An economic analysis of mango pulp agro based industry in Krishnagiri District, Tamil Nadu.

Introduction

India is the second largest producer of fruits and vegetables in the world. The diverse agro-climatic conditions prevailing in the country allow production of large variety of tropical, sub-tropical and temperate fruits. But only 1.5 per cent of fruits and 0.5 per cent of vegetables are processed and exported to other countries. The remaining 30 per cent of its produce of fruits and vegetables are post harvest loss. This can be averted by creating proper processing units. In this respect, agro-processing is the only industry for value addition that can absorb the surplus work force in the agricultural sector and provide better nutrition to the consumers (Subrahmanyam, 1995). Economic prosperity of any developing country depends on the integration of agriculture with industry. The dominance of farming can be enlarged from grain production to food processing.

Agro based industry refers to the subset of manufacturing, the processes raw materials obtained from agriculture and its associated sectors, and intermediate products derived from other industries such as semi-processed products. Some agricultural products do not directly go to final consumption. Before reaching the final consumption basket, it undergoes the value adding process, the contents of which understandably vary from commodity to commodity. The value adding process range from preservation such as drying, grading, storage to production of high value products through modern capital intensive methods (Chandha, 2003)

It was estimated that, driven by changing consumer preferences, the annual consumption of value added foods alone would grow to Rs.2,25,000 crores by 2007. The absolute revenue from this industry has increased to Rs.900 crores in food manufacturing at the end of 2001.

Mango is a fruit that grows in tropical regions of the world. Mango is called the king of tropical fruits. It is a delicious, exotic and nutritional fruit giving vitamins A and B to the human beings. Mango is processed for preparing a host of products such as juices, pulps, squashes, jam and pickles. The total world production of mango was 255.63 lakh tonnes in the year 2003-2004. The major mango producing countries in the world are China (34.13 lakh tones), Thailand (17.50 lakhs tones), Mexico (15.03 lakh tones) and Pakistan (10.36 lakh tones). In India, mangoes were cultivated about 4000 years ago. A loamy soil is fit for mango cultivation. Our total production of 12 million tonnes accounting for 41 per cent of the world production in the year 2003-2004. Nearly 50 different types of mangoes are produced in the country. The major mango growing states are Uttar Pradesh, Gujarat, Andhra Pradesh, Maharastra, Bihar and Tamil Nadu (Table-1)

Mango Exports

The total export of mango products was Rs.464.89 crores in 2004-2005. This is high compared to all other horticultural products. Mango pulp continues to be the largest items of exports (Table-2).

Mango pulp exports to different countries is given in Table-3. Saudi Arabia is the largest importer of mango based products amounting to Rs.103.12 crores followed by UAE (Rs 57.72 crores), Netherlands (Rs.49.16 crores) and Lebanon (Rs. 6.37 crores) in 2004-2005.

Compiled from the raw data of DGCI & S, "Monthly Statistics of foreign Exports", Vol. I, Part I, March 2003& 2004, Kolkata.

Mango pulp Industries in Krishnagiri District, Tamil Nadu

In Tamil Nadu, there are 385 fruit processing units, out of which 80 per cent of the units are under the category of small industries with an average capacity of 5.5 tonnes per day. The remaining units are medium scale category with an average capacity of 80 tonnes per day.

The largest mango producing district is Krishnagiri district, which is a newly created district of the state. Area under mango cultivation is 30017 hectares. The total production is around three lakh tonnes annually. Nearly 6000 metric tonnes of different verities of mangoes like Thapuri and Alphansa variety go for the pulp processing.

There are 30 mango pulp processing units in the district. All the industries are privately owned. Nearly 35000 metric tonnes of fruit juices is extracted every year. Nearly 40,000 persons were employed in this industries, apart from this, there are 150 private mango nursery units producing saplings in Krishnagiri district. The district exported mango based products worth of Rs.100 crores in 2003-2004. This is the largest export of horticultural product in the state. It provides employment to rural women workers as well.

WTO and its Implications on Mango Pulp Industries

The new trade policy of 1991 has given impetus to agro processing industries and it aims at increasing the percentage of processed goods from the present two per cent level to 10 per cent by 2010. The domestic mango pulp units are facing many challenges under WTO agreements. By the provisions or prescriptions of WTO, the member countries have to implement the Sanitary and Phyto Sanitary regulations. It will affect the Indian exports.

Our mango pulp products in the international market are not so attractive to China and Japan, because of the rejection of organic/inorganic residues found in our mango skins. Finally, the developed countries provide larger amount of subsidies to their farmers to produce mangoes.

Keeping the above issues, the present study has examined the following objectives:

(i) To study the economics of mango pulp units in Krishnagiri district; and

(ii) To analyse the problems faced by the processors in the district.

Methodology

The study covers Krishnagiri district of Tamil Nadu. The sample has been chosen based on the number of processing units in the district and hence all the 30 processing units were selected.

Pre-tested interview schedule was administered for the study. All the respondents maintained systematic records about the mango pulp industries. Secondary data was also collected from the office of the Assistant Director of Horticulture, Krishnagiri district. The period of the study was 2005-2006. The sample units were classified based on their ownership. All the industries were privately owned, as there are government run units and the total average investment per unit was Rs 2 crores.

Method of Estimation

The cost and returns in the selected processing units were estimated. The costs involved were grouped into fixed and variable costs.

Returns

The gross return of a unit was estimated by adding the revenues from the sale of the main and bi-products. The net profit was derived by deducting total costs from total returns. Investment in a sample unit was Rs 10,652,184 and lion's share of the investment was towards buildings, accounting 43.2 per cent of the investment and 41 per cent on machineries and equipments (Table-4).

Cost and Returns in the Sample Units

Table-5 shows details of fixed cost incurred by the sample units. Fixed cost included depreciation on buildings, machineries, equipments, interest on investment and salaries to staff. The Total Fixed Cost incurred by a sample unit of Krishnagiri district was estimated to be Rs.1, 698, 31, of which buildings accounted for 10.3 per cent, machineries and equipments 4.0 per cent.

Variable Cost Incurred by the Sample Units

The details on variable cost incurred by the sample units are given in Table-6. The Total Variable Cost incurred per year by a sample unit was Rs.1, 09,987,720, 90.4 percent of total variable cost went for purchase of mangoes and the processing cost amounted to 4.7 percent. The wages and bonus of the labourers amounted to 0.6 per cent of the variable cost.

Cost and Returns in the Sample Units

The details of cost incurred and returns realised per tonne of mango pulp processed by the units in the study region is furnished in Table-7. It shows that a mean total cost of Rs.45,388 was incurred by the sample units. Variable cost extended to 99.3 per cent and the fixed cost was only by 0.7 per cent. The returns realised per tonne of Mango Pulp processed amounted to Rs.61,624. The mean profit realised by the sample units per tonne was Rs.16,236. The result of the overall study revealed that processing of Mango Pulp is a profitable venture in Tamil Nadu.

Percentage was used in analysing the general details of the processing units, investment pattern, cost, returns and employment generated by the processors.

A frontier production function was derived from linear production function and estimated by corrected ordinary least square method. The specified production function was

Y = [a.sub.0] + [b.sub.1] [x.sub.1] + [b.sub.2] [x.sub.2] + [b.sub.3] [x.sub.3] + [U.sub.i]

Where

Y = Mango pulp processed in tonnes

[X.sub.1] = Mango used in tonnes

[X.sub.2] = Number of Female Labour employees.

[X.sub.3] = Number of male Labour employed

[a.sub.0] = Intercept

[b.sub.1], [b.sub.2] and [b.sub.3] are co-efficients, the value of which are to be estimated

[u.sub.i] = Error term

[Y.sup.*] = [a.sub.o] + [b.sub.1] X + [b.sub.2] [X.sub.2] + [b.sub.3] X 3 + [U.sub.i]

Frontier level of Mango Pulp production [a.sub.0] * corrected constant terms of ordinary least square estimate.

Efficiency Analysis

The results of the production function estimated are given in Table-8. Table-8 revealed that the Mango Pulp used was significant at 1% level of probability.

Constraints faced by the Processors

Even though mango pulp processing is highly profitable, it has its own problems. The major constraint in the units as reported by the entrepreneurs is the high wage experienced by most of the processors in the district. More than 80 per cent of the processors felt that declining trend in the supply of raw materials from the domestic market. High purchase tax is another hurdle. Other constraint expressed by the processors is the frequent power cuts during the processing period and wide fluctuations in the prices of mangoes.

In the study area as a whole, the results indicated that declining availability of mangoes in the domestic market as the supply has plateaued over the years, declining export and competition from the other countries were the major constraints faced by the processors.

Conclusions

The growth of the Mango Pulp industries in Krishnagiri district will bring large benefits to the people by way of employment and income. It will enable appropriate environment for entrepreneurs to set up food processing industry in the district. For making a quantum jump in exports there is a need to formulate a suitable export strategy and strengthening of infrastructure facilities. Efficient handling of post-harvest losses to improve cold storage facilities in the district is a must. Better and improved packing technology for the exporters and setting up of more quality control laboratories in the export processing zone's in the district is necessary for the growth of the industry.

Reference

Chandha G.K. (2003): "Performance of Agro-Based Industry in India Analysing Post Reform Advances and Reverse", International Food Policy Research Institute, Washington O.C., USA.

Subrahmanyam K.V. (1995): "Marketing of Perishable Commodities: Role of Fruits and Vegetable Processing Industries," Agricultural Economic Research Review, Vol.8 No.2, pp.37-47.

Table 1: Area and Production of Mango in India

Year         Area under Mango   Production Million
               Million Hect.          tonnes

1999-2000           1.49               10.50
2000-2001           1.52               10.06
2001-2002           1.58               10.02
2002-2003           1.60               10.78

Source: Ministry of Agriculture, New Delhi

Table 2: Exports of Mango based Products from India, April-March

S. No.   Items                    Year 2004-2005 In crores

1        Fresh Mangoes                         86.95
2        Mango based products                 300.86
3        Mango Pul                                --
4        Jams Jellies                          23.73
5        Mango Slices in Brine                 23.50
6        Mangoes Sliced                        10.25
7        Mango Juice                           15.20
8        Mango Squash                           4.40

         Total                            Rs. 464.89

Source : Compiled from the data of DGCIS Monthly Statistics.
Indian Foreign Exports. 2004-05

Table 3: Indian Exports of Mango Pulp Products
to major Markets during 2004-2005

S. No.   Country        Rupees in Crores

1        Saudi Arabia              89.90
2        Netherlands               34.74
3        Yemen                     31.39
4        UAE                       25.16
5        Kuwait                    13.91
6        UK                        12.51
7        Japan                     11.19
8        USA                       10.36
9        Sudan                     10.01
10       France                     6.76
11       Lebanon                    5.77
12       Oman                       5.41
13       Canada                     4.58
14       Nepal                      1.12
15       S. Korea                   0.47

         Total                Rs. 300.86

Table 4: Investment Particulars of the Sample Units

S. No.   Cost Particulars      Sample mean (in Rs.)   Percentage

1        Land                         23,64,981          22.0
2        Buildings                    34,24,825          32.0
3        Equipments                      65,020           0.1
4        Containers                       7,100           0.0
5        Plant and Machinery          44,69,154          41.0
6        Raw Material                  3,21,104           3.0
7        Other                      1,06,52,184           1.0
                                    1,06,52,184           100

Data collected from Primary Survey

Table 5: Fixed Cost Incurred by the Sample Units

S. No.   Cost Particulars                   Sample mean     Percentage
                                            values in Rs.
A        Depreciation: 1) Buildings at 5%        17,437         10.3
                       2) Machineries
                          at 3%                   6,832          4.0

B        Interest on Investment at 14%           87,360         51.4
         Salaries to Staff                       58,200         34.3

         Total fixed cost                     1,698,330          100
         Per tonne of mango pulp                  310.6
         processed

Table 6: Variable Cost incurred by the Sample Units
in Krishnagiri District

Cost particulars                     Sample Mean      Percentage
                                     Value in Rs.

Cost of Mango                         99,488,800.00         90.4
Purchase Tax at 8%                     14,428,44.44         1.30
Commission Charges                        994888.00         0.90
Storage Cost for Mango                   157,888.00          0.2
Packing Material Cost                  1,862,900.00          1.7
Electricity Charges                       40,174.00
Generator                                 15,000.00         0.05
Repair and Maintenance Cost                 8056.00        0.007
Bonus for Workers                        656,604.00          0.6
Processing Cost                        5,216,344.00          4.7
Miscellaneous Cost                          4222.00          0.0
Transport Charges for Mango Pulps        100,000.00          0.2
Variable Cost                        109,987,720.44        100.0
Interest on variable cost                 1,442,543
Total Variable Cost                     111,430,263
Total variable cost / tonne of               45,078
Mango Pulp processed

Table 7: Cost incurred and returns realized per tonne
of Mango Pulp Processed by the Sample Units

S. No.    Cost                      Sample Mean   Percentage

1         Fixed Cost                     310.62         0.67
2         Variable Cost                45078.00         99.3
3         Total Cost                   45388.62        100.0

Returns

          Income from Mango            61624.00
            Pulps, Rs. 150 per Kg.
          Total Returns                61624.00
          Net Profit                   16236.00

Percentage was used in analysing the general details of the processing
units, investment pattern, cost, returns and employment generated by
the processors.

Table 8: Estimate of the Production Function

S. No.   Variables                 Co-efficient   t-ratio

1        Constant                       -10.925    -0.978
2        Mango Pulp                    0.207 **    10.866
3        Female Labour employed           0.002    1.6954
4        Male labour employed              0.01     1.468

** 1 per cent level of Significance

*  5 per cent level of Significance