Agro-Based Industries
Importance, needs and institutional arrangements for the promotion of agro-based
industries, Procedure to be followed to set up agro-based industries, constraints in
establishing agro-based industries
Importance
• Establishment of agro-based industries is based on the availability of raw material.
• Agro-based industries have to set up at rural areas where raw material may be available
in plenty – helps in the upliftment of the rural economy.
• Provide rural population an opportunity for employment.
• Generate income and thereby improve economic condition of people – which in turn
creates potential for demand based industries.
• Provide an opportunity for the dispersal of industries instead of concentrating at a
particular place.
• Solve the problem of exploitation of farming community by traders and middlemen.
• Farmers could be assured of better price for their produce.
• Encourage to bring more and more areas under various crops – increase agricultural
production and improve nation’s economy.
• Transportation cost of agricultural products can be minimized – thereby help to
minimize cost of finished goods.
• Avoid wastage of perishable agricultural products.
• Help to develop backward areas based on their suitability for setting up agro industries.
• Prevent migration of people from rural to urban areas.
Industries are divided into Four Groups:
1. Resource Based
2. Demand based
3. Skill based
4. Ancillary
Again the resource based industries are divided into agro-based, forest based, animal
husbandry and poultry based, mineral based, marine based, etc.
Agro-based industries are those industries which have either direct / indirect link with
agriculture. Industries which are based on agricultural produce and industries which support
agriculture come under agro-based industries.
Need For Agro-Based Industries
• Suitable to rural areas as they are raw material oriented.
• For upliftment of rural economy.
• To solve the problem of unemployment.
• To generate income and increase standard of living.
• For decentralization and dispersal of industries.
• To reduce disparity between rural and urban areas.
• To encourage balanced growth between agriculture and industry.
• To solve the problem of exploitation of farming community.
• To reduce transportation costs.
• To give big push to agriculture and act as a source of demand and supply.
• To avoid wastage of perishable agricultural products.
• To prevent migration of rural people.
• To develop suitable backward areas.
• To improve infrastructural facilities.
Institutional Arrangements for Promotion of Agro based Industries
Following Ministries & Departments at the Centre and State level are at present
looking after development of agro based industries.
1. Ministry of Agriculture
Deals with rice mills, oil mills, sugar mills, bakeries, cold storage, etc.
2. Khadi and village industries boardCovers traditional agro based industries like „gur‟,
handicrafts, khandasari, etc.
3. Director General of Trade and Development
Looks after the industries engaged in the manufacture of tractors, power tillers, diesel engines,
pump sets, etc.
4. Agro-industries Development Corporation
In each state mainly supply agricultural machinery, inputs and agricultural advisory services to
farmers. Some corporations have also undertaken certain manufacturing activities in agro
industries sector.
5. Small Industry Development Organization
Deals with small agro-industries like hosiery, processing of food products, beverages, food
and fruit preservation, agricultural implements, pesticide formulations, etc.
Procedure to be followed to set up Agro Based Industries
1. Assessment of agricultural resource potential in the desired areas.
2. Qualification of agriculture output and inputs.
3. Present utilization of resources in existing units
4. Surplus produce left out.
5. Agricultural produce preserving requirements. Even for local consumption of food grains,
processing is necessary.
6. Selection of certain items of considerable importance.
7. Follow certain approach for actual location of the units to avoid wastage of resources and
maximize utilization of existing infrastructure.
8. Preparation of industrial profitable and feasibility studies
9. Identification of entrepreneurs.
10. Suggesting appropriate technology and imparting suitable training.
11. Finance and other problems.
12. Marketing assistance.
Constraints in Establishing Agro Based Industries
1. Proper guidance is not available to entrepreneurs.
2. It involves some element of risk taking
3. Change in crops / cropping pattern
4. Change in variety of crop due to technological improvement
5. Failure of monsoon may hit the raw material supply.
6. Proper guidance, training for modern and sophisticated agro-industries are not available.
7. As modern small industries are capital intensive, supply of finance will be a considerable
problem.
8. Promotional activities such as conducting, intensive campaigns, identifying candidate
industries and explaining to entrepreneurs about prospects are inadequate.
9. Uncertainty about future market demands.
10. Absence of information about quantity and quality of market.
Types of Agro-Based Industries
There are four types of agro-based industries.
1. Agro-produce processing units
They merely process the raw material so that it can be preserved and transported at cheaper
cost. No new product is manufactured. Ex: Rice mills, Dal mills, etc.
2. Agro-produce manufacturing units
Manufacture entirely new products. Finished goods will be entirely different from its original
raw material. Ex: Sugar factories, bakery, solvent extraction units, textile mills, etc.
3. Agro-inputs manufacturing units
Industrial units which produce goods either for mechanization of agriculture or for increasing
productivity come under this type. Exa: Agricultural implements, seed industries, pumpset,
fertilizer and pesticide units, etc.
4. Agro service centres
Agro service centres are workshops and service centres which are engaged in repairing and
servicing of pumpsets, diesel engines, tractors and all types of farm equipment.
