Packing
c) Storage
d) Transportation
e) Loading and unloading
86.5
057
075
028
016
64.3
062
140
025
017
Total per Quintal
Total per Acre
262.5
1809
308.3
3015
7. Grand Total cost per acre(1+5+6) 65,500 51,200
8. Net profit for raw arecanut per acre 1485 6740
9. Net profit for processed arecanut per
acre 28,550 22,150 10. B: C ratio for raw arecanut 1.03 1.16 11. B: C ratio for processed arecanut 1.44 1.43
* This comprises of Amortized establishment and maintenance expenses per acre
per quintal in Mangalore market for WCT. These were collected from the respective
APMC Offices for processed form of arecanut. Price of raw arecanut was collected
from farmers in producing centers that was Rs. 1150 per quintal for RBT and Rs.1025
per quintal for WCT. Recovery percentage of processed arecanut from raw arecanut
or freshly harvested arecanut was 14 per cent in RBT and 21 per cent in WCT. Yield
levels vary among the types that were 6.89 quintals per acre in RBT and 9.78 quintals
in WCT. But in case of harvesting of raw arecanut the yield was more or less same in
the range of 50 quintal per acre in both the types. Processing cost varied from region
to region. In Shimoga it was Rs. 8613 per acre and where as it was Rs. 4800 per acre
in Dakshina kannada. A total cost of Rs. 65,500 per acre was found in Shimoga
market and it was lower by 27 percent in Dakshina kannada farmers (Rs. 51,200 per
acre). Net profit in RBT (Shimoga) was 1485 rupees per acre for raw arecanut and
28,250 rupees per acre for processed arecanut. Dakshina kannada farmers realize a net
profit of Rs. 6740 per acre for raw arecanut and Rs. 22,150 per acre for processed
arecanut. Benefit to Cost ratio was worked out for both types. It was 1.03 for RBT as
raw arecanut and1.44 for processed arecanut. The WCT arecanut growing farmers got
a B: C ratio of 1.16 for the raw nuts and 1.43 for processed arecanut. And hence, these
results clearly demonstrate that the processing had added value to arecanut in
Karnataka.
4.5.3.1 Factors Responsible for Processing Cost of Farmers
In case of arecanut, processing includes removing of husk, boiling, adding
color, drying etc was must to get good keeping quality and taste. Hence processing
cost has been taken as dependent variable to run multiple regression analysis which is
presented in the Table 4.12. The independent factors considered are year of
experience in farming, yield of arecanut (quintals per acre), area under arecanut
(acres) and Dummy for region (1-Shimoga, 0-Mangalore). All variables showing a
significant influence on processing cost which totally contributes 39 per cent
dependency (R2= 0.39). Processing cost was 6104 rupees per acre irrespective of
variables in both study area (Intercept=6104). Highly significant variable was region
where Shimoga farmers have incurred processing cost 2650 rupees per acre more
compared to Dakshina kannada farmers. As year of experience increased by one unit,
yield by one unit and area of arecanut by one unit then processing cost decreased by
Table 4.12: Factors Influencing for Processing Cost for the Farmers
(N=60)
Dependent variable- Processing cost (Rs. Per acre)
Sl. No. Variables Co-efficient P value
1. Experience in arecanut farming
-82.43*
0.0484
2. Yield of arecanut (Quintal per acre) -77.23* 0.0434
3. Area under arecanut ( Acres) -147.68* 0.032
4.
Region
1- Shimoga
0- Dakshina kannada
2650** 0.00034
5. Intercept 6104*
6. R2 0.39
7. Adjusted R2 0.33
Note: * Significant at 5 per cent
** Significant at 1 per cent & 5 per cent
NS Non Significant
82 rupees, 77 rupees, 147.68 rupees per acre respectively. Processing in arecanut at
the farmer level would decide the value addition in industry level. All the keeping
qualities of arecanut would have a mirror impact on processing at the farmer level. So
it is very important for both farmer and industry side.
4.6 Growth Rate and Instability Analysis in Arecanut Trade
Value chain of a commodity is being influenced by import and export of the
commodity. International consumers also important to consider for value creation
process in the chain. Hence keeping this in view, the study attempted to calculate the
compound annual growth rate and instability index for both export and imports of
arecanut products by taking 13 years data from 1994-95 to 2006-07. The results are
given in Table 4.13.
An examination of the table reveals that average annual quantity of arecanut
exported was 1670 tonnes during 1995 to 2007. Though the export of arecanut from
India has registered a compound growth rate of 19.84 per cent annually it formed
hardly 0.29 per cent and 0.74 per cent of production from India and Karnataka
respectively. Growth rate of arecanut exports was found to be significant at one per
cent level of significance. The increase in growth rate of export was followed by an
increased instability as measured by instability index, especially during the post-
liberalization period in India. The instability index was 48.60 per cent in the post
liberalization period indicating high instability in trade.
The import of arecanut was considered important to meet domestic
consumption earlier but now became a threat to farmers. India imported average
annual quantity of 18,614 tonnes during post liberalization period. It was hardly 3.32
per cent and 8.3 per cent of production from India and Karnataka respectively. India
has registered annual compound growth rate of 32.83 per cent which was highly
significant at one per cent level of significance. The instability index was 40.01 per
cent during the post liberalization period indicating stability in trade.
Table 4.13: Growth Rate and Instability of Arecanut Trade
Sl. No. Particulars
Export Import
1995 to 2007 1995 to 2007
1. Average annual quantity (in tones) 1670 18,614
2. Percentage of India’s production in
2006-07 0.29 3.32
3. Percentage of Karnataka’s
production in 2006-07 0.74 8.30
4. Growth rate 19.84* 32.83*
5. Instability index 48.60 40.01
* Significant at 1 per cent
Discussion
CHAPETR V
DISCUSSION
The empirical results of the study presented in the previous chapter are
discussed in this chapter under the following headings:
5.1 General characteristics of the respondents
5.2 Value added products from arecanut
5.3 Estimation of price spread for Scented supari and Sweet pan/beeda
5.4 Market competitiveness in Shimoga and Mangalore markets
5.5 Cost incurred by the market intermediaries, beeda shops and farmers
5.6 Growth rate and instability in arecanut trade
5.1 General Characteristics of the Respondents
General characteristics of present study including farmers, market
intermediaries and co-operative institutions involved in arecanut trade in Shimoga and
Mangalore markets are briefly discussed below.
5.1.1 General Characteristics of Farmer Respondents
General characteristics of sample farmers were presented in the table 4.1. As
seen in the table, majority of farmers were having a relatively higher holding size of
around 5.15 acres in the study area. As large farmers were having good knowledge of
value chain, more inclination towards value addition and were capable of providing
precise information about costs data, they were purposely selected for the study.
Hence, average holding size of farmers was relatively higher compared to similar
studies like Yadav (2007) under taken in the region. Area under arecanut formed
nearly 60 percent of the total holding which indicates that the main source of income
for the sample farmer was arecanut. Education status of the respondent was above
matriculation and the respondents were of middle aged group to provide the
information. As these general features of farmers have implications on price spread
and producer shares in consumer rupee, these were recorded.
5.1.2 General Characteristics of Market Intermediaries
Shimoga and Mangalore markets were selected for the current study as they
handle nearly 45 per cent of the total quantity of arecanut produced in the Karnataka
(Appendix III). As indicated in the table 4.2, majority of market intermediaries were
private traders. They were handling nearly 70 percent of the total quantity arrived in
to market. There were few wholesalers who facilitated the trade after purchasing from
the traders till reaches to processing and consumer centers. In arecanut older arecanut
normally fetches higher price. So storage facilities by the traders or wholesalers
obviously help farmers in getting higher price. In these markets, private traders
handled nearly 80 per cent of the produce and remaining 20 percent of was handled
by Co-operatives (Bhat, 2008). It is evident that trades in these markets are having
fairly large years of experience (16-17 years) in trading. The average quantity handled
by intermediaries is around 176 tonnes which is moderate. These features will have
implications on market concentration and price spread and hence considered for the
study.
5.1.3 General Characteristics of Co-operative Societies
Co-operatives were formed from the people, for the people and by the people.
It was one distinguished feature in arecanut trading as compared to other agricultural
commodities. The table 4.3 reveals the general features of co-operatives societies in
study area. Six co-operatives were studied to comprehend their buying quantity,
nature of business and also the costs incurred in the business. The MAMCOS is a
commission agent marketing co-operative situated in Shimoga, the HAPCOS and
KRAMCO were procurement and value addition agencies in Shimoga market. In
Mangalore market the CAMPCO was a nodal agency for procurement and processing.
In recent years MASS co-operative was established for procurement and processing
of WCT arecanut. In Dakshina kannada the SKACMS is an oldest commission agent
marketing co-operative society in Karnataka. Among them there were four co-
operatives undertaking further processing or garbling of arecanut supplied by the
farmers. The also further grade the nuts like Chur, Slices and superfine grades as per
the preference of consumers as well as the requirements of processors like CAMPCO
which produces scented supari. And hence, it is evident that arecanut has got the
intermediaries from private agents to co-operatives dealing with all marketing
functions in Karnataka.
5.1.4 General Characteristics of Beeda Shops (Panwallahs)
In India, pan has been playing an important part in social cultural life and
customs of people since centuries. Compared to other commodities, Pan or Beeda
shops are the unique retail marketing in arecanut.
As seen from the results (table 4.4), Panwallahs are making substantial
turnover around 55 to 63 thousand rupees every month. This was higher in Mangalore
compared to Shimoga. It is important to know that majority of these pan shops have
owned by themselves. Most of them purchase raw materials from wholesalers and
thus strengthening marketing network for arecanut. It is interesting to note that almost
65 to 75 per cent shops are situated near the hotel implying that normal food eating
and pan chewing are complimentary in nature. These feature further analyzed while
study the factors explaining sale of branded value added areca products by Panwallahs
in the study area. Hence it can be seen that betel nut have very dispersed and
decentralized retailed chain spread across the country where in pan or beeda has got
higher importance.
5.2 Value Added Products from Arecanut
The details of different value added products are given the table 4.5. It is
evident from the result that majority of value added products in both the cases are
branded, which is slightly higher in the case of RBT. As RBT is boiled, colored and
continuously sun dried before its use, thereby its keeping quality is high. And hence
RBT best suited for branded value added products. It is important to note that within
value added products from RBT arecanut almost 50 per cent are products containing
tobacco. As there are growing criticisms against the use of arecanut products having
tobacco and also several legal interventions, it is important from the point of view
promotion of the industry to switch over to socially accepted arecanut products. It is
heartening to note that there are several emerging products from RBT such as herbal
supari, diaareca, which are not only socially acceptable but also having nutraceutical
properties. A study by Shruthi (2008) has clearly pointed out the increasing
preference for consumers for such emerging products in Karnataka. Hence concerted
efforts should be made to promote such socially accepted products in the place of
arecanut products containing tobacco.
Value addition is a process in which raw commodity has been changed to
consumer preferred products either by processing or adding some other ingredients in
a specified proportion. In arecanut, value addition includes adding some other
ingredient like beetle leaf, lime catechu, clove and other spices to make a product
acceptable to consumers. In this back ground arecanut value added products have
been divided into three groups viz., products containing natural ingredients without
tobacco, products with tobacco and emerging products having nutraceutical
(medicinal) properties. Main products without tobacco are Pan masala, Sweet supari,
Kaju supari, Flavored supari etc. Products with tobacco include Gutkha, Zarda etc.
And the emerging products includes Herbal supari, Diaareca, Syrup, Areca juice,
Areca tooth paste, Supari Viagra, Nisarga supari etc.
As it can be seen from the table 4.5 in the case of RBT, branded or packed or
ready to use products comprise nearly 84 per cent of the total products that are in the
market. Among them 48 per cent are products with tobacco, 24 per cent without
tobacco and 12 per cent are emerging products. Remaining 16 per cent were
unbranded or in situ value added products like Pan or Beeda. Majority of the branded
value added products (60 per cent) were manufactured outside the Karnataka. In India
major consumption centers for branded as well as unbranded value added products are
cities located outside Karnataka such as Mumbai, Pune (Maharastra), Ahamadbad
(Gujarath), Jaipur (Rajastan), Hyderabad (Andrapradesh), Chennai (Tamilnadu), New
delhi (Uttaranchal), etc. It may be one reason for manufacturing outside Karnataka.
State to state policies, Excise duty on tobacco is also having an influence on industry
setup. Raw material other than arecanut may be cheaper in those centers. For example
Kolkata betel leaves were cheaper in Calcutta than Karnataka for Pan preparation.
Tobacco may be cheaper in other states than Karnataka. Demand of arecanut value
added products without tobacco like scented supari, kaju supari, flavored supari etc.
increasing over the years. Emerging products yet to boom in market where consumer
preference would be one important factor (Shruthi, 2008).
The WCT was mainly used for direct chewing purpose as this type has low
keeping quality. Main factors in WCT are flavor and dryness of nut which in turn give
a taste desirable for direst chewing with or without tobacco. There were about twelve
products from WCT available in the market among them 66 per cent were branded
and the remaining 34 per cent were unbranded. Branded with attractive sachet would
have influence on consumers and a long term keeping quality for the retailers.
Majority of the products from WCT were value added without tobacco that is
manufactured within Karnataka. These minute features about the consumption pattern
of the arecanut are very crucial that need to be considered while promoting the value
chain for it.
Arecanut was well known as an appetizer, which is having digestive and
carminative properties. In this background, promotion of arecanut chewing as mouth
freshener and as a fashion product after intake of food becomes a better strategy for
market development. This is in conformity with the study by Shankar Bhat (2008) on
medicinal and alternative uses of arecanut.
5.3 Estimation of Price Spread for Scented Supari and Sweet Pan Beeda
Price spread highlights the producers’ share of consumer rupee where in other
market intermediaries have their own share in between. Two products were used for
studying the price spread was Scented supari and Pan or Beeda, prepared from RBT
and WCT arecanut respectively. Scented supari is a mixture of RBT arecanut with
other flavoring ingredients menthol, borneol, clove oil, magaz tarbuz etc. (Bhat, 2008)
but Pan is prepared from WCT arecanut with other ingredients by panwallahs.
Retail price of Scented Supari and Pan Beeda were taken as consumer price to
find out the price spread. As indicated earlier, Channel II which was co-operative
channel was found to be more efficient than channel I as marketing cost incurred by
the intermediaries considerably higher. This also proves the worthiness of the co-
operative organizations vis a vis the private agents, and hence an ideal option for the
policy makers to support them whole heartedly under the era of liberalization.
5.3.1 Marketing Channels
To analyze the price spread two main marketing channels were identified
which was largely followed by respondents. Channel I starts from the farmer to
market intermediaries and to consumers. The channel II consists of farmer to co-
operatives and to consumers. Marketing channels facilitate easy computation of price
spread that vary for channel to channel. The respondents using channels were taken in
to consideration for the study because value added products selected for the study
were Pan and Scented Supari, manufactured and consumed in the study area itself.
5.3.2 Estimation of Price Spread
The share of producer and market intermediaries in the consumers’ rupee
denotes the magnitude of price spread and market margin of the commodity.
Marketing of arecanut was like any other commodity involves the participation of a
number of intermediaries between the producers and the final consumers. The private
traders purchase the produce directly from the farmers at a lower price and sell the
same to secondary traders, wholesalers or co-operatives at higher prices to make
profit. The size of marketing margin increased with an increase in the participation of
intermediaries. Both the size and composition of the marketing margin varied across
different marketing channels.
5.3.2.1 Sweet Beeda Product
The price spread in arecanut market is given in table 4.6. The price spread in
channel-I was worked out to be Rs.66,000 per quintal for Beeda. In channel-I, the
retail price of beeda shops was considered as consumer price where in the farmers
could realize 10 per cent of the consumers’ price. The remaining 90 per cent was
comprised of marketing cost, value addition cost and profit margin of the
intermediaries. In channel II, producers’ share was 12 percent of the consumer price
and the co-operatives realized four per cent of the marketing margin. The Beeda shops
did not find any price difference among the channels. Among the two channels, co-
operative channel (Channel II) was relatively more efficient as price realization to
farmers were higher. In addition to this farmers could derive other benefits like inputs,
credit, membership dividend etc. from the co-operatives. For sweet beeda, margin
was very high (forms 26 % of total retail price) and the cost of other ingredients other
than arecanut formed nearly 58 percent of the total. Even though producers received
10 to 12 percent of consumer’s rupee, existence of a large number of beeda shops and
millions of consumers of it had given more cumulative benefit to the farmer.
Secondly, due to lower price of WCT arecanut (Rs.7500 to 8800 per quintal)
compared to RBT, used for the preparation of beeda, producers’ share was reduced.
The Co-operatives like CAMPCO should undertake more processing units and open
its own retail outlets under its banner all over India and abroad.
5.3.3.2 Scented Supari (Kaju Supari) For RBT arecanut, the value added product considered was Scented Supari
manufactured by CAMPCO in Mangalore. This is branded as Kaju supari where
arecanut was mixed with cashew, menthol, sugar, vegetable oil etc.
In channel-I, the price spread for Scented Supari (Kaju supari) was estimated
to Rs.30,350 per quintal and that of channel II it was Rs. 29,350 per quintal. The
farmers could realize 31 per cent of the consumer price with a net price of Rs.13,650
per quintal and 33 per cent of the consumer price with a net price of Rs. 14,550 per
quintal from these two channels respectively. The co-operative channel (II) was found
to be more efficient than the channel I as farmers could get two per cent more share
due to the absence of intermediaries in channel II. The scented supari was a value
added product without tobacco using the RBT arecanut which was priced higher
compared to WCT. Intermediaries cost were discussed in subsequent chapters. Glenn
et al. (2002) in his study on Florida dairy marketing co-operative (FDMC) found that,
the supply chain improvement reduces the inventories, wastes and costs incurred in
the co-operative and so it increased the efficiency with in the firm and in the market
channel. This also found to be true in case of the CAMPCO Ltd.
A study by the Central Plantation Crops Research Institute (CPCRI),
Kasaragodu further corroborated the results through price spread analysis which
indicated that the channel consisting of Producer- co-operative society - co-operative
society’s sales depot (consuming center) - retailers - panwallah – consumer was the
most efficient (http://www.cpcri.nic.in).
5.4 Market Competitiveness in Shimoga and Mangalore Markets
In arecanut, marketing implies systematic performance of activities related to
processing, grading, standardizing, assembling, storing, transporting, financing,
selling and distributing in an order to reach the produce to the ultimate consumers. A
competitive market would help the farmers to realize stable and remunerative price
than in a less competitive market. The following techniques were used to analyze the
market share of intermediaries that throw some light on the competitiveness or
otherwise in a market.
5.4.1 Market Share
An examination of the results given in the table 4.7 indicates that market for
arecanut in both Shimoga and Mangalore were not very competitive. A simple
method of calculating the purchase by top ten dominant traders reveal that in both the
market, the value comes around 40 per cent this is the clear indication of
concentration not a competitively dispersed market.
5.4.2 Hirschman's Index
Hi was another technique which was also used study the competitiveness in
market. A value of HI nearer to one indicates a perfect competitiveness in the market.
In the study areas it was 0.30 in Shimoga and 0.32 in Mangalore market. These also
further indicate the concentration of the market. Arecanut markets were widely
distributed as far quantity handled by the intermediaries concern. The same was
further corroborated another techniques called Gini Ratio and Lorenz curve.
5.4.3 Gini Coefficient
The market inequality was analyzed by Gini coefficient ratio by taking into
consideration of buyer’s concentration in respective markets. It was shown that 0.82
in Shimoga and 0.83 in Mangalore market. Therefore both the markets were showing
nearly perfect inequality in quantity handled by different buyers of arecanut. The
market inequality leads to less competition and there by scope of value addition was
limited.
5.4.4 Lorenz Curve
The degree of buyer’s concentration was further analyzed through the
technique of Lorenz curve. It was depicted in Fig. 4.2 and Fig. 4.3 showed the
presence of inequality in buying pattern as the bigger traders made proportionately
more transactions. This was clearly depicted by wide gap between the line of equality
and the Lorenz curve in both the markets. Mangalore market was better than Shimoga
market. Similar results were found by Nikhil (2008) for Shimoga market and Prakash
(1997) for Mangalore market.
By studying the above four techniques, it concluded as Shimoga and
Mangalore markets were not competitive enough to provide a remunerative price to
the farmers. It could be one reason for realizing low producer share in value added
products like Pan and scented supari. However a study by Prakash (1997) indicated
that CAMPCO the co-operative acted as dominant buyer in Mangalore market.
Though this had remitted a concentration like situation due to the presence co-
operative its implication on price front was not undesirable. As co-operative is totally
accessible to farmer member, the presence of CAMPCO in Mangalore helped to
provide a stable and remunerative prices.
5.5 Cost Incurred by the Market Intermediaries, Beeda Shops and Farmers
The next in the step analysis of price spread was to study cost and return for
intermediaries in the markets. As stated earlier, these market intermediaries that
include wholesalers, private traders and co-operatives were studied. These
intermediaries undertake several activities that include transportation, grading,
packing etc within the market itself. Some intermediaries’ especially private traders
and co-operatives even undertake some processing activities such as making slices,
powder of the nut for easy consumption and palability. These costs are present in
Table 4.8. In arecanut economy few industries have share of maximum quantity
processed, they demand different customized arecanut to mix for proper blending of
final products (Gutkha, Pan masala etc). Costs incurred have strong influence on price
spread, lower the cost higher the efficiency in marketing channel.
5.5.1 Costs Incurred by the Market Intermediaries in Shimoga and Mangalore Markets
Intermediaries were the individuals or agencies who specialize in performing
various marketing functions involved in the purchase and sale of goods from
producers to consumers. As revealed in the result private traders incurred more cost
per quintal in both Shimoga (Rs. 2500 per quintal) and Mangalore (Rs. 2200 per
quintal) markets. Within this grading and garbling form the major chunk in both the
centers as private traders take arecanut to far-off consuming and processing centers to
meet their demand, they go up to 25 graders and sub grades. Within these two types of
arecanut hence their cost is relatively higher compare to other intermediaries. By and
large intermediaries in Mangalore market have incurred relatively lower marketing
cost compared to their counterpart in Shimoga. This may be due to difference in types
of arecanut marketed in these markets which may be having different activities having
cost differentials. Wholesalers in both the market have incurred lower cost per quintal.
This is mainly because they did not undertake processing in both the markets. As
wholesalers does not have any processing cost and very less investment on grading,
packing and storing, lead to less cost compared to the private traders and co-
operatives. Few traders opined that high and uneven tax structure across the state’s
leading to tax evasion through illegal trade where lower grade rate was mentioned in
invoice for high quality arecanut. Cooperatives on the other hand in spite of having
better infrastructure and management perspective did not exhibit much cost advantage
in this regard.
By and large it is the grading and garbling by occupying of almost 22 per cent
of marketing cost had emerge as single most cost item in the marketing of arecanut.
This implies the important grading and standardization in arecanut to cater into
diversified needs of processors and consumers in India. As the grading of arecanut in
the consumption sector was different from the production sector, so farmers grades
only limited to five in RBT and three to four in WCT but market intermediaries would
grade more than 25 types from each type of arecanut. Garbling in case of WCT
involves machine grading according to size of arecanut.
Commission charges paid were accounts 11.2 per cent of the total marketing
cost. It is the cost incurred while purchasing the arecanut from farmers through
commission agents, commission charge at the rate of two per cent of value realized
was paid by private traders and Co-operatives. In case of WCT storage quality was
very limited to short period and hence fumigation was must. But in RBT arecanut
majority of the produce come to market was stored for a period of 1-2 years. Gunny
bags were used for this purpose since it was good for better air circulation which was
important for avoiding the fungal growth and protecting the good quality of arecanut.
So gunny bags were preferred over plastic bags though price per plastic bag was
relatively lower than gunny bags. The wholesalers also had borne various
expenditures like establishment cost, rent of the shop and labor charges who handles
the activities of loading and unloading etc. Market intermediaries would incur very
less amount of transportation cost as it was majorly incurred by the buyer itself. As
mentioned earlier the price of arecanut is very elastic not only to method of
processing and also grading of arecanut. As given in the appendix IV and V, these
two types of arecanut are undergoing even specific and minute grading up to 20 types
in the market. However concerted efforts through mechanization should be made to
evaluate machines to undertake the grading and garbling of arecanut at the market
intermediaries level.
5.5.2 Cost and Return of Beeda Shops
Traditionally, cutting across cast, region and religion, the meal and feast
follow pan beeda chewing in India. The Ayurveda considers pan (without tobacco)
chewing keeps mouth clean, strengthens the gums, tongue and teeth and guards
against diseases. It also found to enhance digestion (Prakash, 2006). The Pan or beeda
prepared from shredded areca nut, lime paste (chuna) and other spicy ingredients
wrapped in a triangular package using a betel leaf (Piper betle) held together with a
clove normally served after food in India.
In arecanut marketing Pan shops were very unique as compared to other
agricultural commodity. The costs and returns of beeda shops were given in table 4.9.
As mentioned earlier, the WCT arecanut was mainly used for beeda because of its
low costs, good flavor, easy to chew property and other suitability compared to RBT.
The Beeda can be prepared both without tobacco (sweet beeda) and with tobacco
(zarda beeda) as per the chewing habits of the consumers. Number of sweet beeda
prepared per kg of arecanut is normally lesser than the number of zarda beeda as
more arecanut is used in sweet beeda. As the price of tobacco was also higher and
hence the price and margin were higher compared to sweet beeda. Hence, preparation
of beeda without tobacco required 50 percent less cost than beeda with tobacco.
While preparing the beeda, already processed sweetened supari was used that formed
nearly 12 percent of the total value. Hence, the sweet beeda is having an added
advantage in value chain process of arecanut. As sweet beeda is a traditional chewing
products having more socially acceptability that the beeda with tobacco (Zarda), its
consumption need be further promoted in order to strengthen arecanut economy in
India. While analyzing the cost and return for beeda shops only indirect operational
costs are taken into account. As in most of the cases, these shops are not very well
established. The overhead costs towards building, space etc are not easily available.
Though these costs are very important they are not considered for the study.
5.5.2.1 Factors Influencing the Sale of Branded Value Added Products
After studying cost and return for the value added products, an attempt also
made through multiple regression analysis to factors that are responsible for the sale
of these products. The details are given in the table 4.10. Branded value added
products (Scented supari, supari, flavored supari, gutkha etc) were mostly sold in
Pan shops as a retail chain.
The results clearly demonstrated that year of experience and investment in the
beeda business, nearness to hotel had positive influence on sale of branded value
added products. It is also interesting to note that sale of traditional unbranded products
like pan or beeda had also push the sale of branded value added products by the beeda
shops. Though these are all small issues but they have significant influence in the sale
of a traditional habitual consumption items like beeda. The beeda making is both a
traditional part as well as a skill. Mixing of several ingredients in an appropriate
proportion so as to meet the diverge need of the consumer is both an art and skill.
Hence the experience which panwallahs gain in not only preparation of beeda but also
familiarity with regular customers is also crucial in this respect. And it is clearly
highlighted by the study that vicinity of the well established hotels and restaurant are
ideal place for selling of beeda implying that food eating and pan chewing are
complimentary with each other. Investment also got a direct and significant bearing
on sale of beeda who definitely lack finance for modernize the beeda shops. The
government and financial institutions should look at this issue and come out with
schemes to support panwallahs in India. As the country in having around six lakh of
villages, there is a huge scope to have more pan beeda shops throughout the country
side (Anonymous, 2001).
5.5.3 Production and Marketing Cost Incurred by the Farmers
To understand more clearly producer share in consumer rupee it is essential to
study actual cost incurred by the farmers for production and marketing of arecanut.
The results are presented in the table 4.11. It is also important to see how much
actually farmers get as net profit as well as economies of production in the production
of these two types of arecanut at the price received by the producer (Rs. 7500 for
WCT and Rs. 13,650 for RBT) as revealed in the price spread analysis presented in
table 4.6.
It was evident from the results that farmers producing RBT have incurred
around Rs.15,000 more cost for production and marketing of arecanut. As RBT
undergoes rigorous processing in the form of continuously boiling and sun drying for
12 -15 days for which more cost was incurred. Processing cost alone in RBT comes to
Rs.8613 per acre which was almost double compared to that of WCT produced in
Dakshina kannada. These rigorous efforts while preparing RBT arecanut by the
farmers in the purview of Shimoga market fetches a premium price compared to
WCT. As mentioned earlier farmers producing RBT have received rupees 13,650 per
quintal in the market which is almost 82 per cent higher compared to price of WCT.
This relatively higher profitability was further dissected by estimating net profit acre
and benefit cost ratio. The net profit received by farmers producing RBT was Rs.
28,550 per acre with a B:C ratio of 1.44, the same were Rs. 22,150 and 1.43
respectively in the case of WCT. However it is also evident from the results that
farmers have sold the arecanut in the form of raw form without any processing receive
a meager B:C ratio 1.03 and 1.16 in RBT and WCT respectively. This gives a rough
estimation that processing at the farm gate level added value to the extent of 40 per
cent in the case of arecanut produced and marketed in the study area. These results
clearly demonstrated that processing of arecanut at the farm gate level added more
value in arecanut.
5.5.3.1 Factors Responsible for Processing Cost of Farmers
A Further analysis was under taken to understand the factors which are
affecting the processing cost incurred by farmer in the study region. The results are
given in the table 4.12. As expected on a priory basis experience in arecanut farming,
yield, and area under areca have significantly reducing in total cost of processing.
This indicates that economy of scale if possible might have operated in arecanut. It is
also interesting to note that yield of arecanut have significantly reduced cost of
processing. The earlier studied by Khan (2007) as clearly pointed out that there was
huge yield gap compared to either scientific yield or progressive farmers yield in the
region in arecanut. Hence efforts should be made to enhance the yield of farmers so as
to minimize the cost of processing and thus got higher net returns in arecanut.
Price spread analysis in arecanut value added products should be strengthen or
make it more efficient for consumer preference. From the analysis of intermediaries in
the value chain of the Beeda shops and Scented supari products of arecanut following
points were drawn.
a. Market competition was not favorable. Private traders dominate the markets
compared to Co-operatives.
b. Market intermediaries incurred more cost and keep more margins which reduce
the efficiency of the value chain.
c. Beeda shops were using very negligible quantity of arecanut for preparing Pan.
d. Farmers level processing and grading of arecanut which was not enough for
consumer market.
5.6 Growth Rate and Instability in Arecanut Trade
An analysis of growth rate and instability of arecanut trade reveals same
disquieting trend especially after trade liberalization (table 4.13). Arecanut is a
commodity which has a limited export potential. The bulk of production of arecanut is
consumed within the country. However, a small quantity of arecanut exported is
mainly meant for Indian settlers in abroad. Important countries to which arecanut is
exported are Nepal, UK, Singapore, Saudi Arabia, Russia, Thailand, Australia, USA
etc. Quantity of arecanut exported ranges from 658 tones (1990-91) to 2293 tones
(2006-07) in the post liberalization period. Also the growth rate in arecanut exports
has been found to be positive and instability index was quite high (48.60 %) in this
period. This may be due to increase in the arecanut consumers in abroad over the
years. Value added products were exported over the years. India exports arecanut in
the form of whole betel nut, betel nut pieces, pan masala and scented supari. High
instability index can be owed to range of export quantity which was 406 (1995-96)
and 3695 (2004-05) tonnes. Also government policies and domestic consumption
have also affected the growth rate and instability index. During 2006-07 India
exported 162 tonnes of betel nut split, 756 tonnes of betel nut whole, 1104 tonnes of
pan masala, 999 tonnes other form of betel nut (DGCIS,2008).
India majorly importing from countries like Indonesia, the quantity imported
ranged from 545 tonnes (1994-95) to 53275 tonnes (2006-07). Hence, Growth rate for
these period showed 32.83 and instability index was low (40.01 %). The imported
arecanut were in the form of betel nut whole and betel nut split. Major source of our
arecanut import was Indonesia with a share of 77 per cent. Bangladesh, Thailand,
Myanmar etc are other sources. As reveled through the results import of raw arecanut
is very huge which is fast increasing at a stable rate compare to export of finished
arecanut products from India. This clearly shows that product value management
keeping export in view is very much lacking in arecanut.
In India, average annual export of arecanut was 11 times lesser compared to
the quantity imported. Growth rate of import was 65 per cent higher compared to
Export. Higher instability index was observed in export which was 5.6 per cent higher
than import. In India small quantity of arecanut exported but unstable. Similarly, large
quantity of arecanut imported but stable. These were indicating adverse implications
on domestic farmers producing arecanut in India.
Prakash 2002, outlined following reasons for increased import of arecanut into
India for the recent years. Under the changed atmosphere of free trade and the
removal of quantitative restrictions by the Govt. of India, imports as well as illegal
entry of arecanut into India have received further impetus. Even the permitted import
duty up to 100 per cent, under WTO norms, does not inhibit the entry and sale of
arecanut if the prices are so low in the neighboring countries. Similarly, Govt. signed
the trade agreements under SAARC (with Bangladesh), SAAPTA (with Srilanka) and
ASEAN have also allowed easy import as well as illegal entry of arecanut into
Country. As a result, all these may be reasons for the higher quantity of arecanut
import to India in recent years.
It is also recorded that arecanut is being imported at a much lower unit value
(Rs. 1400 per quintal) recent years in India. This compared to our well processed
arecanut form hardly 15 per cent of average price prevailing in domestic market. This
is possible only either through import of substandard low quality of arecanut or the
produce is undervalued mainly to evade custom duty. As there is a serious case
impeding upon very livelihood security of arecanut farmers especially in Karnataka.
Government should make all effort to arecanut distend.
Summary and conclusions
CHAPTER VI
SUMMARY AND CONCLUSION
Arecanut (Areca catechu L.) is one of the important commercial crops of
India. It plays a prominent role in the religious, social and cultural functions and
economic life of people in India. The economic produce is the fruit called “betel nut”
and is used mainly for masticatory purposes. Arecanut has uses in ayurvedic and
veterinary medicines. The habit of chewing arecanut is typical of the Indian sub-
continent and its neighbourhood. It is estimated that nearly ten million people depend
on arecanut industry for their livelihood in India (Rethinam, 2001). The quality,
variety and types of arecanut vary from one place to another. Betel nut, also known as
Pinang or Arecanut or Supari. Arecanut palm (Areca catechu L.) is cultivated
primarily for its kernel obtained from the fruit which is chewed in its tender, ripe or
processed form. It is native of Malayan Archipelago, Philippines and other East
Indian Islands. Commercial cultivation is confined only in India, Bangladesh and Sri
Lanka. Kerala, Karnataka and Assam account for more than 90 per cent of the total
area and production in our country.
Even though the export potential was limited, due to value addition process
there is a slow and steady increase noted over the years. Major destinations of our
arecanut exports are UAE, UK, Maldives, Singapore etc. Import of arecanut into the
country registered all time high of 76,678 tonnes valued at Rs. 11,065 lakhs during
last year. Major source of arecanut import is Indonesia, Thailand, Myanmar etc. Uses
for Arecanut other than chewing are negligible.
In Karnataka arecanut is processed in two ways viz,. Red bolied type and
White chali type. RBT is majorly used for branded value added products like Scented
supari, pan masala etc, but WCT is majorly used for unbranded or Pan preparation.
At the assembling APMC level places we have the effective market network
comprising of both cooperative and private traders. Within cooperative we have large
multistate cooperatives like CAMPCO and region specific cooperatives like
MAMCOS, MASS, HAPCOS etc. Mumbai, Ahmedadad, Indore, Jaipur, Delhi,
Nagpur, Patna, Calcutta, Cuttack, Bangalore, Rajkot, and Chennai are the important
marketing centers of arecanut in India.
Value addition is key element to meet changing preferences of consumer
demand in India as well as in abroad. To safe guard the consumer and producer,
efficient value chain which comprises of different intermediaries activities play a
major role in arecanut economy. Keeping in view the above, which are important in
arecanut processing, marketing and value added products in the study area, an attempt
has been made for value chain analysis of arecanut – a business management
perspective in Karnataka with the following specific objectives.
Specific objectives
1. To ascertain different value added products from White Chali and Red Boiled
types of arecanut in Karnataka.
2. To estimate and analyze the price spread of major value added products in
arecanut developed by different agencies.
3. To study the impact of trade on value chain management of arecanut in
Karnataka.
6.1 Study Area and Sampling Design
The present study was carried out in Shimoga and Dakshina kannada districts
of Karnataka state which was selected purposively since it accounts for about 37 per
cent of the total area and 45.5 per cent of the total production of arecanut in Karnataka
state which is highest in Karnataka both in area and production. Shimoga (For RBT)
and Mangalore (For WCT) were major marketing centers of arecanut and its value
added products.
The primary data comprises of 30 farmers, 30 market intermediaries, 20 beeda
shops and 03 cooperative societies in Shimoga study area. Similarly in Dakshina
kannada 30 farmers, 30 market intermediaries, 20 beeda shops and 03 cooperative
societies were selected. Data was collected by using pre tested schedule for farmers,
market intermediaries and Beeda shops. Interview method followed for Cooperative
societies for collecting both primary and secondary data regarding arecanut price and
processing. Secondary data regarding prices was collected from APMC offices of
Shimoga and Mangalore markets. Data on Export, Import, Area and Production of
arecanut were collected from regional offices of DGCIS, Kolkatta and DES, New
delhi.
6.2 Analytical Techniques
The data were presented in tabular form to facilitate easy comparison. In order
to ascertain different value added products from arecanut and the economics of
arecanut processing and its value addition at different stage, appropriate ratios
percentages were worked out, cost and return in case of market intermediaries and
beeda shops. The primary data regarding cost of processing and marketing at farm
gate was directly elicited from the arecanut growers. Price spread analysis was
performed to assess the market margins of the arecanut growers in case of value
added products. Market competitiveness was studied by using Lorenz curve, Market
share, Hirschmann’s Index and Gini co-efficients in Shimoga and Mangalore markets.
Growth rates and instability indices were computed to study the impact of in foreign
trade on value chain during 1995 to 2007. Multiple regression analysis was used to
determine the factors influencing branded value added products sale in beeda shops
and farmers processing cost per acre.
6.3 Major Findings of the Study
a) The average size of arecanut garden was 3.25 acres among farmers of
Shimoga (RBT) region and 3.08 acres in Dakshina kannada (WCT) region.
Major source of income was from arecanut farming to farmers.
b) Majority of market intermediaries were private traders (75 %) and
Wholesalers (25 %) with an average annual turnover of 1762 quintals of
arecanut per individual.
c) Natures of business in cooperative societies include commission agent
(MAMCOS, SKACMS), purchaser and processers (CAMPCO, HAPCOS,
KRAMCO and MASS).
d) Arecanut sourced for beeda shops in Shimoga was nearly 70 per cent from
wholesalers, 25 per cent buying from retailers and five per cent from their own
plantation. Similarly in case of Mangalore major source for buying arecanut
was from wholesalers (65 %), from retailers (20 %) and remaining sourced
from their own garden (15 %).
e) There were 25 value added products identified which prepared from the RBT
where as only 12 value added products identified which prepared from WCT
arecanut. Among them 29 were branded and eight unbranded value added
products of arecanut.
f) There were 25 products prepared from the RBT. Out of 25 products 21 (84 %)
were branded type and remaining four (16 %) Pan or Unbranded type.
Among the branded areca products prepared from RBT, 12 were products
containing tobacco, six products without tobacco and three nutraceutical
products. Value added products were Pan masala, Gutkha, Scented supari,
Kaju supari, Tooth paste, Pan beeda etc.
g) There were 12 value added products identified in WCT arecanut. Among them
eight (66 %) branded and four (34%) were unbranded or Pan type. Branded
products include four products without tobacco and four were emerging
nutraceutical products. Products include supari, Pan / beeda, Areca wine,
Areca syrup etc.
h) Among the value added products from RBT arecanut, almost 60 per cent were
manufactured outside Karnataka and that of WCT was 25 percent. It indicates
that majority of the branded products including gutkha, pan masala, scented
supari etc manufactured outside the Karnataka.
i) Majority of WCT arecanut was used for the preparation of unbranded or Pan
preparation.
j) For each product two channels were followed among which channel I
comprises of market intermediaries which in turn reaches the processing
agency. Channel II have cooperative net work which in turn reaches the
processing agency.
k) Producer share in consumer rupee for Sweet beeda was 10 per cent in channel
I and 12 per cent in Channel II and that of Scented supari was 31 per cent in
channel I and 33 percent in channel II. Among the two channels, co-operative
channel (Channel II) was relatively more efficient as price realization to
farmers was higher
l) Shimoga and Mangalore markets showing inequality in their buyer’s
concentration as the Hirshmann’s index was near to zero (0.3), Gini
Coefficient was near to one (0.8). The Lorenz curve was also depicting the
same indicate that markets were not competitive enough to provide a
remunerative price to the farmers.
m) In Shimoga market wholesalers incurred costs of Rs. 1600 per quintal arecanut
handled where as the private traders incurred Rs. 2500 per quintal and
cooperatives incurred Rs. 2200 per quintal while marketing RBT arecanut. In
Mangalore market cost incurred for a quintal WCT arecanut by wholesalers
was Rs.1400, private traders Rs.2200 and by cooperatives was Rs. 2100.
n) In the marketing cost grading and garbling form the major chunk in both the
centers as private traders take arecanut to far-off consuming and processing
centers to meet their demand, they go up to 25 graders and sub grades.
o) Total cost incurred for preparing one Kilo gram of Pan was Rs.550 and
Rs.1046 for without tobacco and with tobacco respectively. Total return from
one kilogram of pan was Rs.724 and Rs.1482 for the same respectively.
p) Experience in beeda business, Investment, Location of beeda shops and pan
beeda sale were found to have influence on sale of branded value added
products.
q) Processing and marketing cost incurred by the Shimoga farmers was Rs.8613
and Rs.1809 per quintal of arecanut respectively. It was Rs. 4800 and Rs. 3015
per quintal for processing and marketing of arecanut in Dakshina kannada
respectively.
r) Net profit in RBT (Shimoga) was 1485 rupees per acre for raw arecanut and
28,550 rupees per acre for processed arecanut. Dakshina kannada farmers
realize a net profit of Rs. 6740 per acre for raw arecanut and Rs. 22,150 per
acre for processed arecanut.
s) B:C ratio for raw arecanut was found to be 1.03 in Shimoga and it was 1.16 in
Dakshina kannada. B:C ratio for processed arecanut was found to be 1.44 in
Shimoga and that was 1.43 in Dakshina kannada.
t) Experience in farming, yield of arecanut, region and area under arecanut were
found to have influence on processing cost of farmers.
u) In the post liberalization the arecanut exports showed 19.84 and 48.60 per cent
of growth rate and instability index respectively. Import of arecanut showed
32.83 and 40.06 per cent of growth rate and instability index respectively
during 1995 to 2007.
6.4 Policy Implications
The present study has thrown some useful insight into the value addition and
consumption of products from two distinct types of arecanut namely, Red Boiled
Type (RBT) produced and marketed mainly around Shimoga market and White
Chali Type (WCT) produced and marketing around Mangalore market. Two
glaring disquieting feature. In this respects are
a. Most of value added branded arecanut products especially from RBT
containing tobacco as main ingredients.
b. Most of the branded are products marketed or manufactured outside
Karnataka.
As tobacco in recent years are increasingly attracting wrath from various
corners mainly on health ground concerted efforts need to be made to produce and
promote socially accepted alternative areca products. Many emerging areca products
such as herbal supari, diarreca, tooth paste, syrup etc. the need of the hour is to
strengthen large scale production and commercialization such socially accepted value
added products within Karnataka itself.
In this regard following policy measures are drawn:
1) Create a separate areca value chain zone in line with special economic zone and
export zone in places like Shimoga.
2) Arecanut is having very well established marketing networks involving both
cooperatives and private traders in Karnataka. However their activities are
confining mainly to assembling and supplying it to processors situated outside
Karnataka. Hence Co-operatives like CAMPCO, HAPCOS, KRAMCO and
MASS should be supported to undertake the production of value added socially
acceptable arecanut products either solely or with the partnerships of private
traders or investor within the arecanut value chain zone in Karnataka.
3) As explained earlier arecanut products are having a unique and traditional retail
outlets called pan or beeda shops dispersed in almost all urban centers throughout
India. However these retail outlet need sufficient credit to modernize then this
should be supplied at a concessional rate by either govt. or formal financial
institutions. Vertical integration need to be established between these and
modernized retail beeda or pan shops and cooperatives and / or private enterprises
who venture into production of alternative areca production.
4) As revealed through the growth rate and instability index of foreign trade of
arecanut, Import compared to export has registered high growth rate. This implies
that huge quantities of arecanut being imported to India in recent years at a very
stable rate compared to export. Hence serious attempts have to be made to remove
this trend. Government in this regard should motivate cooperatives like CAMPCO
to produce value added arecanut products and export same.
5) Areca being a traditionally rooted masticator nuts its consumption is wide
expressed not only in India and also in the entire Asia region. Its consumption
even past picking up among the Asians residing in developed countries in Europe
and North America. Hence it is an opportunity beyond limit to produce and export
of such products like having nutraceutical properties. Government should take
note of these and make an effort to promote the export of such products.
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CHAPTER VII
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Appendices
APPENDIX I: Arecanut World Area, Production and Productivity in comparison with India
Year World India Per cent share to
world production Area in ha
Production in tonnes
Productivity kg/ha
Area in ha Production in tonnes
Productivity kg/ha
1995-96 437320 552460 1263 243900 289700 1187 52.44%
1996-97 451370 556240 1254 255000 295500 1158 53.12%
1997-98 456010 562210 1233 261200 307700 1178 54.73%
1998-99 468320 593200 1267 273700 333500 1218 56.22%
1999-00 516930 645150 1248 277700 330100 1188 51.17%
2000-01 549200 646480 1177 289000 334400 1157 51.73%
2001-02 596580 707860 1187 315200 373100 1184 52.71%
2002-03 628450 740090 1178 340900 403100 1182 54.47%
2003-04 653970 762690 1166 354260 415880 1174 54.53%
2004-05 674340 794520 1178 365040 439150 1203 55.27%
2005-06 691300 819760 1186 37406 456340 1220 55.67%
2006-07 702890 854200 1215 381100 483140 1268 56.56%
2007-08 729395 911600 1249 396800 559200 1409 61.34%
Source: DES. New Delhi & FAO, Rome
APPENDIX II: State wise area and production of arecanut in India for the year 2007-2008
State Area in ‘ooo
ha
Production in ‘ooo
tonnes
Productivity
kg/ha
Share
Andra pradesh 0 0 0 0%
Assam 71 65 915 12%
Goa 1.7 2.6 1529 0%
Karnataka 168 224 1333 40%
Kerala 102.1 110 1077 20%
Maharashtra 2.3 3.6 1565 1%
Meghalaya 12 16.6 1383 3%
Mizoram 2 5.3 2650 1%
Nagaland 0.2 1.3 6500 0%
Tamil nadu 5.5 11.9 2164 2%
Tripura 3.4 6.9 2029 1%
West Bengal 24.4 106.1 4348 19%
Andaman
Nicobar 4.1 5.8 1415 1%
Pandichery 0.1 0.1 1000 0%
All India 396.8 559.2 1409 100%
Source: DES, New Delhi
APPENDIX III: District wise area and production of arecanut in Karnataka (2003-04) District Area in ha. Production
in Tonnes
Productivity in
Kg/Ha
% share in
prodution
Bagal kote 6 8 750 0.004%
Bangalore urban 216 302 715 0.15%
Bangalore rural 1998 2795 715 1.41%
Belgaum 2 3 667 0.00%
Bellary 30 43 698 0.02%
Charajnagar 309 219 1411 0.11%
Chick magalore 16347 18724 873 9.42%
Chitradurga 14366 13838 1038 6.96%
Dakshina kannada 27052 48332 560 24.30%
Davanagere 21235 20455 1038 10.29%
Dharwad 8 11 727 0.01%
Gadag 2 3 667 0.00%
Hassan 3193 3120 1023 1.57%
Haveri 634 886 716 0.45%
Kodagu 1344 1880 715 0.95%
Kolar 67 94 713 0.05%
Mandya 816 1141 715 0.57%
Mysore 645 458 1408 0.23%
Shimoga 28039 42193 665 21.22%
Tumkur 15459 18962 815 9.54%
Udupi 4954 8838 561 4.44%
Uttara kannada 12177 16552 736 8.32%
Total 148899 198857 749 100.00%
Source: DES, Karnataka
APPENDIX IV: Grades in case of White Chali Type Arecanut in Mangalore Market
APPENDIX V: Grades in case of Red Boiled Type arecanut in Shimoga Market
APPENDIX VI: Export and Import of arecanut from India
Source: Directorate general of commercial intelligence and statistics, Kolkatta.
Export Import
Year Quantity in
Tonnes
Value in
Lakhs
Unit value
Rs./Kg
Quantity in
Tonnes
Value in
Lakhs
Unit value
Rs./Kg
India's Production in
Tonnes
1994-1995 823 60002 72.90 545 70.25 12.89 -
1995-1996 406 360.76 88.86 5091 946.75 18.59 295500
1996-1997 513 419.00 81.69 9565 2122.32 22.19 307700
1997-1998 664 365.50 55.05 10823 3396.48 31.38 333500
1998-1999 533 468.92 87.96 6707 1875.57 27.96 330100
1999-2000 734 691.78 94.25 11695 3480.96 29.76 334400
2000-2001 712 669.11 93.98 29350 8554.64 29.15 373100
2001-2002 1483 728.90 49.15 14788 2600.66 17.59 403100
2002-2003 1555 741.28 47.67 21452 3603.74 16.80 415880
2003-2004 1809 1174.05 64.90 27957 3853.33 13.78 439150
2004-2005 3695 2066.12 55.91 32124 4395.37 13.68 456340
2005-2006 3458 2331.54 67.4 53275 7228.10 13.57 483140
2006-2007 5336 2293.00 42.97 76678 11065.00 14.43 559200
APPENDIX VII: Mapping of Value Chain in Red Boiled Type of Arecanut
Land LordsPrimary Traders
Small TradersCommission AgentsLocal Traders
Cooperative Societies
Exporters
Unbranded Supari Processers
Cooperatives
International Consumers
Gutkha, Pan Masala and Scented Supari Industry
Exporters
Private traders
Storage in APMC
Growers
Arecanut Plantation
Wholesalers
Domestic Consumers
Pan Shops
RetailersDistributors
State Agricultural & Horticultural Universities
APMC
AGMARK
CFTRI
Cooperative Societies
DGFT
Interstate policies
Market
Food Safety
Consumer Court
Raw Arecanut
Single Level Processing-
Red Boiled Type
Grading
Storage
Customization of different Grades
Multi Level Processing
Marketing Margin
Consumer
VALUE CHAIN IN RED BOILED TYPE ARECANUT
APPENDIX VIII: Mapping of Value Chain in White Chali Type of Arecanut
Big Farmers
Outside Traders
Small TradersCommission Agents
Cooperative Societies
Exporters
Cooperative Processor/ Garbling
Cooperatives CAMPCO etc.
International Consumers
Fadch, Tukkuda, chur of areca manufacturers
Exporters
Private traders
Small & Medium Farmers
Arecanut Plantation
Wholesale Traders
Domestic Consumers
Pan Shops
Retailers
ICAR,GOVT.
APMC
AGMARK
CFTRI
Cooperative Societies
DGFT
Interstate policies
MARKET
Food Safety
Consumer Court
Ripened Arecanut
Primary processing Processing-
Drying- Storage-Dehusk
Grading
Storage with Fumigation
Customization of different Grades
Marketing Margin
Consumer
VALUE CHAIN IN WHITE CHALI TYPE ARECANUT
CPCRI
DSAR
STORAGE
Supari Market
APPENDIX IX: Description of Value Addition in Arecanut
I. Pan Varieties Prepared by Panwallahs in Consuming Centers
1. Sada Pan: this preparation does include minimum spices and does not include
sweet substances and tobacco power varieties.
2. Meetha Pan: this preparation does include minimum spices and sweet substances
and does not include tobacco power varieties.
3. Special Meetha Pan: this preparation does include rich spices and sweet
substances and does not include tobacco power varieties
4. 120 Pan: this preparation does include minimum spices, 120 tobacco powder, and
sweet substances (on request basis)
5. 160 Pan: this preparation does include minimum spices, 160 tobacco powder, and
sweet substances (on request basis)
6. 300 Pan: this preparation does include minimum spices, 300 tobacco powder, and
sweet substances (on request basis)
7. 600 Pan: this preparation does include minimum spices, 600 tobacco powder, and
sweet substances (on request basis)
II. Value added products description
PAAN WITHOUT TOBACCO
Occasional paan chewers generally prefer paan without tobacco. Chewing paan
without tobacco, known as tambula in Sanskrit, is an ancient practice in India. Areca
nut is an indispensable ingredient of paan. In addition, a wide range of chewing
products including a chewing gum that may not contain either areca nut or tobacco
but contains strong betel quid flavours is available in the market.
PAAN (BETEL QUID) WITH TOBACCO
Paan chewing, or betel quid chewing, is often erroneously referred to as .betel nut
chewing.. Paan consists of four main ingredients.betel leaf (Piper betle), areca nut
(Areca catechu), slaked lime [Ca(OH2)] and catechu (Acacia catechu). Betel leaves
contain volatile oils such as eugenol and terpenes, nitrates and small quantities of
sugar, starch, tannin and several other substances.7 Condiments and sweetening
agents may be added as per regional practices and individual preferences. Some time
after its introduction, tobacco became an important constituent of paan, and currently
most habitual paan chewers include tobacco.
PAANMASALA
Paan masala is a commercial preparation containing areca nut, slaked lime, catechu
and condiments, with or without powdered tobacco. Paan masala contains almost all
the ingredients that go into the making of a paan, but are dehydrated so that the final
product is not perishable. It comes in attractive sachets and tins, which can be stored
and carried conveniently.
SUPARI
Areca nut is known as supari in several parts of north India. Some commercial supari
preparations are made by cutting dried areca nuts into bits and roasting them in fat to
which flavouring, sweetening agents and condiments are added.Supari is marketed in
attractive aluminium foil packs, in tins and in simple paper packets. Offering supari to
guests, especially after meals,is a prevalent and well-accepted social custom.
MEETHA MAWA
Meetha (sweet) mawa consists of thin shavings of areca nut, grated coconut, dried
fruits and other sweetening agents. It is used commonly in Gujarat and similar
preparations with different names are used widely in other regions.
MAWA
This preparation contains thin shavings of arecanut with the addition of some tobacco
and slaked lime. Its use is becoming popular in Gujarat, especially among the youth.
Fadcha: Arecanut cut into two equal halves
Tukkud: Arecanut cut into irregular shapes larger pieces
Chur: Arecanut cut into irregular shapes smaller pieces
APPENDIX X: Identified Value Added Products in Shimoga and Mangalore Branded products identified in the Shimoga and Mangalore market
Sl. No.
Place of manufacture
Price per sachet(RS)
Type of arecanut used
Gutkha 1. Star Belgaum 1.50 RBT 2. Shanti Bangalore 1.5 3. Sikander Sikander(UP) 1.00 4. Champion Hyderabad 0.75 5. Maruthi Kanpur 1.00 6. Vimal Moraiya 1.00 7. Parag 9000 Kanpur 1.00 8. Super Bhimasamudra 1.00 9. Myteacher Gujarath 1.50 10. RMD-Manik chand Pune 3.00 11. Goa 1000 Hyderabad 1.50 12. Panparag Kanpur 1.00 13. Hira Nipani 1.00 Panmasala 14. Rajanigandhi Guwahati 2.50 RBT 15. Star Belgaum 1.50 Supari 16. Sajan supari Hubli 0.50 WCT 17. Raju supari Mathura 0.50 18. Kaju supari Mangalore 0.50 Scented supari 19. Crane Guntur 0.50 RBT 20. Parivar Delhi 0.50 21. Kasthuri Ranibennur 0.50 Flavored supari 22. Parag Vadodara 0.50 WCT Sweet supari 23. CAMPCO Mangalore 0.50 RBT
Unbranded products identified in the beeda stalls of Shimoga and Mangalore towns
Sl.
No.
Beeda shops
products
Profit per unit
of item
Price per
unit in Rs
Type of arecanut
used
1. Sweteed betelnut
pieces
0.50 02 RBT & WCT
2. Sweeta beeda 1.50 05 RBT & WCT
3. Sada beeda 1.00 04 RBT & WCT
4. Zardha beeda 3.50 08 RBT & WCT
Emerging products identified in the Shimoga and Mangalore town
Sl.
No.
Emerging products Type of arecanut used
1. Herbal supari RBT
2. Diaareca WCT
3. Syrup WCT
4. Areca juice WCT
5. Tooth paste RBT
6. Supari viagra RBT
7. Nisarga supari WCT
Traditional value added products in villages
Sl.No. Traditional products Type of arecanut used 1. Tamboola RBT & WCT 2. Betel nut pieces with sugar RBT & WCT