CHAPTER 8.

0 B CASE STUDY: IMPACT OF APMC REFORMS ON APPLE FARMERS OF

HIMACHAL PRADESH

8.1 B Apple Production: India versus the World

In the year 2009, India produced 1.98 million tonnes of apples from an area of 274400
hectares. The area under apple plantation is second only to China in the world. The
average yield of apples in India is 7.2 MT per hectares, the lowest amongst the major
world producers.

Table 8.1 B: Major Apple Producing Countries in the World

Country Area (ha) Production (MT) Productivity
(MT/ha)
China 2000466 29851163 14.9
USA 141676 4431280 31.3
Poland 171963 2830870 16.5
Iran 202000 2660000 13.2
Turkey 158400 2504490 15.8
Italy 54642 2208227 40.4
India 274000 1985000 7.2
France 52200 1940200 37.2
Russian 243000 1467000 6.0
Federation
Chile 35000 1370000 39.1
Argentina 46000 1300000 28.3
Brazil 37890 1121468 29.6
Germany 31800 1046995 32.9
Others 1410973 14870547 10.5
World 4860010 69587240
Source: FAO Website, 10.2.2010 and Indian Horticulture Database, 2009

8.2 B Apple Production in India

Since apple can only be grown in temperate climates, majority of apple is produced in
three North West Indian states, namely Jammu & Kashmir (J&K), Himachal Pradesh (HP)
and Uttarakhand in regions ranging in altitudes between 1000 and 4000 metres. Jammu
and Kashmir is the leading apple producing state in India accounting for a whopping
67.1% of total apple production in India. Himachal Pradesh although produces only 25.7 %
of Indian apples it is the only state where Marketing reforms have been implemented and
as a result has a highly developed marketing mechanism. In Himachal, the major apple
producing areas are Shimla, Kullu, Sirmour, Mandi, Chamba and Kinnaur.

Figure 8.1 B Apple Growing Areas of India

 Table 8.2 B Major Apple Producing States of India (2008-2009)
State Area (ha) Production (MT) Productivity
(MT/ha)
Jammu and 133.7 1332.8 10.0
Kashmir
Himachal Pradesh 97.2 510.2 5.2
Uttarakhand 32.7 132.3 4.1
Arunachal Pradesh 10.8 9.8 0.9
Nagaland 0.0 0.1 0.4
Source: Indian Horticulture Database, 2009

Figure 8.2 B: Leading Apple Producing States 2009-09

 Source:
Apples being temperate fruit need a cold climate to fruit and mature. As a result, apple
harvesting season varies from June to November.

Figure 8.3 B: India’s Apple harvesting season

State Jan Fe Ma Ap Ma Jun Jul Au Se Oc No De

b r r y e y g pt t v c
Jammu and Kashmir
Himachal Pradesh
Uttarakhand

Early harvest Peak harvest Late harvest

8.3 B Apple Production in Himachal Pradesh

More than 98% of the orchard owners of Himachal Pradesh are marginal and small
farmers. District wise area and production of apple in the state is given in Table 8.3 B.

Table 8.3 B: Apple Production in Himachal Pradesh (2008-2009)

District Area under cultivation (ha) Production (MT)
Shimla 32195 336753
Kullu 23663 77409
Mandi 15353 30300
Chamba 7592 8640
Pangi 706 -
Bharmour 3544 -
Kinnaur 9671 55169
Lahaul 460 -
Spiti 352 577
Kangra 454 502
Una 0 0
Hamirpur 0 0
Bilashpur 4 1
Solan 100 34
Sirmour 3344 776
Total 97438 510161
Source: National Horticulture Board, Shimla

Table to be inserted here (made in landscape) 8.4 B

8.4 B Apple Supply Chain of Himachal Pradesh:

Indian horticultural produce supply chains are characterized by strict regulations and large
number of intermediaries leading to low share of farmer in consumer rupee, plethora, lack
of marketing options available to a farmer and poor MIS. In the last 5 years, private
players have started entering fruit and vegetable business in Himachal Pradesh and
started procuring directly from farmers besides providing a host of extension services and
agri-solutions to the farmers/ farming community under one roof.

8.5 B Research Study:

The study was undertaken to compare price realization of apple farmers of Himachal
Pradesh under two different supply chain models:
1. Supply chain developed by private sector company under public-private partnership
model
2. Traditional fresh produce supply chains as has been in existence in Himachal
Pradesh for decades.

8.6 B Research Methodology:

This study of the apple value chain of Himachal Pradesh is based on field visits and series
of discussions with farmers, pre-harvest contractors, consolidators, commission agents at
APMC mandis, transporters including refer truck providers, managers and members of
various NGOs, members of apple grower’s associations, representatives of various private
players like CONCORE, Reliance Fresh, Field Fresh, Mahindra Shubh Labh and owners of
Controlled Atmosphere warehouses like Adani Agro Fresh.

8.7 B Findings of the Study:

8.7.1 B The traditional marketing channel used by apple farmers of Himachal Pradesh
is given in Figure 8.4 B.

Figure 8.4 B: Traditional Marketing Channels of apples in Himachal Pradesh

The role played by various members of the supply chain is as follows:

Grower: The apple growers take care of their orchards throughout the year, add
manure/fertilizers, remove weeds and prune their trees. A lot of new generation of
growers is now practicing scientific techniques of cultivation learnt through extension
agencies especially provided by various private players like Adani, CONCORE, FieldFresh,
Mahindras etc.

Pre-harvest contractor: These contractors travel across villages, inspect apple orchards
post flowering and fruit formation, generate production forecasts and enter into
agreements with farmers. Thereafter, they hire skilled harvesters and packers who take
care of plant protection, irrigation, wrapping of poly ethylene sheets around apple bunches
and theft prevention.
Growers’ cooperatives: It was observed during the survey that farmers in about 40
villages of Churag and Pangana divisions in Karsog valley of Mandi district in Himachal
Pradesh have formed a ‘Karsog Valley Farmers Cooperative Society’, which is a body of
around 350 growers and marketers who now intend to sell their produce directly in big
cities under their own brand name ‘North harvest’ and thus get rid from the web of
middlemen and increase their price realization
Commission agent: The commission agent facilitates the transaction process between
wholesalers and forwarding agent.

8.7.2 B Farmers Realization in Traditional Apple Value Chain

The traditional apple value chain in Himachal Pradesh consists of a plethora of

intermediaries who not only jack up the final costs without significant value addition but
also exert a negative pressure on the farmer’s margin. Also, the quality of apples
deteriorates due to multiple handling. The cost incurred by each intermediary is included
in the ultimate price, which also varies considerably. Therefore, the share of the apple
farmer in price paid by consumer depends on the channel followed by the producer in
marketing his produce. It has been observed that in most of the channels, the numbers of
intermediaries are many and charges of different intermediaries are not in accordance to
the Market Acts adversely affecting the producers and the consumers. For working out
marketing cost and margins, the wholesale prices of Azadpur Fruit & Vegetable Market,
Delhi, are used as an example. This market is considered as the largest market of apples
in India where more than 70 per cent of apples arrive mainly from three states: Himachal
Pradesh (HP), Jammu & Kashmir (J&K), and Uttarakhand (UK).
The research study revealed that in HP, the share of apple growers in consumer rupee is a
mere 35% and the major share goes in the hands of market intermediaries. This price
realization by apple growers of HP is very low when compared to the farm realizations of
60% to 65% of the apple retail price in countries like the USA. (www.marketresearch.com).

Table 8.5 B: Marketing Costs, Intermediaries Margins & Farmers Realization-

Nov 2009
(Rs per apple box of 20 kgs)
S.N Particulars Traditional Channel
o. (Rs.)
Net Price received by Apple Grower 350
Expenses Incurred by Apple Grower
1 Packaging, Grading and Assembling 25
2 Packing Materials 70
3 Carriage up to Road Head 10
4 Freight up to Market 50
5 Commission of Forwarding Agent, State Tax, Octroi, 60
Loading/Unloading Charges, Commission of
Commission Agent
Subtotal 215
Whole sale price at Delhi market 565
Consumer Retail price across markets of Delhi 1000
Figure 8.5 B: Share of various Intermediaries in Traditional Apple Value Chain of Himachal

Source:

8.7.3 B Farmers Realization under Apple Procurement by Private Players

In the last couple of years various players beyond APMC like CONCORE, Reliance Fresh,
Field Fresh, Mahindra Shubh Labh and Adani Agri Fresh have starting procuring apples
directly from farmers. This has become possible as in Himachal Pradesh; reforms to APMC
Act have been done. Under the new Act amendment in Himachal Pradesh, private players
are allowed to open and operate agriculture markets, where farmers can sell their
produce. There is no compulsion on the farmers to bring their produce to the market yard
as they now have the option of selling their produce directly to private parties, food chains
and retailers.
Table 8.6B: Apple Procurement by Private Players in Himachal Pradesh

Name of Firm Year Quantity Average Rate (Per

(MT) Kg.)
M/S Adani Agri Fresh Limited 2006 4766.56 31.30 to 32.50
2007 15409.99 24.30
2008 19704.48 25.30
2009 8783.94 41.75
M/S Fresh and Healthy Enterprises 2006 1060.00 29.62
Limited 2007 10940.00 27.87
( a subsidiary of Container 2008 7720.00 35.50
Corporation of India, CONCOR) 2009 2720.00 44.12
M/S Dev Bhoomi Cold Chain Pvt. 2006 - -
Limited 2007 690.08 25.00 to 45.00
2008 723.24 35.80
2009 285.52 33.82
M/S Mahindra Shubh Labh 2009 500.00 37.00
Source: National Horticulture Board, Shimla

Adani Agri Fresh Ltd.

Adani Enterprises is one of the leading trading houses of agro commodities. Adani's Agro
commodities business is focused on trading in various agro products in India and
internationally, including grains, pulses, castor and soya.

Adanis realized that despite being the second largest producer of fresh fruits and
vegetables, India is a virtual non-entity on the world trade map in terms of the global trade
volumes. Due to lack of post-harvest management facilities, absence of suitable cold
stores and the lack of an organized distribution system, the wastage of fresh produce in
India is as much as 40%. The domestic market is characterized by oversupply in the peak
season and shortage in off season, resulting in off season prices that are often 3-4 times of
season prices. The lack of appropriate storage and logistic infrastructure jacks up the
prices for the ultimate consumers. As a result, neither does the produce reach the
consumer in the optimal condition nor does the producer get fairly remunerated.

Adani’s strategy is to concentrate on those fruits that are produced far from major
consumption centers, are seasonal in nature and are amendable to increase in storage life
using modern integrated cold chain facilities. This would enable them to leverage on its
logistics strength while at the same time take advantage of controlled atmospheric
storage technology to arbitrage on the price differential between peak and off peak
season. Initially the project is focused on apples and then they plan to diversify into other
fruits and vegetables like banana, grapes, lime, litchi, mango, mosambi, pineapple,
papaya, brinjal, bitter gourd, green chillies, peas, cabbage, cauliflower, ginger, garlic, etc.

In Himachal Pradesh, Adanis identified many constraints and in order to strengthen its
position aimed at the following aspects:

i. Development of innovative technology including cool chain, handling,

transportation, storage etc. to minimize post harvest losses in food products.
 Formulation of conditions for development of markets and marketing infrastructure
including e-marketing and assessment of trading performance.
ii. Application of International codes and standards (CODEX, HACC, and EU standards)
for food safety and quality assurance.
iii. Started developing strong relationships with farmers and government
iv. Training the teams
v. Developing better understanding of produce and the market.

Adani Agri Fresh started its operations in September 2006, by contacting farmers for
procuring the produce (apple) at an announced price and with certain specifications. Since
then they have Adani Agri Fresh Ltd set up Controlled Atmospheric Storage units at three
locations (Rewali, Sainz, Rohru) in Himachal Pradesh with a capacity of around 18,000 MT.
Each site has been constructed with 7 Blocks of 6 Chambers totaling to 42 chambers at
each location. ‘Controlled Atmosphere Technology’ increases the shelf life of apples.

Adanis procure apples from the farmers’ right at the orchard site or at their collection
centers conveniently located close to the farmers. The farmers do not have to bear any
marketing cost such as cost of box, transportation to the markets, commission, and
market fees etc. This totally eliminates any risk of farmers during transportation as well as
drastically reduces his price risk. Adanis provide plastic crates to the farmers and also
impart training on scientific cultivation, pest management and post harvest management
practices. At the pack house apples are cleaned, washed, sorted, and graded for both
quality and color by sensors. Finally, the apples are put under CA storage for better shelf
life.

From Table8.6 B, we can see that the farmer’s price realization from Adanis supply chain
has increased by 34% of the wholesale price as prevailing in Delhi’s Azadpur market.
Moreover, his risk of price fluctuation and wastages also gets reduced. This helps him to
plan his future investments in upgrading his farm and accept latest scientific technologies.
 Table 8.7 B: Producer’s share in Whole sale price: Adanis versus
Traditional Supply Chain

S.N. Particulars Tradition Adani’s Apple

al Supply chain
Channel
Net Price received by Apple Grower 62.0 96.1

1 Packaging, Grading and Assembling 4.4 2.9

2 Packing Materials 12.4 -
3 Carriage up to Road Head 1.8 1.0
4 Freight up to Market 8.8 NIL
5 Commission of Forwarding Agent, State Tax, 10.6 NIL
Octroi, Loading/Unloading Charges,
Commission of Commission Agent
Subtotal 38.0 3.9
Whole sale price at Delhi market 100.0 100.0

8.8 Lessons for Uttar Pradesh from Adani-Agri Fresh’s Model

The model adapted by Adani enterprise in designing the supply chain to improve price
realization of farmers clearly explains the role of different players in the supply chain to
bridge the gap existing in the traditional agri- supply chains.

The study suggests that public private collaboration through contract/corporate farming
would help understand functioning of domestic and global market and their implications.
The private players can provide both backward and forward integration to the farmers as
well as in building the capacities of all the stakeholders. With the creation of specialized
market infrastructure, post harvest losses can be minimized if quality aspects are properly
managed and would result in higher returns to the farmers and the consumers will get
better returns. Horticulture at national and international level would meet the long felt
need of planners and private sector for better management, and safeguarding against
supply shocks and price risk.

Some of the measures that Uttar Pradesh can take to re-design the supply chain for
improving the competitiveness of the fresh produce are as follows:
i. Integrate supply chain for fresh market, processing and export
ii. Sorting, grading and packaging to be done closer to production areas
iii. Setting up of a network of ‘Collection Centers’ / ‘Value Added Centers’ with basic
postharvest
iv. facilities
v. Introduce Returnable Packaging for fresh produce to avoid multiple handling and
minimize wastages
vi. Establish common cold chain facilities for marketing perishable products
vii. Encourage Contract Farming- provide direct linkages with farmers [market by-pass]
viii. Invest in training of farmers’ especially small and marginal farmers on practical
agri-techniques, pest management and post harvest practices.