CONTENTS Page no. CHAPTER 1: INTRODUCTION 1.1 1.2 1.3 1.3.a 1.3.b 1.3.c 1.4 2.1 Background Objectives Methodology Desk Research In-depth interview Group discussion Sample Size

2010

Economic Analysis of Medicinal & Aromatic Plants Value Chain in Uttr akhandCHAPTER 2: MAP PRODUCTION IN UTTRAKHAND General Information 2.1.a 2.1.b 2.2 2.3 Introduction of Production Area MAP Production Market Information Wholesale Market 2.3.a 2.3.b 2.3.c 2.3.d 2.3.e 2.3.f CHAPTER 3: MAP VALUE CHAIN ANALYSIS OF UTTRAKHAND 3.1 3.2 3.2.b 3.2.c 3.3 3.4 3.5 Actors and their Functions in the value chain of MAP Various marketing cost components in the value chain of MAP Value Chain Mapping Marketing Channel Followed Description of value chains members

3.6 SWOT

GTZ Regional Economic Development Programme2/6/2010

CONTENTS CHAPTER 1: INTRODUCTION 1.1 1.2 1.3 1.3.a 1.3.b 1.3.c 1.4 2.1 2.1.a 2.1.b 2.2 2.3 3. 3.1 3.2 3.2.a 3.2.c 3.2.d 3.2.e 3.2.f 3.3 3.4 3.5 3.6 Background Objectives Methodology Desk Research In-depth interview Group discussion Sample Size General Information Introduction of Production Area MAP Production Market Information Wholesale Market Marketing Channels Marketing Channel Followed Description of value chains members MAP growers Transporters Wholesalers Manufacturing companies of MAP products Consumers Actors and their Functions in the value chain of MAP Various marketing cost components in the value chain of MAP Value Chain Mapping SWOT

CHAPTER 2: MAP PRODUCTION IN UTTRAKHAND

CHAPTER 3: MAP VALUE CHAIN ANALYSIS OF UTTRAKHAND

3.2.b Aggregators/Village Commission agents

1.1

BACKGROUND

The Regional Economic Development Programme in Uttarakhand is the most recent initiative of the Federal Republic of Germany in promoting Indo-German economic cooperation by assisting a relatively backward region in India to bridge the existing economic divide between the hills and the plains by complementing and supporting ongoing development efforts. The RED program envisages a steady flow of technical assistance from the German side which is intended to complement the Government of Indias reform policies geared towards a more inclusive growth and reducing poverty by generating income and employment, particularly for the rural and marginal groups in Uttarakhand. Following a market driven approach, the program focuses on the development of selected value chains and clusters with potential for inclusive growth, the creation of improved framework conditions for pro-poor market development and the improvement of market access for small and medium sized enterprises (SME) and producer organizations. The program also emphasizes on regional marketing and the promotion of Uttarakhand as a business location. The program is anchored in the Department of Rural Development of the GOU in cooperation with German Technical Cooperation (GTZ). In recent times the Indian economy has witnessed rapid economic growth and transformation. However the impact of this phase of economic resurgence continues to be limited to certain sun rise sectors. There still is a large cross section of the population that continues to remain untouched by the general spell of economic transformation. As a result of this overbearing phenomenon, today, the challenge lies in improving market access for large parts of the population, particularly rural and / or deprived groups, thus enabling them to grasp opportunities embedded in the ongoing economic development. Such challenges are especially evident in the new state of Uttarakhand, which is characterized by a dual economic structure: subsistence agriculture in the hilly regions and dynamic industrial development in the plains remain largely disconnected, thereby reinforcing the already existing economic and social disparities. To break this deadlock a concerted drive is required to improve upon the framework conditions and identify promotional instruments that foster the development of local enterprise and their integration in sustainable value chains; all leading to the creation of income and employment opportunities in the hilly regions. The present study was carried out on the value chain of Kuth and Kutki to analyze the economic aspects of Medicinal and Aromatic Plants (MAP) in Chamoli district of Uttarakhand

1.2

OBJECTIVES Collect relevant information from growers to consumers on current farming and marketing practices of MAP in the region. To define essential players in K&K value chain, then to map flowchart for different marketing channels and to evaluate roles of particular players in the chain. To identify the overall value addition generated by the chain and shares of each value addition at different stages To gather data and information on the production and marketing costs at each stage of the chain, and the cost structure along the chain stages To identify the cost drivers To assess the performance of operators (utilization of productive capacity, productivity, profitability)

1.3

METHODOLOGY

By identification of different stakeholders, value chain study on MAP has been carried out by adopting following approach: a. Desk Research: Relevant information from different resources such as annual reports of the organizations, reports from workshops, conferences had been collected and presented in accordance with the objectives of the study. b. In-depth interview: Oral interviews had been carried out for individuals or representatives of particular organizations in order to obtain reliable information or experiences regarding (K&K- MAP) cultivation and marketing. Players in K&K value chain like input suppliers, aggregators in cultivated area, wholesalers, retailers and consumers had been identified. Reliably collected information had been subsequently analyzed in the manner required by objectives of investigation. c. Group discussion: Information regarding cultivating and marketing practices of K&K had been obtained from growers through field visit, group discussions in order to learn problems and needs of growers. The information had also been analyzed and presented in this report. 1.4 SAMPLE SIZE As different areas of K&K production are from Chamoli district (being the pilot district) the representative samples from the areas and markets were selected to understand the true dynamics of the (K&K) MAP sub-sector in the district. Value chain as follows:

Table 1:

Area and value chain stakeholders

S.No

Area/Block wise

Villages visited

Value Chain Stakeholders

Total

1

Deval

Lohajung, Kulling

Vaan,

1. Farmers 2. Aggregators 3. Extension Provider Service

29 2 1

2

Ghat

Kanol, Ramani,

Sitel,

1. Farmers 2. Input Supplier 3. Aggregators 4. Extension Provider Service

23 1 3 4

Charbang, Bheti

CHAPTER 2: MAP PRODUCTION IN UTTRAKHAND 2.1 2.1.a GENERAL INFORMATION INTRODUCTION OF PRODUCTION AREA

The present study is confined to some selected blocks of Chamoli district of Uttarakhand which is considered as main production area of K&K in Uttarakhand. In this area cultivated K&K production has been in operation and is being run by different organizations such as NGOs, Govt. Organizations, entrepreneurs etc. Figure 1. Map of Uttarakhand showing the MAP (K&K) growing region

2.1.b MAP (K&K) Production Uttarakhand is the home for cultivation of all kinds of MAP, which are grown at different altitudinal zones and in all the geographical locations. In addition, diversity in the MAP crops can be observed everywhere. In terms of production, some areas are producing high quality and quantity of MAP but the production is not as much as can be desired keeping favorable geo environmental conditions in view. The villages, which are located in the highland, in one of the cases have exported substantial amount of MAP, particularly Kutki, in the international market and earned high income, but through the buying agents sitting at Bangalore in India. Table 2. MAP major growing regions (K&K) and their time of production in Uttarakhand S.NO MAPs (K&K) 1 Kuth Duration of the Planting Crop 2 years approx. and Growing regions

harvesting time April/May September/Oct Chamoli, Bageshwar, Uttarkashi, Rudraprayag, Pithoragarh, Almora Chamoli, Bageshwar, Uttarkashi, Rudraprayag, Pithoragarh, Almora

2

Kutki

3 years approx.

April/May September/Oct

2.2

MARKET INFORMATION

The hill areas are capable of growing MAPs that have a great demand in the National and International Market particularly in AYUSH, Herbal and wellness industry. A related advantage for Uttarakhand is its proximity to Delhi and other north Indian urban centers that have an increasing demand for Medicinal and Aromatic plant based raw material. Haridwar and Rishikesh are well known in the international and national market as centers of Yoga, aromatherapy, panchkarma and meditation etc. 2.3 WHOLESALE MARKET

Uttarakhand has a comparative advantage of Cultivating High Altitude Medicinal and Aromatic Plants in India. In Uttarakhand for marketing the MAPs the State Government has opened three MAP specific mandies at Ramnagar, Tanakpur and Rishikesh where the produce from various corners of the state is brought for sale/auctions. The mandi has fixed two days in a month for auction, which is presided over by Officials of Forest Department (DFO).

3. 3.1

MARKETING CHANNELS Marketing Channel Followed:

Farmer(s) Aggregators Wholesalers Manufacturer Consumers This is the main marketing channel followed, farmers send their produce to aggregator/ village commission agent, who is in touch with wholesalers and sends the produce to them and in turn sold to Manufacturing companies (Medicinal and Aromatic Products) 3.2 3.2.a Description of value chains members MAP growers

Through direct observation and discussion with farmers, the results showed that: The average area under MAP production per farmer is around 2-3 nalis/ farmer (50 nalis = 1 ha.).Most of the farmers are dependent upon HRDI and others sources e.g. NGOs for seed supply and are not aware of the latest techniques for production; very few progressive farmers (15-20 % of the total MAP farmers) are buying seeds directly from input suppliers (e.g. HRDI, HAPPRC and Ankur NGO). Farmers follow the cultivation procedure as sowing of seeds, weeding, manuring and harvesting of produce at the end. Farmers knowledge regarding scientific cultivation of MAPs is very limited. Most of the farmers sell the produce at cheap rates to get access to money for meeting their daily requirements. There is complete absence of primary post harvest operations (sorting/ grading /packaging /selling etc) by farmers. Farmers are not aware of the market rates, whatever information is supplied by aggregator/village commission agent; he has to rely upon them. Besides moss and lichen collection from the wild which is the major income earning items from the forest area farmers also do cultivation of potato, lentils and fruit crops such as apples etc. 3.2.b Aggregator/ Village Commission Agent He is the main link between buyers/traders and farmers. He is on the roadside where farmers brought their produce. He performs the operation of loading, unloading, putting marks on the packing units (Name of the farmer and name of the trader to whom it should be sent, the name of the farmer and trader (as symbol) is marked on packing. He also performs the function of information provider to buyer/traders about the production level in the area. He is also in touch with transporters.

3.2.c

Transporters

Transporters act as one of the main link between production area and market. Transportation is mainly done at two levels: i) ii) Produce loaded on animal Since the production is scattered and small quantities from different fields, transporters collects produce from collection points through aggregator 3.2.d Wholesalers Village aggregator/commission agent sends the produce to wholesalers. A wholesaler knows the production statistics of farmers produce through village aggregator/commission agents. He also knows the demands of the farmers, his requirements for consumable items, monetary support. 3.2.e Manufacturing Companies of MAP products

The samples of the material required by the Company are provided to the farmers in advance so that they can dry and grade the produce accordingly. The company uplifts the material from a pre decided locations as mutually agreed with the farmers. Weighing and grade checking is performed at the point of upliftment. Farmers are paid according to their produce. 3.2.f Consumers

Consumption is at two levels i.e. direct consumers who purchase medicine from the company and indirectly through other companies by products.

Figure: 2 Actors and their Functions in the value chain of MAP

INPUTS

PRODUCTION

TRANSPORT

TRADE

TRANSPORT

MARKETING

CONSUMPTION

A C T O R S

HRDI HAPPRC GB Pant Institute Ankur

Farmers

Animal load

Jeep Owner

Village Aggregato rs Large suppliers

Trucks

Retail Market Seller

Company End Consumer

Small Capacity Vehicles

A C T I V I T I E S

Supply of Seeds & Cuttings Technical Knowhow

Land Preparation Sowing Weeding Harvesting Cutting Drying Grading Packing

Loading + unloading transportatio n by pick up vehicle, link between farmer and wholesale trader to assess demandsupply

Grading Sorting Buying + Selling Transport

Loading Unloading Carrying transport to manufacturin g Unit

Storing Sorting Buying + selling

Buying produce for consumption

Table 3 S.No 1 2

Various marketing cost components in the value chain of MAPs Cost factors (Rs/Kg) Packing (Rs 20 per gunny bag) Transportation cost (animal load) (Rs 200/trip/2 gunny bags) Kuth 0.35 1.60 Kutki 0.50 2.50

3

Transportation cost roadside to mandi/company (approx)

4.25

4.25

4 5 6 7 8

Total transportation cost (2+3) Aggregator Commission (10%) Farm wastage @ 3% Wholesale wastage @ 1% Unloading charges at Mandi/company (approx) Rs 1000/truck

5.85 15.00 4.50 1.50 0.20

6.75 42.50 12.75 3.25 0.20

9

Weighing charges @ Rs 1000/truck load =3000 kg

0.33

0.33

10 11 12

Stationary charges Rs 1200/day Weighing error @ 1% Commission rate charged to farmer @ 8% (Rs./Kg)

0.40 1.50 12

0.40 4.25 34

13

Total Commission Charges at wholesale level

14.43

39.18

(8+9+10+11+12) (Rs./Kg) 14 Total Marketing Cost (Rs./Kg this cost 41.63 104.93

(1+4+5+6+7+13) excludes input cost)

Figure 3 MAP value chain Mapping

INPUTS

PRODUCTION

MARKETING

CONSUMPTION

Public and Private Extension Service (Subsidized planting material by HRDI) HAPPRC, Ankur, GB Pant Institute

Farmers (Around 350) NGOs

Wholesaler/A ggregators

Company End Consumer

VC Support

VC Operator

Informal business relation (Product)

SWOT analysis of MAP VCSTRENGTH All the produce is traceable and registered Threat of destruction by wild animals is limited Frost is not a problems Groups of growers is available for bulk production Availability of Research and Training Institutes in the state for high altitude MAPs. High demand supply gap demand is more than the total production Increasing price trend Negligible/no competition Quality produce is available Negligible required maintenance and inputs WEAKNESS Transportation from farm to roadhead and to collection points is a major problem Drying of the produce is a variable factor as per the different buyer requirements Awareness of grading process is not available Processing at farm level is missing No previous exposure to similar initiative or activity No specific relevant training is provided to the farmers Low level of awareness among the farmers for MAP cultivation Non availability of market linkage and organized setup Very long gestation period of crop Lot of paper work required OPPORTUNITY Suitable Climatic conditions for kuth and kutki cultivation Availability of ample land for up scalability of cultivation QPM is available Technical know how is available Scope of organized selling is high THREATS No assurance of market Kurmala insect and wild boars destroy the crop Dependency on rainfed agriculture Climate change & global warming