T MAT

Value Added Products

F ood processing sector in India is one of the largest in terms of production,

consumption, export and growth perspectives. The government of India
has identified horticultural crops as a means of diversification for making
agriculture more profitable through efficient land use, optimum utilization of natural
resources and creating skilled employment for rural masses. The Cabinet Committee
on Economic Affairs (CCEA) approved a proposal to raise allocation of plan fund
from Rs. 98 crore to Rs. 295 crore for the Scheme of Technology
Upgradation/Modernization/Establishment of Food Processing Industries (FPI) units
during the X Plan period.
Fruits and vegetables typically constitute an essential part of the daily diet in India
and they are in great demand round the year from most sections of the population.
The commercial value of fruits and vegetables in terms of direct consumption
besides, processing as well as trade has risen substantially in recent years. Their
economic importance
has also increased
and high labour
intensity in the production of
most fruits and
vegetables makes them
important from the
employment angle as
well. The growing food
processing industry is
poised to dominate the palate of Indian households in the near future.

The horticultural crops in the country presently cover 13.6 million hectares of arable
land, i.e. 7 per cent of the gross cropped area and contribute 18-20 per cent of the
gross value of India’s agricultural output.

Production of fruits and vegetables has been growing at compounded annual rates of
5% and 6%, respectively over the past decade. Although India is the second largest
producer of fruits and vegetables, only 2 % of this production is commercially
processed. Out of 370 million tons of fruit production in the world, India accounts for
33 million tons with a share of 11 per cent. Of the 450 million tons of vegetables
produced in the world, India produces as much as 70 million tons accounting for 17
per cent.

Almost 50 per cent of the population is under 20 years of age, providing a large base
of consumers for several decades to come. India's middle class is estimated at 250-
300 million people, the majority of whom earn between $1,200 and $3,600 US per
household per year, an amount that is short of what many deem to be the income
required to purchase value-added food products ($5,000 US). Yet, about 30-40
million Indians earn $20,000 US or more a year, a huge market by any standard, but
scattered all over India in major cities. The consumption and living patterns of this
emerging middle class is comparable to those in western market economies during
the 1960s.

Due to globalization, with the Government of India providing incentives and an easier
working environment for foreign investors, both the Indian corporate sector and
multinational corporations (MNCs) have jump-started the food processing industry,
with participation from farm to factory.

Primary food processing is a major industry with hundreds of thousands of rice-

mills/hullers, flour mills, pulse mills and oil-seed mills. There are several thousands of
bakeries, traditional food units and fruit/vegetable/spice processing units in
unorganized sector. Size of the semi-processed and ready to eat packaged food
industry is valued at over Rs. 4000 crores (US $0.8 billion) and is growing at over
20% annually.

As a result of the continuing reform process the food processing industry has drawn
a considerable amount of Foreign Direct Investment (FDI) in the last few years. As a
result of several policy initiatives undertaken since liberalization in August 1991, the
industry has witnessed fast growth in most of the segments.

Hence in this article, one of the major food processing industries i.e., tomato is
discussed. This article is most useful to the farmers, how to get more profit from
value added products of tomato instead of selling tomato as vegetable directly.

Processed tomato export trends

World trade

The production of processed tomato

has been predominantly concentrated in
the EEC and North America. These
accounted for almost 75 per cent of the
total production in 1992-93. USA
accounts for 42.2 per cent and Italy
producing about 16 per cent of the
world production has processed tomato.
World trade in processed tomatoes is in the form of paste, ketchup/sauce, puree and
canned tomato. Italy ranks as the largest exporter of processed tomatoes, making its
presence felt on the world market for all the four processed tomato items.

About 6 per cent of the tomato products consumed by Americans today are imported.
During the 1990s, imports averaged about 4 per cent of consumption, down from 7
per cent during the 1980s.

Tomato processing industry in India

India is not a dominant player in the

world market, whether that is in the
context of production, imports or exports.
India’s share in world production is only
5.7 per cent. However, Indian tomato
processing industry prides itself on being
the largest in south Asia. Infact, the
output of the Indian industry is more than
twice that of Japan, and considerably greater than Thailand and Taiwan. Another
encouraging trend has been that India’s production level of processed tomato has
risen by 50 per cent. (Table 1)

Table 1

Production of tomato - India’s position in the world

Tomato Production ( 000 MT)

India 7,430
World 84873
India’s Share (in %) 5.7
India' Rank 6

Source: Horticultural Statistics, Department of Horticulture, Chennai 1999-2000.

http://www.postharvestindia.com/indhrvst/fruits.htm
Production of tomato in India

S.I.NO Tomato 1990 2000 2005

1. Production quantity (1000 tonnes) 4,603.45 7,430.00 7,600.00
2. Yield per hectare (kg/Ha) 158.59 161.52 140.74
3. Area harvested (1000 Ha) 290.28 460.00 540.00

Source: FAOSTAT

Recently, India has started the export of

processed tomato. India’s exports mainly
consist of tomato ketchup/sauce,
paste/chutney. In the export of processed
products tomato paste contributes a large
share and touched the level of 68
thousand tonnes as against the target of
one lakh ton, this is a substantial jump
from the base of 30 thousand tonnes.

The increased export of about 127 %

during last year encourages the growers.
In terms of value, exports do show an
increase of about 122 % as reported. The
level of exports has been rising in value and volume.

India exports processed tomato paste and chutney, to the USA, Saudi Arabia and
Japan. Other forms of preserved tomatoes are exported in small quantities to Kuwait,
Sri Lanka and the UAE.

Export competitiveness

Processed tomato is a major trade item in the world. But India does not figure
anywhere among the top exporters of any of its many forms. However, India has
been exporting processed tomato in the form of tomato paste and ketchup. India
does possess moderate export competitiveness on the world market for tomato
paste. The domestic market is expanding, and there is also world demand for this
product. Tomato paste is another item in which India possesses export
competitiveness.

Quality of raw material suitable for processing

The quality of a tomato product is judged by its colour, which is dependent on the
redness of the tomatoes used. In fact, the red pigment (lycopene) can be used an
index of the amount of tomato actually present in a product.

Tomatoes should be ripe, red, and firm to soft, free of all mould growth (by cutting out
infected parts) and free of stems, leaves, dirt and other soils (by washing). It is less
important if the tomatoes have surface blemishes or splits/cracks (provided these are
not infected) and in most processes they will be cut or pulped. Tomato crop raised in

winter season is superior in quality because they contain more total solids.

Value added products of tomato

The following products can be prepared from tomato

• Tomato paste
• Tomato juice
• Tomato ketchup
• Tomato pickle and
• Tomato sauce.

Working costs of preparation of tomato ketchup

It is observed from the table that, total working cost amounted to Rs. 60782.96/tonne
of tomato ketchup. Expenditure towards total raw material cost has maximum share
of 87.84 per cent, followed by tomato (20.36) and glass bottle (16.45). Table 2
indicates working cost of preparation of tomato ketchup.
 Table 2
Working costs of preparation of tomato ketchup (Rs./tones)
SI.NO Particulars Rs/tonnes Per cent to total
Working cost
a. Expenses on human labour
1. Plant manager 120.00 0.20
2. Plant supervisor 96.00 0.16
3. Technical assistants 180.00 0.30
4. Skilled artisans 144.00 0.24
5. office assistants 36.00 0.06
6. Unskilled workers 300.00 0.49
Total human labour cost 876.00 1.44
b. Expenditure on raw materials and Packing
1. Tomato 12375.00 20.36
2. Sugar 4000.00 6.58
3. Salt 175.00 0.29
4. Onion 1500.00 2.47
5. Ginger 450.00 0.74
6. Garlic 405.00 0.67
7. Red chilli powder 1125.00 1.85
8. Cinnamon 3250.00 5.35
9. Cardamom 5750.00 9.46
10. Cumin 3000.00 4.94
11. Black pepper 4500.00 7.40
12. Clove (Nos.) 1500.00 2.47
13. Vinegar(Lit) 600.00 0.99
14. Sodium benzoate 84.50 0.14
15. Glass bottle (500g. Capacity) 10000.00 16.45
16. Plastic Cork 1000.00 1.65
17. Plastic Cap 1000.00 1.65
18. Corrugated box @12 bottles/box 1530.00 2.52
19. Expenditure towards electricity@ 140 units 910.00 1.50
20. Water charges 240.00 0.39
21. Total raw material cost 53394.50 87.84
22. Interest on working capital @ 12% 6512.46 10.71
Total variable cost 60782.96 100.00
Fixed costs of preparation of tomato ketchup

Total fixed cost accounted for Rs. 1075000. Among the fixed costs, area under
building has maximum share of 41.86 per cent, followed by machineries and
equipments has 37.21 per cent as shown in the Table.3.

Table 3
Fixed costs of preparation of tomato ketchup (in Rs.)
SI.NO
Fixed cost (Rs.) Per cent

1. Land (500 esq.) 90000.00 8.37

2. Area under building (150 m2) 450000.00 41.86
3. Machineries and equipments 400000.00 37.21
Installation and erection charges @ 15 %
4. 60000.00 5.58
cost of equipments and machineries
5. Office expenses (Furniture and chair) 75000.00 6.98
6. Total fixed cost 1075000.00 100.00
7. Total cost 1135782.96

Cost of production of tomato ketchup

The details of cost of production of tomato ketchup are given in the table.4. The cost
of production of tomato products are worked out for a tonne of output. It is observed
from the table that cost of production was Rs. 62882.96. per tonne of Tomato
ketchup.

Table 4
Cost of production of tomato ketchup (Rs./tonne)
SI.N Cost of Production (Rs./tonne) Per cent
o.
1. Recurring expenses 60782.96 96.66
2. Depreciation on building (SLM) 490.00 0.78
3. Depreciation on machineries & equipments (SLM) 437.00 0.69
 4. Interest on fixed capital @ 12% 1173.00 1.87
5. Total 62882.96 100.00
Return
Turnover
1. Gross return of Tomato ketchup (1000 Kgs.) 85000.00
Cost Economics
Net return 22117.04

Recurring expenses has maximum share of 96.66 per cent of the cost of production.
Gross return of tomato ketchup was Rs. 85000/ tonne and Net return was Rs.
22117.04/ tonne.

Challenges to the food processing sectors

ƒ Absence of post harvest practices at the farm level. Huge post harvest loss in
the range of 10-15 % for agricultural produce and 30-40 % for horticultural
produce.
ƒ Only about six percent of India's agricultural output is currently processed and
mainly primary processing like milling, sorting and refining are undertaken.
Hence for value addition of agricultural commodities, more investment is
required.
ƒ The local entrepreneurs have to compete with multinationals in terms of
quality, hygiene, appearance and standards.
ƒ Poor cold chain and weak infrastructure is a serious constraint for nation-wide
reach of the processed foods.
ƒ Seasonable availability of many of the agricultural commodities, particularly
fruits and vegetables.
ƒ The bulk handling facilities are not available in all ports.
ƒ Refrigerated warehousing and transportation facilities are also inadequate
and costly.

Conclusions

™ Developing cold storage closer to the major tomato markets will help to
stabilize tomato prices and post harvest losses can be reduced.
 ™ Policies and plans are required for improvement of food processing
infrastructure including upgradation of technology and enforcement in food
processing, activating domestic market with focus on exports.

™ A strong and dynamic food processing sector could play a vital role in
diversifying agricultural activities, improving value addition opportunities and
creating surplus for exports of agro food products.

™ In India, the utilization of fruits and vegetables for processing in the organized
and unorganized sectors is estimated to be around 2 per cent of the total
production. The desired growth of agriculture sector in general and economic
prosperity of rural farmer in particular is achievable only with the effective
integration and synergy between agriculture and agro based industries. Value
addition ensures better market and remunerative price of the agricultural
produce by making it more marketable.

# Dr. A. Malaisamy, Ph.D

Assistant Professor
&

# R. Parimalarangan
Senior Research Fellow
Department of Agricultural Economics,
Tamil Nadu Agricultural University,
Coimbatore, Tamil Nadu
India - 641 003.