OF NON-OIL VALUE CHAINS IN PEANUT : A CASE OF PEANUT-CANDY AND SALTED-PEANUT SMALL-SCALE UNITS IN INDIA

This study was conducted to assess the extent of value-addition, employment generating potential and economics of peanut-candy and salted-peanut small-scale units in India. In the low-capacity peanut-candy units, the value-addition at the end of Stage-I (pod to kernel) was $ 2.4/q, whereas, it was $ 2.2/q in the high-capacity units. In salted-peanut units, the value-addition in the lowand high-capacity was $2.2/q and $2.3/q, respectively. In Stage-II (kernel to final product), the value-addition was high across sizes and type of the processing units. Around 525 and 635 man-days of employment/month/unit were generated by low and high-capacity peanut-candy units, respectively. The employment generation was less in salted-peanut vis-à-vis peanut-candy units due to different processing methods. The kernel alone constituted 50 to 52 per cent of the total cost in peanut-candy, and 89 per cent in salted-peanut units. The sensitivity analysis revealed that change in the kernel price directly affected the magnitude of profits. The important policy implications emerged were: if the units process the pods to obtain kernel (Stage-I) instead of procuring kernels from the market, considerable value-addition can be made, kernel price directly affects the profits and hence an appropriate mechanism like ‘contract farming’ would stabilise the kernel prices, majority of the units retrench labour during off-peak period due to less demand and hence diversification in processing will generate sufficient employment to retain the existing skilled employees, and appropriate policy intervention is necessary to address the capital, technology and marketing constraints of the peanut processing units.


Introduction
Peanut (Arachis hypogaea L.) is an important leguminous oilseed crop grown in India.It occupies an area of 5.2 million ha with productivity of around 1,180 kg/ha .It is grown in semi-arid regions of India, especially, in the states of Gujarat, Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra.Gopalan et al. (1996) and Basu and Singh (2004) stated that the peanut kernel contains on an average 25-29% protein, 47-50% oil, 3% fibre and other essential vitamins, minerals and amino acids.The peanut is directly consumed as raw nut or in processed form developed through different value chains.Humphrey and Schmitz (2001) pointed that the value chain in any crop includes a range of activities that are required to bring a crop product from its conception, sourced raw materials and intermediate inputs, its marketing and distribution to the final consumer.Kaplinsky and Morris (2003) stated that value chain incorporates production, transportation, transformation, processing, marketing, and consumption of a given product or service.Value chain analysis helps in understanding and evaluating the value-addition, income distribution and other benefits like employment generation.
In India, the peanut produced is used for seed, edible purpose (table nuts), and for oil extraction.Reddy (1988) stated that during the 1980's, 81% of the total peanut produced in the country was utilized for oil extraction, 12% for seed purpose, 6% for domestic use, and 1 per cent for export.The study by Govindaraj (2010) revealed that in recent years the utilization propositions have altered in India, due to changes in trade and tariff policy after liberalization, availability of cheaper oils like soybean, sunflower, and palm, and also due to urbanization induced as well as 'consumption shift'.The solvent extraction association of India reported that of late, only 49 per cent of the peanut produced is available for oil crushing (www.seaofindia.com).It implies that most of the peanut kernel produced in the country is used for direct consumption especially as value-added products.In India, important value-added products processed from peanut are salted-peanut, peanut-candy, peanut-butter, peanut-flour, roasted nuts, pre-cooked full-fat peanut flakes, de-oiled cake and Hand Picked and Selected (HPS) peanut.Among these, salted-peanut, peanut-candy, peanut-butter and HPS are very important products having high commercial value.Savalia et al. (2004) pointed that most of the HPS peanut referred as 'table nuts' are of extrabold size (>60 g/100 kernels) and mainly exported to the EU countries.Regarding the peanut-butter, Dhamsaniya and Patel (2004) stated that it has commercial value but its demand is restricted in few metropolitan centres.In recent years, the domestic demand is increasing for confectionary products especially for peanut-candy and salted-peanut.These are popular snack food among the rural people.Dave (2011) reported that the rising prices of 'dry fruits' also have paved the way for the cheaper table nut as a preferred option among the urban middle class.Hence, there is an increased demand across the spectrum of population for these peanut products.Several smallscale peanut-candy and salted-peanut units are emerging in the urban and semiurban centres and thus create a commercial value chain for peanut based products, which is otherwise mainly used for oil extraction.
The consumption demand of peanut-candy and salted-peanut in India is met mainly through the small-scale units and only small portion of the demand is met through the established, large and branded units.The quantitative studies related to the economics of small-scale units are limited in literature.Hence, the present study was conducted with the objectives of understanding the value-addition at different stages, employment generation potential, investment pattern, and cost and returns of peanut-candy and salted-peanut units.

Materials and Methods
In India, Gujarat State is the largest producer (the highest production) and highest table peanut processing (800 units) with about 70% of market share and hence it was selected for the present study.Reddy (1988) reported that among the different districts of Gujarat, five districts viz., Junagadh, Rajkot, Jamnagar, Bhavnagar, and Amreli in Saurashtra region are called as 'peanut bowl' of India.Among these districts, Junagadh District occupies 22 per cent of the area (0.4 million ha) and 33 per cent of peanut production (0.7 million tonnes) in Gujarat State and hence it was selected for the study.Two urban centres in Junagadh district viz., Junagadh and Keshod were randomly selected to assess the economics of peanut processing units.Since the published data on the number of peanut-candy and salted-peanut units that operate in these selected urban centres were not available, a snowballing technique was followed to identify the majority of the small-scale units.Accordingly, thirty-one salted-peanut and twenty-six peanut-candy small-scale units operating in these urban centres were identified and surveyed using the pre-tested questionnaire during the year 2007.The median processing level of the units (i.e.302 kg/day/unit) was considered as a cut-off for classifying the low-and high-capacity units.Economic indicators like gross return, net return were calculated for peanut processing units as follows: GR = Q*P, where GR = Gross returns; Q = Quantity of the processed product; P = Selling price of the product; NR = GR-TVC, where NR = Net returns; GR = Gross returns; TVC = Total variable cost.
The 't' test was used to test the significant differences in employment generation across the sizes of the units.The pooled analysis for peak and off-peak employment generation, and pooled analysis for the low and high-capacity units for capital investment and cost and returns were also analysed.The value-addition at Stage-I (pods to kernel) and Stage-II (kernel to final product) was calculated as follows.

Stage-II
Separate formulae were used for peanut-candy and salted-peanut units since in peanut-candy units 0.5 q of peanut kernel is used to obtain 1 q of processed product.

Results and Discussion
The major commercial non-oil small-scale peanut processing units in India are peanut-candy and salted-peanut.In peanut-candy making, the kernels are roasted, blanched, split and mixed with additives like jaggery (unrefined whole cane sugar) and glucose in appropriate quantities.This mixture was spread in trays, cut into different shapes using cutter, shade dried and packed in appropriate sizes.The salted-peanut is prepared by roasting the brine pre-soaked kernels, and adding colouring agents and additives in right proportion.The final product is then shade dried and packed suitably.
The majority of the peanut-candy and salted-peanut units procure kernels from the local government marketing yard for processing.The salted units use bold size kernels (>60 g/100 kernels), whereas, the peanut-candy units use medium/small size kernels (30-40 g/100 kernels).The prices of kernels used by the salted units are higher than the peanut-candy units due to differences in quality of raw material used by these units.The different stages (Stages I and II) in the development of peanut-candy and salted products are presented in Table 1.In each stage, some value-addition takes place until the final peanut-candy/saltedpeanut is developed.The details of value-addition ($) at different stages of the value chain are discussed in the later part of the paper.

Seasonal pattern of demand
The demand for peanut-candy and salted-peanut fluctuates during different months in a year.The demand for these value-added products is high during June to February (peak period) and low during March to May (off-peak season).The production patterns of these processing units are demand driven and have an inbuilt variation.In consonance with demand, higher production was observed during the peak period and low production during the off-peak period.The variations in demand for the peanut-candy and salted-peanut in the study area are mainly due to the climatic and cultural factors.During the off-peak period (summer season) there is less consumption demand of peanut-candy and salted-peanut, mainly due to high temperature induced indigestion problems.Moreover, the closure of schools and colleges during summer season (March-May) reduces the demand for these value-added products.
Table1.Different stages in peanut-candy and salted-peanut preparation.During the rainy and winter months (peak period), the demand for these products is high due to the use of fresh inputs (peanut and jaggery) in peanut-candy production and also due to local belief that the peanut-candy and salted-peanut consumption is good for health during these months.

Employment generation
The employment generation varied across the peanut processing units significantly and the details are discussed separately here under.

Peanut-candy units
The average man-days of employment generated in peanut-candy unit varied across different periods.In the peak period (June-February), an average of 404 man-days per month was employed by low-capacity peanut-candy unit, of which, 76% (308 man-days) was hired labour and 24% (96 man-days) was family labour (Table 2).During the off-peak period (March-May), an average of 121 man-days per month was employed by the low-capacity peanut-candy unit.Almost 73% (88 man-days) of the labour employed was hired and 27% (33 man-days) was family labour.The pooled results indicated that an average of 525 man-days of employment per month was generated by low-capacity peanut-candy units.
In the peak period (June-February), the high-capacity peanut-candy unit employed 525 man-days per month.Around 86 per cent (450 man-days) of the labour demand of these units was met through hired labour and 14% (75 man-days) through family labour.During the off-peak period, the high-capacity units employed around 110 man-days per month the majority of them (82%) were hired labour.The pooled results indicated that an average of 635 man-days was employed per month by every high-capacity peanut-candy unit and the majority of them were hired labour (85%).Hence, it can be concluded that the peanut-candy processing generates more employment especially during the peak period.Irrespective of the size/capacity, the labour needs of these units are met through hired labour since skilled labour is a pre-requisite in peanut-candy processing.There were significant differences in the percentage of labour participation across the sizes and different periods of the year.

Salted-peanut units
The man-days employed in salted-peanut unit varied across different periods.During the peak period, an average of 219 man-days was employed per month by low-capacity salted-peanut unit, of which, 60% (131 man-days) was hired labour and 40% (88 man-days) was family labour.In the off-peak period, an average of 68 man-days per month was employed by the low-capacity salted-peanut unit.Nearly 56% (38 man-days) of the labour employed in the salted-peanut unit during offpeak was hired and 44% (30 man-days) was family labour.The pooled results indicated that on an average of 287 man-days was employed by every low-capacity salted-peanut unit and the majority among them were hired labour.
The high-capacity salted unit employed to the tune of 315 man-days per month in the peak period.Around 65% (206 man-days) of the labour demand of these units was met through hired labour and 35% (109 man-days) through family labour.In the off-peak period, 83 man-days were employed per month, of which, 54% (45 man-days) was through hired labour and 46% (38 man-days) by family labour.The pooled results indicated that on an average 398 man-days were employed per month by high-capacity salted-peanut unit and the majority of them were hired labour (64%).There were significant differences in the percentage of labour participation across the sizes and different periods of the year.It can be concluded that the salted-peanut unit is a high employment generating unit like the peanut-candy unit.However, a perusal of Tables 2 and 3 revealed that the employment generating potential of peanut-candy unit was higher than the saltedpeanut unit irrespective of capacity and across different periods.It was mainly attributed to different processing procedure involved in peanut-candy production.Moreover, the packing of peanut-candy was in small sizes and it needed more labour than the salted-peanut units.The skilled labour requirement was a necessity in peanut-candy processing and hence the hired labour component was higher in peanut-candy vis-a-vis salted-peanut unit.The peanut processing units are high employment generating units but many units are constrained with capital, technology and marketing strategies.These constraints limit their business expansion and thereby employment generation capacity in the long run.Most of the state governments in India including Gujarat State had set up Agro-Industrial Corporations (AIC) to promote agro-industries and to generate employment.However, Goyal (1993) and the review report of the finance department of Gujarat State (www.financedepartment.gujarat.gov.in)revealed that these AICs concentrated on sale of inputs to agriculture and failed to promote agro-industries in the state.Gujarat State agro-industrial policy has a wide gamut of provisions for the development of agro-industries in the state like single window clearance, interest-subsidies, assistance for pre-feasibility studies, support for setting up of centre of excellence, infrastructure and marketing facilities including setting up of agro-export zones and air freight subsidy etc., to promote exports.But the penetration of these policies to peanut processing units is rather slow and inadequate.Hence, there is an urgent necessity to address the capital, technology and marketing constraints perceived by the peanut processing units through appropriate policy.

Investment pattern of peanut-candy units
The break-up of capital investment is presented in Table 4.The capital investment varied positively with the size (processing capacity) of the units.The total capital investment in low-capacity peanut-candy units was $ 2,449.7,whereas, it was $ 4,289.4 in the high-capacity units.The share of buildings/shed was substantial and accounted for 67% and 49% of the total capital investment in low-and high-capacity units, respectively.In low-capacity peanut-candy units, the second major investment was in machineries and accounted for 18% of total capital investment.In high-capacity units, the second major investment (32%) was in accessories like tray, plates, cutter and roller.The pooled analysis revealed that in peanut-candy units, the major capital investment was in buildings and shed (55%) followed by accessories (24%).

Investment pattern of salted-peanut units
The capital investments in salted units are presented in Table 5.Similar to peanut-candy units, the capital investment in salted units varied positively with the size of the unit (processing capacity).The total capital investment in high-capacity salted units was $ 4,040, whereas it was just less than half ($1,783) in the lowcapacity units.The share of buildings/shed was substantial which accounted for 80% of total capital investment in high-capacity salted units, and 75% in lowcapacity units.The second major capital investment was machineries in both the high-and low-capacity units.The pooled analysis revealed that in salted-peanut units, the major investment was in buildings and shed (78%) followed by machineries (9%).A perusal of the capital investment in peanut-candy and salted-peanut units (Tables 4 and 5) revealed that the investment in buildings and shed was the highest in both cases since these products are to be processed and packed under minimal moisture conditions.Hence, the concrete shed is a pre-requisite to avoid contamination and spoilage of the processed end product as well as the raw materials.Thus, a high investment in the construction of shed was observed in both of these products.The investment in peanut-candy units was higher vis-à-vis salted-peanut units since peanut-candy processing needs sophisticated procedure, whereas salted-peanut is prepared by a simple procedure.

Cost and returns structure of peanut-candy units
The results of the cost and returns structure of low-capacity peanut-candy units revealed that fixed cost constituted only 4%, whereas the variable cost constituted 96% (Table 6).A similar trend was observed among the high-capacity peanut-candy units.In low-capacity units, among the variable costs, the kernel alone constituted 51% of the total cost followed by packaging and labour (21%) and additives (20%).In high-capacity units, among the variable costs, kernel constituted 53% followed by additives (21%), packaging and labour (20%).Irrespective of the size of the peanut-candy units, the kernel constituted the major cost and thus any variation in kernel price would directly affect the cost and returns.The low-capacity unit generated a net income of $ 298.1 per month, whereas the high-capacity unit generated a net income of $ 1,209.5 per month.The highcapacity units generate more income compared to low-capacity units due to more processing volume per month.
Cost and returns structure of salted-peanut units A perusal of Table 7 revealed that in the low-capacity salted-peanut units 98.5 per cent cost was variable cost and 1.5% was fixed cost.Similar results were reported by Raj (2008) in mango processing industries.Among the variable costs, the raw material (kernel) alone constituted 89% of the total cost, followed by additives (2.5%), packaging and labour (3%).A similar trend in cost was observed among the high-capacity salted-peanut units.The pooled results also confirmed that the major cost in salted-peanut units was variable cost (99%).Among the variable cost, the raw material (kernel) cost alone constitutes 89% of the total cost.It was mainly due to fewer inputs required for processing salted-peanut unlike peanutcandy.Moreover, using a simple procedure, the salted-peanut is processed and hence the packaging and labour cost is less in salted-peanut vis-à-vis peanut-candy.The low-and high-capacity salted-peanut unit generated a net income of $ 1,086.2 and $ 2,919.6 per month, respectively.The high-capacity units generated more income compared to low-capacity units due to more processing volume per month.

Simulated economic gains of peanut-candy and salted-peanut units for changes in kernel price
A perusal of Tables 6 and 7 revealed that the kernel alone constituted 52% of the total cost in peanut-candy units, whereas it was 89% in the salted-peanut units.The cost of kernel was a major component of the total cost irrespective of the size of the processing units and hence any change in the kernel price would affect the profits of the processing units.The kernel price and variable cost were positively related, whereas they were inversely related to profitability of the units.The kernel prices are linked to the peanut crop production pattern.The production pattern of peanut crop coincides with peak consumption demand period (June-February) resulting in low raw material prices.Otherwise, the units encounter low production cost or more returns to peanut-candy/salted-peanut units during this period.But in the off-peak period (March-May), the kernel price was high resulting in low profits to the units.Since the variation in prices affects the profits, a sensitivity analysis was undertaken to study the profitability of peanutcandy and salted-peanut units for the changes in kernel prices.The prices considered for sensitivity analysis were based on the existing price (Scenario-II), maximum expected fall (Scenario-I) and maximum expected increase (Scenario-III) in prices perceived by the units during the survey year.It was observed from Figures 1 and 2 that in low-capacity peanut-candy units, as kernel price fall from Scenario-II ($ 0.71/kg) to Scenario-I ($ 0.62/kg), the net returns that would be generated per unit per month increase from $ 298.1 to $ 548.1.If price of kernel rises to Scenario-III ($ 0.78/kg), the net returns slip down to $ 173.1 per unit per month.A similar trend in net returns for changes in kernel prices was observed among the high-capacity peanut-candy units.
The existing price of kernel used in salted-peanut units was $ 0.78/kg of kernel (Scenario-II), the maximum expected fall price was $ 0.67/kg and maximum expected price rise was $0.89/kg.It was observed from Figures 3 and 4  kernel price fall from Scenario-II ($ 0.78/kg) to Scenario-I ($ 0.67/kg), the net returns of low-capacity salted-peanut units per month increased from $ 1,086.2 to $ 1,593.1.If prices increased to Scenario-III ($0.89/kg), the net returns were expected to decrease to $ 579.3 per month.A similar trend in net returns was observed in high-capacity salted-peanut units.Most of the units do not increase the price of processed products (peanut-candy/salted-peanut) in consonance with the increase in kernel price, as there are competition and price-war among the producers.Moreover, the price increase in kernels was during the off-peak season, when demand for these processed products was already low and any further increase in price by the producers would cause a fall in demand.Hence, instead of transmitting the increased cost (kernel cost) burden to consumers, the peanut-candy and salted-peanut units absorb themselves and reduce their profit margins.This reduced profit does not affect existence of peanut-candy/salted-peanut units since the off-peak period (March-June) lasts only for a short period.However, the retrenchment of labour increased during the off-peak period (March-June) to offset the fall in demand.Hence, we can conclude that to stabilise the income and to circumvent a disengaging of the existing skilled labour, the processing units should diversify the production portfolio (peanut butter or HPS peanut) instead of specialising in one product.
Value-addition at different stages of peanut-candy and salted-peanut units The extents of value-addition in different stages of peanut-candy and saltedpeanut preparation are presented in Tables 8 and 9.Among the low-capacity peanutcandy units, the value-addition at the end of Stage-I was $ 2.4/q, whereas it was $ 2.2/q in the high-capacity units.There was an insignificant difference in valueaddition between the low-and high-capacity units.The pooled results revealed that among the peanut-candy units the value-addition was $ 2.3/q at the end of the Stage-I.In salted-peanut units, the value-addition among the low and high-capacity was $ 2.2/q and $ 2.3/q, respectively.There was an insignificant difference in the valueaddition between the sizes of salted units.The pooled results revealed that the valueaddition among the salted units was $ 2.3/q during the Stage-I.Though the valueaddition seems less in terms of one quintal of kernels processed, it becomes very high if we consider the amount of kernels processed per day or month i.e. (if the unit processes 1,000 kg/day or 30,000 kg/month the value-addition will be 10 times or 300 times).Hence, some of the small-scale units (peanut-candy and saltedpeanut) which now purchase the kernel directly from the marketing yard could purchase pods and process them to generate more value-addition and profits.The value addition in the Stage-II of peanut-candy and salted-peanut processing units is presented in Table 9.Only 0.5 quintal of kernels is required to produce one quintal of peanut-candy (the rest of 0.5 quintal of peanut-candy will be mixed with additives such as glucose and jaggery), and the price of 0.5 quintal of kernel was considered.The value addition was calculated after subtracting the kernel and processing cost from sale price.The results revealed that among lowcapacity peanut-candy units, the value-addition was $ 6.9/q of the final processed product, whereas it was $ 4.5/q in the high-capacity units.The pooled results revealed that the average value-addition among the peanut-candy units was $ 5.7/q.There was a considerable difference in the value-addition regarding the size of the peanut-candy units and it may be attributed to differences in labour participation.The family labour participation was high in low-capacity units compared to high-capacity units resulting in a significant difference in the processing cost among these units.As stated by Tim Coelli and Battese (1996) the family labour is more productive than the hired one resulting in low processing cost or more value-addition among the low-capacity units.Among the salted-peanut units, the value-addition in the low-capacity units was $ 26.5/q, whereas it was $ 25.8/q by the high-capacity units (Table 9).The pooled results revealed that the average value-addition among the salted-peanut units was $ 26.0/q.Unlike the peanut-candy units, there was no considerable difference in the value-addition considering the size of the salted units and it was mainly due to high family labour participation both in low-and high-capacity salted units.Moreover, the necessity of skilled labour (hired labour) for processing was less in the saltedpeanut vis-à-vis peanut-candy preparations.

Figure1.Figure 2 .
Figure1.Simulated economic gains of low-capacity peanut-candy units for changes in kernel price.

Figure 3 .
Figure 3. Simulated economic gains of low-capacity salted-peanut units for changes in kernel price.

Figure 4 .
Figure 4. Simulated economic gains of high-capacity salted-peanut units for changes in kernel price.
HL-Hired labour; FL-Family labour; AL-Average Labour; Figures in parentheses indicate

Table 9 .
Value-addition in Stage-II (kernel to final product) of peanut-candy and salted-peanut processing ($/quintal).
* Includes all cost in processing except kernel cost.