ACTION PLAN FOR DEVELOPMENT OF VALUE CHAIN OF …...The entire value chain of any commodity can be segregated into the following aspects 1. Production 2. Logistics (connectivity to

Action Plan for Development of Value Chain of Lakadong Turmeric in Meghalaya

ACTION PLAN FOR DEVELOPMENT OF VALUE CHAIN OF LAKADONG

TURMERIC IN MEGHALAYA

In the pursuit of developing an action plan, our approach involved assessment of the various

aspects of the value chain, comprehending the challenges at each level and finding the possible

solutions to those challenges.

The entire value chain of any commodity can be segregated into the following aspects

1. Production

2. Logistics (connectivity to the consumers [either markets or processors])

3. Markets

4. Processing

In each of the above aspects, there may be issues pertaining to infrastructure, technology,

manpower and finance which need to be addressed in order to make a value chain highly efficient.

Through this paper, we have pursued the objective of capturing the key challenges faced in each

of the value chain aspects and suggested pragmatic interventions that can be addressed by the

Ministry of Food Processing Industries (MoFPI).

These suggested interventions are a result of :

Secondary research (published papers and information available in the public domain)

Interaction with technology providers

Premier institute involved in technology solutions

Major market players (potential and existing consumers of Lakadong Turmeric)

The limitations of the action plan

No primary survey and no stakeholder meet was conducted (hence constraints appearing

through secondary research alone have been addressed)

Only telephonic or email correspondence (conclusive rapport building could not be

possible)


Production

In the year 2016-17, the total production of Turmeric was 16,386 MT. Out of the state’s total

production, 53 per cent, i.e., 8,666 MT is grown in the West Jantia Hills district, which is well

known for the production of Lakadong Turmeric. West Jantia Hills districts does not merely grow

the Lakadong variety, two other varieties viz., Lasyein and Lachein are also grown in the district.

This section of the report deals with the challenges faced in production of Lakadong Turmeric and

interventions suggested to overcome the same.

1. Farmers’ unawareness of the varietal differences:

Three varieties of Turmeric are grown in the West Jaintia Hills District of Meghalaya, viz.,

Lachein, Lasyein and Lakadong. While Lakadong variety has 7 per cent curcumin content,

the other two varieties yield only 4-5 per cent curcumin. The farmers are either unaware of

this information or are not incentivized by way of higher returns from the market, for

cultivating high curcumin content varieties. Because of this unawareness, the Lachein

variety, though having lower curcumin content, has the highest share in terms of area under

cultivation in the West Jaintia Hills district. At present, farmers do not take special interest

in comprehending the variety being cultivated and are unaware of the variety being

cultivated by them. For the market stakeholders who are aware of the varieties and

curcumin content, they face the problem of lower economies of scale as the Lakadong

variety is unavailable in large quantities. Also this variety cannot be cultivated elsewhere,

as the soil of the West Jaintia Hills is the most suitable to cultivate Lakadong turmeric with

a curcumin content of 7 per cent. It is for this very reason that Lakadong Turmeric has a

Geographic Indication tag linked to West Jaintia Hills district. In order to take advantage

of the high curcumin content, Lakadong turmeric it would be important that awareness is

created among farmers about the turmeric and its GI Status. Farmers should be given an

opportunity to take an informed decision on shifting to Lakadong cultivation, while

carrying out simultaneous efforts for providing the incentive of the same to the farmers, in

terms of price realisation. The planting material required for this major shift will also have

to be made available to farmers. Mass multiplication techniques such as tissue culture can

also be thought of.


Suggested Interventions:

Presently, besides the Operation Greens Scheme there is no other scheme under the

PMKSY scheme of MoFPI which provides for subsidy for Quality Input for “Quality

Production”. However, this scheme is applicable only to the TOP (Tomato, Onion and

Potato) crops and the clusters from North Eastern are not covered within these purview of

the scheme. Taking into account the fact that GI tagged produce is a brand in itself for easy

marketing, it may be promoted by the Ministry by covering the production of GI tagged

turmeric under the scheme/ subscheme.

2. Increase production through area expansion and constraints in production

Besides converting the present farmers and their acreages under cultivation of Lakadong

turmeric. It may also be required that more uncultivated lands should be brought under

Lakadong turmeric cultivation after assessing the suitability of soil and other factors such

as temperatures, humidity, etc., other factors such for logistics such as approach roads,

availability of proper handholding expert teams in the locality,etc., will also have to be

made. In addition, to further increasing the production, the constraints faced in present

production need to also be addressed to improve returns for farmers. According to a

research report, lack of knowledge about pest control has been reported as the major

constraint by 42 per cent of farmer respondents1. The respondents have also indicated that

there was no attempt by any institution/ source for control of pest in turmeric.

Suggested Interventions

In order to overcome these challenges, either MoFPI by itself or MoFPI may recommend

to the Ministry of Agriculture to engage services of certain organisations which make use

of Artificial Intelligence in mapping of agriculture lands, suitability for the activity, input

supply, etc., for various crops. These organization have used Artificial Intelligence to help

the farmers schedule their pest control activities and to schedule their harvest cycles, etc.,

Fasal, an organization based out of Bangalore has been successful in providing such

services.( https://fasal.co/)

1 Papang et al.: Economics of turmeric marketing in Jaintia Hills District of Meghalaya

https://fasal.co/


Challenges in the Logistics

1. Aggregation constrained by absence of approach road and lack of transportation

facilities

In general, the operational holding under turmeric cultivation are very small with majority

of the farmers cultivating less than 0.25 ha. Collection and aggregation is a tedious task

considering the small quantum produced at each farm level. Added to this issue of small

landholdings, is the lack of approach road2. As such the farmers do not invest their time in

carrying their own produce to the markets and discovering the market price themselves, as

the market is away from the sites. Due to the absence of approach roads, the bargaining

power is in the hands of the village traders who visit the farms to aggregate the produce.

Lack of approach road and unavailability of transport has been reported as a major

constraint in marketing of the produce by 26 per cent and 15 per cent of the farmer

respondents.3

2 Economics of Turmeric Marketing in Jaintia Hills District of Meghalaya. 3 Economics of Turmeric Marketing in Jaintia Hills District of Meghalaya.



While a theoretical suggestion could include suggestion for development roadways,

ropeways, etc., in order to improve the accessibility between producer and market.

Development of transport would partially shift the bargaining power into the hands of the

farmers. However, farmers may not be capable of paying for the transportation costs and

require ready cash for immediate consumption requirement. We may therefore improve the

holding capacity of the farmers through innovative credit mechanism against their

harvested produce. Further, it will ensure regular supply of raw material throughout the

year.

Success story of gravity ropeways for agriculture produce in Nepal

“It could take two people over three hours to carry a 120kg load of apples 1.3 km down a

steep mountain path – and that’s just the first part of the grueling journey to market. Now,

with a gravity ropeway, the apples take less than five minutes to cover the same distance.

Depending solely on gravitational force – and using no external power – gravity ropeways

are simple, inexpensive to operate, and environmentally friendly.”4

4 https://practicalaction.org/gravity-ropeways

https://practicalaction.org/gravity-ropeways


Gravity ropeways is a concept developed by an organization named Practical Action and

has offices in Delhi and Bhubaneshwar.

Similar technologies have been developed by IIT-Madras professor Dr Shankar

Krishnapillai.

NABCONS has established contact with both Dr Krishnapillai and Practical Action, Delhi.

To begin with on a pilot project basis the ropeway project can be can be implemented in

Thadlaskein block as maximum turmeric cultivation is done in this block.

The ropeways along with aggregation points may be considered as an eligible component

customized to the need of the food sector in the North East Region under the “Creation of

Backward and Forward Linkage Scheme of the Ministry of Food Processing Industries.”

Challenges in the Processing

The common lacuna observed when the aspect of processing of a commodity is usually assessed

is the unavailability of sufficient processing capacities to utilize the marketable surplus. However,

in the case of Lakadong turmeric the issue is that, the units for processing of turmeric have been

established but the supply chain is so weak that there is no backward linkage for a year round


steady supply of raw material to these units. The reason for these and other constraints witnessed

in processing are discussed in the section.

1. No Sync between Industry Requirements and Present Value Addition: There are

around 40 mills in West Jaintia Hills district with an average processing capacity of 200

kg per day. There is also an Aggregation cum Processing Hub established by the

Directorate of Horticulture in Thadlaskein. However, the drying and grinding machines in

the unit are not in operation. The major reason is that Lakadong turmeric sold as an ordinary

culinary spice, after processing, does not fetch the premium price for its high curcumin

content. Consumers may not pay higher price for using turmeric as an ingredient despite

its higher curcumin content.


It is the nutraceutical firms that extract curcumin from turmeric, which benefit from this

and are willing to pay a higher price for the same. These nutraceutical firms do not require

powdered Lakadong, they have a requirement for slice dried turmeric. Therefore, the

farmers and other stakeholders have to be oriented to avoid investing in powdering units

which would result in idle capacities and non-performing assets and should rather be

directed to establish sorting, grading, cleaning, slicing and drying units.

Suggested Interventions:

Presently, nutraceutical firms involved in Curcumin extraction and export of the same have

also made inroads into Meghalaya through aggregators who procure Lakadong Turmeric

from Farmers. In a recent interaction with Synthite Industries, a Kerala based nutraceutical

firm and one of the largest exporters of Curcumin from India, it was understood that they

have been procuring Lakadong since the last three years from Meghalaya and they have

shown interest in building up stronger association for procurement from the region.

Similarly, as we approached some other companies such as M/s Patel Phytochem, Mumbai

and Katraphytochem, Bangalore also have requested for samples and price quotations for

supply of Lakadong to their units as they would be interested in procuring raw and dried

turmeric from Meghalaya. This brings focus on two aspects:

Instead of value addition by way of powdering the rhizome it is the sliced turmeric

that will find a better market value and hence units restricted to slicing of turmeric

may also be considered for providing subsidy under the CEFPPC. Units applying

for powdering units should be informed and encourage to restrict the processing to

the level of slicing and should be allowed to take an informed decision on

modifying their plans.

Presently, these nutraceutical firms are based outside Meghalaya, as they feel that

investing in capital may not provide expected returns as the quantum of raw

material is very low and due to lack of economies of scale the unit may turn

unviable. However, with the Mission Lakadong expected to increase the turmeric

production by 2023 and through the establishment of suggested logistic solution

for aggregation of the produce, the prospect of establishing Curcumin extraction

unit may also be present to the existing players. Presently the Curcumin extraction


units procure from the traders who aggregate from the farmers. While farmers are

being paid Rs. 79 per kg of turmeric sold, the curcumin is being sold at a price of

Rs. 2,430 per kg. As the curcumin content is 7 per cent, we may consider that for

one kg of curcumin roughly 14 kg of turmeric is required. The cost of turmeric is

Rs. 1,128 Kg for producing one kg of curcumin and it is sold at almost double it

cost as an active ingredient in the export market. Establishment of a curcumin unit

in Meghalaya will help pass on benefits of this huge margin among farmers and

would help implement the concept of conscious capitalism. (practiced by Tata

Beverages where the profits are shared with the tea growers).

Here below, we have provided the prospective clientele for procurement of Lakadong Turmeric.

Alternatively, they can be considered as prospective investors for establishment of Curcumin Unit

in Meghalaya.

The global curcumin market is expected to reach USD1,30,671.7 thousand by the year 2025, while

registering a growth of 13.3 per cent CAGR during the forecast period5. It may be noted that India

alone contributes to 80 per cent of the global production of curcumin. Hence, the units in the

business of curcumin extraction would look out for greater opportunities to grab a major portion

of the growing market’s share. A variety such as Lakadong Turmeric would help these processors

5 www.grandviewresearch.com/press-release/curcumin-market


with better yields of curcumin from comparatively lower quantum of raw material. Approximately,

42 per cent of the previous procurement will have to be made to extract the same quantum of

curcumin if Lakadong is procured.

It may be noted that some companies such as Synthite and Sabinsa are already procuring from the

producers in the region, but they hold the bargaining power to determine the price. It is a sort of

Oligopoly. However, when other competing organization are approached, there will be rise in

demand for Lakadong and with the limited supply; the negotiation power will shift to the farmers

resulting in higher price realization.

Correspondence made with some of these organizations by NABCONS have been appended in the

Annexures.

Challenges in the Marketing

The major issues faced in marketing of Lakadong turmeric are as under:

1. High price fluctuation and absence of regulated market-

The paper covers the various channels of marketing and it has been observed that the most

common channel of marketing which is followed is :

Producer- Commission Agent- Wholesaler-cum-Retailer-Consumer

The producers sell their produce immediately through commission agents in the weekly

markets of their respective villages. At the weekly market the turmeric is dried and sold to

the wholesaler-cum-retailer. The fresh turmeric when sold by farmers fetches Rs.17 per kg,

whereas dried turmeric would fetch them Rs.70-90 per kg. Secondly, it may be observed

that these are flat prices being paid to the farmers irrespective of the curcumin content. In

addition to the difference between fresh and dried turmeric, the price of the dried turmeric

when sold immediately fetches lower prices while the turmeric sold in the months of

November and December fetch a higher price. But the farmers, are not able to stock their

produce until the lean seasons, because of the financial requirements of the farmers in the

post-harvest season, where they require finance for sowing the next crop and for meeting

family expenditure especially the time for payment of their children’s school fee coincides

with the time of harvest of turmeric.



1. Development of a network of aggregation centres which serve as grading, analytical,

storage and credit centre for the farmers in the region. The intent is that the grading

facility along with analytical set up will help farmers to sort the turmeric as per the

variety and grade and as per the curcumin content. Upon grading, the farmer may store

the produce at the centre and may receive a credit against the turmeric stored at the

centre on similar lines of the warehouse receipt system. This credit would be adjusted

at the time of the final sale during the lean season. The centre will also work as a market

intelligence system which will study the price in the market and will also establish a

network of consumers (curcumin extractors, powdering units, exporters, etc.,) Such

units may be encouraged to be set up under the scheme of Creation of Backward and

Forward Linkage Scheme.

2. Modifications have to made in turmeric processing industry, i.e., instead of establishing

curing, drying and powdering unit, units which convert raw turmeric to slices and

drying of these slices may be set up.


3. A web portal, which details the real time stocks at each of these centres should be

created. The real time stocks with details of the quantum and curcumin content would

be mentioned on the portal. Each of these centres, would then be linked to the regulated

market, comprising an auction centre and will help in price determination for varieties

with different curcumin content.

The daily auction of turmeric at a market hall in Nasiyanur, Erode district.

Proposed Unit (Turmeric Processing Unit and Slice-cum-Drying Unit)

In order to retain the present turmeric powder market as well as to diversify into by production of

sliced and dried turmeric. We have proposed a turmeric powder cum sliced and dried turmeric

processing unit of 200 kg per hour capacity. The unit is expected to run for 6 months for the

production of turmeric powder and 6 months for production of slice and dried turmeric.


Projected Financials

1. Name of the Product Turmeric Powder

Sliced and Dried Turmeric

2. Project Cost

a. Capital Expenditure

Land NA

Building Shed Rs. 30,00,000.00

Equipment:

Turmeric cleaning unit, Turmeric grading sorting line,

Cutting and Drying unit, Powdering unit, Weighing

Scales

Rs. 55,50,000.00

Total Capital Expenditure Rs. 85,50,000.00

b. Working Capital

7 days of raw material, 7 days of finished goods, 15 days

of receivables

Rs. 65,02,400.00

TOTAL PROJECT COST Rs. 1,50,52,400.00

3. Estimated Annual Production

a. Turmeric Powder (1,09,824 kg @ Rs. 100 per kg) Rs.1,09,82,400.00

b. Turmeric Sliced and Dried (99,840 kg @ Rs.750 per kg) Rs.7,48,80,000.00

4. Raw Material Procurement Cost (9,98,400 @ Rs. 20 per

kg)

Rs. 1,99,68,000.00

5. Wages Rs. 18,00,000.00

6. Salaries Rs. 30,60,000.00

7. Fuel and Power Rs. 27,94,000.00

8. Cold Storage Rentals Rs. 5,99,000.00

9. Repair and Maintenance Rs. 1,07,000.00

10. Promotion and Marketing Rs. 8,59,000.00

11. Insurance Rs.23,000.00

12. Administrative Overheads Rs. 5,00,000.00

13. Depreciation (SLM Method) Rs. 7,08,000.00


14. Interest on Term Loan Rs. 3,46,000.00

15. Interest on Working Capital Rs. 7,80,288.00

16. Total Interest Rs. 11,26,288.00

17. Working Capital Requirement

Fixed Cost Rs. 91,47,000.00

Variable Cost Rs.2,05,67,000.00

Requirement of WC per cycle Rs. 65,02,400.00

Estimated Cost Analysis

S.No. Particulars Capacity Utilisation (Rs. in Lakh)

50% 60% 65% 75%

1 Fixed Cost 27.26 69.10 72.21 77.83

2 Variable Cost 102.84 123.40 133.69 154.25

3 Cost of Production 130.10 192.50 205.89 232.09

4 Projected Sales 429.31 515.17 558.11 643.97

5 Gross Surplus 299.21 322.67 352.21 411.88

6 Expected Net Surplus 282.41 307.39 339.39 401.34

Documents

ACTION PLAN FOR DEVELOPMENT OF VALUE CHAIN OF …...The entire value chain of any commodity can be segregated into the following aspects 1. Production 2. Logistics (connectivity to