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The agro-based industry or agricultural industry implies industries related to textiles, sugar, paper, and vegetable oil. Agro-based industries imply raw materials of agricultural products. There are four types of agro-based industries such as agro-produce processing units, agro-produce manufacturing units, agro-inputs manufacturing units, and agro service centers.Agriculture is the backbone of Indian economy. It's Contribution in GDP of the country is currently about 14% and in export about 11%.Another important sector of Indian economy is industrial sector. Agriculture also provides raw materials for major industries like paper, sugar, textile etc. Agro based industries can play a vital role in solving the problem of poverty, unemployment through farming and in off farming activities and contributing to the overall development of the economy by proper utilizing the local raw materials.

The objective of this paper is to study the opportunities and challenges which are facing by Agro Based Industries in Bihar.

For this paper many books, research papers, newspaper articles etc has been reviewed which has been discussed through out the paper.

The Scope of Agro-Based Industries

The scope of agro-based industries in India is pretty high because of the fact that the country is predominantly dependent on agriculture. According to the statistical data for the year 2020, the agriculture sector in India contributes about 18% to India’s GDP. Also, approximately 42% of the Indian population is employed in the agricultural sector alone. The share of the population employed in the agriculture sector has been declining year after year because of various reasons. However, it still remains the largest sector employing the majority of the population.

Agro-based industry is regarded as the sunrise sector of the Indian economy because of its huge potential for growth, likely socio economic impact, specifically on employment and income generation and for the ability to generally keep itself recession proof. Also, approximately 70% of the population is dependent on agriculture and agro-based industries. According to the economic survey 2014-15, conducted by the Central Statistical Office, agro-based industries consistently grew in India during the period 2009-10 to 2013-14. Some estimates also suggest that in developed economies, approximately 14% of the total workforce engages in the agro-processing sector directly or indirectly, whereas in India, only about 3% of the workforce finds employment in this sector. The data highlighted above reveals the underdeveloped state and the vast potential of growth in this sector.

Importance of Agro-Based Industries

1.Helps in the upliftment of the rural economy.

2.Proper utilization and achieving the potential of the rural economy sector, where plenty of raw materials are available.

3.Provide rural populations with an opportunity for employment.

4.Generate income and thereby improve the economic condition of people – which in turn creates the potential for demand-based industries.

5.Provide an opportunity for the dispersal of industries instead of concentrating at a particular place.

6.Solve the problem of exploitation of the farming community by traders and middlemen.

6.Farmers could be assured of better prices for their produce.

7.Encourage bringing more and more areas under various crops – increase agricultural production and improve the nation’s economy.

8.The transportation cost of agricultural products can be minimized – thereby helping to minimize the cost of finished goods.

9.Avoid wastage of perishable agricultural products.

10.Help to develop backward areas based on their suitability for setting up agro-industries.

11.Prevent migration of people from rural to urban areas.

12.To encourage balanced growth between agriculture and industry.

Types of Agro-Based Industries

1.Agro-produce processing units:

These units are not involved in manufacturing and mainly deal with the preservation of perishable products and utilization of by-products for other uses. Rice and Dal processing mills are perfect examples of these kinds of units.

2.Agro-produce manufacturing units:

These units engage in the manufacturing of new products where the finished goods are entirely different from the raw materials used. Sugar factories, solvent extraction units and textile mills are some of the examples of these kinds of units.

3.Agro-inputs manufacturing units:

These units are engaged in the manufacturing of products, either for the mechanization of agriculture or for increasing agricultural productivity. Some examples of these units include agricultural implements, seed, fertilizer and pesticide manufacturing units.

4.Agro Service Centers:

Agro service centers are workshops and service centers, which are engaged in the repairing and servicing of pump sets, diesel engines, tractors and other types of farm equipment.

Opportunities of Agro-based Industries

Textile Industry

i.The textile industry is concerned with the design, production, distribution or marketing of yarn, fabrics, or readymade clothing. It consists of units manufacturing cotton textiles, woolen textiles, silk textiles, synthetic fibers and jute textiles.

ii.The industry plays an important role in India’s economy because it is the biggest employer in the country after agriculture. Also, it provides direct and indirect employment to around 10.5 crore people.

iii.India is also the second-largest manufacturer and exporter of textiles and clothing in the world, with a share of 5% of the total global trade. It contributed 12% to India’s total exports in 2018-19.

iv.The US and the European Union are the two largest markets for Indian textile exporters, followed by various Asian countries and the Middle East.

v.The size of India’s textile and apparel market was USD 108.5 billion in 2015 and is expected to reach USD 226 billion by 2023, growing at a CAGR of 8.7% between 2009 and 2023.

vi.The Union Government has introduced various policy initiatives and programmes for the development of the textile industry, some of which include

vii.Scheme for integrated textile parks,

viii.National Handicraft Development Program (NHDP),

ix.North Eastern Region Textile Promotion Scheme (NERTPS) and

x.Comprehensive Handicrafts Cluster Development Scheme (CHCDS).

Sugar Industry:

i.The sugar industry is responsible for the supply of sugar, which is considered as an integral part of the human diet.

ii.India fell back to second place in sugar production during 2019-20, narrowly losing the top spot to Brazil. India produced 28.9 million metric tonnes of sugar, which is roughly 17% of the world’s total sugar production of 166.18 million metric tonnes.

iii.Today, the sugar industry’s annual output is worth approximately INR 80,000 crores. Sugar production is expected to rise by 17% in 2020-21 and the domestic consumption is forecast to hit a new record of 28.5 million tonnes.

iv.The GOI has undertaken several initiatives to improve the financial health of the sugar industry, some of which include

v.De-regulation of the sugar sector,

vi.Ethanol Blended Petrol Program (EBP),

vii.Scheme for extending financial assistance to sugar undertakings (SEFASU-2014),

viii.soft loans to sugar mills to facilitate clearance of cane price arrears, (v) Minimum indicative Export Quotas (MIEQ),

ix.production subsidy and

x.Imposition of stock holding limits on sugar mills.

Vegetable Oil Industry:

i.The Indian vegetable oil industry accounts for about 5% of the world’s vegetable oil production.

ii.India is the largest consumer of edible oils in the world. The estimated domestic demand for vegetable oil is over 23 million tonnes, which is predominantly met by imports. Also, India is currently the biggest importer of edible oils in the world with an import of 15 million tonnes annually, which is about 14% of the world’s total vegetable oil imports.

iii.The industry occupies a distinct position in the Indian economy because it provides job opportunities to millions of people, achieves an average domestic turnover of USD 10 billion per annum and earns a foreign exchange of USD 90 million per annum.

iv.Vegetable oil processing will remain one of the largest industrial segments in India because of an exponential increase in domestic demands and exports.

v.In order to increase the production of edible oil in the country and to reduce the dependence on imports, the Union Government has proposed/introduced several measures, some of which include

vi.tax concessions for companies engaged in oilseeds farming,

vii.promoting oil palm cultivation under National Mission on Oilseeds and Oil Palm (NMOOP) and

viii.Preparing ‘zero edible oil import’ plans.

Tea Industry:

i.Tea is the second most consumed liquid in the world after water Between 2014-18, the global tea production increased at a CAGR of 2.97%.

ii.As of 2019, India was the second-largest tea producer in the world with a total production of 1,339.70 million kgs. Also, India is one of the world’s largest consumers of tea, with about three-fourths of the total production consumed locally.

iii.The tea industry holds a special place in the Indian economy because it employs a total workforce of over 2 million people.

iv.The industry also earns much needed foreign exchange for the country with exports of USD 830.90 million in FY 2019 and USD 826.47 million in FY 2020.

v.The growth of the Indian tea industry has always been remarkable. Based on the current level of production, the global tea production is expected to increase at a CAGR of 2.65% between 2019-25.

vi.In case of India, the tea production and consumption is expected to increase at a CAGR of 2.88% and 2.25% respectively between 2019-25. Also, the revenue earnings of the tea industry are also expected to grow at a CAGR of 6.23% between 2019-25.

vii.In light of the above, the Indian Tea Association has requested the Union Government to handle the rising costs, stagnated prices, take over the PF contribution of workers for a period of 3 years and introduce other measures in order to provide relief to the Indian tea industry.

Coffee Industry:

i.India has always been a tea-loving country, however, over the last two decades, we have witnessed an unprecedented rise in the number of coffee lovers because of a number of reasons such as (i) increase in disposable incomes (coffee is considered more expensive than tea), (ii) global exposure, (iii) digital media penetrations and (iv) lifestyle changes among others.

ii.The increase in coffee consumption ignited a cafe culture in India and saw major brands like Cafe Coffee Day, Costa Coffee and Starbucks setting up numerous outlets across the country.

iii.India is the sixth-largest producer and the fifth-largest exporter of coffee in the world. The coffee production stood at 2,99,300 million tonnes during 2019-20, which was 3.14% of the total global coffee production.

iv.India exports 70% of its domestic coffee production, with an export of USD 738.90 million during 2019-20. The top 5 importers of Indian coffee during 2018-19 were Italy (21.63%), Germany (9%), Russian Federation (6.3%), Belgium (5.24%) and Turkey (4.17%).

v.The coffee industry occupies an important position in the Indian economy because it provides direct and indirect employment to over a million people and earns a foreign exchange to the tune of about 4,000 crores.

vi.There is a huge potential for the coffee industry because of a rise in the domestic consumption of coffee. Rural India is today evolving in every aspect. If brands are able to penetrate and create a connection with rural India, then the coffee industry stands to witness an exponential growth in the overall domestic consumption of coffee.

Leather Goods Industry:

i.Leather is one of the most widely traded commodities globally. The demand for leather is driven by the fashion, furniture, interior design and automotive industries.

ii.The Indian Leather industry accounts for around 12.93% of the world’s leather production of hides/skins. Also, the total exports of leather and leather products from India stood at USD 5.07 billion in 2019-20.

iii.The major markets for Indian exports included USA (17.22%), Germany (11.98%), UK (10.43%), Italy (6.33%) and France (5.94%).

iv.The industry occupies an important position in the Indian economy because it provides employment to 4.42 million people. Also, it is among the top ten foreign exchange earners for the country.

v.The global leather industry is in the process of shifting its manufacturing base from developed to developing nations. This provides increased opportunities for employment and flow of foreign direct investment in India.

vi.The Union Government has also identified the industry as one of the 12 focus sectors because of its growth potential. It has undertaken several initiatives for aiding the growth of the Indian leather goods industry

Challenges Faced By Agro-Based Industries in India:

1.Small Landholdings:

Small landholdings make it difficult for farmers to achieve economies of scale because of which farmers are forced to rely on subsistence farming.

2.Perishable nature of products:

Agricultural products are perishable in nature because of which they require huge infrastructure in the form of cold storage, excellent road connectivity. India suffers on both accounts, forward and backward linkages.

3.Seasonal nature:

This means that the farmers have a very small window to reap the benefits of their hard labor. In recent times, climate change has affected weather patterns because of which there has been an adverse effect on agricultural production.

4.Competition:

India is increasingly facing competition from other countries in the region such as Bangladesh, which offer similar advantages in terms of low labor costs and soil fertility.

5.Limited Knowledge:

The absence of information, lack of awareness and limited knowledge about opportunities, technology and production systems are also a major hurdle.

6.Variability:

Agro-based industries involve variability in the quantity and quality of raw materials. Quantity of raw materials suffers because of fluctuations in weather and soil conditions. The quality suffers because of lack of standardization. These factors exert additional pressure on agro-based industries in terms of operations related to production, scheduling and quality control.

Institutional Arrangements for Promotion of Agro-Based Industries

Different Government Departments and Agencies

i.Ministry of Agriculture-Deals with rice mills, oil mills, sugar mills, bakeries, cold storage.

ii.Khadiand Village Industries Board: Covers traditional agro-based industries like “gur‟, handicrafts, khandsari.

iii.Agro-Industries Development Corporation- In each state mainly supply agricultural machinery, inputs and agricultural advisory services to farmers. Some corporations have also undertaken certain manufacturing activities in the agro-industries sector.

iv.Small Industry Development Organization- Deals with small agro-industries like hosiery, processing of food products, beverages, food and fruit preservation, agricultural implements.

Policy Directives by the Government

Agro Processing Cluster

i.The scheme aims at the development of modern infrastructure and common facilities to encourage groups of entrepreneurs to set up food processing units based on a cluster approach.

ii.It seeks to link groups of producers or farmers to the processors and markets through a well-equipped supply chain with modern infrastructure.

iii.At least 5 food processing units with a minimum investment of Rs. 25 crores. 

iv.The units are set up simultaneously along with the creation of common infrastructure. 

v.At least 10 acres of land is required to be arranged either by purchase or on lease for at least 50 years for setting up an Agro-Processing Cluster.

vi.Each agro-processing cluster under the scheme has two basic components i.e. 

vii.Basic Enabling Infrastructure, such as roads, water supply, power supply, drainage.

viii.Core Infrastructure or Common facilities such as warehouses, cold storage, IQF, tetra pack, sorting, grading.

Mega Food Park

i.The Mega Food Park Scheme is based on the “Cluster” approach and envisages the creation of state of art support infrastructure in a well-definedagri-horticultural zone for setting up modern food processing units in industrial plots provided in the park with a well-established supply chain.

ii.It aims at providing a mechanism to link agricultural production to the market by bringing together farmers, processors and retailers.

iii.Intends to ensure maximizing value addition, minimizing wastage, increasing farmers income and creating employment opportunities particularly in the rural sector. 

iv.Mega food parks typically consist of supply chain infrastructure including collection centres, primary processing centres, central processing centres, cold chains and around 25-30 fully developed plots for entrepreneurs to set up food processing units.

v.The Mega Food Park project is implemented by a Special Purpose Vehicle (SPV) which is a Body Corporate registered under the Companies Act. 

vi.State Governments, State Government entities and Cooperatives are not required to form a separate SPV for implementation of the Mega Food Park project. 

vii.Subject to fulfillment of the conditions of the Scheme Guidelines, the funds are released to the SPVs. 

viii.There are 41 Mega Food Parks funded under the scheme.

Creation/ Expansion of Food Processing/ Preservation Capacities (Unit Scheme)

i.The main objective of the Scheme is the creation of processing and preservation capacities and modernization/ expansion of existing food processing units with a view to increasing the level of processing, value addition leading to reduction of wastage. 

ii.The processing activities undertaken by the individual units cover a wide range of post-harvest processes resulting in value addition and/or enhancing shelf life with specialized facilities required for the preservation of perishables.

iii.While the expansion of processing capacity is necessary to increase the level of processing and reduce wastage, the induction of modern technology is intended to make a clear difference in terms of process efficiencies as well as improve the quality of the end product. 

iv.The settings up of new units and modernization/ expansion of existing units are covered under the scheme.

v.Scheme is implemented through organizations such as Central & State PSUs/ Joint Ventures/ Farmer Producers Organization (FPOs)/ NGOs/ Cooperatives/ SHGs/ Pvt. Ltd companies/ individuals proprietorship firms engaged in establishment/ upgradation/ modernization of food processing units.

Agro-based industries are going to be the driver of growth for India in the coming decades. Further, as the government strives to double the farmers’ income, reduce employment dependence on the agriculture sector, and also the labour contribution, developing competitive agro-industries is crucial for generating employment and income opportunities. Agro-industries have the potential to provide employment for the rural population not only in farming but also in off-farm activities such as handling, packaging, processing, transporting and marketing of food and agricultural products. The agro industries helps in processing agricultural products such as field crops, tree crops, livestock and fisheries and convert them to edible and other usable forms. The private sector is yet to actualize the full potential of the agro industry. The global market is huge for sugar, coffee, tea and processed foods such as sauce, jelly, honey and other products. Agro-industries are involved with postharvest activity involving processing of fruits and vegetables. These activities are only two percent compared to eighty percent in United States and forty percent in china. The food processing sector is an important segment of the economy, constituting a share of around 9.0 to 10.0 percent of the Gross domestic product. Studies suggest that the setting up of an agro-industry in a rural area sets in motion forces which positively impact the socio-economic structure of the areas.

The study also implies that there need to be a strong relationship between agro based- industry and employment, income generation and socio-economic development in rural part of the state. So in this direction agro-industry can play a major role. The policy suggestion from the study is to increase agricultural production and productivity with higher share in public expenditure in agriculture sector. Therefore, speedy growth of agro-industrialization is an imperative necessity for our economy not merely because of the floor interrelationship between agriculture and industries but also in view of the fact that there is technical interrelationship in the sense that each sector uses some form of output or the other is there are course of its own production process. Therefore in order to generate employment and to provide effective utilization of the resources.

1. SharmaArpita. Agro Based Industries and Rural Development, Kurukshetra, 2014, 62(7)

2. https://samajho.com/agro-based-industries-in-india.

3. https://byjus.com/agro-based-industries-in-india

4. Food Processing Policy, Government of Bihar, Patna 2008

5. www.nabard.org

6. https://byjus.com/free-ias-prep/bpsc-agriculture-industries-and-transportation//

7.https://www.tractorjunction.com/blog/agro-based-industries-in-india-types-importance-scenario/
8. https://www.mofpi.gov.in/Schemes/about-cefppc-scheme/