State Induced Capital Penetration of Agriculture Sector in India

It is notable that most of these major players in the market are of Indian origin starting as family group, others are either cooperatives, government undertaking, or are compa[r]

State Induced Capital Penetration of Agriculture Sector

Abstract The paper looks at Corporate penetration in Indian Agriculture, highlighting the historic path as well as the current scenario where there is active policy thrust for increasing corporate presence

in Indian Agriculture The historic outcome of such linkages and their impact on the agriculture community as well as private-corporates involved needs to be studies extensively so that we can correctly gauge the impact of private corporate involvement in the agriculture sector on the various parties involved and the larger Indian economy The problem in Agriculture sector has been documented by many researchers but in my research, I make an initiative to study this sector from the vantage point of corporates Checking for the concentration in the corporate enterprises engaging in agriculture and how is that solving or compounding the problems in agriculture sector The study traces the evolution path of Private Corporates in Agriculture and see whether the same has provided some relief to Agriculture as corporates participation in agriculture is pushed by subsequent Government as a panacea that can alleviate the distress in agriculture sector I found that these interlinkages have been strengthening over time and are present in both the upstream and downstream activities of agriculture The agriculture sector faces an oligopolistic corporate sector when they buy Agri-inputs like fertilizers, seeds etc from farmer and an oligopsonistic corporate sector when the food processing industries buys farmer produce

A transaction between a scattered agriculture sector and a concentrated corporate sector is bound

to result in an outcome which is not in favor of the agricultural farmer Increasing corporate presence as government has intended in its various policies will only worsen the plight of farmers instead of eliminating farm distress The need of the hour is for active government intervention in the market so that the corporates are regulated and the farmer get a better bargain in this transaction

Introduction

The paper looks at State induced capital penetration of Indian Agriculture The objective is to unravel those policy mechanisms and the context of the Indian economy which are unable to arrest the distress in Agriculture sector which is going through a crisis We begin our study by providing

a brief overview of concentration in Indian economy by outlining some policies that are in work

in Indian economy post-independence that directly or indirectly signals towards increasing private corporate presence in Indian economy Though Private corporate presence in itself is not a problem but withdrawal of state support, framing laws which rather than helping farmers become another means by which they are kept in a perpetual state of distress, amounts to state abdicating its responsibility towards farmer and state’s inducement to private capital penetration then become a means to increase corporate profit at the cost of the crisis in agriculture The paper has been divided

in four sections, the first section attempts to highlight the historical context of corporate presence and outline some of the policies which works as inducements for private capital to foray in agriculture sector The second section looks at the corporate presence and makes a case for concentration from the perspective of Agri- input and Agri-output markets The third section looks

at the fragmentation of Agriculture sector and looks at the growing interlinkages between Agriculture and Private corporate sector, highlighting the interdependence among them Followed

by conclusion in the last section

Section I- Corporate sector and Government policies

Indian Economy has historically been an agrarian economy, with agriculture being the mainstay occupation of its population and largest contributor to GDP at the time of the country’s independence from British rule According to previously used methodology to calculate GDP in 1950-51 contribution of Agriculture & allied, Industry, and Services sector was 51.81 per cent, 14.16 per cent, and 33.25 per cent, respectively at current prices In 2013-14 share of Industry sector has increased to 24.77 per cent, services sector to 57.03 per cent while that of agriculture and allied sector has declined to 18.20 per cent There is a structural imbalance in the Indian Economy where agriculture still employs half the population of India while contributing less than

20 per cent to the country’s GDP

The government seems to be tackling this problem through its various schemes, the major thrust

of which appears to be increasing corporate presence in the agriculture sector This is evident in

the National agricultural policy(NAP-2000) which states that “private sector participation will be promoted through contract farming and land leasing arrangements to allow accelerated technology transfer, capital inflow and assured market for crop production, especially of oilseeds, cotton and horticultural crops”(Ghosh,2003 p1) we can note that contract farming, privatization

is stressed and production of cash crop is emphasized in NAP, which also talks about benefits arising from exports of agriculture products The logic that is followed is that privatization will lead to a healthy competition, reduction in food wastages, increased investment in agriculture, better management of micro-problems associated with production, corporate presence in upstream and downstream activities will be good for consumer and farmers In the form of quality products

at affordable prices and farmers getting better prices for their produce where the scissors crisis of rising inputs prices and falling output prices will be overcome by corporates sharing the responsibility making hi-end technology available to reduce cost, investing in the required infrastructure working in tandem with government, providing better variety of seeds , and assuring the farmer better prices for their produce

The following are some of the channels through which corporates penetrates into agriculture: -

• Contract farming: A package of input supply, price security, sharing of monsoons risk, sharing of technical knowledge by the firm etc under a forward contract between producer and processor Food Processing companies by such arrangement get assured input supply, they are dependent on farmer for their raw material supply, the structure of Contract farming is such that the success of farmers in cultivating a good crop translates into a success for the processor

• FPI- Food processing Industry: an industry still at nascent stage as the sector contributes less than 2% to Indian GDP, and only 10% of India food is processed

• MCX-Multi-Commodity exchange in different agricultural commodities also options and other spot and derivatives being introduced by SEBI

• Annual reports of private Corporates like ITC, HUL etc hints toward other channel like: Integrated watershed programs, diversifying farming activities through introducing Livestock Development program to diversify farmers income, R&D facilities of corporates working in coordination with ICAR and support by other government research institutes

• Integrated Consumer Goods Manufacturing and Logistics facility with the aim of making

a demand driven value and supply chains in agriculture, replacing the traditional supply chains

• Supplying Agri-inputs like seeds, pesticides, fertilizers etc to the Farmer, engaging in innovation and research of the aforementioned products

Some of the facilitative and regulatory function that the government has done until now to facilitate corporate penetration in agriculture (as per Press Information bureau (PIB), Government of India):

• Change in laws: FPI became a priority sector in 1999

• Agricultural producing and marketing committee- APMC law 2003, and its amendment in

2013 and in 2017: includes de-notification of perishables from AMPC act and stresses on direct selling of farmers to agribusiness corporates

• APLCFS-2018 ( Agriculture produce and Livestock Contract Farming and services Act),: a separate law for contract farming earlier contract act (1872) used to apply to this sector, but a need for separate law keeping in mind the specific provision of contract farming was felt

• Government has launched a Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters formally- KISAN SAMPADA YOJANA with a budgeted expenditure of Rs 6,000 crore rupees for the period 2016-20 to promote food processing industries in India Private sector is supposed to take a lead role in its implementation the SAMPADA scheme is flexible enough to let the entrepreneur choose the appropriate location for their projects based on availability of raw material, viability of the project and techno-economic feasibility

• Ministry of Food Processing Industries (MoFPI) :- establishing mega food parks and signing MoUs with Italy and France and other countries with departments like NIFTEM- National Institute of Food Technology Entrepreneurship and Management and IIFPT -Indian Institute of Food Processing Technology for developing Food processing technologies so as to stimulate investment for developing infrastructure of FPI sector, developing capability for institutional cooperation, and to ensure farmer’s participation in conferences, workshops, food fairs etc

• Measure to increase FDI-Foreign Direct Investment in FPI; as 100 per cent FDI is allowed under the automatic route Also, 100 per cent FDI is legitimized under Government approved route for trading, through e-commerce- e-NAM (Electronic- National Agriculture Market) for trading and manufacturing in food products

• Notification by SEBI for using stock markets for MCX in agriculture commodities

Privatization is glorified as the one-shot panacea to cure all the maladies affecting our country – and the same is true with regard to the approach towards agriculture In the discourse surrounding it, the emphasis always tends to be on the ‘efficiency’ aspects of heightened

corporate presence What is neglected in the process is the dimension of concentration of

economic power that is also associated with the corporate sector

Ploeg (2008) regards big corporates as food empire who are present in every arena of Agri-market; from input supplying, developing chemicals, carrying out R&D in agriculture, food processing, selling, distribution, marketing of the agriculture product etc The control by few corporates over the amount of fertilizers, pesticides, seeds, tractors, the sale of farmer’s produce, to the consumption by the consumer etc and the political-support garnered by them prompts Ploeg to regard them as an empire

At the time of independence, planning was recognized as a potent tool to transform the Indian economy and bring it out of the stagnancy and decadence; the legacy inherited from two centuries

of British rule The expectations were to emulate the success story of the centrally-planned Russian model of development Several plans were chalked-out even before an independent Indian state came into being

Post-independence, a planning commission (1950) was set up, national development council was established, elaborate plans were made, where state was designated to play a significant central role Gradual policy changes continued thereafter till the 1990s when, Indian economy witnessed the balance of payment crisis that initiated widespread liberalization of the economy, and a change

in the role of state from omnipotent manager, owner, regulator of the economy etc., to imparting some of these function to the private sector while retaining the regulatory function with itself

The industrial sector post-independence was small comprising of few industrial houses, and the majority of the population was engaged in agriculture, which too was marked by highly unequal distribution of land holding in country Concentrated land ownership contributed towards

depressing agriculture income, minimal surplus to invest and naturally no market for industrial good, as the mass just didn’t have the monetary income to buy goods Land reforms was the necessary corrective to this particular problem of economic concentration and to eliminate its dragging effects on the economy Land Reforms, however, met political resistance from the rich and powerful land holding class in India and achieved limited success Only some parts of the country- West Bengal, Kerala etc could execute the policy A similar thing happened in the process of increasing agriculture productivity as green revolution-1965 onwards was limited to Punjab, Haryana and Western Uttar Pradesh etc Green revolution marked a shift in policy towards increasing productivity of the agricultural land through use of HYV seeds, and greater use of fertilizers, pesticides etc., and thereby increasing the return in farming rather than distribute the land equally through land reforms

Limited success of land reforms could never be fully compensated by other policies to promote agricultural development An agriculture policy geared towards increasing agricultural productivity, equal distribution of land, achieving food security for the millions only remained on paper and could never come into effect It not only meant an agricultural sector prone to crisis but also impeded the development of the industrial sector Lerche (2013) remarks that this is the main cause due to which the larger agrarian question could never be resolved, even in 21st century majority of Indian population is employed in agriculture, with rampant farmer suicide, lower yields than other countries, reeling under crisis as the primitive and unbalanced nature of agriculture is still intact

Chakravarty (1998) has stated that agriculture has been treated as a bargaining sector in the planning process of India Chakravarty argues that the terms of trade in economy in first three FYP- Five Year Plans, was tilted against agriculture Land reform, productivity enhancing R&D didn’t happen The consequence of which is a depressed level of income of the majority of population of India The demand side of the economy was not forthcoming to absorb the supply

of products from the industrial sector This resulted in overcapacity in industrial sector, the market just like in colonial times was characterized as being narrow, the industrial sector grew on the back

of government expenditure in phases of 1970s and 1980s of 4th and 6th FYP, hampered by

whenever agricultural faced severe distress and resources had to be diverted there, this led to a very slow growth in the size of the market Agriculture worked as a constrained to the growth of industrial sector in two ways, first as the resources earmarked for development of industrial sector had to be diverted to agriculture and second in the absence of market for industrial product

The monopoly element by the post-independence industrial development process was documented

by Mahalanobis committee, Monopoly Inquiry Commission (MIC), Industrial licensing policy inquiry committee (ILPIC), Hazari committee etc There was unanimous agreement on the formation of monopoly in the economy via licensing requirement, amending Industrial development regulation act (IDRA) (1948 & 1956) to make special provision for some business houses S.K Goyal (1979) contends that state took measures to protect, promote and support incumbent industrialist at the neglect of other potential enterprising individuals

Goyal (1979) contends that there were two kinds of concentration that came to characterize the Indian economy One was a concentration over business and economic assets and the second and more dangerous was the aggregate concentration; the corporate-state nexus with which they could change the thrust of government policy, customizing the economic policies as deemed fit by them The corporate-state nexus hindered the growth of the economy Though the Monopolies & Restrictive Trade Practices Act (MRTP act-1969) came into effect to curb growth of monopoly power in the Indian economy, it achieved little of that objective Corporates always found a way around government regulations For e.g intercorporate investment, opaqueness in accounting practices Production capacity was undertaken by them under licensing agreement which were never utilized, at other times they produced more than their licensing capacity to tap the profit etc Little was done by corporates to develop technological base so as to fare the economy through the changing course of global growth trajectory shaped by the third industrial revolution

In the period 1970’s banks were nationalized (1969) but even that meant little dent in private corporate concentration It meant that finance would be provided to private players to expand their operation Essentially government would support the financing of business venture along with the larger goal of spreading the benefits of banking to rural farmer and every other citizen of India,

reducing their dependence on usurious moneylender Government financed a lot of business operation where private capital was not forthcoming Public Private Partnership (PPP), providing loan, acquiring equity share etc., became some of the way to finance business operation during that time

MRTP and Competition Act 2002 (CA02) have led to hampering the growth of monopoly power

of business houses Mazumdar (2008) documents that none of these expectations and policy efforts bore fruits, as government though owned a substantial share through debt or equity actively choose

to not exercise its decision-making power and interfere in management The narrow private sector could make decisions, foray into new ventures, could carry on its opaque accounting practices, and kept other out, only this time by the legitimacy provided by the state Though MRTP was on paper

a good act it couldn’t bring out the required change in industrial sector The MRTP Act was abolished and replaced eventually by the Competition act of 2002 Mehta (2005) states that the competition act shifted attention away from monopolization of the economy and towards enhancing competition Checking monopoly power was not the regulating-government priority agenda

Other measures like abolition of managing agency, the foreign exchange regulation act (FERA) led to the exit of some MNC’s like IBM, coke in the 1980’s, and some of this vacated space was occupied by indigenous industries though they lacked technology to fill those roles

Liberalization in 1990’s also proved to be beneficial for Indian corporate sector as they could get hands on the technology which hitherto has acted as a barrier for their expansion in foreign market and to create new markets for the inland consumer Mazumdar notes that Post liberalization there were also heightened horizontal M&A taking place in the economy by both the big Indian players and the foreign MNC’s Rather than opening the entry for new indigenous players in industries, the LPG reforms worked to strengthen the hold of incumbents which together with TNC’s controlled the Indian and world market The market instead of the Indian economy became the focal point of corporates

Section II: Concentration of Corporate sector in Agri-input and Agri-output market

We analyze the corporate sector by first focusing on Agri-input market and then on Agri-output market

Concentration in Corporates, providing input to the Agriculture Sector

Since 1960s, the Public sector which undertook Research and Development (R&D) and invested

in agriculture was the major player in Agri-Input market and private sector was at a nascent stage

of this development The Private interest in Agri-business input segment aroused around 1980s with the change in policy environment; New Policy on Seed Development (1988), the arrival of New Industrial policy (NIP-1991), stronger IPR rules, technological advances etc Post liberalization, the Private sector vigorously Invested in R&D and undertook investment in developing commercially viable crops where profit opportunities were greater as compared to less profitable staple crop The Private sector dominated the import of transgenics with the big international firms dominating the scenario The successful ventures of R&D also lied with the Private sector, within which market leaders were divided according to crops they operated in No doubt, it is the fraction of the big six firms in Agri-input industry that made their presence felt in the Indian Agri-input market post-liberalization With Mansonto-Mahyco, Pioneer Dupont being more prominent than others in the crops like Cotton, Pearl millet, Soybean Maize etc While, Wheat & Rice- the staple crops experienced lesser expenditure in R&D and stagnation in yields compared to the peaks reached in 1980s Firms in Agri-input industry are divided into upstream and downstream activities where, upstream activities include activities such as R&D- where firms compete in the innovation process using advanced scientific knowledge, tools and sophisticated equipment, downstream activities include multiplication, breeding and distribution of seeds There

is a clear-cut division within industry between upstream tech-development and downstream segments of product selling and distribution The Indian companies barring a few like Rallies India limited, NSL (Nuziveedu seeds limited)etc confined their operation in downstream activities, while the global MNCs and few Indian-MNCs- NSL, Tata group’s Rallies, Rasi seeds etc were engaged in both upstream and downstream activities Our analysis yields the result that the level

of concentration in 2008 was lesser in comparison to world's level of concentration, and the Indian seed and chemical market was still in nascent stage but this is certainly expected to have changed

in 2017, when there are three (3) big scale mergers taking place in the global front among the big six firms And Indian agriculture is more mechanized than ever, with wheat being the most mechanized crop Due to limitation imposed by data, we extrapolate our findings based on the secondary data and studies of different authors

Sharma (2009) notes that the yield of food grains has increased from 522 kg per hectare in

1950-51 to more than three times to 1854 kg per hectare ha in 2007-08, and food grains production increased from 51 million tonnes (approx.) in 1950-51 to about 231 million tonnes

in 2007-08 Production of sugarcane, oilseeds and cotton all increased more than four-fold reaching approximately 348 million tonnes, 29.75 million tonnes, and 25.88 million bales, respectively in 2007-08 The period 2002 to 2007 saw an unprecedented increasein imports of fertilizers, the reason being that there has not been any addition

in domestic capacity of fertilizer research and productionowing to uncertain policy environment regarding the same Imports of fertilizers namely nitrogen, potassium and phosphorous and their variant has increased from about 1.9 million tonnes in 2002-03 to nearly 7.8 million tonnes in 2007-08

Rao (2015) notes that the total Production of food grains in India catapulted to

260 million tonnes in theyear-2013-14 from 81 million tonnesin the year 1965, when fertilizer technologies first arrived in the form of green revolution into the country’s agriculture Food grain productivity per unit of land has also increased from 591 kilograms per hectare to 2,100 kilograms per hectare in the aforementioned Period, Rao states that there is a need of a second green revolution as the productivity of cereals-wheat and rice along with other crop as Indian agricultural productivity is far behind that of the agricultural productivity of the world

seed-Singh (2009) emphasizes to Mechanize Agriculture to raise productivity and save costs in the small plot size of Indian farmers Along with the need of farmer extension services, educating farmers, increase usage of tractors and Combine harvesters was thought.to increase productivity Singh talks about the expected outcome of contract farming, farm-extension services and that there has been no recorded contract in India till date, mechanization has increased but only at increased costs There is an urgent need of regulation, proper contract farming laws and an efficient tractor/ combine harvester market for the proper functioning of agriculture market in India

Nagarajan (2014) et al noted that the consumption, production and import of fertilizer all experienced an upward trend from 1971 to 2011 The sale of seeds, pesticides, tractor and fertilizer all experienced an upward trend The competition in the market actually increased post liberalization between the Public & Private companies of India and foreign MNC’s In tractor manufacturing Indian firms leads the market share (89%) in 2011, in seeds market the market is evenly distributed between the three, while in the other market the market is less skewed towards the foreign players

Especially noticeable is the Cotton production and the corporate players engaged in it Murgukar(2007) et al noted that Private sector has grown rapidly in the period 1997-2007 The area, volume and value under proprietary hybrid cotton seeds have increased over the years while the corresponding under public hybrids have come down With Bt-cotton, the cotton-seed industry holds within itself a seed and a technology market The technology market- i.e the upstream activities in cotton is characterized by the monopoly of MMB- Monsanto Mahyco Biotech which licenses its Bt genes product to almost all cotton seed companies MMB sets Bt seed prices as high

as four times the price of non-Bt hybrids There is competition in the seed market among limited bunch of major firms namely- Monsanto Mahyco of US, Rasi seeds & Nuziveedu Seeds Limited(NSL) seed companies of Indian origin Though private firms engaged in downstream activites of distribution, marketing etc has increased over the years, and concentration measured

by HHI- Herfindahl Hirschman Index and Mobility index is lower than that in global market, the price of proprietary seeds has increased over the years

Kannan (2017) notes that the price of fertilizers has increased very rapidly, in between the period 1991-92 and 2013-14, the price of urea increased by 69%, that of potash and DAP (diammonium phosphate) rose by 600 per cent and 300 per cent, respectively One may be misled to believe that rising use of inputs, consolidation in the Agri-input market is leading to innovative products which

in turns is increasing the productivity of Indian Agriculture However, Raghavan (2014) notes that this is not the case as India’s yield rate of rice is 2.4 tonnes per hectare (t/ha) while that of China and Brazil is at 4.7 t/ha and 3.6 t/ha, India’s yield rate of wheat is 3.15 t/ha lower than that of China 4.9 t/ha and South Africa 3.4 t/ha

Subhash (2017) et al studies the Pesticides industry in India, he recognizes that the data of production, consumption of chemical pesticides is difficult to reconcile, and hence only a vague picture of corporate involvement in Indian market can be formed Pesticides use has increased in India especially since 2009-10, in the year pesticide consumption increased to 0.29 kg/ha which is

50 per cent more than that in the year 2009-10 The per-hectare pesticides use in India stands at 0.29 kg/ha (of gross cropped area) which is much lower than countries like China at 13.06 kh/ha, Japan- 11.85 kg/ha etc The category Pesticides include Insecticides, Fungicides and Herbicides Insecticides form the highest share out of total pesticides used in India, though their total share has come down over the years as use of fungicides has increased The firms engaged in Pesticides relies on heavy import from the industry giants of Germany’s Bayers and China’s Chemchina The author notes that though 6000 companies are engaged in this industry in India, and the concentration by the top-4 is 19% in 2014-15, while that of top-8 is 28 per cent, still there is a need

to promote competition in pesticide industry so as to reduce pesticides prices

The integration of various Agri-input industries like pesticide, biotech, and seed sectors is an important feature of Agri-input industries in United States and Europe The big six namely BASF, Bayer, Dow, Dupont, Monsanto and Sygenta have consolidated their worldwide position with Mergers and Acquisition (M&A) happening between Bayer's- Monsanto, Sygenta-Chemchina, Dow-Dupont This M&A activity across firms engaged in different or the same segment of industry, expanding firm's market share either in their own products or in different branch of the Agri-Input Industry For e.g Bayer is a chemical company whereas Monsanto is a seed developing company In a study by the FBN- Farmer business Network, it was observed that empirically concentration and consolidation in the market has led to rise in price for agricultural inputs for the consumers i.e Agriculture Producers and that the effect of greater synergies in R&D activities tapers off after a while The CEO of Dow-Dupont, Brenner has made a public statement that they will be cutting down projects which have lesser revenue generating capacity and they have recently shut down some projects notwithstanding their social benefits for e.g corn disposing-ethanol producing plant Combined with newer tech like GPS and soil testing facility these MNC's can control not only who to sell what but also when to sell their products thus creating a behemoth with dominance in production, marketing, selling powered by a digital database Instances of Economic Concentration are visible by the fact that these mergers are allowed by the regulator of

most of the country and are in the process of being merged, despite widespread agitation from farmer groups, NGOs, parliamentarian etc These big corporates bend rules, find loopholes in the regulation law and use it to their advantage

Concentration in Corporates, sourcing output from the Agriculture Sector

In this section, we go into the details of the corporate sector; the companies comprising it, the range of products they deal in, the nature of their organization- foreign, private & public The objective of this section is to gauge the concentration in corporates, sourcing their input requirements from agricultural sector to produce their output such as processed food products, beverages etc To fulfil this objective, we use the Prowess Database of CMIE- Centre for Monitoring Indian Economy for the time period 2007-16, so as to trace out the growth in concentration in this short span of last decade

The Prowess database lists all the companies engaged in Agri-Manufacturing, like food products, tobacco products, floriculture, other agricultural products etc The total number of such firms is 2,653 A preliminary inspection of these companies shows that only 21 of these firm accounted for 37.46% of the market share and a corresponding profit share of 61.82% in 2007 with the asset share of 29%(approx.) and in 2016 their share is around 39.49% a profit share of around

66.80% with an asset share of 32%(approx.) Table 1 and 2 lists the Market & Profit share of these companies These table suffices the discussion of concentration, and hence the table for Assets share is deliberately not shown here for the sake of brevity

TABLE 1.) Market share of 21 large cos dominating food manufacturing sector

S no Co Name Market share= sales/total sales( in percentage) (in percentage)

Table 2) Profit share of 21 large cos dominating food manufacturing sector

S no Co Name Profit share= Profit/total Profit (in percentage)

Table 1) reveals that some companies like Gujarat Co-Op Milk Mktg Fedn Ltd had a share of

2.59% in 2007 and as the database shows has a market share of 0% in 2016, not to say that their product under Amul brand, the household name of Gujarat Co-Op Milk Mktg Fedn Ltd does not command a market share but that the data is not up to date in it’s case and some other corporates like Hindustan Coca Cola Beverages Pvt Ltd., Cargill India Pvt Ltd., Karnataka State Beverages

Corpn Ltd., Mother Dairy Fruit & Vegetables Pvt Ltd., Pernod Ricard India Pvt Ltd having a market share of 0% in 2007 but have a market share greater than 1% each in 2016 revealing the dynamic environment in which this sector and economy works Though the data is not up to date Even on the available data an idea of the size of market and changes in it, can be formed through these exercises It is important to understand that acquiring a market share of 1% or greater is a big achievement as we are here talking about the whole Agri-manufacturing sector comprising of diverse industries within it We will look at the industry wise break-up in the exercises following this one Some of them like Cargill are foreign MNC’s and some other cos like Hindustan coca cola simply used to operate with a different name or didn’t had its data updated on prowess database Table 2 furthers the point of concentration in profit accounted by these companies which command a disproportional market share as shown in Table 1

The nature of the firms and these firms and the product they deal in are shown in table 3)

Table 3) Foreign, Private, PSU etc.; nature of the dominant 21 firms and the product they deal in

S no Name of the

Company

Nature- foreign, Private, PSU, Cooperative etc

Range of Products dealt in

1 Adani

Wilmar

Ltd

MNC an Indian Private co The Adani group was estd in

1865

Frozen Buffalo Meat, Chilled Vacuum Packed Buffalo Meat, Frozen Buffalo Offal, Chilled Lamb Carcasses, Spices Products, Coffee Beans, Fruits Pulps & Concentrates etc

3 Bajaj

Hindusthan

Sugar Ltd

MNC an Indian Private co Part

of the Bajaj group was founded in

1931

Sugar and ethanol manufacturer

in l930s - flagship company of

Modi Group

Tobacco, agri-business, specialty chemicals, retail, lifestyle, education and FMCG; defining Group today

6 Gokul

Refoils &

Solvent Ltd

Indian company of Gokul groups

1992, MNC of Indian origin

Edible oils such as Soya bean oil, Cottonseed oil, Palm oil (Palmolein), Sunflower oil, Mustard oil, Groundnut oil, Vanaspati and Industrial oils such as Castor Oil

Co-by the NDDB

in 1965

Milk Bread Spreads, Cheese, UHT Milk, Beverage Range, Amul PRO, Ice Cream, Paneer, Dahi, Ghee, Milk Powders, Mithai Range, Mithai Mate,

Chocolates, Lactose Free Milk, Fresh Cream, Amul Sour Cream, Pouch Butter Milk, Amul Cattle Feed etc

Coca-Cola, Diet Coke, Thums Up, Sprite, Fanta, Limca, Kinley, Soda, Schweppes, Tonic Water Still Beverages – Maaza, Minute Maid, Pulpy Orange, Minute Maid, Nimbu Fresh, Minute Maid 100% Juices (Apple, Grapes, Orange, Mixed Fruit), Minute Maid range of fruit flavoured drinks Water

- Kinley, Bonaqua etc

9 I T C Ltd Formed in

1910, an India based MNC

Fast-Moving Consumer Goods (FMCG), Hotels, Paperboards & Packaging, Agri Business &

Information Technology

10 Nestle India

Ltd

Foreign MNC Founded in

1866, incorporated as Nestlé S.A

(Société Anonyme)

Baby food, medical food, bottled water, breakfast cereals, coffee and tea, confectionery, dairy products, ice cream, frozen food, pet foods, and snacks Including espresso, Nescafé, Kit Kat, Smarties, Nesquik, Stouffer's, Vittel, and Maggie

11 Parle

Biscuits

Pvt Ltd

Indian private limited company, founded in

1929 by Chauhan family

Deals in Biscuits under the brand Parle-G, KrackJack, Monaco, Kreams, Golden Arcs, Parle Marie, Milk Shakti, Parle Hide & Seek Bourbon, Parle Hide & Seek Fab, Top, Parle Gold Star, Happy Happy, 20-20, simply good, Namkeen parle magix, coconut, cheeselings, Parle-G Gold Sweet confectionery under brands like Melody, Mango Bite, Poppins, 2 in 1 Eclairs, Mazelo, Kismi Toffee Bar, Londonderry, Kaccha Mango Bite Snacks under brands like Mexitos Nachos, Parle's Wafers, Fulltoss, Parle Namkeens, Parle rusk, Parle Cake

13 Ruchi Soya

Inds Ltd

Public limited co., an Indian Conglomerate part of Ruchi group

Manufacture and sale of edible oils, vanaspati, bakery fats, and soya food primarily in India It also offers soya chunks, granules, and soya flour

products Wide range of food products include cooking oils, soya foods, vanaspati and bakery fats The edible oil range holds a number of brands including Mahakosh, which is an umbrella brand containing Soyabean oil, Cottonseed oil, Groundnut oil; Ruchi Gold Palmolein and Ruchi Gold Mustard oil; Nutrela oils, namely Nutrela Soyabean oil, Nutrela Mustrad oil, Nutrela Sunflower oil, Nutrela Groundnut oil and Nutrela Rice Bran oil; and Sunrich sunflower oil Nutrela is the largest selling soya foods brand in the country, with more than 50% market share

Sugar production, water treatment, steam turbines, gears manufacturer, sugar exporter, gears supplier, sugar producer india, gearboxes manufacturer, waste water treatment from India One of the three leading producers of sugar in India

15 United

Breweries

Ltd

Indian conglomerate

co estd in 1857

by scotsmen and is owned

by UBHL and heineken international

Beverages, aviation and investments in various sectors The company markets beer under the Kingfisher brand and owns various other brands of alcoholic beverages

16 United

Spirits Ltd

Indian alcoholic beverage co

subsidiary of Diageo(54.8%),

Alcohol,the world's second-largest spirits company

Manufacture and sale of biscuits, bread, rusk, cakes and dairy products, sells its Britannia and Tiger brands of biscuit throughout India

18 Cargill

India Pvt

Ltd

foreign based MNC, Cargill-family in 1865

Processes, refines and markets a wide range of both indigenous and imported edible oils, fats and blends

to the food industry including Sweekar, Nature Fresh, Gemini, Rath and sunflower and Shakti brands of Edible Oil, Chalki fresh atta in India by the brand name "Sampoorna” Cargill developed some of these brands like Naturefresh but acquired most of them like sunflower oil, rath, gemini, sweekar refined oil, Leonardo brand of olive oil

has a monopoly over wholesale and retail vending

Dealing in Brands like Mother Dairy, Safal, Dhara, Dailycious etc

21 Pernod

Ricard

Pernod Ricard

is a French company

Pernod Ricard owner of the distilled beverage division of the former corporation Seagram

Source: The official website of each company

It is notable that most of these major players in the market are of Indian origin starting as family group, others are either cooperatives, government undertaking, or are companies of foreign descent The Foreign companies too are a part of a particular family business group which established itself either in 19th or 20th century If we look at the nature of these firms in terms of product manufactured and the place of incorporation, we find that most of these are conglomerates

i.e have simultaneous engagement in diverse set of often unrelated business, of foreign or Indian origin Column 3 that shows the nature of these firms-foreign, private, public reveals that out of these 21 firms 5 are of Foreign descent, 4 are cooperatives or are under government control, 12 are companies of Indian origin Even from the firms from Indian descent only 2 firms have established themselves after 1980s and 4 are cooperatives and government companies The rest are Indian firms established as family houses before independence or are their foreign MNC counterparts

The fact that most of these business group started as operating in an arena of production which is different from food processing or related products and have been commanding a sizeable profit, market share in the product they deal in, highlights the subtle fact that these players have endured, sustained and grown amid economic and political upheavals that the world as a whole has gone through during 19th,20th and a decade and half of 21st century In this section we acknowledge their dominant position and the fact that it is firm from the “past”, i.e incumbent firms that have firmly established themselves in pre-liberalization era, are dominating the Agri-Manufacturing segment

It is important to understand that Agri-manufacturing segment of the corporates is a big category,

we can get an idea of product wise concentration of companies by the product wise sub-category

of products given in the prowess database The Agri-Manufacturing category in the data set contain

2653 companies, the category Agri-Manufacturing contains further sub categories namely 1) Food products, 2) Tobacco products, 3) Floriculture, 4) Other agricultural products The category food products further contain 7 sub-categories namely, (1.1) dairy companies -containing 140 companies, (1.2) Tea cos contain 233 companies, (1.3) Coffee cos contains 30 companies, (1.4) Sugar cos containing 227 cos, (1.5) Vegetable Oils and products containing 402 companies, (1.6) beer and alcohol containing 160 cos., (1.7) other food products containing 703 companies We undertake a closer inspection of these sub-categories of Agri-Manufacturing industries to check for concentration and the extent of the same

1) Out of the category food products containing 1896 companies we find that there are only

28 companies (Cos), which dominate this whole sub-category as their market share in 2007

is 40.99 per cent with a corresponding share of profit 59.93 per cent and asset share of

33.17 per cent and their market share in 2016 has grown to 43.34 per cent with a corresponding share of profit 54.24 per cent and asset share of 36.25 per cent it must be noted that some of these players have gained the chunk of market share only recently while they had 0 per cent market share in 2007, i.e to say that their data was not available in

2007 or they have acquired or merged with some company to form a new entity which is dominating the market according to the data available From Table 4), it can be noted that Adani group, Ruchi group, United group, Tata’s and Parle’s in India and MNC’s like Cargill, GSK of British origin, Nestle, Coca-cola etc are some of the major conglomerates However, due to the different food product portfolios of these companies, it would be beneficial to look at the specific portfolio and then gauge the relative dominance of these companies in their respective food segment

Table 4) Dominant food Product Companies

Dominant food Product Companies Mar-07 Mar-16

share (%)

market share (%)

4 Balaji Distilleries Ltd [Merged] 1.24 0.00

7 Cargill Foods India Ltd [Merged] 0.72 0.00

8 Glaxosmithkline Consumer Healthcare Ltd 1.00 0.90

9 Gokul Refoils & Solvent Ltd 1.27 0.32

11 Gujarat Co-Op Milk Mktg Fedn Ltd 3.44 0.00

15 Pepsico India Holdings Pvt Ltd 1.95 1.29

17 Sabmiller India Ltd 1.11 0.77

20 Triveni Engineering & Inds Ltd 1.66 0.39

24 Hindustan Coca Cola Beverages Pvt Ltd 0.00 2.10

25 Karnataka State Beverages Corpn Ltd 0.00 4.29

27 Mother Dairy Fruit & Vegetables Pvt Ltd 0.00 1.41

Source: Prowess Database

We start by looking at the sub-category of food products by looking at 1.1) Dairy companies The prowess database records 140 companies engaged in manufacturing dairy products Table 5 shows that out of these 140 companies we find that only 7 companies command a market share of 68% (approx.) with a corresponding share in profit of 69%(approx.) and asset share of 58%(approx.)

And their market share in 2016 is 55%(approx.) with a corresponding share in profit of

73%(approx ) and asset share of 57%(approx.) It must be noted that though the concentration

in sales and assets of these 7 companies has declined but their profit share has actually grown in the last decade