ntfp marketing initiative taken by sevamandir,udaipur . a study by ashutosh nanda
DESCRIPTION
The objective of the study is substantial analysis of current business in financial, operational andmarketing aspect of the organization’s initiative on NTFP trading.The outcome of this study is, the members of the FPCs will get proper prices for the collected NTFPs (Mahua with major Focus) and their labor days spent while doing it. And maximizing profit through introducing economies of scale through pooling of the produce. This study enables various possible Value addition of the pooled produce in such a way so as to fetch the best possible price for the NTFP.TRANSCRIPT
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COMMUNITY BASED MICRO ENTERPRISE DEVELOPMENT
THROUGH MAHUA FLOWER BUSINESS
HOST ORGANIZATION
SEVA MANDIR, UDAIPUR
“A report submitted for partial fulfillment of MBA in Rural management” (MTS-II)
FACULTY GUIDE: PROF. SANJIT KUMAR DASH
SUBMITTED BY:
ASHUTOSH NANDA (70201040)
KIIT SCHOOL OF RURAL MANAGEMENT (KSRM)
KIIT UNIVERSITY, BHUBANESWAR
January 2009
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ACKNOWLEDGEMENTS
I would first of all like to thank Prof. AV Ramana Acharyulu, the MTS Coordinator and
KSRM for providing me an opportunity to understand and work with Seva Mandir for my
MTS-II.
I would like to thank my host organization, Seva Mandir for giving me an opportunity to
work with them and also for providing me with all the needed support. I would like to
mention my special gratitude to Mr. Vivek Vyas, my reporting officer, for his guidance and
help during the study. I am also thankful to Mrs. Nilima Khaten,, Shri Satish Narayan Bhise
,Shri R K Khetarpal and Sailandra sir, who in spite of their busy schedule made it possible for
me to meet and interact with them.
I thank my faculty guide Prof. Sanjit Kumar Dash whose guidance provided me useful insights
and helped me to undertake this study in an objective manner. My special thanks to Prof
V.Venkatkrishnan for his all time support, without his support it was not possible to
accomplish this project in such a successful manner as it has been done
I thank to all the employees of NRD Unit and especially Priti Sikhawat, Mr Arun Pujari,
Kripasankar ji,Firoz Ji, Khatulal Ji and Panalal Ji of Seva Mandir for their support and
cooperation. Last but not the least, I express my thanks to all of my friends volunteers, LIzzy,
Aminaz, Rose, windy, Rimjhim ,Anisha, Sangeeta, Raswmi, Tushar, Abhisekh, Arati
,Samrat,sandeep and Subhashree for their Moral support during this study.
KSRM, KIIT University Ashutosh Nanda
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EXECUTIVE SUMMARY
I. Title : Community Based Micro enterprise through Mahua Flower initiative. II. Organization : Seva Mandir III. Reporting officer: Mr. Vivek Vyas, Development Professional, Seva Mandir IV. Faculty guide : Prof. Sanjit Dash V. Students name : Ashutosh Nanda( 70201040)
The objective of the study is substantial analysis of current business in financial, operational and
marketing aspect of the organization’s initiative on NTFP trading. The study was conducted
using structured interviews and semi structured interviews, formal discussions, and informal
chats with villagers at various levels within the village, Forest department and it includes use of
different financial tool and operational tool for planning of the up gradation Seva Mandir’s
initiative. The study also attempted to identify the organizational activities , work breakdown
structure and how the NTFP initiative has evolved over the years and the problem faced during
this journey.
The outcome of this study is, the members of the FPCs will get proper prices for the
collected NTFPs (Mahua with major Focus) and their labor days spent while doing it. And
maximizing profit through introducing economies of scale through pooling of the produce.
This study enables various possible Value addition of the pooled produce in such a way so
as to fetch the best possible price for the NTFP. The basic stategy adopted here is
collectivization of NTFP and make the business in sustainable manner,
This study also addresses the questions such as whether to go and strengthen the old
institution, which of them already exist or to form a new village level institution for NTFP
trading in a forest area. From the research a clear understanding developed that the best
possible institutions for NTFP trading are Cooperative, FPC (Forest protection Committee)
and GVK. The study gives a clear differentiation between various institutions prospects and
constraints. A detail planning, starting from collection to commercialization has been done
for five villages with in Jhadol Block of Udaipur district in this paper.
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LIST OF ABBREVIATION
NTFP: Non Timber forest Produce
MFP: Minor forest produce
FPC: Forest protection Committee
CIG: Common interest group
LAMPS: Large Multi Purpose Society
SHG: Self Helf Groups
GVK: Gram Vikash Kosh (A unit of Seva Mandir)
SAMUHA: Village unit of GVK
Rajas Sangh: NTFP Trading Authority of Rajasthan
Mahua: Flowers of Madhuca indiaca tree
Dolma: Seeds of Mahua tree
NRD: Natural Resource Development Unit of Seva Mandir
NGO: Non government organizations
MSP: Minimum Support Price for selected NTFP
BEP: Break Even Point
CC: Collection Centers
Bakhara: Storage point
DRDA: District Rural Development Agency
WBC: Work Break down Structure
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SL NO
Particulars Page No
1 INTRODUCTION 1
1.1 Organization Overview 2
1.2 Objectives 3
2 METHODOLOGY:
3
2.1 Location 3
2.2 Data Requirements 3
2.3 Sources of Data 4
2.4 Limitation 4
3 RATIONALITY OF THE PROJECT 5
4
PROPSED BENIFTS FROM THE
PROJECT
6
4.1Tangible Benefits 6
4.2 Intangible Benefits 6
4.3 Advocacy Rights: 6
5 PROJECT BACKGROUND: PAST EXPERIENCE OF MAHUA BUSINESS AT VILLAGE SOM
7
5.1 Problem in Storage and
weight Loss:
8
5.2 Problem in Accounting & Record
keeping:
8
5.3Problem in Profit Sharing: 9
5.4 Problem in Price Fixation: 9
TABLE OF CONTENTS
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6 PLANNING FOR NTFP BUSINESS IN THE CLUSTER FOR 2009‐10 FINANCIAL YEAR
10
6.1 objective 10
6.2 Core service: 10
6.3 Support Service 10
6.4 Business Model: 11
6. 5 Procurement Policy: 11
6.6 Risk Bearing: 11
6.7 Possible Source of Value Addition 12
6.8 Developing the Proper
Marketing Channel:
13
6.9 Profit Distribution or Profit
Sharing:
14
6. 10 Planning For the Cluster and its
Details
14
7 POSSIBLE INSTITUTIONAL MODELS FOR NTFP BUSINES 15
8 GOVERNANCE STRUCTURE OF
FPC BUSINESS:
17
8.2 Operating structure 18
8. 3 Benefits from the centre 19
9 ORGANIZING CLUSTERS 20
9.1Work Break down Structure 21
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10.
CLUSTER DEVELOPMENT
22
10. 1 Identification of Area
22
10. 2 Production Estimation 22
10. 3 Discussion with GVK Unit 24
10. 4 Linkage with Rajas Sangh and
other Private Players:
25
10.5 By Laws Formation: 25
10.6 Membership Terms: 26
10. 7 Procurement Rules: 26
10.8 Payment Mode: 27
10. 9 Storage Mechanism: 27
10. 10 Profit Distribution: 27
10. 11 Membership Registration 28
10. 12 Price Fixation Mechanism: 28
11 ESTABLISHMENT ACTIVITIES: 30
11.1 Purchasing weighing Machine 30
11.2 Building of Storage Point
11.3 Purchasing Office Administrative
Cost
30
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11.4 Appointing Managers: 32
11.5 Training for Record keeping: 32
12 PROCUREMENT OF RAW
MATERIAL
33
12.1 Purchasing of raw material: 33
12.2 Guide Lines for Procurement 33
12.3 Grading and SUN Drying: 34
12.4 Record Keeping/ Book Keeping 34
13 STORAGE /VALUE ADDITION 35
13.1 Oil Extraction 35
13.2 Linkage with Soap Making
Industries 35
13.3 Using Mhaua Seed Cake as
fertilizer 36
13.4 Time Utility: 36
13.5 Primary Value Addition 37
14 TRADING OR MARKETING
38
14.1 Option 1: Rajas Sangh 38
14.2 Option 2: Traders other than
Rajas Sangh
38
14.3 Option 3: Trader + Rajas 39
14.4 Option4: Selling to villager 39
14.5 Supportive Activities for
effective Marketing:
39
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ANNEXTURE 1: Activity Chart of NTFP Business Institution‐ Page 52
ANNEXTURE: 2: Production Estimation‐ Page 55
ANNEXTURE: 3: Formats of Card System and Stock Resister‐ page 56
ANNEXTURE: 4: Job Profile of Co‐Operative Coordinator‐ page ‐57
LIST OF CHARTS AND GRAPHS
Chart‐1 Business Process Flow: Page 11
Chart: 2 Possible Value Addition in NTFP: Page 12
Chart‐3 Proposed Marketing Channel of Mahua at Udaipur: Page 13
Chart‐4 Showing Organization structure: page 17
Chart‐5 showing Work Break Down Structure: page
14.6 Cost of Transportation 40
15
FINANCIAL ANALYSIS:
41
15.1 Fixed Cost:
For 50 Quintal NTFP Business
42
15.2 Variable Cost
for 50 Quintal Business
42
15.3 Break Even Point Analysis 43
15.4.Fixed Cost:
For 100 Quintal NTFP Business
44
15. 5 Variable Cost
for 100 Quintal Business
44
15.6 Opportunity Mapping 46
15. Opportunity Mapping (100Q) 48
16.8Cost Sheet for300 Quintal NTFP Business 50
x
Table ‐1 Study Area Details: District Udaipur………………………………………...….…4
Table ‐2 Showing financial Status of GVK…………………………………………………..14
Table‐3 Showing Comarigion between Various Institutional Models…….….15
Table 4: Production Estimation for the Cluster (Selected Village)………..…….23
Table 5: Target Quantity for the Cluster to Start the Business…………….……..23
Table 6 Showing responsibility allocation…………………………………….………...29
Table 7 Showing Estimated Budget of different village of the cluster……....30
Table 8 Showing logistics details of Storage point………………………….……..…31
Table 9 Showing Purchasing Details of Administrative work…………………...31
Table10 Details of Managers Responsibility……………………………………………..32
Table 11 Procurement Guide line of Mahua………………………………………….….33
Table 12 Price fluctuation in Market………………………………………………...………36
Table 13 Details of Packaging material with Price……………………………….…....39
Table‐14 Details of wage for Loading in trucks……………………………………...…40
Table‐15 Details of transportation……………………………………………………….......40
Table: 16 &17 Details of Fixed Cost and Variable cost for 50 Quintal Business…....42
Table 18&19 Details of Fixed Cost and Variable cost for 100 Quintal Business….44
Table: 20 & 22 Showing Operational Cost per Kg.........................................................…........46
Table 21 & 23 Shows Viably of the Business………………………………………………47 &49
List of Tables:
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1. INTRODUCTION
Rajasthan is 11% of the country's geographical area. It is situated in the northwestern part
of the Indian Union and lies between 23º30´ and 30º 11’ North latitude and 69º 29’ and 78º
17’ East longitude. It has only 9.5 % of total geographical area recorded as forest. The state
is girdled by Punjab and Haryana states in the north, Uttar Pradesh in the east, Madhya
Pradesh in the southeast and Gujarat in the southwest. The forests of Rajasthan are spread
unequally in Northern, Southern, Eastern and South Eastern parts. The forests are mostly
adapho‐climatic climax forests. The extent of Natural Forest in Rajasthan is not only one of
the lowest in the country but also the lowest in terms of productivity of forest. NTFP
collection and selling is an important source of livelihood for the forest dwellers of Udaipur
District, Rajasthan. In the last decade, the NTFP management system in the area has gone
through a lot of changes. The study tries to analyze the past years experience of NTFP
business (especially Mahua) and various dimensions of it. Mahua (Madhuca indica) is a
large deciduous tree growing widely under dry tropical and sub tropical climatic
conditions. It is an important tree for poor tribal peoples of Udaipur district as they have
great value for its flowers and its seeds known as Dolma. The trees with the best girth in
the forest are often protected and cared for by forest dwellers. The tree with its useful
flowers and multipurpose fruits can be a great relief to poor people when an unusual dry
spell can destroy most other crops. In rural areas of the state, tribal and other forest
dwellers depend so much on the Mahua flower during days of scarcity period.
As part of the Management Traineeship Segment, a study of business analysis in
both financial and operational aspect of NTFP Commercialization was carried out to
understand the various initiatives taken by Seva Mandir (NRD Unit). In order to identify
challenges for the organization in current and future context different concepts that were
learnt in the classroom were utilized. The period of the study was from the 14th of
September to the 20th of January 2008. It is an occasion for the organization to assess its
success over the past year following the efforts taken by NRD Unit.
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1.1 Organization Overview:
Seva Mandir was established in 1968 by Dr Mohan Sinha Mehta, an educationist
from Udaipur in Rajasthan, India. Seva Mandir operates in the southern part of Rajasthan in
the form of a NGO. Seva Mandir's work area encompasses 626 villages and 56 Urban
Settlements. Majority of these villages are located in Udaipur District. In total the
organization reaches out to around 70,000 households, influencing the lives of
approximately 3, 60,000 persons. Seva Mandir began its work in the field of adult
education, later expanding to encompass a wide variety of interventions spanning natural
resource management (NRM), primary and continuing education, health systems, women’s
empowerment, early child care and development (ECCD), alternative income generation
activities (IGAs), and people’s institutions at the village level. Seva Mandir’s philosophy of
development is based on the Gandhian concept of constructive work, in which people are
able to achieve ‘development’ or swaraj only through the very process of working for their
own development. This places communities at the centre of the development process,
rather than merely as beneficiaries of externally driven agendas. Thus, at the very core of
Seva Mandir’s work is a participatory process that seeks to bring people together in
dialogue on the issues that affect them and to engage in collaborative efforts to address
them
Seva Mandir’s work on restoring and enhancing productivity of the natural
resource base in its work area dates back to the 1970s. Land, water and forests play a
major role not only in strengthening sustainable livelihoods but also in contributing to the
development of social solidarity. Indeed, many of the strongest village institutions that Seva
Mandir works with are those that have collectively resolved conflicts over their common
lands. At present the work includes afforestation – on both private, common and forest
lands; developing water resources for agricultural, livestock and human needs; promoting
sustainable agricultural practices to improve crop productivity and diversity; and engaging
in policy advocacy and networking to share lessons and insights with the rest of the
development sector.
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1.2 OBJECTIVES OF THE PROJECT
To help the people/members of the FPCs to get proper prices/ of the collected
NTFPs (Mahua with major Focus) and their labor days spent while doing it.
To introduce economies of scale through pooling of the produce. This will also
enable Value addition of the pooled produce in such a way so as to fetch the best
possible price for the NTFP.
To enhance livelihood portfolio through collective action
To strengthen Van Utthan Sangh as well as the forest protection committees as an
institution capable of providing incentives which it has been promising.
Strategy: The strategy adopted to achieve the above objective is:
Understanding the current supply chain of the Mahua,
Identifying the various stakeholders involved in the value chain,
Designing a financially viable model which gives benefits to farmers by giving them
proper value for their produce and
Exploring the possible value addition options for Mahua flower and seed.
2. METHODOLOGY: 2.1 Location:
The location constitutes a cluster of six villages namely Som, Bhamti and Garanvas and
Mangara, Nayakhola and Dala. The reason for these villages being, they had descent
productivity of Mahua and enjoyed good connectivity with the markets. All these areas are
coming under jhadol Block of Udaipur District.
2.2 Data Requirements:
To get sensitized regarding the production potential of the village and to know the ground
realities of the village life it is very much necessary to know the demography, social structure
and dynamics, infrastructure facilities, agro‐climatic resources, forest Resource and other
village economy, village organizations and people’s institutions etc. so various data related to
it were collected. We divided it into two major classes: Quantitative and Qualitative.
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2.3 Sources of Data
Primary Sources:
Interviews, case studies, Meetings with villagers, Focus group Discussion of the village and
sample survey formed our primary data sources.
Secondary Sources:
The data collected from NRD Department of Seva Mandir and , data collected from the
Forest Department . To ensure the production and to know the marketing channel we have
collected data from various Traders operating in the cluster
Table 1 Study Area Details: District Udaipur
Village Names GVK Fund(Rs) *** Block Forest Range
SOM 200490 Jhadol Phalasia
Bhamati 681406 Jhadol Phalasia
Garanvas 14781 Jhadol Phalasia
Mangara 48229 Jhadol Phalasia
Nayakhola 176458 Jhadol Phalasia
*** All those data taken from GVK unit. The data shows the 2008 July Check list of GVK Unit,
Seva Mandi
2.4 Limitations: The limitations remain in this study due to certain field based constraints such as:
• Limited sample size due to language constraint.
• Unavailability of precise data towards the quantity of the produce.
• Limited availability of literature on the topic and secondary data.
• Lack of presence and interaction with villagers towards community meetings because of
Rajasthan State Election.
• The limited time frame available
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3. RATIONALITY OF THE PROJECT:
This study could impact on intuition in the capacity building of tribal and forest dependant
people. It will also helpful for the traders and organization working for NTFP marketing.
This intervention can be apparent in from of developing policy and legal framework for
channelization of NTFP in national markets. It will avoid or eliminate the middle man from
the NTFP trading so that the poor tribal people will be in a position to enhance their
income in various seasons. The main aim of this project is to compare all the possible
intuitional model for NTFP Commercialization and choosing the best among them for
Business. This study also helpful to different NGO’s for their developmental work and
promotion of livelihood planning in long term basis. It will also helpful to know the impact
of NTFP collection in the ecology and biodiversity Conservation. At the village level
multiple buyers system (LAMP) has failed to trade NTFP in all forest areas. The old traders
and their networks still continue in the NTFP trade. Thus in most situations the primary
gatherers are left with little option to sell their produce. So here the study tries to develop a
village level institution through which NTFP trading will be done without exploitation and
the tribal’s will get better price.
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4. PROPSED BENIFTS FROM THE PROJECT
4.1 Tangible Benefits (monetary)
As on date the monetary benefits accruing from the project shall be in the form of the 8 %
commission that the Agent shall get through the Rajas Sangh for selling the collected
produce. Therefore the net rate of return from the investment turns out to be 8%.
4.2 Intangible Benefits (Social Benefits)
This shall be in the form of reduced exploitation:
• The fair prices/returns that the average collectors shall get due to directly
selling at the rates specified.
• Correct weighing practices will lead to the correct accrual to the collector.
• Benefits of the economies of scale shall accrue to the committee in the form of
lesser administrative costs etc.
4.3 Advocacy Rights:
Once the FPCs start dealing in the produce they can also look into advocacy issues
• Ownership Rights.
• Issue of transfer of revenue from the Rajas Sangh to the collectors.
• Ensuring a decent price for the collectors so that they are not caught in the
vicious web of the middlemen. In many cases the declared prices of the NTFPs
does not reach the collector due to false weighing etc.
• Training and capacity building of the collectors regarding the correct methods of
collection and harvesting of the NTFPs.
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5. PROJECT BACKGROUND: PAST EXPERIENCE OF MAHUA BUSINESS AT
VILLAGE SOM
Som is situated in the Jhadol Block of Udaipur district in Rajasthan. Som is well‐known for
its natural resources. Many people in Som depend on natural resources and especially on
Forest. But the forest dwellers were exploited for many years by various middleman and
traders. They never got the fair price for NTFPs or the MSP provided by the Government.
The government (Rajesh Sangh) collect NTFP through LAMPs but it has also many
limitations and constraints. So Seva Mandir thought to intervene in the NTFP
commercialization work to help the people to get there minimum price through its NRD
unit. The basic principle followed in this was collectivization of NTFPs. Before going to
intervene in this domain a pilot study was taken by Mr. Vivek Vyas1 (Seva Mandir) and
other staff members to know the feasibility of such an intervention. Initially the role
allocation and responsibility distribution work started in the village for NTFP Collection
and storage. The FPC took the responsibility to look at all activities. The initial grant
provided by Seva Mandir was Rs 75000 to the FPC account. It was decided to collect 50
quintals on an experimental basis. The price fixation mechanism started in the village with
discussions by the members of FPC. It was decide that the price should be more than the
local market or the trader’s price offered. With common concerns it was decided to collect
NTFP (Mahua) at a rate of Rs 8.50 per kg (This was fixed by considering the Local market
price of Mahua Rs 8.00 per kg). Initially the decision was made to make two collection
centers and building the storage point. Then the storage point was constructed in
Shambhulal ji’s house2. But unfortunately it was collected in one collection center. But
during all those activities FPC faced many problems because of the haste with which they
carried out all the activities. The collection was good and it crossed more than 55 quintals.
Then the collection stopped and the remaining NTFP was stored in the storage point. After
that the institutional linkage was done and all material was sold to Rajas Sangh. All
operational expenses were adjusted from the grant money provided by Seva Mandir. At last
1 Mr. Vivek Vyas is Working as Development Professional in NRD Unit of Seva Mandir 2 Shambulal JI is one of the Member of FPC in SOM Village and actively associated with Seva Mandir.
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the FPC committee received Rs. 59000 from Rajas Sangh for the 55 quintal material sold.
After the final calculation it was felt that FPC had a profit3 of Rs. 8000. So the profit was
again redistributed among the primary collectors( Actually when . Being our first attempt
in Mahua Flower trading various problem and difficulties were faced . Some of these were:
5.1 Problem in Storage and weight Loss:
Storage and value addition is the most important thing in the whole process. During the
pilot we did not have enough guidelines to ensure good quality material and also we lagged
in storage mechanism. We stored it without regards of the pest control activities in the
building made for storage. But we need more storage practices for this, we will discuss this
issue more in next chapter. Basically we have to take greater care for the weight loss and
pest attack by adding natural pesticides or preservatives, if we are thinking to store Mahua
for a longer time and sell it in the market at a higher price.
5.2 Problem in Accounting & Record keeping:
Being the 1st year, accounting and records could not be maintained properly due to lack of
proper training for which the committee faced problems in the settling of accounts and
payments. In last year business FPC did not have any receipt system for payment these
payments ware done informally. There was no proper track record of the payments. The
FPC did not have also any counter receipt of payments made in its procurement activities
nor the villagers who gave their commodity. The stock book maintenance was not
systematic, that is why FPC faced some problems like, profit sharing and monitoring. Last
year there was no format to record the shareholders names and business activities. So
when the profit was redistributed family wise then the problem of recognizing who
belonged to which family became an issue. So we need an accounting system where we will
have a sufficient database and official records of our procurements and payments of the 3 The MSP price is Rs 10 .00 per Kg. Initially we offered 8.50per kg of Mahua, so the rest amount 1.50@kg adjusted from the amount Rs 8000. And when we are doing business with Rajas Sangh the net profit is very less
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business. This would then make things easier at the time of profit distribution and also
audit work in the long term and for better transparency
5.3Problem in Profit Sharing:
During procurement it was decided that, If any profit will be earned that will be distributed
among the villagers. If any loss will occurs then that was to be faced by SevaMandir but not
by the villagers. During procurement activity the villagers were paid 8.50 (with respect to
the local market price) per kg of Mahau flower. After procurement the Mahua flowers were
sold to Rajas Sangh at the MSP and Rs 59000 revenue received from Rajas Sangh. It was
decided that the villagers should get the MSP fixed by the Rajas sang, so they should get
1.50 /kg more for the Mahua flower. Then it was decided by NRD unit to give Rs 1.5 per one
kg in equitable manner. But some suggestion comes to distribute the amount in an equal
manner. But this issue resolved by the villagers and profit distributed in equitable manner.
So from the beginning of the business the bylaw of profit distribution should be cleared and
standardized.
5.4 Problem in Price Fixation:
The main challenge in the NTFP commercialization work is fixating the price of the
commodity (NTFP) and offering to the forest dweller. There is no certain fixed price for
Mahua in the market. The price fluctuate day to day basis and season to season. So last year
it was decided by FPC and Seva Mandir that we should offer a price rate which should be
slightly more than the local market price. The objective behind this decision was to collect
and creating interest among the NTFP collector to sell their produce to FPC Committee nor
to the traditional Traders. The problem is NTFP collector’s wants instant money, when we
do procurement activities. Rajas sangh will provide MSP after procurement but that is after
three month of procurement. The NTFP collector cannot wait for such a long time. So if we
will not provide good price than the traders, then NTFP collectors will sell to the Traders.
So here we have to watch the price of Local market and Big Mandi Markets of Udaipur.
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6. PLANNING FOR NTFP BUSINESS IN THE CLUSTER FOR 200910
FINANCIAL YEAR
The objective of the project was to construct a marketing model for the trading of the NTFP
(Mahua) for the villages Som, Bhamti, Mangara, Nayakhola and Garanvas,. For this, first of
all it was required to find out the feasibility of such a project taking into consideration the
social aspects, the financial analysis and most importantly; the willingness of the people to
undertake such a project. This required a detailed discussion with the villagers of all the
five villages as well as the traders to know the intricacies of the trade and gauge the
potential of the villages towards a co‐operative trading body.
6.1 The main objective of the NTFP Commercialization Planning is:
• Facilitating the process of cooperative formation, management and business
• Exploring new territory and strengthening broad territories
• Capacity Building through Market Facilitation
• Arranging working capital from revolving fund established at its level at very low
interest rates.
6.2 Core service:
These cooperatives have been formed exclusively with NTFP gatherers to address their
common need of proper marketing of their produce and thereby earn a fair return. Core
service of these cooperatives is shaped on the aforesaid common need.
6.3 Support Service
o Forest Management and Biodiversity Conservation awareness
o Sustainable Harvesting
o Introducing Scientific storage Mechanism
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6.4 Business Model:
These cooperatives follow commodity pooling based model of procurement, which seeks
low working capital requirement and can better withstand the vagaries of market. The
produces brought by the members are kept with the cooperative and not ‘purchased’ and a
pooling advance is being given. Final distribution price is arrived at only after completion
of sale of the produce. Even out of their due advance members leave 20% of it as ‘running
share’ in order to keep requirement of working capital low.
Chart1 Business Process Flow
6. 5 Procurement Policy:
Each cooperative formulates a season‐wise, commodity specific procurement policy, which
guides the cooperative business. The procurement policy speaks of quality standards,
verification methods, storage methods/ place, procurement time, sustainable
harvesting principles, roles & responsibilities, advance rate fixation procedure,
payment system and record maintenance.
Primary Collectors
FPC (Value Add) Seva Mandir
FPCs
Retailer/ Retailing
Rajas Sangh
Tribal’s Women Child Individual family
Membership Profit Sharing Fund Availability Procurement Storage Value Addition
Technical Support Forward and Backward Linkage Human resource
Whole Seller
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6.6 Risk Bearing:
The collective business has enhanced the risk bearing capacity of the member’s manifold
who all live below the poverty line and have negligible capital base.
6.7 Possible Source of Value Addition:
Chart: 2 Possible Value Addition in NTFP
Time Utility
This refers to the increase in value due to storage of the produce. This is already being
done in some cases like Mahua. Traders store the excess produce of Dolma seeds and
sell it in the months of winter when they are in short supply. Thus they benefit through
sale of the produce in the off‐season
March- May Flower Price- Rs 6 to 7 June- July Flower Price Rs 8-10 Aug- September Flower Price Rs 10- 12 Sept- January Price-Rs 14-18
Flowers Drying Grading Storage Application of Preservatives Liquor Edible Purpose
Village level Nearest Market Block HQ Nearest City Outer market
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Form Utility
This entails change in the form of the produce through processing so as to bring about
increase in the value. But it is very difficult I the context of Mahua change in value
addition and add value
Place Utility
This helps in fetching better price for the produce through transportation of the
produce to such areas where it is in greater demand such as Udaipu
6.8 Developing the Proper Marketing Channel:
Chart-3 Proposed Marketing Channel of Mahua at Udaipur
Nearest Market Trader (Big Trader) Option 3
LAMP Agent Traders
Rajas Sangh Option‐1
Big Players in Udaipur, Ahmadabad: Option‐2
Open Market Udaipur District Consumers
Auction Village Level
Micro Enterprise (Value Addition) Direct selling
Primary Collectors
Consumers
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6.9 Profit Distribution or Profit Sharing:
Profit distribution will be done to the members only. And the main agenda of profit
distribution is to share the profit in equitable manner but not in equal manner. This means
the profit will be divided on the basis of patronage in the total amount purchased or
collected. The profit per kg will be calculated and accordingly we can give the amount to
the stake holders. The profit sharing will be done family wise not individual wise. Anthe
family enrolled under the FPC or Cooperative has the right on Profit. Those people don’t
have membership but participated in the business they will not allowed to get the profit
amount Now we will discuss in details how we should approach from the beginning of the
entire process. For this we have to prepare the work break down structure and the activity
chart of each and every activity. So that that chart will be act as the guideline to do every
single activity
6. 10 Planning For the Cluster and its Details4:
Village Names
Target Quantity
No of CC
Estimated Budget (Rs)
GVK Fund(Rs) Possibility
Total FD Saving Cash in Hand
SOM 100 1 59000 200490 75197 68113 57180 well
Bhamati 50 1 59000 681406 620521 55963 4939 well
Garanvas 50 1 59000 14781 0 13540 1241 Fund Deficit
Mangara 50 1 59000 48229 35000 13229 0 Fund Deficit
Nayakhola 50 1 59000 176458 150000 26458 0 well
Total 300 quintal
6 295000 923364
Table No -2 Showing financial Status of GVK
Interpretation 4 All those data taken from GVK unit. The data shows the 2008 July Check list of GVK Unit, Seva Mandir
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7. POSSIBLE INSTITUTIONAL MODELS FOR NTFP BUSINESS
Parameters Selfhelp groups Cooperatives FPC
GVK CIG
Size/ base Limited size
(10‐15 members)
Broad‐based;
Open ended
( more than 15 )
Limited
opened Limited
Vision Limited vision.
Basic orientation
has been on thrift
& credit. Being
small in size it
normally starts
with saving
operation, which
is easier.
Definite set of
principles, norms
having a vision
followed by
different mission
to do trading of
NTFP
Primary focus is
to look JFM and
forest protection
Secondary
objective is NTFP
Trading
Legal entity No legal back‐up
Except Banks
Recognised as
body corporate
under law
Recognised by
law
No Legal
Back ‐Up
No legal
Back‐Up
Membership
Limited/
restricted not
concern for the
community
Open to eligible
persons. And
concern for the
whole
community.
Not concern for
the whole
community
Limited Limited
Economy of
Scale
Very difficult
Cannot be
achievable
Can be achievable Can be
achievable
Can be
Achievable
Difficult
Participatio
n in
business
Less Concern
Many time
More Concern
Competitive
Well
Participation
No
Well Well
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confined to
female
membership
only
ness to earn
profit
compulsion
No Mandatory
ness
Viability Less viable Viable Viable Viable Not Viable
Role of govt. More interference
in absence of
clearly defined
legal position.
Non‐interfering
facilitative role as
enshrined in the
governing act.
******
Least Least
Fund
Availability
Deposits
against
Saving
Bank
MFI
Loan from
Can be taken
from the
Banks
Rajash Sang
another
Alternative
Grant based
Funding
No Financial
support from
Bank for
NTFP trading
Grant based
funding by
NGO
******* ********
Ownership Limited to 10‐15
people
All Members All members who
are under FPC
Open Limited
Profit
sharing
Equal Equitable Equitable Equitable Equial
Supervision
Monitoring
Less Less More More Most
Support
Service e.g.
Health camp
Limited
Well Well Well Less
Risk Bearing Less Well Less Well well
Table3: Showing Comarigion between Various Institutional Models
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7.1 Interpretation
These are the possible institutional model we can opt for possible collective action of NTFP
Commercialization. Apart from it Government arrangements are also working for NTFP
through LAMPs. So now the question is whether to go and strengthening the old institution
which are already existing or forming a new village level institution for NTFP trading. This
table gives a clear understanding regarding the various drawbacks and strength of
institutions. From the above comaragion we get a clear understanding that the best
possible institutions for NTFP trading are Cooperative, FPC (Forest protection Committee)
and GVK. But the dilemma is whether Forest department will give transit pass to all those
institution or not. It’s clear that the forest protection Committee and cooperative will be
not a problem with respect to transit pass and legal back‐up. So further discussion is
required at Policy level to take the appropriate institutional model. Whatever the model
will be the operational process will be almost same in NTFP trading. So Looking all
parameters we thought that the FPC and Cooperative institution are the good option for
doing business.
8. GOVERNANCE STRUCTURE OF FPC /COOPERATIVE NTFP
BUSINESS:
Chart4 Showing Organization structure
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The governance structure will consist of the people who will have the decision making authority.
This may be formed by the FPC members involved in setting up centers for collection of selected
villages where centers are set up. It will consist of one representative from each hamlet of village
where centers have been set up. In order to ensure maximum participation and due representation
from the entire centre’s, representatives will be replaced after a fixed duration. This body will
decide upon the pattern of profit distribution every season. This body will also consist of a Zonal
worker employed by Seva Mandir who will be the link between the centre and the market. His
job will be to:
• Be updated himself about the latest market prices of Mahua and inform the sanchalaks
about the same from time to time
• Determine the procurement price for each day based on market information
• Monitor for proper functioning of centers
• Ensure that correct entries are being made at every centre
• Ensure that the norms regarding loan and interest repayment to GVK are met for every
centre
8. 2 Operating structure-the implementing body
It will consist of the entire elected member who will run the centers. Details process we will
discuss in the subsequent chapter. One procurement manager will be appointed for the
procurement and payment activity Minimum qualifications for a person to become a centre
procurement manager are as follows:
• He/she should not be attached to Seva Mandir in any programme directly
• He/she should be at least 10th pass
• Preferably he/she should be the one who is unemployed and not working anywhere else
• He/she should have attended one day training module at the zone office
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His/her job will be to:
• Carry out the collection after confirmation of price by the Secretary
• Maintain adequate stock of stationary, packing bags and essential items like weights for
measurement
• Distribute the profit among the villagers in proportion to their patronage
• Keeping daily record of quantity collected and number of people who sold the fruit
• Act as link between the governing body and the beneficiaries
8. 3 Benefits from the centre
Increase in economic profit
It will also help to build entrepreneurial skills among the villagers
It will help in increasing the credibility of Seva Mandir over a period of time
Will improve the living standard of people
Ultimately, this type of arrangement will help in building an institution which will
increase the binding among villagers
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9. ORGANISING MICRO ENTERPRISE IN CLUSTER LEVEL
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9.1Work Break down Structure: For NTFP Business Development:
Chart-5 showing Work Break Down Structure
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10. CLUSTER DEVELOPMENT
10. 1 Identification of Area
Identification of Area is the most important job in the whole process. Initially availability of
raw material and production estimation are the important task to be done. For this activity
we have to go and see the availability of tree species (especially the Mahua trees) and its
ownership. During cluster identification another important component is to decide the
operational area and its nearest market. Also we have to know the level of exploitation and
the willingness of the villagers to carry out the business. In cluster identification a detail list
of the various existing institution working on that area should be analyzed for better
intervention. In this step initial market research is also required for all sub activities to
know the external and internal environment. So basically we have to gather data of the last
couple of year’s price in the nearest markets of the operational area and detail list of the
private players present on that cluster and the value chain of the Product
10. 2 Production Estimation/ Target Fixation for the Selected Village :
Once it will decided to work in the selected Village. The next step is to estimate the total
production and the target quantity for that particular village. Last year in village SOM the
target quantity was estimated for collection of 50 Quintal Mahua flower. It is crucial to
decide the target quantity in the very fast year. In the initial year the feasibility of the
project is not guaranteed and secondly traders may not accept this type of intervention
.Traders may form Cartel and hamper the Business. So in the initial years we will have to
start the business with very carefully. The Quantity in the new village should be maximum
82 Quintals and in SOM it can be up to 100Quintals. The Collection quantity also dependant
on the fund available in GVK of the village. During production estimation we have to
analysis the various operational costs and BEP5 of our business.
5 For Details of BEP (Break Even Point) please see the Annexure.
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Table 4: Production Estimation for the Cluster (Selected Village) Village Names Minimum Production(Quintal) No of Trader Nearest Market
SOM 216 12 Phalsia
Bhamti 100 6 Phalsia
Garanvas 192 10 Phalsia
Mangara 195 5 Phalsia
Nayakhola 180 10 Phalsia
Total 883 43 Phalsia
Source: Primary Market Survey
These data’s were collected from the primary market survey in the cluster. We have taken
the average of production of last three years. The village wise data collected with the
interaction with village traditional traders.
Table 5 : Target Quantity for the Cluster to Start the Business
Village Names Target Quantity No of Collection Centres Estimated Budget(Rs)
SOM 100 1 59000
Bhamti 50 1 59000
Garanvas 50 1 59000
Mangara 50 1 59000
Nayakhola 50 1 59000
Total 300 quintal 6 295000
Source: Taken as Assumption
It is the responsibility of the Zonal worker with Professional (NRD Unit) to decide the
collection and the production estimation for the village. Figure of Collection Quantity
should be available to the Committee for better decision making.
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10. 3 Discussion with GVK Unit and Samuha for Fund Arrangement
(Fund, interest rate, Time limit)
Fund availability is one of the important factors for every business activity. During financial
year 2007‐08 an amount of Rs 75000 fund was given to the FPC as a grant from Seva
Mandir to FPC SOM to do the NTFP Business. But Seva Mandir will not be in a position to
provide grant to the whole cluster. Every time when we will upgrade our
commercialization activities to larger scale, we will have to arrange more working capital.
So we have to arrange that amount from some other source. The possible options for fund
are money available with GVK Fund. But GVK fund cannot be taken as grant amount. So
certain rate of interest we have to charge on FPC for the fund. Now it is very difficult to say
that every time the FPC will have profit in NTFP business. The GVK fund is the property of
whole village but in NTFP business it may happens that whole villagers will not participate.
Only the forest dwellers will participate in the process. So if loss occurs we cannot give the
loss burden to the whole village, the burden should be carried out the stakeholders of NTFP
business. That’s why it is important to discuss with the villagers investing the GVK fund in
NTFP business. Points to be considered during the Discussion:
1: Availability of Fund
2: Amount with Saving Account and in Hand
3: Interest Rate for the Financial Year
4: Pay Back Period of the Fund
5: Contribution to GVK if any profit earned
In general we can take loan from GVK with common concern with a interest rate of 4% per
annum provided all villagers will agreed to the proposal and participate in the Process. It
may also happen that the GVK will not charge any interest on the loan amount in the initial
year for starting the business.
Responsibility:
The main responsibility to take the decision is with the villagers on the issue. The process
of decision making will be facilitated with the Block Coordinator with the GVK in charge of
25 | P a g e
the Block. In this process of facilitation the main agenda should be the decision to take the
fund of GVK and invest it in the NTFP business and the second agenda should be the rate of
interest should be charged to NTFP FPC/ Cooperative for the business,. The time frame is
required be discussed in the meeting. During this process the all details of GVK must be
discussed, like the amount availability, the amount in the form of fixed deposit, the amount
availability in Bank as current savings and etc.
10. 4 Linkage with Rajas Sangh and other Private Players:
After the process of meetings and fund availability work finished, we need to link our
program with Rajas sangh. Because without linkage to Rajas Sangh it will be very risky to
carried out the business in the cluster. Basically we need to link our intervention with Rajas
Sangh having two objective that are, the first one is we have to hedge our risk of NTFP
business. The second one is to achieve the legal support for our business from forest
department. Once we will link our program to Rajas Sangh then the FPC or any form of the
village level institution have the legal authority to carry out the business. So the FPC has to
apply to Rajas Sangh for taking the permission of NTFP trading. The Rajas Singh’s MSP will
be counted as the benchmark price for the villagers. If any disturbance happened in the
market price on the financial year then also we have less risk regarding our product.
Because we can sell it to Rajas Sangh.
10.5 By Laws Formation:
By laws formation is the next step of institutional building. The FPC/ Cooperative have to
fix some by laws and guideline for successful business activities. Previous year it was felt
that there was no such strong rules and regulation regarding the procurement and other
Mechanism like storage and profit sharing. So before venturing the whole process it should
be very clearly decided and convinced to the entire interested stake holder. Once they will
agree on those, then it will easier to enroll them as the member of Forest user group/
Cooperative. So during fixing the bylaws some points to be considered that are described
26 | P a g e
below. It varies from village to village and depends on the context of business. Thje key
points to be discussed are:
10.6 Membership Terms:
For membership we will fixed some criteria.
• The members should have dependant on the forest for their livelihood.
• Commitment towards the FPC and various role perceptions regarding the business.
• Once the member discontinues from the Institution he/she will not be allowed to
share the profit of the Business
• Membership fee should be collected during registration
• Membership Card should be provided by FPC after registration to Head of the
enrolled family
10. 7 Procurement Rules:
• The Pooling Quantity to Collection Center must be more than 5kg in Quantity in every
time by individuals or by Family
• The Quality of Mahua should be Grade‐A(1) and Good Color in nature
• The CC will not receive Black Colored Mahua from Members
• The CC will not receive wet Mahua from the Members
• If wet Mahua with Good quality procured then the price will be lesser for the
commodity
• No Pest attacked or fungus attacked material will be acceptable
• In case of child of the family brought Mahua, then the price will be provided on
his/her name and the quantity will be with the family account.
27 | P a g e
10.8 Payment Mode:
• The payment will be given in every seven days/every day by Card system
• The payment will be paid to Individual family wise( not individual wise)
• The payment will be given according the Grade of the material( Grade given by the
Manager/President of Collection Center will be final decision)
10. 9 Storage Mechanism:
• The material will stored in Cool and dried place
• If possible then Bamboo Baskets will be used for storage purpose
• From all side of the Bamboo basket or place should be air tighten
• After one month if Possible one hard sun draying is required(three days)
• The Polythene cover should be covered from all side
• Application of preservative will be done with presence of President and Block officials
• The Final material in godown should be matched with the Stock Book Records
• The Manager and watch man will be responsible for any change in quantity except
the storage weight loss( max up to 10% with one Business cycle of 12 months)
• Terms and commission terms of Storage Points( if constructed in somebody Home)
10. 10 Profit Distribution:
• The profit realized (if any) will be distributed by equitable manner
• The Profit will be shared at the end of the business cycle
• The profit will be calculated after paying the interest rate or any other unpaid
expenses
• Profit will be distributed to only the enrolled members
• Non members do not have any claim over the Profit of the business
• Only in case of Rajas Sangh trading it may be happen that they will get the MSP
• The FPC will decided the amount to be kept in GVK from the Profit will be final
28 | P a g e
10. 11 Membership Registration
Once all the bylaws formation work will be finished by FPC members, we have to keep
those by laws in front of all interested villagers. If the villagers agreed on these bylaws then
they will be registered under the membership with an amount of 50/100 Rupees with
common agreement. The basic idea behind the membership fee was to raise some fund in
the form of equity for the self sustainability of the institution. And in future this institution
can be enrolled itself under cooperative society act and became a independent self
sustainable organization. Processes of membership registration are
• Awareness regarding various By laws
• Clears understanding of Rules and regulations
• Depositing the Membership fee
• Issuing the membership Card
• Updating the membership Card
• All details documentation of the family and family member
The main responsibility will be taken by the FPC committee and basically by the president
of FPC committee for membership. The process will be facilitated by the zonal worker and
all technical details will be handled by the zonal worker for easier process.
10. 12 Price Fixation Mechanism:
Price is determined by the market every time. The demand and supply of material actually
finalized the price. So we do not have much control over pricing mechanism in the market.
For our business context MSP will be the minimum bench mark for trading. But the risk is
in value addition and to sell it in outer markets of Udaipur and Himmatnagar instead of
sailing to Rajas sangh. Then it will be highly challenging to determine the price. According
to initial research6 the prices remain in the range of Rs. 8-10 during the Mahua collection season
(mid April to May) and go up to Rs. 15 to 20 in the off-season. When it is traded back to these 6 Research carried out by IIFM students and Vivek Vhyas
29 | P a g e
tribal villagers for meeting their liquor demand the price increased by 50%. So many a time
fluctuations in price will cause heavy loss and the vice-versa. So it will be better for us if we will
offer the minimum price at the time of initial procurement and after the business cycle we will
redistribute the net profit if any realized out of the business. But the major constraint in this
operation is, it may not be accepted by the villagers or members to sell their product if we (FPC)
will provide the price lesser than the trader provide in new clusters. The villagers will not think
about long-term benefit, they simply believe that trader is giving more money so they should
give them. In the intervened village like Som we can convince the people from our previous
business experience but it will be highly challenging to convince the members of new areas. So
we have to offer the price which is slightly more what the trader proving in the local market.
Responsibility Allocation
A detailed discussion is required regarding the structure of official body to be constituted
with the collection and the trading rights and absolute legal validity too. The villagers have
to suggest names for this work and its should be undertaken by the persons who have well
understanding of Mahua. After a brief discussion on who would be they, we have to chek
the willing ness to operate those elected members.We cannot do all those activities by our
self or taking all members. It is not also possible to take the concern of individual member’s
every time for the decision making. So once the membership activities finished we will
have to do a small election among the members to choose Some person for certain
responsibilities. We have to do like this:‐
1.Building of Storage Point ‐ Responsibility goes to” Elected Members X, Y, Z”
2.Purchasing of weighing Machine‐ Responsibility goes to – President+ Zonal worker
3.Supervision of Procurement‐ Responsibility goes to‐ Elected Members A, B, C
4.Packaging and Loading in Trucks‐ Y+B+ Zonal worker
5, Overall Coordination and Decision Making‐ President +X+A+ Zone Worker
Table 6 Showing responsibility allocation
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11. ESTABLISHMENT ACTIVITIES:
11.1 Purchasing weighing Machine
Before the Procurement starts we have to be ready with all supporting activities. So during
the procurement the first thing is to weight the raw materials brought by the primary
collectors and give them the price according to the weight of the material. So Purchasing of
weighing machine is nessecery after cluster development work.
Village Names No of Collection Centres Estimated Budget
SOM 1 5200
26000
Bhamati 1 5200
Garanvas 1 5200
Mangara 1 5200
Nayakhola 1 5200
Total 6 26000
Table7 Showing Estimated Budget of different village of the cluster.
11.2 Building of Storage Point
Building of the storage point is also required before we start out procurement activities. So
we have to go through following steps before going to build the storage point
11.2.1 Construction Plan:
Before going to prepare the construction plan we have to check the decision taken by FPC
regarding the estimated collection Quantity. Keeping our Collection Quantity we have to
design the capacity of out storage unit (Bakhara). In construction plan some critical points
should be considers that are:‐
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The length and breadth of the (Bakhara)
The height of the Bakhara
The Storage unit should be free from Water resource or Rain
The storage point should be above the Ground( min one meter) to avoid the
problem of Seepage and percolation problems
Bamboo covering or wooden or Cement Brick use and quantity
11.2.2 Logistic arrangement
Once the plan is prepared the next step is to arrangement all accessories required for the
building of storage point. The material and cost involved in all those activities are
Building Expense in Rs
Total(Rs)
Transportation 1000 5000Brick 1250 2 2500 5000Cement 250 2 500 2500Hardware 600 600 3500Labor (@100 Rs/Lab) 12 1200 6000Covering Polythene 2 400 600 3200Total Capital Investment 11600 51200Table8 Showing logistics details of Storage point
11.3 Purchasing Office Administrative Cost:
Office and Adm Expense Unit Cost Total Per Village
For Five Village
Total 1750
Registers 4 25 100 500 Rubber Stamps 2 50 100 500 Telephone Expenses 100 500 Salary of the Staff 0 0 0 Stationary(Pen/Penil/Eraser) 50 250 Office rent
1750 Total 350
Table9 Showing Purchasing Details of Administrative work
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11.4 Appointing Managers:
Appointing the storage manager/ procurement manager is necessary before starting the
procurement activities. For this work one person is required who is relatively qualified and
good in numbers. He has to do the weighing and have to do record keeping of all financial
activities. So he should be well trained in the procurement activities before doing the
business. The duties of procurement manager are:
3.1 Purchasing of raw material Weighing,
3.2 Grading of raw material Good Quality checking
3.3 Drying of raw Material If Good Quality wet Mahua will be there
3.4 Storing in the Storage Box Transfer the Raw material to storage box
3.4 Payment @ weighing Giving payment to primary collectors
3.5 Receipt Issuing to Member Also provide receipt for quantity purchased vs Amount
3.6 Stock Book Updating Book Keeping( Total Collection/Cash inflow and outflow)/day
3.7 Reports of Accounting Reporting to Zone worker every seven days
3.8 Track Record of Cash Flow
Table‐10 Details of Managers Responsibility
11.5 Training for Record keeping:
Training should be given to the procurement manager and Zonal worker by NRD unit
professional or other agency regarding these issues, like
o How to issue the receipts and make entry of details of slips in the Record Book
o To measure the cash inflow and out flow
o Every day stock register maintain
o Updating the Card of the Members
o Regular tracking of market information
o Quality checking and book keeping
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12. PROCUREMENT OF RAW MATERIAL
12.1 Purchasing of raw material:
Purchasing of raw material will be done by the procurement manager which will be trained
by Seva Mandir in accounting. His job is to procure the material (Mahua) from the members
or from the primary collectors. The time will decide by the FPC members who are in charge
of supervision and with the time suitability of Procurement managers. The Procurement
manager will purchase the raw material on the price fixed by the committee previously.
The Committee is supposed to give the price list and criteria to the Procurement managers
for easy and effective procurement. It is also the manager’s duty to update the cards of
every member and give receipt for every transaction.
12.2 Guide Lines for Procurement
SL NO Date Named of MFP Grade Price Special Order
1 Mahua Grade I 8.50
2 Grade II 8
3 Grade I( wet) 8
Table: 11 Procurement Guide line of Mahua
• This format chart always should be kept with the procurement manager with
Collection Center
• If Possible the market price also we can show
• Issuing Receipt to the members and make entry in Cash Book
It is the whole responsibility of procurement manager to look all procurement activities. It
is also his responsibility to look the weighing machine and other valuable property of FPC.
The procurement manager is responsible for all financial transaction. The supervision
committee consisting of members A, B, and C will facilitate the process and help the
Procurement activities. They are responsible any problem if happens in the Collection
Center.
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12.3 Grading and SUN Drying:
After procurement of Mahua flowers we need to differentiate the good pest free Mahua
flowers from the pest attacked flowers. We can grade like the whole materials like this:
Grade 1: Yellow Dried Pest free
Grade 2: Yellow Wet Pest Free
Grdae3: Wet Mahua
Grade4: Black Mahua
12.4 Record Keeping/ Book Keeping
Accounting is a vital process in running any business efficiently and profitably. The main
objective includes all four stages of accounting processes starting from recording financial
transactions in the books of business, classifying the transactions into meaningful and orderly
types, summarizing the accounting data into useful reports and interpreting the financial data to
for better decision making and learning’s. the format of the stock register is as follows The
procurement manager is supposed to update the stock book every day and make entry of all
details of the day transaction. And the stock book should be rechecked and audited in every
seven / fifteen days by the zonal worker for better activity scheduling. The stock book
calculation should be done every day
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13. STORAGE /VALUE ADDITION
In form Utility particularly we do not have much option or scope to do. Most of the people
use Mahua for preparation of country liquor. But we cannot go for this because it’s
unethical from our part. And it is not socially accepted. So preparing liquor out of Mahua
flower and Marketing is not viable in case of village level institution. But yes we have
option for the Mahua fruit called Dolma. We can go for Oil extraction out of those collected
seed. If we will collect the Mahua seeds in the same procedure as like Mahau flower and go
for value addition then that may be one source of value addition in the form.
13.1 Oil Extraction
Setting up a small size oil as a SSI(Small scale industry) would cost Rs. 1 to 1.25 including
filtration set up required at a central level. DWCRA and DRDA schemes could be explored
for this. KVIC also has schemes that could help setting up of a SSI. Assuming that 3 Kgs of
ripe gully will result in 1 kg of oil and average price of oil as Rs. 27 a Kg, the returns to the
primary collector per kg of gully would be Rs. 7/ Kg again assuming a Rs. 2 per Kg of
processing cost of the gully. The percentage of oil content is varies from 30 to 40%
maximum.
13.2 Linkage with Soap Making Industries:
Many industries are coming with various new product. And all industries are now want to
minimize their cost in both operational and with the raw material. In this context Mahua
seed oil is one the best substitute of other soap making oil. So if we can link with some Soap
or lubricant making industry and sell them directkty, then it will be one possible value
addition to the product
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13.3 Using Mhaua Seed Cake as fertilizer:
The remnants of extraction can be used for Organic manure in the field. In the domestic
market the demand of organic manure is growing day by day. So if the FPC/ Village level
institution can think on this and have market linkage with Organic manure Producing
Company , then we can sell directly to those company and get the benefit. Another option is
we can sell it directly in Udaipur and Himmatnagar Mandies. So that it will enhance the
livelihood portfolio of the members of FPC.
13.4 Time Utility:
The time factor brings with itself one more effect on the revenue to be realized. The Mahua
flower on being stored starts losing weight and tends to dry up. This is good as far as its
longevity or shelf life is concerned as the flower would get blackened and catches germs etc
if moisture above a certain level remains in that. But it has a negative impact since the
weight of the commodity doesn’t remain same as it was bought a few months ago. On an
average, the Mahua flower loses 5 to 6 % of weight over a storage period of 5 months. Out
of this, the first three months account for about four percent of the weight loss. Similarly
the revenue to be realized also decreases in the same proportion. But since the increase in
demand and thus the price overcomes the effect of weight loss, therefore the net effect is
still of increase in profit only. For example, the approximate rates at Himmatnagar market
during these time frames are (figures chosen are the most conservative ones obtained from
the survey conducted with local traders): Table12 Price fluctuation in Market
Month May June July August September October Nov‐December
Quantity 100 kg 98 kg 97 kg 96 kg 95 kg 94 kg 94 kg
Price 13/kg 13/kg 13.5/kg 14/kg 15/kg 16/kg 16/kg
Revenue 1300 1274 1309 1344 1425 1504 1504
Actual Price 13 12.74 13.09 13.44 14.25 15.04 15.04
The actual price of the materials is less because of the weight loss of flowers over a period
of time.
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13.5 Primary Value Addition
13.5.1 Spreading polythene Cover:
Once the procurement activity will be finished the it the duty of the Manager and the
Concern person from the FPC will cover the polythene cover over the Storage material in a
manner that the raw material will be kept air tightened. The polythene cover should not be
damaged one or with low quality. The checking work should be done by the FPC president.
13.5.2 Collection of Neem Leaf and Addition of Neem Leafs
We have to also look that the whole stock should be disease and pest free. It was proven
that neem leafs acts as good preservative against pest and fungus. So we have to collect
Neem leafs and twigs to add those in our stock point. Its usually require 20 to 30 kg Neem
leaf will be sufficient for the 100 quintal material. Neem leafs act as a natural repellent to
kill the fungus and various pests.
13.5.3 Purchasing of preservative & Application of preservative
Chemical preservative is the not advisable for Mahua. But in case of Sevier pest attack we
have to add some chemical preservative. Chemical preservative addition will be done very
carefully with appropriate quantity and dosages. During chemical preservative or
insecticide application experts should be there to guide this operation.
13.5.4 Watch and guard of Storage:
Its natural that the amount will dry and loose weight. But for better transparency and
accountability we have to take care the watch and guard of the raw material. So the storage
point should be well locked or sealed. And when ever supervision work should be then
with presence of concern members of the FPC.
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14. TRADING OR MARKETING
Financial success often depends on marketing ability. Marketing is an organizational
function and a set of processes for creating, communicating and delivering value to
customers and for managing customer relationships in a way that benefits the
organization. Marketing is a mix of product, price, promotion, and place. So here we have a
clear understanding what the areas and possible option where we have to emphasize more
are let’s see
14.1 Option 1: Rajas Sangh
Here, it has to be taken care that this option is feasible only if the MSP (minimum support price)
provided by the Sangh is higher than the average procurement price paid per Kg. by the firm.
Sometimes the MSP remains lower than the average price provided by the traders throughout the
season. Since, in case of pricing the firm needs to compete with the local traders also; therefore
the prices would definitely remain higher than the MSP and in such a case selling off to Rajas
Sangh would incur losses only. Presently the rate being offered by the Rajas Sangh is Rs. 10 per
Kg. and going by their trend in the past; it would remain the same for at least the next two
seasons. In addition to that, since the VFPMC undertaking the activity would be registered as
their agent, it would also get a commission of 8%. Therefore in this option the risk factor is
minimum.
14.2 Option 2: Traders other than Rajas Sangh
Here, we have two major options again, one is to sell at the Udaipur market and the other
remains to sell at the Himmatnagar market. On a dialogue with the villagers it was found that in
the belt we have chosen (village Som and the cluster of neighboring villages); it is much more
profitable to sell at the Himmatnagar market owing to the better returns it provides even after
taking into consideration the transportation cost. But in this alternative risk factor is very high.
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14.3 Option 3: Trader + Rajas Sangh:
Here we have the option that we can sell our produce to both Rajas Sangh and to the private
players. The aim behind this decision is to minimize the risk and to get better price from the
private Players. But in this model we will minimize the transportation cost and get better Profit.
This option is the best option from the point of profit maximization of our Business. All financial
we will see below.
14.4 Option4: Selling to village traders in the off season
Also, the existing laws permit such a firm run by the VFPMC to trade back the whole or a part of
the stock to the villagers themselves. During interaction with the villagers at Som, it was known
that the Mahua is traded back to the villagers themselves at the cost of about Rs. 18 per Kg.
during the off-season. Now, if the co-operative sells the produce to the traders at Rs. 16 per Kg.
and the traders then sell some part of that produce back to the villagers at Rs. 18 per kg. then this
whole process can be replaced by the co-operative itself selling it back to the villagers at the rate
of 16 per kg. This would mean that the co-operative would realize the revenue it would have
earned by selling to the traders and at the same time, the villagers would earn Rs. 2 per Kg. as
indirect income through saving:
14.5 Supportive Activities required for effective Marketing:
14.5.1 Packaging:
We have to pack the dried Mahua flowers in the sac and stitched it properly. Because all the
traders/Rajas sangh wants the raw material in packed form. So for this activity we need to
arrange labor and made sure that all the materials were packed well.
Particular Units Rate Price@ one Village For Five Villages
Thread 1.2 50 50 250
Sacs 100 12 1200 6000
Table13 Details of Packaging material with Price
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14.5.2Labor for Loading to Trucks:
Once it decided and the trucks will be arranged then it the responsibility of the FPC
members to arrange the labor for loading the material in the truck. The wages will be paid
by the manager or by the zonal worker. But the arrangement duty will be of the FPC
members. The cost incurred in the loading process will be charged in the whole lot of raw
material and deducted from the profit amount if any
Particular Quantity Price@ one Village For Five Villages
Labor 50 Quintal 1000 5000
Labor 100 Quintal 2000 10000
Table‐14 Details of wage for Loading in trucks.
14.6 Cost of Transportation and Economy of Scale: In case of the Mahua marketing effort at Som, this quantity comes out to be 50 quintals. The
transportation from there to the nearby markets of either Himmatnagar or Udaipur can be
carried out through trucks or smaller loading vehicles which charge a minimum basic
amount for any quantity up to 50 quintals. If an amount of 50 quintals is transported, the
average cost comes around Rs. 0.5 per Kg. and as the quantity of transportation decreases
the average cost would increase to Rs 0.833 for 30 quintals and would go as high as Rs.
1.25 per Kg for a quantity of 20 quintals. For example; while transporting to Himmatnagar,
the average cost pattern with different quantities would be:
Quantity transported Total Cost /Truck(Rs.) Average Cost (Rs./Kg.) 50 quintals 2500 0.5 60 quintals 5000*** 0.833 70 quintals 5000 0.714 80 quintals 5000 0.625 100 quintals 5000 0.5 Table15
****Details of transportation is given in opportunity Mapping Analysis
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15. Financial Analysis:
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15.1 Fixed Cost: For 50 Quintal NTFP Business
Fixed Cost( Capital Investment)
Sl No Particular Unit Cost Total (Per One Village)
1 Weighing Machine 2 2500 5000
2 Additional weights 100
3 Building Expense
Transportation 1000
Brick 1250 2 2500
Cement 250 2 500
Hardware 600 600
Labor (@100 Rs/Lab) 12 1200
4 Covering Polythene 2 300 600
Total Capital Investment 11500
Table: 16
15.2 Variable Cost for 50 Quintal Business
B.1 Direct Cost(Fixed Cost) Unit/kg Rate
+ Purchasing of Raw Material 5000 8.5 42500
+ Direct Labor(Packaging loading) 1000
PRIME COST
B.2 Indirect Costs
+ Storage Rent 0 0 0
+ Thread 1.2 50 50
+ Sacs 100 12 1200
+ Neem Leafs 300
+ Salary of Procurement Manager 2000
Factory Cost 47050
Table: 17
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Here Total sales: 54000
(10.80@ one kg * 5000 kg = Rs 54000)
We know that Contribution= Sales‐ variable Cost= Rs 6950
Per unit Contribution= 1.39
Now BEP= Fixed Cost/ Contribution
Once we will get the contribution we can calculate the BEP of the collection
So the BEP is 11500/1.39= 8273 Kg that mean 82 Quintal
BEP is the equilibrium point where the industry do not face any loss nor any profit. So
if we will be in position to collect 50 Quintals then our Collective business is in loss. So
a minimum amount of 82 Quintal required for attending the BEP So it is realized that
we need have to collect minimum 32 Quintal more with 50 quintals what we have
target But in the first year of Business No Industry or Micro enterprise will attend its
BEP.
****BEP:
In economics & business, specifically cost accounting, the break‐even point (BEP) is the
point at which cost or expenses and revenue are equal: there is no net loss or gain, and one
has "broken even". Therefore has not made a profit or a loss. in other words The Break‐Even
Point is where Total Costs equal Sales. In the Cost‐Volume‐Profit Analysis model, Total
Costs are linear in volume. the break-even point is one of the simplest yet least used analytical
tools in management. It helps to provide a dynamic view of the relationships between sales, costs
and profits.
15.3.1 Findings:
In last year Business we have collected only 55 Quintal Raw materials for the NTFP
Business. But that amount is less than the BEP amount. So our business is not incurring
any profit last year. So when we are planning for this year our minimum target should be
more than 80 Quintals.
15.3 Break Even Point Analysis:
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15.4.Fixed Cost: For 100 Quintal NTFP Business
Fixed Cost( Capital Investment)
Sl No Particular Unit Cost Total (Per One Village)
1 Weighing Machine 2 2500 5000
2 Additional weights 100
3 Building Expense
Transportation 1000
Brick 1250 2 2500
Cement 250 2 500
Hardware 600 600
Labor (@100 Rs/Lab) 12 1200
4 Covering Polythene 2 300 600
Total Capital Investment 11500
Table:18
16. 5 Variable Cost for 100 Quintal Business
B.1 Direct Cost(Fixed Cost) Unit/kg Rate
+ Purchasing of Raw Material 10000 8.5 85000
+ Direct Labor(Packaging loading) 2000
PRIME COST
B.2 Indirect Costs
+ Storage Rent 500
+ Thread 1.2 50 100
+ Sacs 100 12 2400
+ Neem Leafs 500
+ Salary of Procurement Manager 3000
Total Cost Incured 93500
Table:19
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Here Total sales: 108000
(10.80@ one kg * 10000 kg = Rs 108000)
We know that Contribution= Sales‐ variable Cost= Rs 14500
Per unit Contribution= 1.45
Now BEP= Fixed Cost/ Contribution
Once we will get the contribution we can calculate the BEP of the collection
So the BEP is 11500/1.45=80 Quintal
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15.6 Sensitivity / Opportunity Mapping Analysis For 50 Quintals
6% weigh loss Assumption
Option 1
Rajas Sangh
Option 2
Private Trader
Option 3
Rajash + Private
Amount Cost/Unit Amount Cost Amount Cost
Revenue
54000 10.80 70500 15 64500
Cost Incurred
Raw Material Cost 42500 8.5 42,500 8.50 42,500 8.50
Initial capital Invest
(Rs 10,000=Establishment
Cost)
1275 0.25 1275 0.25 1275 0.25
Salary of Manager 2000 0.4 2000 0.4 2000 0.4
Labour for Packaging &
Loading
1000 0.2 1000 0.2 1000 0.2
Sac and needle 1200 0.24 1200 0.24 1200 0.24
Storage Cost 500 0.1 500 0.1 500 0.1
Adding Preservative 0 0 1000 0.2
Interest rate from GVK/Bank 0 0 2400 0.5 2400 0.5
Transportation Cost 0 0 2500 0.5 1500 0.3
Cost incurred 48475 9.695 54375 10.87 52375 10.47
Profit 5525 1.10 16125 3.22 12125 2.42
Operational Cost 1.2 2.37 1.9
Table: 20 Showing Operational Cost per Kg
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*** The yellow component is the initial capital investment and converted to per kg unit. The
initial fixed investment depreciated in 10 years and charged for every year. One may not take
initial capital investment as the liability when calculating the profit.
Bar Graph-1 Comparing Profit with operational Cost
Interpretation: Option Rajas Sangh Private Player Private+ Rajas
Profit less -10 Pc More 0.85 More 0.52
Operational Cost More Less Less
Viability NO Yes but Risky Viable
Table: 21
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16.7 Sensitivity Analysis for 100 Quintal Business
For 100 Quintals
6% weigh loss Assumption
Option 1
Rajas Sangh
Option 2
Private Trader
Option 3
Rajash + Private
Amount Cost/Uni
t
Amount Cost Amount Cost
Revenue
108000
10.80 141000 15 129000
Cost Incurred
Raw Material Cost 85000 8.5 85000 8.50 42,500 8.50
Initial capital Invest
(Rs 10,000=Establishment
Cost)
1275 0.25 1275 0.25 1275 0.25
Salary of Manager 4000 0.4 4000 0.4 4000 0.4
Labour for Packaging &
Loading
2000 0.2 2000 0.2 2000 0.2
Sac and needle 2500 0.24 2500 0.24 2500 0.24
Storage Cost 500 0.05 500 0.05 500 0.05
Adding Preservative 0 0 1000 0.1
Interest rate from GVK/Bank 0 0 4800 0.5 4800 0.5
Transportation Cost 0 0 5000 0.5 2500 0.25
Cost incurred 95275 9.52 106075 10.60 102576 10.25
Profit 12725 1.27 34925 3.5 26424 2.64
Operational Cost 1.14 2.24 1.39
Table:22
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Graph2
Interpretation:
Option Rajas Sangh Private Player Private+ Rajas
Profit More +0.13 Pc More 1.26 More 1.25
Operational Cost More Less Less
Viability Yes Viable Yes but Risky Yes Viable
Table23
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16.8 Cost Sheet for 300 Quintal NTFP Business: For the Whole Cluster:
Fixed Cost for 300 Quintal NTFP BusinessSl No Particular Total (Per One
Village) Five Village
1 Weighing Machine 5000 250002 Additional weights 200 10003 Building Expense Transportation 1000 5000 Brick 2500 5000 Cement 500 2500 Hardware 600 3500 Labor (@100 Rs/Lab) 1200 60004 Covering Polythene 600 3200 Total Capital Investment 11600 51200 Cost sheet for 300 Quintal NTFP Trading
Unit in Kg Rs/kg Cost
A Total Revenues 29000 10.8 313200 B.1 Direct Cost(Fixed Cost) + Purchasing of Raw Material 30000 8.5 255000 + Direct Labor 0 0 0 PRIME COST 255000 B.2 Indirect Costs + Storage Rent(6% per kg)*** + Thread 400 + Sacs 600 10 6000 + Neem Leafs 500 + Niddle 150 Factory Cost 262050 B.3 FPC Adm Expense + Registers 10 500 + Rubber Stamps 10 250 + Telephone Expenses 300 + Salary of the Staff 4000 + Stationary(Pen/Pencil/Eraser) 10 100 + Office rent 0 0 Cost of Production 267200 B.4 Selling and Distribution + Transportation Charge 0 + Mahua Packaging 600 1 600 + truck Loading 500 4 2000 Cost of Goods Sold 269800
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A‐B Profit/loss profit Table24
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ANNEXTURE 1
Activity Chart of NTFP Business Institution
Responsibility Activity Budget Time NRD BLOCK FPC Manager
1.Cluster Development Jan‐March
1.1 Identification of Cluster ‐
1.2 Initial Meetings ‐
1.3 Production Estimation ‐
1.3 Discussion with FPC & GVK
(Fund, interest rate, Time limit) ‐
1.4.Linkage with Rajash Sangh ‐
1.5 By Laws Formation ‐
1.6 Membership Registration ‐
1.7Administrative Body Formation ‐
1.8 Price Fixation Mechanism ‐
1.8. Storage Point Identification ‐
1.9 Guideline Formation(Quality) ‐
1.10Talk on Mode of Profit sharing ‐
2.Establishment Activities February(30)
2.1 Purchasing weighing Machine 5000
2.2 Building of Storage Point
2.2.1 Construction Plan
2.2.2 Transportation of material 2500
2.2.3 Logistic arrangement 4200
2.2.4 Labor for Construction 1200
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2.2.5 Payment to the Labor ‐
2.3PurchasingOfficeAdministrative 300
2.4 Purchasing Polythene Cover 400
2.5 Appointing Managers 2000
2.6 Training for Record keeping Tr 500
3.Procurement of Raw Material 15th March‐May 15th
3.1 Purchasing of raw material 42500
3.2 Grading of raw material ‐
3.3 Drying of raw Material ‐
3.4 Storing in the Storage Box ‐
3.4 Payment @ weighing ‐
3.5 Receipt Issuing to Member ‐
3.6 Stock Book Updating ‐
3.7 Reports of Accounting ‐
3.8 Track Record of Cash Flow ‐
4. Storage /Value Addition May15th –July1st week
4.1 Spreading polythene Cover 100
4.2 Collection of Neem Leaf 200
4.3 Addition of Neem Leafs 100
4.4 Purchasing of preservative 1000
4.5 Application of preservative 100
4.6 Watch and guard of Storage 500
4.7 Regular checking of flower
4.8 Purchasing of Sac 1200
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4.8
Purchasing of Thread and Niddle 300
5.Processing/ Trading July 2nd week –Aug 2nd week
5.1 Packaging 300
5.2 Stacking
5.3Labor for Loading to Trucks 500
5.4 Weighing the truck load ‐
5.5 Transportation fee ‐
6 Transaction August 30th
6.1 Collection of Money from opposite party
‐
6.2 Deposit it in Bank ‐
6.3 Calculation of total profit ‐
6.4 Payment of due interest or any other miscellaneous work
‐
6.5 Calculation of Net Profit ‐
6.6 Equitable distribution ‐
6.7 Contribution to GVK 10% of profit
September 5th
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ANNEXTURE:2 Production Estimation
Production Estimation Garanvas in Quintals
Sl No Name of the Trader Year 2008 2007 2006 Avarage
1 Sankar Baranda 40 40 40 40
2 Lala Singh 20 25 30 25
3 Manji bhai Baranda 30 30 10 23.33333
4 Kawaram Baranda 25 30 15 23.33333
5 Hiralal Aahari 15 20 15 16.66667
6 Sarhad Khumari 12 20 10 14
7 Phalasia Market 60 50 40 50
8 Lamps 0 0 0 0
8 FPC 0 0 0 0
9 Total Production 202 215 160 192.3333
Production Estimation in SOM in Quintals
Sl No Name of Trader Year 2008 2007 2006 Average
Quintals Collected
1 Deepak Choudhary 30 50 30 36.66667
2 Badrilal Ahari 25 50 30 35
3 Vouralal Jain 20 40 35 31.66667
4 Nathulal Darangi 20 30 30 26.66667
5 Ratanlal Khrari 10 12 5 9
6 Shankarji Kharari 10 10 5 8.333333
7 Raton Promod 10 18 8 12
8 FPC 55 0 0 18.33333
9 Phalasia Market 20 30 25 25
10 Lamps 0 0 40 13.33333
11 Total Production 200 240 208 216
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ANNEXTURE: 3 CARD FORMAT FOR MEMBERS
Individual Member Wise( Front Side ) Name of the members: Name of the collection center:
Silp no:Advance:
Sl no Date Name of the commodity Quantity(kg) Rate per kg
Total Rate
Amount Paid Sign
Grade-1Grade-2
Grade-1
Grade-2
Special Comments: Signature of Head of the Family
Signature of Representative
Signature of In charge of CC
Guide Lines or Membership Terms ( Back Side Card)
1 2 3 4 5 6 7 Name of the family members…………………………………………………………………………………………
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DAILY COLLECTION REGISTER
Collection center Date-
Sl no
Name of the member
Collection slip no
Quantity(kg) Amount Paid Total Amount Paid
Grade-1
Grade-2
Grade-1 Grade-2
Total
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ANNEXTURE:4 JOB PROFILE OF CO-OPERATIVE COORDINATOR
o To coordinate the field level facilitation support to the cooperative process in Jhadol
Block (prospective operational area of the Union).
o To maintain proper coordination with employees of cooperative union.
o To document and record major events and processes under cooperative work with special emphasis on process documentation.
o To coordinate monthly planning and reporting in collaboration with the Union.
o To help design and implement training programmes,work shops on cooperative process.
o To help identify other thematic issues in the operational area and provide support to concerned thematic team as per commonly agreed plan.(WCD,EDUCATION or GVK)
o To liaison with local line departments/ PR institutions/ other support agencies.
o To ensure proper field office management – maintenance of attendance registers/ log book/ cash book
o To undertake monthly bill settlement as per procedures.
o To report to the team leader (Concern person from NRD) and the organization as per the laid procedures.
o To facilitate entire cooperative business in proper collaboration with the cooperative union in Jhadol Block.
o To develop business and marketing skills of cooperative members, facilitators and workers.
o To develop/ help develop business and marketing literature relating to cooperative business.
o To facilitate market and business development activities of the cooperatives.
o To help design and implement training programmes on cooperative business.
o To develop and maintain proper database on marketing and business
************ THANK YOU *************
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Prepared By: Ashutosh Nanda, MBA (Rural Management), B.Sc (Forestry)KSRM.
Email Id: [email protected] or [email protected]
Host Organization: Seva Mandir, Udaipur, Rajasthan