End of Project Report for the
Cashew and Fruit Processing Cluster of Sindhudurg, Maharashtra
- Executive Summary
The cashew and fruit processing cluster of Sindhudurg consists of around 150 micro enterprises (MEs) and 15 SSI (small scale industry) units which process cashew. Besides, 44 MEs and 160 self help group (SHG) units are into processing of other fruits, e.g. mango, jamun, kokum and jackfruit. It is estimated that the cluster employs around 4,000 persons, 90 per cent being woman. During a PPA exercise, the stakeholders identified the landless labourers and the small and marginal farmers earning their livelihood as casual/seasonal labour in various local units, as the poor, the BPL families being specially relevant in this context. Accordingly the vision for intervention was set as empowering 75 SHG and 50 ME units thereby impacting not only upon the income level of the families involved, but also improving their health and social security.
The major problems of the cluster units were identified as lack of adequate credit; absence of preparedness for productionisation, lack of production infrastructure as also lack of access to market and market linkages. Health aspects of the workers and the members of the SHG units as also their social security system was also a concern. All these were constrained due to absence of appropriately networked efforts to initiate steps to solve these issues.
During the process of implementation the poor (especially BPL) families were promoted by activating their SHGs as processing units, supported by the local NGOs, village panchayats and ME units in skill up-gradation, mobilising credit, getting access to appropriate tools, quality up-gradation, promotion of production infrastructure facilities and market linkages. As a result 74 SHGs (42 being BPL) consisting of 697 members (315 being BPL) were networked through 3 NGOs and 3 village panchayats. 36 SHGs (18 being BPL) consisting of 233 members (147 members being BPL) processed an estimated 200 tonnes of cashew and fruits. Loan and grant worth Rs 7.17 million was also mobilised. It is estimated that by the year 2006 around 176 families got an average additional income (wage and profit) of Rs 2824. 50 SHGs of farmers were also federated to go for joint certification of organic cashew. DRDA sanctioned infrastructure support to 3 networks of SHGs organised by the respective village panchayats. A number of technical and financial institutions were involved in this process of development.
While the networks of MEs have become self-dependent, for the future there is need for continuity of technical and handholding support to the networks of SHGs, especially the ones promoted into production by the village panchayats. Here, the disbursement of supports promised by various technical agencies will also be required at the earliest.
2. Evolutions, Turning Point and Current Status
Sindhudurg district[1] belongs to the State of Maharashtra[2], India. It has a population of 862,000, 92 per cent of whom live in 710 villages and 31 per cent of which are below poverty line (BPL[3]). It has an area of about 5,000 square kilometres contained in 8 blocks, namely Devgarh, Kankauli, Kudal, Malvan, Savantvadi, Vengurla, Vaibhavadi and Dodamarg. Agriculture is the main occupation of the people of the district. Paddy is the main crop. It represents 90 per cent of the crops grown and is used in the majority of households for self-subsistence. The district also abounds in horticultural produces including mangoes, cashew, garcenia indica (kokum), Indian gooseberry (aonla) and black berry (jamun). While cashew processing in Sindhudurg is almost a century old, the growth of other fruit processing units is a relatively recent phenomenon.
The first cashew-processing unit was set up in 1920 in Vengurla. Two more units followed in 1928 and 1929. The fourth unit came up in 1953. These units were exporting cashew kernel from the Vengurla port, through Portuguese traders, to the USA. At the beginning, cashew processing was profitable as export markets were fetching good prices. But since the raw material was available for a limited period in the year, processing units invested in working capital to procure and stock raw cashew nuts. It was in 1940, when the oldest unit suffered a major financial loss, due to the fluctuation in procurement price of raw cashew nut (RCN) with respect to the final price of cashew kernel (CK), the moving difference of which is a key determinant of profitability in cashew processing.
Most of the units have tended to confine themselves to the local market. Growth of the local market in Mumbai[4] further promoted this trend. Since then, a high birth rate[5] of small processing units is being constantly accompanied by equally high death rates, especially pronounced in young new units. Lack of working capital, the emergence of big processing units in Kerala and Mangalore[6] with stronger working capital capabilities, coupled with price fluctuations affected the SSIs in the district and many units got closed.
In the early 1970s, the Government of Maharashtra introduced the minimum wage laws for cashew nut processing workers. This led to a proactive discussion among the manufacturers and led to the creation of the Konkan Cashew Manufacturers and Exporters Association (KCMEA) in 1973. The Association was mainly into policy advocacy.
A significant section of the male members from the district was working in textiles mills and related businesses in Mumbai. During the late 1970s and early 1980s, labour disturbances led to mass closures of textile mills in Mumbai. As a result, the remittances received from family members living in Mumbai, which had been a constant source of income for most families in Sindhudurg[7], dried up. Soon, the local people started discussing for avenues to create employment, based on the existing natural resources, that could not only give employment to the villagers, but that could also absorb those returning from Mumbai. Soon a local NGO, Dr. Hegdewar Smriti Sewa Prakalp (HSSP) designed small-scale boiler, suitable for micro/household cashew processing units. The “Employment guarantee scheme” launched in 1990-1991 by the Department of Agriculture (DoA) led to conversion of cultivable wastelands and fallow lands into production of crops like cashew, mango, coconut, kokam, jamun, jackfruit, etc. 63 per cent of the additional area brought for cultivation by 2001-02 was sown with cashew.
Since November 2002, DoA started providing assistance to willing households for purchase of cashew processing machinery and also paying them interest subsidy under the National Programme for Rural Industrialisation (NPRI)[8]. As a result, a number of micro cashew processing units were established. Although most small/marginal farmers continued to cultivate paddy for domestic consumption, there was a growing tendency among them to grow horticultural crops due to these attractive incentives. As a result, there has been a substantial expansion in the area of horticulture in the state and many farming/processing units have emerged. The majority of former framers have been given the opportunity to process their production and have become micro-entrepreneurs. Some families with no land at all, even started cashew processing by buying RCN.
3. Major Stakeholders and Poverty Dimensions
3.1 The major stakeholders:
The major stakeholders include cashew and fruit processing units in the form of self-help group (SHG[9]), micro enterprise (ME) and small-scale industry (SSI) units.
In general an SHG consists of a group of 10 to 15 households. Each household is represented by a male or a female member. Accordingly, a male (all male members), female (all female members) or a mixed (some female and some male members) SHG is formed. An SHG takes a name and the members necessarily do joint savings in an account opened in a bank in the name of the SHG. Members do inter-loaning and the SHG can also take loan from a bank, where it has opened an account. Moreover, members of an SHG can go for joint loaning, joint purchase of raw material, joint production (often at a single location), joint marketing, etc. for a typical product. Accordingly, an SHG unit is defined here as an SHG that is involved in at least one of these joint activities. Labour wise, SHG units use their own labour only. SSI units hire wage labourer from across the district and MEs use both own family labour as well as hired labour. The processing capacity is dominated by SSIs in cashew kernel (98% of the total) and MEs in fruit processing (almost 90%).
It is estimated that around 15 SSIs and 150 MEs process cashew. These units process 30 per cent of the total produce (30,000 tonnes) of the raw cashew grown in the district[10] and also process, imported cashew. Besides, 44 MEs and 160 SHGs[11] are into processing of other fruits (e.g. mango, jamun, kokum and jack fruit). MEs and SHGs often use the cashew and fruits they grow themselves for processing. They also source raw material from traders. The average employment is around 40-50 persons per SSI, 5 to 10 persons per cashew ME, 10 persons per fruit processing ME and 50 per cent of the members of each SHG unit. Hence, it is estimated that the cluster employs around 4,000 persons[12], 90 per cent being woman. A block wise break-up of units is given below (table 1).
Table 1: Major Stakeholders of the Cluster
Talukas
/ Cashew processing units / Other fruit processing unitsSSIs[13] / ME[14] / ME /
SHGs
Kudal / 2 / 58 / 8 / 25Savantvadi / 3 / 55 / 13 / 5
Vengurla / 7 / 51 / 8 / 43
Malvan / 2 / 48 / 4 / 49
Sub-total / 15 / 212 / 33 / 122
Other talukas / 0 / 101 / 11 / 48
Total / 15 / 313 / 44 / 160
Though these units are spread over the district, most of them are concentrated in the talukas of Malvan, Vengurla, Savantvadi and Kudal. The Kankavali block also has a sizeable presence of units, however, an NGO - Gopuri Ashram was already active in Kankavali with the support of the National Bank for Agriculture and Rural Development (NABARD). Hence for all practical purposes, UNIDO decided to concentrate in the talukas of Malvan, Vengurla, Savantvadi and Kudal as detailed below in Figure 1.
Figure 1: Coverage of the UNIDO Project
There are 100,000 farmers in the district and 70,000 are involved in cashew cultivation or have cashew trees in their land. In every village there are one or two big farmers and rest are small and marginal framers (maximum land holding not more than 2 Ha). Small and marginal farmers have between 10 to 100 trees (around 1 to 2 acres of land), while the large farmers have around 1,000 trees. Every household has a few cashew or other fruit trees such as kokum, mango and/or jamun. Besides these units, there are petty traders who stock and supply raw material and growers of fruits and also machinery suppliers.
Since March 2001, NABARD has been implementing a Cluster Development Programme (CDP) for the cashew sector through a local NGO - Gopuri Ashram. This project is covered under the District Rural Industries Project (DRIP). A number of banks have promoted a number of SHGs too. DoA provides subsidy to farmers for cultivation of cashew under their Employment Guarantee Scheme since 1990-91. Subsequently, it has drawn a subsidy-linked scheme to farmers for establishing micro enterprise at their homes. The District Rural Development Agency (DRDA) is promoting SHGs of below poverty line. A number of NGOs like the Krishi Vigyyan Kendra (KVK) based at Kirlos, Malvan taluka; HSSP – a well known fruit processing training institute, Jan Shikshan Sanstha (JSS), Development Management Research Centre (DMRC), Konkan Nisarg Manch, etc. are also active in the cluster.
3.2 Overview of Poverty in the cluster
As a result of small and decreasing land holdings (coupled with poor inputs, labour-intensive technology and a scarcity of storage facilities and capital), subsistance agriculture is declining as a viable livelihood opportunity especially among small and marginal farmers[15]. The predominant economic activities of the population revolve around horticultural crops, cashew processing and fisheries.
Due to seasonal variations in climate and the limited spread of horticultural crops, many small and marginal farmers as well as landless people (who make up for more than 90 per cents of the agricultural labour) are involved in wage labour. It is estimated that the average family income of these small and marginal farmers who are both in farming (small plot owners or agricultural labourer) is in the range of Rs 15,000 (USD 350) to Rs 20,000 (USD 450) annually.
This section of the population also constitutes the principal labour force of the local horticulture processing industry. This is particularly relevant for the cashew processing industries where 95 per cent of the workers are women, many being the principal bread earner in their family. Although earning by women started as a 'complementary' income, it is increasingly becoming an essential part of the family income. Group enterprises, such as those undertaken by Self-Help Groups (SHGs), have provided them with some disposable income.
Accordingly, the participative poverty assessment identified people engaged in low pay work and/or labour intensive livelihood options (e.g. wage workers, agriculture labourers, domestic workers, etc.) under the category of poor and they constitute mostly the landless labourers and the small and marginal farmers. Here again the BPL families are of particular relevance as their annual income is below the national minimum.
4. Major Problems
4.1 Enhancing the production scope of the cluster
As the livelihood of most poor people in India (as elsewhere in developing countries) crucially depends on the growth of the agro-related industry, the Project expectation was to explore how the development of an agro-processing industrial cluster could indirectly benefit poor people in rural areas by, for example, increasing the demand for agro-based raw materials, rewarding higher-quality producers, etc. Accordingly the cashew processing cluster of Sindhudurg was chosen becasue (a) cashew kernel is a leading exportable as well as domestically consumed product in India, (b) there are a significant number of small- and micro-processing units in the cluster and (c) Maharashtra is the highest producer of cashew with significant area under cashew cultivation.
However, soon into the implementation of the project it was realised that, unlike other horticulture crops, all the cashew produced in the cluster is processed: 30 per cent of locally (that is in the Sindhudurg cluster) and the remaining 70 per cent goes outside the district; mostly to the states of Kerala and Karnataka. Cashew factories in the Sindhudurg cluster however also process a lot of imported cashew. What is however significant, is that both the price of imported cashew and that of domestic ones are determined outside local demand-supply interaction, by complex international commodity trading[16]. Under such circumstance, it was realised that the growth of local processing industry could have little backward linkage effect either through price increase (which is determined exogenously) or through higher utilisation (as all produce is already fully utilised). The only option to have a lasting link between increased cluster production and income levels of growers is through increased cultivation of land for cashew, which is simply unfeasible for this type of project both because of the significant lead time and, especially for the poor small and marginal farmers, because of lack of land[17].
Interestingly Sindhudurg also had a sizeable presence of other horticulture products, especially mango, kokum, jamun, etc. Apart from mango, the degree of processing was found to be low for kokum and jamun[18]. It was therefore felt that growth of horticulture-based products could lead not only to enhanced employment but also higher growth in demand for farm produce. Furthermore, with the small and marginal farmers ofting owning such resources, though in smaller quantity, horticultural growth had a strong prospect to lead to a direct impact on poverty.
Hence while promotion of cashew processing industry can lead to higher local employment (an issue that can take poor people out of poverty), promotion of the agro-processing industrial cluster can create an impact on the demand for agro-based raw materials and can directly benefit rural poor through enhanced utilisation of farm produce.
4.2 Stakeholder issues
The diagnostic study[19] undertaken at the beginning of the intervention (July 2003) highlighted issues to enhance the competitiveness of the cluster. However, it was relatively silent on micro analysis of the problems with respect to various ‘poverty’ nodes among the stakeholders. A Participatory Poverty Assessment (PPA) was carried out to identify the ‘poverty’ nodes. The PPA found ‘poverty’ to be particularly relevant among small and marginal farmers, SHGs, and workers in MEs (in most cases owned by farmers as well) and SSI units.
The major problems of the SHG units and the MEs were (a) lack of adequate credit; (b) limited backend support for productionisation, e.g. appropriate skill, technology, quality, infrastructure and work place (for new entrants from the poverty nodes); (c) limited access to market and market linkages and (d) appropriate size of enterprise and (e) networked efforts to organise the above.
4.2.1 Lack of appropriate networks
The cluster saw the presence of a number of SHGs. However, most of them were involved in (a) either savings or (b) savings and credit activities or (c) were lying idle after their initial formation. Some of them were involved in production/processing activities. Even the latter category was mostly into fringe activities with hardly any plan for systematic production or selling efforts. Similarly the cashew MEs were lacking appropriate forum to address their business needs – e.g. credit, quality, marketing, etc. that could only be solved through a common forum and as a result many cashew MEs were lying idle or were grossly under utlilsed, leading to lack of prospective employment. The food processing MEs lacked a common platform and the SSI association of the cashew units was lying non-functional.