Agro-Processing Industry and Farmers’ Linkages: Pattern and Impact on Enhancing Farmers’ Income in Tamil Nadu

Abstract

Linking production to processing is one of the strategies outlined by the government to double the farmers’ income by 2022. In this context, this study examines the role of processing industry in enhancing farmer's income. More specifically, the study has assessed (i) evolution of processing industry cluster and its enabling factors, (ii) farmers-processing industry linkage mechanisms and their impact on farmers’ income, and (iii) farmers’ preference for marketing outlets and its key determinants. This study is based on the comprehensive survey conducted across various stakeholders such as mango processors, commission agents, traders, and farmers of Krishnagiri cluster of Tamil Nadu in 2016–17. The study has found a rapid growth in the number of processing firms in the study region during 2000s. The growth was fuelled by export demand, assured supply of raw material and Government's policy incentives. On an average, the cost of mango cultivation was 1.56 lakh/ha and cost of production was 8.29/kg and farmers received net income of 1.34 lakh/ha. The cost of processing of mango was estimated to be 7/kg. More than 90 per cent of the farmers were linked with the processors either directly or through local contractors and an oral agreement was the common form of institutional mechanism. Overall, the study has shown that those farmers those who were linked with the processing industry could gain on an average additional income of about 49 per cent in comparison to the farmers those who were located in the non-processing industry region.