THE SALEM CLUSTER
ABOUT THE
REGION
Salem has
traditionally been known as the land of sago and starch. The industry got a
fillip during the
Second World
War when imports from the far-east were rendered impossible. The Salem region
offers a
good raw
material base, cheap labour and good sunshine throughout the year. All these
factors provide a
congenial
environment for growth of tapioca based products and have made this place
famous for the
same even at
an international level.
The
productivity of tapioca is about 25-30 t/ha in this area, which is known to be
the highest in the world.
The national
average is 19 t/ha while the world average production stands at 10 t/ha only.
2.2 THE
GROWTH OF SAGO AND STARCH INDUSTRIES IN SALEM
In the year
1943, Mr. Manickam Chettiar an adventurous entrepreneur went to Kerala and
found tapioca flour to be a good substitute for American corn flour. He tried
various ways and means to improve the production and marketing of this flour.
To meet the growing demand of sago and starch, Mr. Manickam with the help of a
genius mechanic Mr. Venkatachalam Gounder, improved the method and machineries for
production. In their efforts, they were able to increase the production of Sago
flour from 20 to 25 bags per day. The sago and tapioca starch industry was born
during the Second World war but the end of war posed a threat to its existence
because of the changes in the import policies. As a result of the successful representations
made by the sago and starch manufacturers, and at the instance of the then
Governor General of India, Thiru. C. Rajagopalachari, the Indian Government
imposed a ban on import of starch.
The industry
heaved a sigh of relief temporarily before they were made to confront with the
import of maize starch under P.L.480, which again came to an end in 1965. The
sago industry in the Salem district and the adjoining areas has witnessed a
phenomenal growth in the last 60 years, as shown below:
Year No of
Units Production (in tons)
1945 7
1949 45 7000
1957 125
23000
1960 200
50000
1970 650 1.5
lac tons
As on date
there are more than 750 sago and starch units in Salem, Namakkal, Dharampuri
and Erode districts, registering an awesome growth! It is but appropriate to
name this grand growth as the “Sago Revolution”.
2.3 THE ROLE OF 'SAGOSERVE' IN THE CLUSTER'S GROWTH
Prior to the
formation of SAGOSERVE, an industrial cooperative service society, the
manufacturers of starch and sago in this district faced a lot of problems such
as lack of financial assistance, warehousing and marketing facilities for
tapioca products. The merchants used to offer low prices for their goods and exploited
the manufacturers due to an absence of organised marketing and warehousing
facilities. To overcome these problems, the sago/starch manufacturers in 1981
formed the Salem Starch and Sago Manufacturers Service Industrial Co-operative
Society Ltd., popularly known as the SAGOSERVE under the Tamil Nadu
Co-operative Societies Act 1961. This society is functioning under the
administrative control of the Director of Industries and Commerce, Government
of Tamil Nadu.
After the
emergence of SAGOSERVE, the bargaining power of manufacturers has substantially
increased and the menace of middlemen in this trade has been completely
eliminated. Owing to the sustained efforts of the society, sago/starch industry
has now become the backbone of Salem district’s rural economy, providing
employment to more than 5 lac people both in agriculture as well as factories.
3. THE PRODUCTION DETAILS
3.1 SKETCH OF THE SMES IN THE CLUSTER
There are
about 800 sago and starch units situated throughout Tamil Nadu. Though the sago
industry is spread over Salem, Namakkal, Dharmapui, Erode, Tiruchirappalli and
Perambalur districts, the Salem and Namakkal districts are known to have the
highest concentration of sago units. While most of the centres are known for
simple Sago production, some of the units at Salem also produce 'Nylon Sago', a
special product which is made by subjecting the sago balls to steam cooking.
The sago
factory owners at Attur and Harur area predominately produce starch in their
factories. While most of the sago units are producing sago from tapioca starch
produced at their factories, a new trend has emerged wherein wet starch is
being purchased from factories that are only producing starch and then sago is
being produced from the wet starch thus purchased. Sago widely referred to as
‘Sabut-dana’ in Hindi is consumed as a food item especially during religious functions
in the states of Maharashtra, Gujarat, Madhya Pradesh, Orissa and West Bengal.
Earlier for making sago, the outer skin of the tapioca tubers was completely
peeled and crushed to produce starch milk. This operation involved large amount
of labour and resulted in loss of starch along with the peels. It was also time
consuming and expensive. No chemical was used in this type of processing.
However the resultant quality of the sago used to be wholesome and tastier. In
this process the smaller tubers, which could not be peeled had to be rejected,
only to be used for making starch later. But now due to the innovations made in
the industry by the introduction of shaking machines and devices like rotating
peelers etc, the sago producers have started processing the sago tubers without
the manual peeling operation. But the machine peeling was not proving to be as
efficient as that by hand and the resultant starch used to contain impurities
like portions of outer skin. To remove these impurities and to improve the
colour of sago, chemicals like bleaching liquid and sulphuric acid were started
being used. In this case the resultant product is less tasty than that by the
earlier procedure.
At present
there appears to be some consumer resistance in the Northern states for the
products with excessive chemical odour and inconsistent cooking quality.
Therefore many sago factory owners are resorting to the old practic e of hand
peeling. In order to ensure a better quality in the products, the SAGOSERVE has
established a laboratory at its premises to test all the samples of
consignments of starch and sago brought for sale. And only the samples, which
pass through the test are allowed to participate in the auction process. The
turnover statistics of SAGOSERVE is shown below: 1
SAGOSERVE,
SALEM TURNOVER FOR 1982-83
TO 1999-2000
TURNOVER RS. IN LAKHS
0
5000
10000
15000
20000
25000
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
YEAR
Y-Axis Rs.
IN LAKHS
3.2 PRODUCTS
AND THEIR MARKETS
The main
products of industry are Sabut-dana and starch. The different types of Sago are
given below:
•Grades of Sago
o Super Fine
o Milk white
o Special
o Best
The other
types of sago produced by some of the units in the cluster are Nylon Sago and
Sago Brokens.
•Grades of Starch
o Textile
Grade
o Edible
Grade
o Glucose
and Laundry Grade
10% of the
sago produced is being marketed directly to the producers and the wholesale
dealers in other
states. This
procedure is undertaken by obtaining E&F form and is somewhat complicated.
Another 10%
to 20% of
the sago is being marketed through local traders in Salem. This procedure is
followed by
obtaining
the form C. A major portion of the sago production i.e. 70% to 80% is being
marketed through
SAGOSERVE.
Marketing through this society does not require filling of form C and is much
more
advantageous
than direct selling, which is why most of the sago producers prefer to go by
this channel.
The main
markets for sago are Northern States, like Maharashtra, Gujarat, Madhya
Pradesh, Orissa,
Andhra
Pradesh and West Bengal.
Starch also
is marketed through SAGOSERVE as well as through Salem traders directly. The
manufacturers
undertake the following measures to improve the grade of the sago/starch.
1. Washing
the tubers thoroughly with jet washing.
2. Peeling
of outer skin with help of shaking machines with peeling devices and rotary
peelers.
3. Hand
peeling.
4. Use of
chemicals like bleaching liquid and sulphuric acid to remove unwanted materials
and to
improve the
colour.
5. Use of
agitators instead of manual walking process in the starch setting tanks.
6. Proper
roasting of the product.
7. Keeping a
high level of hygiene in the factory.
3.3 PROCESS
FLOW CHARTS
The flow
charts depicting the various stages involved in the production of Sago and
Starch are
given below.
3.3.1
MANUFACTURE OF SAGO
Sago
(globular shaped one) is one of the important products made from tapioca starch
commonly
used in the
dietary preparation. The unit operations for sago manufacture are given below.
Starch from
settling tanks (moisture content @ 40%)
Pulverization
Globulation
Sieving
Roasting
Drying
Polishing
Sieving
Sago
Bagging
3.3.2
PRODUCTION OF STARCH
The process
flow chart for the production of starch from cassava is given in Fig.1. below.
Waste water
Residual
pulp
Cassava
Tubers
Washing
Peeling
Washing
Rasping
Screening
Setting of
starch
Disintegration
Drying
Pulverizing
Sifting
Bagging
3.4 PRODUCT
DIVERSIFICATION
Cassava as
such provides an ample scope of diversification and value addition. There lies
a vast
opportunity
for non-traditional uses of cassava in the form of value-added food, animal
feed formulation,
sago and
production of commodity chemicals like citric, high fructose syrup etc. It can
exploit its
opportunities
in the area of convenience food for which greater demands are projected in
future.
Trade
sources indicate that there is a great demand for chips (almost one lac ton per
month) in the export
markets,
which of course has competition from South-east Asian countries. The by-product
of starch
factories,
thippi and of cassava flour milling, bharda can be used as a cost effective
ingredient in animal
feed
formulations. Also the simplicity of sago and starch extraction puts cassava in
a one-upmanship
position
than other sources. This could be exploited for setting up units in
non-traditional areas.
Nevertheless
cassava faces stiff competition from other sources of starch in price as well
as in the
preference
for processed products. Starch and sago are the major processed products of
cassava
manufactured
mainly from 1000 small-scale factories of Tamil Nadu and Andhra Pradesh. There
are nine
large-scale
starch factories mainly using maize and sorghum, and very rarely fresh and
dried cassava. The
major reason
for preference towards maize and sorghum is the relative advantage in price of
these crops
over
cassava. Dried cassava chips are 60-70% and 70-90% costlier than sorghum and
maize respectively.
The
applications of starch include textile sizing and finishing, foodstuffs,
adhesives, starches and
sweeteners.
Although cassava starch has specific advantages especially in hard printing of
textiles,
adhesives
etc., maize starch is mostly preferred for other applications.
However, it
was observed that thippi, a by-product of cassava factories is used as a filler
in the poultry
feed formula
tions. Dried cassava chips may be used as a source of energy in compound feeds
but most of
the feed
companies are reluctant to include cassava chips as an ingredient due to the
cost factor. It is a
matter of
pride that two modern factories following Thaila nd model have come up on each
in Dharmapuri
and Erode
districts of Tamil Nadu. These factories are trendsetters for quality
improvements of cassava
products.
3.5 EXPORT
STATUS
Trade of
cassava in the international market is either in its raw form of in its
processed form. India has
been
exporting cassava products since 1950’s in different forms viz. raw tubers,
frozen tapioca, tapioca
chips,
manioc starch, tapioca & substitutes, tapioca flour, sago pith and sago
flour. The Indian cassava
exports
declined after 1960’s due to domestic food situation especially in Kerala.
However in late eighties
exports
picked up momentum.
The bulky
and perishable nature of cassava offers little scope in the export trade of raw
tubers. However,
there is an
active international trading in chips and pellets and to some extent starch and
sago.
Between 1956
and 1964, India was exporting cassava products (70000 tons of dried chips)
mainly to
European
countries. But it went out of export trade gradually after-82 due to quota
restriction imposed by
EC and in
view of the emerging export giant of cassava, Thailand, whose 90% of the total
cassava
production
is exported to EC. In spite of the fact that the cost of the production of raw
tubers in Thailand
did not have
much advantage over India, the former could forge ahead in export due to low
processing
costs, good
export handling facilities and free trade environment.
Presently,
India is exporting very small quantities of cassava raw tubers to the Middle
East countries. It is
exported in
two forms i.e. frozen tapioca and cassava raw tubers. These exports are routed
through the
Cochin sea
port and from Kozhikode and Trivandrum airports. As per the published data, raw
tubers
exports
started only recently. Dried cassava chips were exported mainly to European
countries like
Netherlands,
Belgium, Italy and USSR. Even though the published data shows that cassava
chips were
exported
between 1972–73 and 1985–86, trade enquiries in Andhra Pradesh revealed that
even in 1987–
88, 92–94
and 95-96, dried chips were being exported to European countries from Kakinada
port. An
annual
export growth rate of 1.45 per cent was observed for dried cassava chips
between 1972-73 and
1985-86.
Trade enquiries indicated that a high percentage of sand and silica in the
chips is the general
problem in
the quality of chips exported from India.
Cassava
chips offer a great scope for export provided more efforts are made to improve
the product
quality.
Tapioca flour, which is mainly exported to the European countries, has been
increasing at the rate
of 1.17 per
cent per annum during 1970-97.
Manioc
starch exports started only recently from India i.e., from 1992-93 onwards. It
is exported to
European and
South East Asian countries. The major problem in starch exports is
inconsistency in the
product
quality. It is exported from Chennai, Mumbai and Calcutta ports. During
1997-98, India exported
3385.47 tons
of starch valuing Rs2.89 crores.
Under the
group tapioca substitute, various value added products prepared from tapioca
starch in the form
of flakes,
grains, pearls, siftings in smaller forms are exported. This group has a major
share among the
cassava
exports from India. During the last two decades quantity exported ranged
between 2.4 tons to
35232.55
tons. These products are routed through Chennai, Mumbai and Calcutta ports.
Although
there are no reports of sago & starch production derived from Sago palm in
India but the
published
data shows that products under sago pith and sago flour are being exported from
here. Sago pith
exports have
shown significant growth of 2.02 per cent per annum during 1980-97. It is
exported mainly
to
Bangladesh, Middle East countries from Mumbai and Calcutta ports. These exports
have shown an
average
growth of 1.75 per cent per annum since 1970.
4. ANALYSIS
OF BUSINESS OPERATIONS
4.1 MARKETS
The traders
of sago usually have to make payment through immediate cash or within a
reasonable period
to the sago
factory owners. However, in their turn they have to sell the produce to the
wholesale dealers at
credit.
Non-realisation of money in time poses a major problem for these traders.
Most of the
traders are dealing in low end products like special and best and only a few of
them deal in
super fine
and milk while sago grades. These traders concentrate on quality and usually
test every sample
of the
produce. They sell the produce to other states under their brand name and try
to build a brand
loyalty
among the customers. Because of their focus on consistent quality, the wholesale
dealers are ready
to pay a
better price for their products and try to settle the payment dues as fast as
possible. One such
trader even
maintains a computerised record of the quality of all the consignments and is
confident that he
can deal
with any dispute regarding the quality of any consignment supplied to any
wholesale dealers.
This also
enables him to trace the producers who supply inferior quality of sago. Another
wholesale
dealer makes
a lot of efforts to market his brand through advertisement and by conducting
Sago food
festivals at
important market centres. Through his initiatives, he has made a good
reputation in the
northern
states.
As the
competition for the low end products is high, the traders are not able to
concentrate on quality and
also the
payment for their products often gets defaulted or is either not received in
full or in time. Most of
the time,
disputes between the trader and the wholesale dealer is settled at the cost of
the trader. The
reason for
the fluctuating cost is often attributed to the supply and demand position of
the sago. However
this aspect
requires close scrutiny and detailed market surveys.
The major
problem faced by the owners of sago units is the highly fluctuating prices of
sago and starch
and
sometimes even the mismatching of the purchase price of the tubers. Some owners
of sago units feel
that as the
traders have to analyse large number of samples within short time at SAGOSERVE
and as a
result a
proper classification on the grade of sago/starch is not being done. This,
according to them gets
them a
lesser price for their product than they deserve. Some manufacturers also feel
that despite their
undertaking
of hand peeling operations, their product does not get an adequate price to
compensate the
additional
expenses they have incurred or the quality they maintain.
The traders
also have association of their own but the association is not very active and
rarely arranges
organises a
meeting of the members. Also the lack of awareness amongst the factory owners
about the
quality
standards affects the market.
4.2 RAW
MATERIAL SUPPLY
Among the
different tropical roots and tuber crops grown in India tapioca is one of the
most significant
ones, as it
can produce more calories per unit. Its importance in tropical agriculture is
due to its drought
tolerance
and wide flexibility to adverse soil, nutrients, and management conditions
including the time of
harvest.
Tapioca can be profitably cultivated throughout the year with irrigation.
Tapioca is
grown in almost all the districts of Tamil Nadu, the major ones being Salem,
Namakkal,
Dharmapuri,
Vilupuram, and Kanyakumari. Tapioca grown in Kanyakumari district is mostly
used for
culinary
purposes. The area under tapioca is said to be expanding to Erode, Karur and
Dindigul districts
as well.
The tapioca
tuber is available in the industry from July to April but the maximum amount of
raw material
is available
only during the November to February period during which the starch content of
the tubers is
at its peak.
Winter appears to be helpful for the consolidation of starch in the tubers.
Maximum crushing
activity is
being undertaken during this period only. Availability of raw material starts
from June end
onwards as
mentioned below.
Tuber from
Available during
Kolli Hills,
Patchamalai June, July, August.
Karamundurai
Hills August, September
Panruti Area
September, October, November,
December
Salem,
Namakkal Nov., Dec., January, February,
March.
Harur,
Dharmapuri Dec. Jan. February.
Erode July
to February
Brokers play
a major role in supplying the raw materials for the sago and starch units. They
have a wide
network of
sub brokers who help in fetching the tubers even from the far-off places and ensure
a
continuous
supply of tubers to the sago and starch units. 90% of the raw materials sold
from the farmers
are being
routed through the brokers only. Mostly the main brokers are situated at Attur,
Salem,
Namagiripet,
Chellappampatti and a few other areas.
The main
brokers get their produce through sub brokers. In hilly areas the sub brokers
operate through
village
brokers. The main brokers usually get a commission of Rs.2.50 per bag. The sub
brokers earn their
living by
negotiating both ways.
While the
transactions between the main broker and the farmers are made in cash, those
between the
broker and
sago units are made in credit basis. The sago factory owners believe that the
brokers exploit
both the
farmers and the sago factory owners cleverly by manipulating the needs of the
both. However the
brokers
claim that their income is dwindling because of intense competition. Some
farmers directly deal
with main
brokers also.
Main Brokers
Attur is a
major market for tapioca tuber, which has the maximum number of main brokers
i.e. 23, most
of whom have
offices of their own and another 15 who operate without offices. Kattukottai, a
place near
Attur has 26
offices and Salem has two offices while Chellapampatti and Namagiripettai have
two and
one
respectively. The brokers also operate in other areas like Thammampatti,
Senthamangalam etc.
The biggest
broker in Attur deals on an average 5000 lorry loads of tubers in a year. Other
brokers deal on
an average
of 1000 to 1500 lorry load tubers per year. The farmers resort to sell their
tubers through the
brokers for
the following reasons.
1- They get
advance money from the sub brokers or local brokers.
2- They
believe in better bargaining power of the brokers to fetch a good price for
their produce, as
the brokers
are capable of knowing the current prices of the sago/starch in the market and
negotiate
with sago factory owners accordingly and get maximum price for the tubers.
Some factory
owners also get tubers directly from the farmers by giving advance money to the
farmers
before the
start of a season. Such type of transactions which where largely prevalent
earlier have
diminished
considerably now, as they find it increasingly difficult to get the tubers from
the farmers with
whom they
have made an advance deal. The farmers are supposed to bear the cost of
transport from their
fields to
the factories. Most of the farmers prefer that the arrangement of transfer the
produce is left to the
broker
itself as they believe that the labourers and transport owners can be handled
by the brokers more
efficiently
than them.
The major
problems faced by the owners of the sago units with regards to procurement of
raw
material are
as below:
•Non-availability of quality raw material of adequate quantity.
•High fluctuation in prices of the raw material.
•Availability of raw material only for a short period.
The
availability of quality raw material that is tubers with rich starch content is
restricted to the winter
period that
is November to February. The sago factory owners try to purchase maximum amount
of raw
material
during that period and process it into starch. However only a part of the
starch thus produced is
converted
into sago, while the rest of it is stored in tanks under water. After the
crushing period is over
the stored
starch is taken out from the storage periodically and then washed and used for
sago making.
During the
last season as the prices of sago had fallen below the prices of stored raw
material, and as a
result many
sago factory owners incurred huge losses. In case during a season the prices of
tuber are very
low, the
sago factory owners tend to purchase maximum tubers and store it in the tanks
underwater. But
due to wide
fluctuation in prices now a days the sago factory owners have started adopting
a cautious
approach in
storing the starch.
The major
problems faced by the farmers of the sago units with regards to supply of raw
material
are as
below:
•The yield of tapioca is getting reduced year by year.
•Diseases like Cassava Mosaic virus, tuber rot, phoma leaf fall are affecting
the crop badly.
•Good quality seed material is not available. The existing varie ties
of H165, H226, and Mulluvadi
had been
released by C.T.C.R.I. and T.N.A.U. long ago and their yield potential have
come
down. New
varieties like CO2 and CO3 has not spread among most of the farmers.
•The farmers are not aware of the modern methods of cultivation
practices, which are cost
effective
and environmentally sustainable.
•Depleting soil fertility.
•Depleting water table.
•Monsoon failure requiring drought tolerant varieties and cultural
practices to withstand drought.
•Escalating cost of cultivation.
•Fluctuating cost of Tubers. Sometimes the cost of tubers is falls below
the level of cultivation
expenses.
Another
problem between the farmers and the sago factory owners is the determination of
scale for
measuring
the starch content in the tubers and fixing the price according to the starch
content. The scale is
introduced
by the sago factory owners to Tamil Nadu on the model of scale used in
Thailand, where the
specific
gravity of the tuber is correlated to the content of starch. The same quantity
of tuber is first
weighed in
air and then immersed in the water and then the difference is shown as
percentage of starch
calibrated
in the scale itself. The sago factory owners are of a unanimous view that the
usage of scale is
the best
method for buying the raw material However many farmers are skeptic about it
and feel that as it
is not
approved by the concerned Government authorities so its usage may give way to
manipulation by
the owners
of the Sago units.
Once the
problem of applying a scale for the purchase of raw material is settled to
mutual satisfaction of
both the farmers
and Sago factory owners, it will be a major break through for the industry.
Even while
applying the scale there is a variation between the starch content shown as per
the scale and
the recovery
of actual starch in certain varieties of tubers. For example Mulluvadi variety
of Tapioca
though shows
a higher starch content as per the scale but the percentage of starch derived
is more than the
scaled
measure. These variations are to be taken into account while applying scale for
the purchase of raw
material.
4.3
PRODUCTION TECHNOLOGY & PROCESING
The
sago/starch industry in Tamil Nadu is nearly 60 years old. Though the kind of
machinery deployed to
manufacture
starch and sago has undergone a tremendous change over the years yet the
existing practices
of processing
require a lot more alteration in order to become cost effective and to produce
quality
products
acceptable to the discerning consumers. The sago/starch owners mainly depended
on local
mechanics,
who are well versed in the layout and erection of sago factories. Many sago
factory
equipments
are fabricated locally with the help of engineering workshops and laths
available nearby. The
necessary
spare parts and machines are also available in the neighbouring towns or at
Salem itself.
Most of the
machinery, which is presently used by a majority of the sago factory owners
like tapioca
crusher are
not efficient. However some innovative sago factory owners with the help of
some machinery
manufacturers
at Salem and Erode have introduced several new machines in their factories. The
machinery
manufacturers are highly innovative and keep gathering information through
different sources
like
internet etc. A detail about some new machines that have been introduced
recently in the cluster is
given below:
Rasper
'Rasper' is
one such innovative machine that replaces the existing root crushing machine.
The existing
root
crushing machine uses perforated iron sheet to tear and crush tubers in order
to release the starch
milk. This
equipment needs replacement of iron sheets everyday or two after an average
crushing of 400
to 500 bags.
However, the new rasper is fitted with imported blades and it even separates
the starch from
the tuber
than the existing root crusher. This rasper is capable of crushing 20000 to
30000 thousand bags
of tubers
without any replacement of blades. At present 4 manufacturers at Salem are
manufacturing
raspers and
around 30 raspers have already been installed in many factories. Many more
persons are
known to be
willing to install raspers in their factories.
Tippi Screw
Tippi screw
is another such equipment that has been introduced by a machinery manufacturer
at Salem.
This
equipment separates the leftover starch milk from the tippi. It is gaining
acceptance among the sago
factory owners.
Two machinery manufactures are manufacturing tippi screw at Salem.
Hydro
cyclone
Hydro
cyclone is another device introduced to the industry by a British NGO, which is
effective in saving
water to the
extent of 40 to 50%. Many factories that are situated in the water-starved
areas can be
immensely
benefited by installing of this equipment. At present two persons are
manufacturing this
equipment at
Salem.
Mechanical
un-loader
Mechanical
un-loader is an innovative equipment, which is developed on the model of
poclain earth
excavator
and is slowly finding acceptance among the sago factory owners. It can replace
6 to 8 men
labourers.
Mechanical
roaster
Mechanical
roaster is being used in one factory to roast sago. This machinery is yet to be
popularised
among the
sago factory owners. It is found that the process of roasting, which is being
used at many sago
units is 12
to 15% inefficient as compared to the efficiency level of this mechanical
roaster.
A lot of
simple improvements which if implemented will pave way for saving energy and
cost. Use of
thermic
fluid, butterfly valve in the chimney, use of methane gas etc are some of the
suggestions for
improving
the roasting made by scientist from National Productivity council at Hyderabad.
Many sago
factory owners are showing interest on sago and starch dryer and metallic
rotary screens.
Experiments
have been carried out by some companies on the above equipments. The cost
factor remains
one of the
major blocks in introducing new machinery. The sago factory owners are averse
to purchase
costly ready
to install machinery from the manufacturers and usually fabricate most of the
equipments
with the
help of local engineering workshops. However the machinery manufactures feel
that the sago
factory
owners should take into account the cost to run these machinery-manufacturing
units.
Problems
faced by the sago factory owners with regards to technology
•Getting the skilled mechanics to install the equipments on time is
very difficult. Instead the
factory
owners have to oblige to the convenience of mechanics. The mechanics are also
not
technically
highly educated and hence the efficiency of machinery and equipments is below
the
expected
level.
•The average annual amount spent on repairing and replacement of
machinery ranges
from
Rs50,000 to
Rs1 lac.
•The sago factory owners do not get adequate technical advice for
machinery and the equipments
from any
formal institutions.
•There is a mistrust prevailing among the sago factory owners and
machinery manufactures
hampering
the rapid technological advancement of the cluster.
Problem
faced by machinery manufacturers with regards to technology
The sago
factory owners often hesitate to offer the price quoted by the machinery
manufacturers and are
not
considerate to the establishment costs of the latter. They also don’t even pay
the entire amount in
lump sum.
There is feeling among the machinery manufacturers that the sago factory owners
often try to
copy their
equipments and neglect them afterwards.
4.4 PREMISES
The sago and
starch factories are mainly situated in semi urban and rural areas with an
exception of Salem
city wherein
around 60 units are situated. Most of the sago factories are housed in large
areas ranging
from three
to seven acres in rural areas, and one to two acres in urban areas. In the city
of Salem paucity
of space
restricts the expansion of the factory. The sago factories are usually situated
in formal structures.
4.5 FINANCE
Almost all
the sago factories are family owned and most of them are farmer turned
entrepreneurs. These
owners get
their equity from the surplus fund that they generate from agricultural income.
Many of the
sago factory
owners were also previously brokers doing business as raw material suppliers to
the industry.
They all
usually maintain a current account in a commercial bank or a co-operative bank
to en-cash the
cheques
received from SAGOSERVE or traders.
Only 50% of
them are availing credit from commercial or co-operative banks, while the rest
of them
manage with
their own funds or borrowed money from relatives or money lenders for a short
period.
Availing
credit facility for working capital is more prevalent than availing credit for
term loan. Most of
them feel
that their real incomes have reduced over the years due to the escalation of
cost and
competition.
Most of them tend to plough back their profits into improving their factories.
However some
are even
investing in transport business and other local businesses. The sago factory
owners situated at
semi urban
and urban centers are able to obtain credit from the banks easily than those
situated in the
rural areas.
The
following problems are expressed in financing the sago industry by the bankers.
•The bankers feel that the sago factory owners do not route their
transactions
through their bank
accounts.
•Multiple finance
•It is a seasonal business and therefore fixing credit limit is
difficult.
•Non maintenance of proper accounts.
•Difficulty in measuring the starch stored in the tanks.
•Highly fluctuating price of sago and starch.
Though most
of the sago factory owners who have availed credit facilities from the banks
expressed
satisfaction
with their services yet some are disillusioned with the behavior of the
bankers. They feel the
credit
limits offered by the banks are not adequate, are unrealistic and not
sanctioned in time. They
generally
feel their cash credit facilities should be enhanced when the raw material
prices are low so as to
enable them
to purchase enough material for the entire season.
4.6
INFRASTRUCTURE, POLICES REGULATIONS
The
Government is providing with all the necessary infrastructure for the growth of
the industry. The
electricity
board is providing the necessary power supply and is also giving advice on
economising
electricity
charges.
The
Government through the pollution board controls and monitor the pollution
control efforts taken by
the sago
factory owners. However the units feel difficulty in getting clearances from
the board.
Through
SAGOSERVE and District Industry Center, the Government disseminates the details
about the
policies and
incentives offered to the industry. Overall the cluster enjoys excellent
logistic and
communication
facilities.