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Study of Infrastructure and Logistical Issues in Supply Chain of Apples
There are various Infrastructure and logistical issues in supply chain of fresh fruits and vegetables in India. It is believed that poor efficiency in the supply chain management is leading not only to high and fluctuating consumer prices, but also to only a small proportion of the consumer rupee reaching the farmers. The paper examines the Infrastructure and logistical issues in supply chain of apples.
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Study of
Infrastructure and
Logistical Issues in
Supply Chain of
Apples
Indian Institute of Management
Ahmedabad
Authors
Himanshu Garg
Mukta Dharma
Prateek Jain
Tarun Jain
12 Dec 2007
Contents
1. Introduction
2. Objectives
3. Demand and Supply
4. Domestic production of Apples
5. Supply Chain of Apples
6. Channel
7. Whole sale prices prevailing in various markets
8. Marketing costs and margins for domestic apples in India
9. International Supply
10. Infrastructure related issues
11 Conclusion
2 Introduction
India ranks second in the world in the production of vegetables and third in production
of fruits. With growing demand, fruits and vegetables have assumed great importance.
There are various Infrastructure and logistical issues in supply chain of fresh fruits and
vegetables in India. It is believed that poor efficiency in the supply chain management is
leading not only to high and fluctuating consumer prices, but also to only a small
proportion of the consumer rupee reaching the farmers. The paper examines the
Infrastructure and logistical issues in supply chain of apples.
India ranks third in the world in terms of area under apple cultivation i.e. 25.8 million ha
in 2005. India accounts for 2.16% of the world's apple production in 2005. In absolute
th
numbers India produced 135.32 million tons of apple and ranked 9 in world in term of
production. The difference between the ranks in area of production and total
production is best explained by low productivity of apples in India. In 2005, India ranked
at 68th position in world in terms of yield i.e. 5233.90 kg/ha.
Apple Production Area
T
o
n
s
Year
3Apple Production
Objectives
• Existing supply chain of apples will be studied in the project
• Effect of transportation cost on the cost price of apple
• How improvement in infrastructure can lead to better quality of apples
Demand and Supply
In 2006 the total consumption of apples in India was 1261.71 ('000 tons) while the total
supply was 1357.13 ('000 tons). There is a different type of mismatch; the supply is
more than the demand. This excess supply should have pushed the prices down but it
doesn't happen, the analysis of price to cost is done in the later part of the report.
Out of the total supply of 1357.13 thousand tons domestic production was 1353.26
thousand tons and the rest was imports.
The export of apples from India was 32.03 thousand tons in the year 2006 while the
imports were of 35.9 thousand tons. The imported Apple is very high priced as
compared to the home grown apple. The imports are not due to the shortfall in
4domestic production but it is due to the increasing demand for better and more variety
in products by Indian consumers.
Consumption and Supply of Apples in India
Import and Export of Apples
5The imports have suddenly gone up in the last 4 6 years. This can be attributed to the
increasing purchasing power of Indian households.
Domestic production of Apples
India's apples are grown in three States in north India Himachal Pradesh, Jammu and
Kashmir, and Uttarakhand, where they are typically grown at altitudes of 4,000 to
11,000 feet. Himachal Pradesh and Jammu and Kashmir each have roughly equal area
planted to apples, but Jammu and Kashmir has the highest average yield. In Himachal
Pradesh, apples are mostly grown in cold and dry zones and in the high hills and valleys.
Production in Uttarakhand, is primarily in mountainous districts. The remaining small
amounts of production occur in the hill regions of northeastern India, in the States of
Arunachal Pradesh and Nagaland.
Supply Chain of Apples
Most of the apples grown in India are variants of the Red Delicious or Royal Delicious
varieties and have similar maturity periods of about 125 to 134 days from the time of
flowering. Although some harvest activity begins as early as June, the bulk of the
harvest occurs during September and October.
The domestic production of apples by various states in India are as follows
State Area Yield Production
1000 ha Metric tons/ha 1000 metric tons
Himachal
Pradesh 88 3.1 273.1
Jammu &
Kashmir 86 9.6 824
Uttarakhand 56 2 109.7
Others 6.8 1.7 11.5
Total 237 5.2 1,218.10
In terms of percentage
6State Percentage Production
Jammu & Kashmir 68
Himachal Pradesh 22
Uttarakhand 9
Others 1
Graph showing percentage share of various states
in apple production
The bulk of the production, more than 60% of the total production comes from Jammu
and Kashmir. Delicious, Red Delicious, and Rich Red, account for most apple area.
Farmers are increasingly concerned about problems with apple scab disease, outbreaks
of premature leaf fall, and infestations of red spider mite on these varieties. Although
more than 700 accessions of apples introduced from abroad have been tried and tested
during the last 50 years, the Delicious group of cultivars still accounts for about 83
percent of production in Himachal Pradesh and more than 45 percent in Jammu and
Kashmir.
7The apple production is not at the same time in various states. The harvesting begins in
Uttarakhand in June and during August it reaches its peak and the harvesting is over in
October. While in Himachal Pradesh the harvesting starts in July and the production
continues till October. The harvest is on its peak in the months of August and
September. In the case of J&K, the largest producer of apples in India, the harvest
period is only of four months. It starts in August and reaches at its maximum in
September and October. In November the production starts to decline. So, effectively
the apple harvesting season for India starts in July and ends in November.
Chart showing harvesting seasons of various apple growing
states
After the harvest, apples from J&K, HP and Uttarakhand reach Delhi whole sale market.
The biggest wholesale market for apple is the Fruits and Vegetables market at Azadpur,
in Delhi. About 70 per cent of the total tradable apple is distributed through this
market. Apples are purchased from wholesale traders and merchants in Delhi for
smaller towns.
The other major apple markets are Banglore, Chennai and Mumbai markets.
The whole sale market in Delhi start getting the produce in July with supplies from HP,
but the major supplies comes from J&K. This is clearly shown in the figure; the peak of
production is overlapping with peak of apple arrivals in Delhi. From Delhi, the apples are
shipped to other markets.
Chart showing apple arrival in major markets and harvesting
seasons of various apple growing states
8Channel
Various channels are used though which apples are being traded in the country.
Some of the major channels are discussed below
In this model the producer signs a contract with the trader, who is known as pre harvest
contractor. The major work of the pre harvest contractor is to aggregate the supplies
and to ship them to whole sale markets. When the supplies reaches whole sale markets
the commission agents, takes their share in the pie and sell the apples to whole sellers.
The whole sellers in turn sell the produce to retailers, who finally sell the produce to
consumers.
In this channel design there is no pre contractor, though pre contractor used to help in
risk mitigation for the farmer. The apples are sent to the whole sale markets through
the commission agents who in turn sell them to the whole sellers.
Whole sale prices prevailing in various markets
Average price
City (Rs/20kg box)
Bangalore 675.6
Kolkata 575.8
Chennai 918.6
Delhi 531.8
Mumbai 699.4
As expected the prices in Delhi market are the lowest. As the distance from Delhi is
increasing the price of fruit is also increasing. The average price is Kolkata is low
because Kolkata gets some of its supplies from north eastern production areas. At ever
whole sale market the price commissions of various agents adds up and increases the
final price of the product for the consumers. The cost of transportation is not a major
9cost in this context. The marketing costs and margins for domestic apples in India are
shown in the next section of the report. The cost and margin calculations are taken
from a research done by Professor of Indian Institute of Ahmedabad Mr. Satish Y.
Deodhar and two senior Economists Mr. Maurice Landes, Mr. Barry Krissoff.
Marketing costs and margins for domestic apples in India
For a 20kg box of apple the farmer gets Rs. 295.27 while the consumer has to pay
Rs. 900. Around Rs. 600 is taken up by the various middle men. The freight charges up
to the market are Rs. 20 only, which is for the first market.
International Supply
Apple imports by India from different countries in terms of percentage of the total
volume imported are
• USA (51.56%)
• China (17.94%)
• Australia (13.93%)
10These three countries add up to form 80% of the total apple imports by India
Apple exports by India from different countries in terms of percentage of the total
volume exported are
• Bangladesh (90.14%)
• Nepal (8.19%)
Indian exports are concentrated to Bangladesh only 98% of the total exports are to that
country.
India's Apple Imports
India's Apple Exports
11Infrastructure related issues
The post harvest practices followed by Indian growers and contractors are poor compared with
those followed in the United States and other major producing countries. Incentives to improve
postharvest practices were weak, likely because of the limited domestic market for higher
quality and higher priced products, as well as the price risk faced by growers and contractors.
Although there is some evidence of a few growers' improving their practices to take advantage
of the emerging market for higher quality products, the following practices characterize the
marketing of most domestic apples:
Storage At the producing areas the apples are not held at cold storage. Apples not sold
immediately by growers and those held for later sale by wholesale merchants may be held in
cold storage in Delhi or other major markets. There are high quality cold storages in most major
markets, apples that are stored are generally stored in cheaper facilities with less control over
temperature and atmosphere.
Grading Most growers do not grade on farm. Some harvest contractors, and wholesalers grade
apples based on either color or size. Himachal Pradesh authorities have prescribed standards
for seven size grades. Retailers may also sort out high and low quality fruits before sale. Price
differences observed in primary and wholesale markets are primarily based on visual
inspections of the boxes.
Packaging Packing sizes are boxes of roughly 20 kg. Many different packing materials are used,
including thin wooden crates with straw packing, corrugated cardboard boxes, and trays of
various qualities. Use of high quality boxes and trays with sufficient rigidity to protect the fruit
is limited. Overstuffed boxes containing significant amounts of bruised fruit are common.
Handling and transport. With very few exceptions, domestic apples are transported throughout
India in unrefrigerated trucks over poor roads, whether it is a 1 2 day trip from Jammu and
Kashmir or Himachal Pradesh to Delhi or a 4 5 day trip to Chennai. Growers generally face
shortages of trucks during the peak harvest period, leading to periods of unrefrigerated storage
in producing areas. Trucks are often loaded beyond the stipulated legal and safe norms. In
combination with poor quality packing materials, overloading leads to heavy pressure on the
fruit and damage during transport. Lack of refrigeration, long journey times, and poor packaging
reduce the quality of domestic apples available in more distant markets, including Mumbai,
Chennai, and Bangalore. (Prospects for India's Emerging Apple Market)
Conclusion
Due to poor post harvest practices the farmer is not able to get the optimum price for
his/her produce. Lot of production gets wasted due to lack of proper utilization of
12available infrastructure facilities. At many important areas there are no infrastructure
facilities available.
The production area under apple cultivation is very large in the country but yield per
hectare is very low. With the rising income the demand for apples is going to increase
and people will move towards costlier imported apples if the domestic supply is not
increased.
References
• FAO
• http://faostat.fao.org
• Prospects for India's Emerging Apple Market by Satish Y. Deodhar, Maurice
Landes and Barry Krissoff
• http://agmarknet.nic.in/
• Can Horticulture be a Success Story for India? By Surabhi Mittal (ICRIER)
• Indian Agriculture and Policy in Transition by Maurice Landes, Market and Trade
Economics Division, Economic Research Service, U.S. Department of Agriculture
• Report of the working group on agriculture marketing infrastructure and policy
required for internal and external trade
13
Infrastructure and
Logistical Issues in
Supply Chain of
Apples
Indian Institute of Management
Ahmedabad
Authors
Himanshu Garg
Mukta Dharma
Prateek Jain
Tarun Jain
12 Dec 2007
Contents
1. Introduction
2. Objectives
3. Demand and Supply
4. Domestic production of Apples
5. Supply Chain of Apples
6. Channel
7. Whole sale prices prevailing in various markets
8. Marketing costs and margins for domestic apples in India
9. International Supply
10. Infrastructure related issues
11 Conclusion
2 Introduction
India ranks second in the world in the production of vegetables and third in production
of fruits. With growing demand, fruits and vegetables have assumed great importance.
There are various Infrastructure and logistical issues in supply chain of fresh fruits and
vegetables in India. It is believed that poor efficiency in the supply chain management is
leading not only to high and fluctuating consumer prices, but also to only a small
proportion of the consumer rupee reaching the farmers. The paper examines the
Infrastructure and logistical issues in supply chain of apples.
India ranks third in the world in terms of area under apple cultivation i.e. 25.8 million ha
in 2005. India accounts for 2.16% of the world's apple production in 2005. In absolute
th
numbers India produced 135.32 million tons of apple and ranked 9 in world in term of
production. The difference between the ranks in area of production and total
production is best explained by low productivity of apples in India. In 2005, India ranked
at 68th position in world in terms of yield i.e. 5233.90 kg/ha.
Apple Production Area
T
o
n
s
Year
3Apple Production
Objectives
• Existing supply chain of apples will be studied in the project
• Effect of transportation cost on the cost price of apple
• How improvement in infrastructure can lead to better quality of apples
Demand and Supply
In 2006 the total consumption of apples in India was 1261.71 ('000 tons) while the total
supply was 1357.13 ('000 tons). There is a different type of mismatch; the supply is
more than the demand. This excess supply should have pushed the prices down but it
doesn't happen, the analysis of price to cost is done in the later part of the report.
Out of the total supply of 1357.13 thousand tons domestic production was 1353.26
thousand tons and the rest was imports.
The export of apples from India was 32.03 thousand tons in the year 2006 while the
imports were of 35.9 thousand tons. The imported Apple is very high priced as
compared to the home grown apple. The imports are not due to the shortfall in
4domestic production but it is due to the increasing demand for better and more variety
in products by Indian consumers.
Consumption and Supply of Apples in India
Import and Export of Apples
5The imports have suddenly gone up in the last 4 6 years. This can be attributed to the
increasing purchasing power of Indian households.
Domestic production of Apples
India's apples are grown in three States in north India Himachal Pradesh, Jammu and
Kashmir, and Uttarakhand, where they are typically grown at altitudes of 4,000 to
11,000 feet. Himachal Pradesh and Jammu and Kashmir each have roughly equal area
planted to apples, but Jammu and Kashmir has the highest average yield. In Himachal
Pradesh, apples are mostly grown in cold and dry zones and in the high hills and valleys.
Production in Uttarakhand, is primarily in mountainous districts. The remaining small
amounts of production occur in the hill regions of northeastern India, in the States of
Arunachal Pradesh and Nagaland.
Supply Chain of Apples
Most of the apples grown in India are variants of the Red Delicious or Royal Delicious
varieties and have similar maturity periods of about 125 to 134 days from the time of
flowering. Although some harvest activity begins as early as June, the bulk of the
harvest occurs during September and October.
The domestic production of apples by various states in India are as follows
State Area Yield Production
1000 ha Metric tons/ha 1000 metric tons
Himachal
Pradesh 88 3.1 273.1
Jammu &
Kashmir 86 9.6 824
Uttarakhand 56 2 109.7
Others 6.8 1.7 11.5
Total 237 5.2 1,218.10
In terms of percentage
6State Percentage Production
Jammu & Kashmir 68
Himachal Pradesh 22
Uttarakhand 9
Others 1
Graph showing percentage share of various states
in apple production
The bulk of the production, more than 60% of the total production comes from Jammu
and Kashmir. Delicious, Red Delicious, and Rich Red, account for most apple area.
Farmers are increasingly concerned about problems with apple scab disease, outbreaks
of premature leaf fall, and infestations of red spider mite on these varieties. Although
more than 700 accessions of apples introduced from abroad have been tried and tested
during the last 50 years, the Delicious group of cultivars still accounts for about 83
percent of production in Himachal Pradesh and more than 45 percent in Jammu and
Kashmir.
7The apple production is not at the same time in various states. The harvesting begins in
Uttarakhand in June and during August it reaches its peak and the harvesting is over in
October. While in Himachal Pradesh the harvesting starts in July and the production
continues till October. The harvest is on its peak in the months of August and
September. In the case of J&K, the largest producer of apples in India, the harvest
period is only of four months. It starts in August and reaches at its maximum in
September and October. In November the production starts to decline. So, effectively
the apple harvesting season for India starts in July and ends in November.
Chart showing harvesting seasons of various apple growing
states
After the harvest, apples from J&K, HP and Uttarakhand reach Delhi whole sale market.
The biggest wholesale market for apple is the Fruits and Vegetables market at Azadpur,
in Delhi. About 70 per cent of the total tradable apple is distributed through this
market. Apples are purchased from wholesale traders and merchants in Delhi for
smaller towns.
The other major apple markets are Banglore, Chennai and Mumbai markets.
The whole sale market in Delhi start getting the produce in July with supplies from HP,
but the major supplies comes from J&K. This is clearly shown in the figure; the peak of
production is overlapping with peak of apple arrivals in Delhi. From Delhi, the apples are
shipped to other markets.
Chart showing apple arrival in major markets and harvesting
seasons of various apple growing states
8Channel
Various channels are used though which apples are being traded in the country.
Some of the major channels are discussed below
In this model the producer signs a contract with the trader, who is known as pre harvest
contractor. The major work of the pre harvest contractor is to aggregate the supplies
and to ship them to whole sale markets. When the supplies reaches whole sale markets
the commission agents, takes their share in the pie and sell the apples to whole sellers.
The whole sellers in turn sell the produce to retailers, who finally sell the produce to
consumers.
In this channel design there is no pre contractor, though pre contractor used to help in
risk mitigation for the farmer. The apples are sent to the whole sale markets through
the commission agents who in turn sell them to the whole sellers.
Whole sale prices prevailing in various markets
Average price
City (Rs/20kg box)
Bangalore 675.6
Kolkata 575.8
Chennai 918.6
Delhi 531.8
Mumbai 699.4
As expected the prices in Delhi market are the lowest. As the distance from Delhi is
increasing the price of fruit is also increasing. The average price is Kolkata is low
because Kolkata gets some of its supplies from north eastern production areas. At ever
whole sale market the price commissions of various agents adds up and increases the
final price of the product for the consumers. The cost of transportation is not a major
9cost in this context. The marketing costs and margins for domestic apples in India are
shown in the next section of the report. The cost and margin calculations are taken
from a research done by Professor of Indian Institute of Ahmedabad Mr. Satish Y.
Deodhar and two senior Economists Mr. Maurice Landes, Mr. Barry Krissoff.
Marketing costs and margins for domestic apples in India
For a 20kg box of apple the farmer gets Rs. 295.27 while the consumer has to pay
Rs. 900. Around Rs. 600 is taken up by the various middle men. The freight charges up
to the market are Rs. 20 only, which is for the first market.
International Supply
Apple imports by India from different countries in terms of percentage of the total
volume imported are
• USA (51.56%)
• China (17.94%)
• Australia (13.93%)
10These three countries add up to form 80% of the total apple imports by India
Apple exports by India from different countries in terms of percentage of the total
volume exported are
• Bangladesh (90.14%)
• Nepal (8.19%)
Indian exports are concentrated to Bangladesh only 98% of the total exports are to that
country.
India's Apple Imports
India's Apple Exports
11Infrastructure related issues
The post harvest practices followed by Indian growers and contractors are poor compared with
those followed in the United States and other major producing countries. Incentives to improve
postharvest practices were weak, likely because of the limited domestic market for higher
quality and higher priced products, as well as the price risk faced by growers and contractors.
Although there is some evidence of a few growers' improving their practices to take advantage
of the emerging market for higher quality products, the following practices characterize the
marketing of most domestic apples:
Storage At the producing areas the apples are not held at cold storage. Apples not sold
immediately by growers and those held for later sale by wholesale merchants may be held in
cold storage in Delhi or other major markets. There are high quality cold storages in most major
markets, apples that are stored are generally stored in cheaper facilities with less control over
temperature and atmosphere.
Grading Most growers do not grade on farm. Some harvest contractors, and wholesalers grade
apples based on either color or size. Himachal Pradesh authorities have prescribed standards
for seven size grades. Retailers may also sort out high and low quality fruits before sale. Price
differences observed in primary and wholesale markets are primarily based on visual
inspections of the boxes.
Packaging Packing sizes are boxes of roughly 20 kg. Many different packing materials are used,
including thin wooden crates with straw packing, corrugated cardboard boxes, and trays of
various qualities. Use of high quality boxes and trays with sufficient rigidity to protect the fruit
is limited. Overstuffed boxes containing significant amounts of bruised fruit are common.
Handling and transport. With very few exceptions, domestic apples are transported throughout
India in unrefrigerated trucks over poor roads, whether it is a 1 2 day trip from Jammu and
Kashmir or Himachal Pradesh to Delhi or a 4 5 day trip to Chennai. Growers generally face
shortages of trucks during the peak harvest period, leading to periods of unrefrigerated storage
in producing areas. Trucks are often loaded beyond the stipulated legal and safe norms. In
combination with poor quality packing materials, overloading leads to heavy pressure on the
fruit and damage during transport. Lack of refrigeration, long journey times, and poor packaging
reduce the quality of domestic apples available in more distant markets, including Mumbai,
Chennai, and Bangalore. (Prospects for India's Emerging Apple Market)
Conclusion
Due to poor post harvest practices the farmer is not able to get the optimum price for
his/her produce. Lot of production gets wasted due to lack of proper utilization of
12available infrastructure facilities. At many important areas there are no infrastructure
facilities available.
The production area under apple cultivation is very large in the country but yield per
hectare is very low. With the rising income the demand for apples is going to increase
and people will move towards costlier imported apples if the domestic supply is not
increased.
References
• FAO
• http://faostat.fao.org
• Prospects for India's Emerging Apple Market by Satish Y. Deodhar, Maurice
Landes and Barry Krissoff
• http://agmarknet.nic.in/
• Can Horticulture be a Success Story for India? By Surabhi Mittal (ICRIER)
• Indian Agriculture and Policy in Transition by Maurice Landes, Market and Trade
Economics Division, Economic Research Service, U.S. Department of Agriculture
• Report of the working group on agriculture marketing infrastructure and policy
required for internal and external trade
13
