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KAPPEC scouts for more PPP model projects: B.A. Channappa Gowda, Managing Director, KAPPEC
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Tuesday, 19 August, 2008, 08 : 00 AM [IST]
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 Karnataka State Agricultural Produce Processing and Export Corporation Limited (KAPPEC) was established on April, 22, 1996 with an Authorized capital of Rs. 500 lakh and paid-up capital of Rs. 50 lakh. According to the recommendations of the agricultural policy of the Statet, KAPPEC develops and promotes the production, processing and export of agriculture, horticulture and floriculture products. Ending March 2008, KAPPEC generated profits to the tune of Rs. 8.22 crore. B.A. Channappa Gowda, Managing Director, KAPPEC provides an overview of the state food processing exports in an interview with Nandita Vijay.
How would you describe the present scene in the State for marketing and exports?
Agricultural exports are increasing from Karnataka. This year, the State was able to send out 13 containers to the international markets despite the un-seasonal rains. The target set by KAPPEC is 50 containers.
Ending March 2007, the export of agriculture and horticulture produces including processed food products from India accounted for Rs. 39,095 crore. Of this Karnataka accounted for Rs. 4341.50 crore. There has been a huge incremental jump in the exports from the State beginning from 2000-2001 when it was Rs. 2,273 crore and in 2006-2007, it was Rs. 4,341 crore. The key exports are coffee, silk, cashew, agro-processed products, gherkins, groundnuts, maize and flowers. Gherkin exports constitute Rs. 313 crore, Bangalore Rose Onions generates earnings to the tune of Rs. 59.13 crore and spices account for Rs. 219.70 crore.
KAPPEC, which is the nodal agency for setting up of agri export zones in the State has implemented successfully two agri export zones with the assistance from Agricultural and Processed Food Products Export Development Authority (APEDA) from the Centre. Currently, there are 25 gherkin processing units operating in the State.
Currently, Karnataka has 2,244 food processing units. These include 40 gherkin, fruit and vegetable processing units, 40 sugar mills, 111 cashew processing units in Uttara & Dakshina Kannada districts, 128 dhal mills spread out mainly in Gulbarga, 50 Roller Four Mills, 65 coffee curing units, 1,700 rice mills, 23 oil mills, 50 desiccated coconut powder mills, and 37 medicinal and aromatic processing units. There are also many cold chains supporting these units.
What have been KAPPEC's thrust areas?
Our thrust areas are food processing, warehousing including cold chains. In 2002, the Government of India had notified a Scheme "Assistance to States for developing Export Infrastructure and Allied Activities" (ASIDE) and Horticulture Mission. The National Development Council (NDC), set-up a special Additional Central Assistance Scheme, the Rashtriya Krishi Vikas Yojana (RKVY). Under RKVY, KAPPEC was able to generate funds to establish cold chain facility at Kushtagi for export of pomegranates and other horticulture products and the facility will be completed by December 2008. It will have a pack house, two pre-cooling units of 6 metric tonne (MT) capacity, 4 cold storages for exports of 50 MT each and 3 cold storages for bulk storing. This will be helpful for seasonal fruits and vegetables like pomegranates, grapes and other horticulture produce. The total project cost is Rs.833.05 lakh, of which APEDA has sanctioned a financial assistance of Rs.563 lakh and the balance from RKVY.
What are the other important investments made in the area of food processing in the State?
Among the key projects is the focus on public private partnership(PPP) efforts. KAPPEC with the association of successful agri entrepreneurs group based in Hubli has setup an IQF unit titled. Tropicool Foods Pvt. Ltd., for the processing of fruits and vegetables grown by thousands of small and marginal farmers under contract farming system. In order to set-up this unit, an investment of Rs. 1058 lakh is envisaged. The promoters have raised an equity of Rs. 650 lakh and KAPPEC share is Rs. 78 lakh which is 12 percent of the equity. A Belgium partner who has taken substantial stake in the equity will assist the company in marketing the produce. KAPPEC is looking for more such PPP model projects and would like to be a facilitator.
Could you enlist some of the future efforts by KAPPEC?
Efforts are also on to establish a multi fruit processing plant at Kolar under the RKVY scheme for mango, tomato, pomegranate and Bangalore Blue grapes and we have recently floated an advertisement calling Expression Of Interest(EOI) for the same on PPP model. KAPPEC will propose to have a maximum equity of up to 49 percent in this project.
A dedicated tomato processing unit at Malur is also planned under RKVY. The total project cost is Rs. 300 lakh, of which Rs. 200 lakh will be the equity stake from Mittal Foods Pvt. Ltd., and remaining Rs. 98 lakh is by KAPPEC with the financial assistance from RKVY.
Further an integrated cold chain complex consisting of grading & packing line, pre-cooling, cold storages, VHT plant, irradiation unit and allied facilities will be set up at Dharwad for mango growers and other horticulture producers in the region since the Hanagal, Haveri belt in this district is known for the cultivation of Ratnagiri variety Alphonso mangoes. A cold chain facility is also planned at Bidar for the export of grapes, pomegranates and other horticulture produce from the area.
What kind of support is provided by the Union government for the promotion of agri exports?
Consistent and considerable financial aid is provided under ASIDE, RKVY, APEDA and National Horticulture Mission. Karnataka Government in its Budget 2008-09 has announced 25% subsidy for the establishment of cold storages, warehouses and food processing units established in rural areas of the State.
What according to you are the constraints in the sector of exports?
The first issue is the serious shortage of raw material and its availability at affordable price. We are also not developing produce for processing but are primarily focusing on table varieties. This hampers the food processing industry growth considerably. The need of the hour is to ensure consistent supply at competitive prices and quality produce. The second issue is the competition in food products from China at a far affordable price.
What are recommendations by KAPPEC to offset the problems that bog down the food processing sector?
The State government will have to ensure 3 phase uninterrupted quality power supply right through the year.
Government should increase the subsidy for favorable investments in agro processing sector. Efforts to exempt the APMC cess which is currently 1.5 percent of the total value of the raw material should be made. Loan for the establishment of food processing unit should be made available at 4% interest rate.
There is also a 4 percent value added tax (VAT) on processed products which should be removed. There should be cut on duty for packaging material. The price difference is huge between the fresh produce and processed items. In addition, there should be total removal of land conversion charges and stamp duty exemption.
Where does Karnataka stand in food processing in the country?
Karnataka is among the top three after Maharashtra and Gujarat. Karnataka is predominantly an Agriculture State. Around 24% of the total GDP comes from Agriculture. Over 66% of the work force are dependent on
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