Performance of Karnataka State

PERFORMANCE OF KARNATAKA STATE
AGRICULTURAL PRODUCE PROCESSING AND

EXPORT CORPORATION, LIMITED AN
ECONOMIC ANALYSIS
Thesis submitted to the
University of Agricultural sciences, Dharwad
In partial fulfillment of the requirements for the
Degree of
MASTER OF SCIENCE (AGRICULTURE)
in
AGRICULTURAL ECONOMICS
By
DEEPA KALLAPPA TALLIKERI
DEPARTMENT OF AGRICULTURAL ECONOMICS
COLLEGE OF AGRICULTURE, DHARWAD
UNIVERSITY OF AGRICULTURAL SCIENCES,
DHARWAD 580 005
JULY, 2008 ADVISORY COMMITTEE
DHARWAD (S. B. HOSAMANI)
JULY, 2008 MAJOR ADVISOR
Approved by:

Chairman: _______________________
(S.B. HOSAMANI)
Members: 1._______________________
(L.B. KUNNAL)
2. ______________________
(N.R. MAMLE DESAI)

3. _______________________
(VILAS KULKARNI)
4. _______________________
(K.V. ASHALATHA) C O N T E N T S
Sl.
No.
Chapter Particulars
Certificate
Acknowledgement
List of Tables
List of Figures
1 INTRODUCTION
2 REVIEW OF LITERATURE
2.1 Performance evaluation of Institution
2.2 Growth rate of the institution
2.3 Documentation
2.4 Constraints of the institution.
3 METHODOLOGY
3.1 The Study Region
3.2 Organization and Working of Export Promoting Industry in
Karnataka
3.3 Functions of KAPPEC
3.4 The Karnataka State Agricultural Produce Processing and Export
Corporation Limited (KAPPEC)
3.5 Nature and Sources of Data
3.6 Analytical Technique Employed
3.7 Compound Growth Rates
3.8 Principal Component Analysis
3.9 Index method
4 RESULTS
4.1 Basic information of KAPPEC
4.2 Financial analysis of KAPPEC
4.3 Compound growth rate
4.4 Projection of value
4.5 Principal component analysis
4.6 Documentation
4.7 Constraints of KAPPEC Sl.
No.
Chapter Particulars
5 DISCUSSION
5.6 Documentation
5.7 Constraints of KAPPEC
6 SUMMARY AND POLICY IMPLICATIONS
7 REFERENCES
APPENDICES LIST OF TABLES
Table
No.
Title
3.1 Karnataka at a glance
4.1 Financial Indicators of KAPPEC
4.2 Growth Rates of Financial Indicators
4.3 Test of Solvency
4.4 Liquidity ratio of KAPPEC
4.5 Test of Profitability
4.6 Test of Efficiency
4.7 Tests of Strength
4.8 Growth trend of important commodities handled by KAPPEC
4.9 Growth Trend of KAPPEC Markets
4.10 Projection for Financial Indicators
4.11 Projection for Export Marketing
4.13 Role Players in the Process of Documentation
4.14 Documentation Process for Export
4.15 Constraints of KAPPEC through index method LIST OF FIGURES
Figure
No.
Title
1. Location map of the study area
2. Organisational Structure
3. Test of Solvency
4. Liquidity ratio of KAPPEC
5. Test of Profitability
6. Test of Efficiency
7. Tests of Strength
8. The flow chart of documentation process
1. INTRODUCTION
Agriculture is the major driving force of Indian economy. It accounts for the largest
chunk of employment and gross domestic product, a source of raw material for industry and a
major source of foreign exchange earner at present and potentially even more in the decades
ahead. Domestic agriculture can substantially contribute to the balance of overseas payments
either by augmenting countries export earnings or by expanding the production of agricultural
import substitutes this is termed as foreign exchange contribution of agriculture. In countries
with a lagging agriculture sector and unmanageable food import bill, it would make better
economic sense to expand food production. But once domestic agriculture is able to meet the
basic requirements of domestic market; it may be a sound policy to exchange agricultural
exports either of food or other agricultural products to increase the rate of development
through sectoral diversification.
Trade in agricultural goods can play an important role in promoting economic
development especially in the less developed countries. The export of agricultural goods can
pay for imports of capital goods, technologies, manufactured products and other essential
commodities for the sustained growth of developing countries. Many developing countries
have a comparative advantage in the production of agricultural goods and export of these
goods is the main source of foreign exchange earnings. In an export led growth model of
trade it would be to the advantage of the developing countries, to specialize in production of
those goods where they have comparative advantage and to exploit the surplus production to
earn the valuable foreign exchange. Such a policy will lead to the use trade as an engine of
growth, as well as in ensuring rational allocation of resources.
In, India ever since the planning has been used as a tool for rapid economic growth,
the development of agriculture is given due importance. The importance of agriculture is felt
not only in feeding additional mouths but also to earn foreign exchange through exports.
Strength and resilience are the hall mark of Indias agriculture. Scarcity situation in many
commodities are over; and new challenges are emerging from surplus.
India has a strong comparative advantage because of its very diverse agro-climatic
conditions ranging from arid to heavy rainfall areas. Most of the areas have well distributed
rainfall, sunshine and temperature conductive to the growth of a very wide range of tropical,
subtropical, and temperate fruits, vegetables and flowers. There are long uninterrupted
Himalayan hilly region suitable for temperate and nut crops like Apples, Pears, Peaches and
Walnuts. It then gradually descends forming sub-mountain regions and plains. There are also
vast fertile plains and savannas suitable for a wide variety of crops.
Further Indias geographical situation gives it the unique advantage of being at the
center of most of the prosperous economies of the eastern world i.e, middle east in the west
and far east in east including countries like Iran, Iraq, Japan, Singapore, Thailand Malaysia,
Korea etc.This gives India the comparative edge for linking these markets as the third country
export center. With its agricultural predominance, India occupies a special position in the
developing world and should take a leading role in creating a favorable atmosphere for putting
across the points of negotiation in favour of developing countries at the WTO negotiation.
India exports more of horticultural crops, compare to agricultural commodities.
Horticulture crops includes fruits, vegetable, root and tuber crops, mushroom, floriculture,
medical and aromatic, nuts etc. This sector has established its importance in improving land
use, promoting crop diversification, generating employment and above all providing nutritional
security to the people.
India has made fairly good progress on the horticulture sector of the world with a total
annual production of fruits and vegetables of over 114 lakh metric tonnes during 2006-07,
which was only 167 thousand metric tonnes during 2005-06.The total gross annual income
from horticulture is Rs.7152 crores which is 40.00 per cent of the gross annual income from
combined agricultural sector. India is the second largest producer of horticultural crops. The
major crops in the case of fruits are Mango, Banana, Citrus and Apple and in the case of
vegetables Potato, Onion, Tomato and other seasonal vegetables. Urgency was felt to
formulate new strategies with the back up of attractive scheme which would give boost to
each and every segments of horticulture industry, all over the country. Global Exports
The present total global exports are well over US$ 5000 billion. The share of
agricultural commodities accounts for US$300 billions (6.00 per cent). In recent years, the
share of agri-commodities has increased considerably, mainly because the developing
countries have realised the importance of export to the development of their economy. There
has been a great deal of interest among the countries of the world to earn foreign exchange
through export of agricultural commodities. Agricultural and horticultural products have a
high-income elasticity. This situation makes developed countries to turn to the developing
countries to meet their demand. Therefore, developing countries are accounting for a large
share of the world trade in these commodities. The important developing countries viz.,
Argentina, Mexico, Morocco, China, Philippines, Taiwan, Turkey, Brazil, Costa Rica, Thailand,
Egypt and India account for two-thirds of the total horticultural exports. Other countries are
also improving their export competitiveness.
Fruits comprise 61.00 per cent of the horticultural exports of the World and 70.00 per
cent of it comes from the developing countries. There are as many as 80 different fruits and
65-70 types of vegetables traded in the world market.
Indias Export
Indian agriculture has a distinct position in the World agricultural production. It is the
second largest producer of Rice, Wheat, fruits and vegetables and the largest producer of
Milk. Still, in the world agricultural trade, its share is very less. The share of Indian agriculture
in the world export is less than one. Export of agricultural products is an important component
of the countries agrarian scene. Its present position in the Indian economy is quite significant
as export contribute a great deal to the development of an economy through the foreign
exchange earnings. Agricultural exports comprised about 30 percent of the total exports from
India during 1980-81 and the share dropped to 19 percent in 1990-91. Agricultural exports in
1995-96 constitute 19.87 percent in the total exports from India and this share has been
decreased to 15.08 per cent in 1999-2000. In 2000-01 agricultural export constituted 14.10
percent in the total exports and this share has been decreased to 10.4 percent in 2006-
07.Though the proportionate share of agricultural products in total exports declined, the value
of agricultural exports increased during this period.
Export Policy
Majority of the agricultural exports are unrestricted except some items, which are
regarded as essential and sensitive. For example, export of pulses and sugar (excluding
sugar that are subjected to a tariff rate quota in the United States and the EC) were
prohibited, to maintain domestic supplies of these products in order to keep the price at a
reasonable level. In order to boost the agriculture exports government has set up Agri Export
Zones. These zones receive assistance from Central and State Governments to improve
efficiencies in supply chains of the identified products. Currently, there are over 60 Agri Export
Zones sanctioned by the Central Government and monitored by Agriculture and Processed
Food Products Export Development Authority (APEDA).However, of the total investment of
Rs.17.18 billion envisaged over 2002-07, just around 50 percent has been realized.
Moreover, exports from these zones during 2005-06, were around 43 percent of expected
exports, in 2004, Vishesh Krishi Upaj Yojana (special vegetable products scheme) was
introduced to promote exports of fruits, vegetables, flowers, minor forest produce, dairy,
poultry and their value added products.
Scenario of Karnataka
Karnataka state is predominantly an agriculture State. About 33.00 percent of total
gross domestic product is derived from agriculture and 66.00 per cent of the workforce
dependent on agriculture further 70.00 per cent of state population is still living in rural areas
and are completely depending on agriculture for their livelihood. As such if the state has to
prosper and progress economically, it is possible only through the development of the
agriculture sector. In the state, agro-products are grown in an area of 107.90 ha and annual
production is 92 lakh metric tonnes. The area under horticulture crops is increasing year by
year and now the horticultural crops are grown in an area of about 14.72 lakh hectares and
annual production is 114.90 lakh metric tones. The total gross annual income from horticulture sector is
Rs 1752 crores and this account for about 40.00 per cent the gross
annual income derived from combined agriculture sector.
Karnataka occupies a unique position with its natural resources and could
contribute significantly in the development of the State and the Nation. Karnataka has been
recording a reasonable performance in export. The total export value of Karnataka is Rs
105850.50 crore during 2006-07. It is expected that Karnataka would emerge as one of the
major participating states in Indias agricultural trade. Nevertheless, it is essential to
periodically balance between the domestic demands, exportable surplus, and imports keeping
in view specially the interest of the domestic consumers and traders.
The export performances in the case of Coffee, Cashew, Pepper etc. are indeed
outstanding. But the same could not be observed for other horticultural commodities, where a
miniscule share of the production is exported. This is primarily because this sector has not
been developed to serve as an export oriented activity. Agencies like Coffee Board, Spices
Board etc, have been promoted for the export of specific commodities.
The Karnatakas export value is increasing over the years. In 1993-94, the export
value was only Rs 496.86 crores and it was increased to Rs 1528.23 crore by 1997-98 and by
2001-02 the value increased to Rs 2346.88 crore. In 2006-07 export value of Karnataka
increased to Rs 4341.35 crore. These increased export values shows that Karnataka is doing
good progress in exporting of agricultural and horticultural commodities. This is an indication
that there is ample scope for the development and increase of agriculture exports from the
State.
To promote the exports and provide an inadequate post-harvest infrastructure
facilities like procurement centers, grading washing, waxing, packing units, cold storages etc.,
in the state and by as per the recommendations of the agriculture policy of the State. The
Government has established Karnataka State Agricultural Produce Processing and Export
Corporation Limited (KAPPEC) on the 22
nd
of April, 1996.The authorized share capital of the
corporation is Rs 500 lakh. So far the State Government has released Rs 75 lakh out of which
Rs 50 lakh was utilized as share capital and Rs. 25 lakh as grant. In addition to this the
Government has also released an amount of Rs.10 crore in the budget for the creation of post
harvest infrastructure facilities in the state based on the potential in a phased manner in order
to boost the export of agricultural and horticultural commodities from the state.
Since inception till 31-01-2008, KAPPEC has handled about 3, 07,029 metric tonnes
of agricultural and horticultural commodities valued at Rs 48,739 Lakh. In addition to grapes,
KAPPEC has also exported Mangoes, Pomegranates, Drumstick, Watermelon, Red split
lentils, Niger seeds, Menthe seeds, Coconuts, Onions, Potato, Chilies, Garlic, Coriander, and
Turmeric to USA, U.K., Singapore, Srilanka, Malaysia, Middleeast, Turkey, Australia,
Netherland, Mexico, and Brazil etc.
KAPPEC has opened a cold chain facility in Bijapur mainly to harness the vast export
potential available for fresh Grapes, Pomegranate, Lime, Mango, Sapota, Banana, and other
horticulture crops grown in and around Bijapur district. It has created the required
infrastructure facilities like grading and pack house, pre-cooling chamber, cold storage units
under one roof equipped with refrigerated van and a laboratory. It organises training and
study tour for farmers and also arranges for publicity and propaganda programmes to boost
the export of Grapes and other fruits. The total cost of the project is Rs.301.23 lakh.The
facility has already been commissioned and the export of fresh Grapes and Pomegranates
has started. At the end of 31
st
May 2007, about 86.400 Mts.of fresh Grapes and 167.871
Mts.of Pomegranates were exported by leading exporters like M/s.Seven Star Fruits Pvt. Ltd.,
and M/s.Field Fresh. KAPPEC has recently constructed an integrated cold chain facility with a
total cost of about Rs 600 lakh at Kustagi. It is being implemented with the financial
assistance from APEDA.
Agricultural and Processed Food Products Export Development Authority (APEDA),
Ministry of commerce, Government of India has established an Agri Export Zone for Gherkins
in the state. Government of Karnataka has appointed KAPPEC as the nodal agency for the
implementation of AEZ for Gherkins in Karnataka. The concept of Agri Export Zone is to
take a comprehensive look at a particular
product located in a contiguous area for the purpose of leading to final exports. To start an
Agri Export Zone first they identify the export potential products and identify the contiguous
areas where they are grown. After that they adopt an end to end approach of integrating the
entire process right from the stage of identifying or enlisting difficulties or problems
encountered at each stage. Lastly, they develop a package to suggest solutions to the above
listed problems and the agency or agencies identified to implement these in a given time
frame.
The Agri Export Zone for Gherkins is being implemented in Bangalore (Urban &
Rural), Kolar, Hassan, Tumkur, Chitradurga, Dharwad and Bagalkot districts. Out of 26
Gherkin processing units in India, there are 24 units in Karnataka, exporting about 70,000
Mts.of Gherkins every year and the turnover is around Rs.313 crores.Under this Agri Export
Zone around 41600 small and marginal farmers are being benefited under the contract
farming system. Various key activities like research on Integrated Pest Management and
Rural Credit to farmers have been successfully undertaken by KAPPEC in the capacity as a
facilitating nodal agency.
Bangalore rose onion is mainly grown for export purpose. About 16 active exporters
are engaged in exporting of these commodities. In 2006-07 about 32,652 Mts at value of
about Rs 74 crores was Exported from Karnataka. Bangalore rose onion are grown only in
Bangalore (Urban and Rural) and Kolar, and KAPPEC has been supplying good quality Rose
onion seeds to farmers every year.
During July 1999 Government of India had canalized the export of Bangalore rose
onion through KAPPEC. Accordingly, KAPPEC has successfully made necessary
arrangements for exports. By looking into the performance of KAPPEC Government of India
made KAPPEC as the canalising agency of Bangalore rose onion.
By considering the excellent performance of Karnataka State Agricultural Produce
Processing and Exporting Corporation Limited (KAPPEC).The Government of India, Ministry
of Commerce has awarded it the status of an EXPORT HOUSE.
An attempt has been made to study the role of Karnataka State Agricultural Produce
Processing and Exporting Corporation Limited (KAPPEC).In export promotion till now no
comprehensive study has been conducted on the performance evaluation of Karnataka State
Agricultural Produce Processing and Exporting Corporation Limited (KAPPEC).Hence, it was
felt appropriate to study the performance of KAPPEC and its impact on exporting of
agriculture and horticulture commodities in the State with a view to know the strong and weak
points in its operations.
The study may help the planners, policy makers and administrators in taking future
course of action. The results of the study will also help in identifying the constraints if any, in
the working of KAPPEC, which may serve as guideline for the administrators and suggest
appropriate package of policy measures, which will help the planers, policy makers etc., for
developing effective programe implementation.
The Specific Objectives of the Study are as Follows
1. To analyse financial indicators of Karnataka State Agricultural Produce Processing
and Export Corporation Limited (KAPPEC).
2. To analyse the trend of agricultural and horticultural commodities Exported by the
KAPPEC.
3. To document the agricultural and horticulture Commodities export procedure.
4. To identify the constraints in the functioning of KAPPEC and suggest appropriate
policy measures.
Hypotheses
1. The performance of KAPPEC is satisfactory.
2. There is an increasing trend in agricultural and horticultural commodities exported by
the KAPPEC. 3. There are some constraints in functioning of KAPPEC.
Presentation of the Study
The entire study has been presented in six chapters. Chapter 1, deals with the
significance of the problem, the issues involved and the specific objectives of the study.
Chapter 2 includes Review of earlier studies connected with the present investigation.
Chapter 3 is devoted to the description of the study area. The nature and sources of data.
The tools and techniques of analysis adopted for evaluating the objectives. The next chapter
sumarises the results under appropriate heads, consistent with the objectives of the study.
While chapter 5 provides explanation for the causal relationships between certain variables
and the outcome which they produced. It also tries to provide a frame or references for
drawing policy measures. The last chapter summaries the overall results and brings out the
major policies to improve the performance of the KAPPEC.
Limitations of the study
1) It is a case study.
2) No comparison is made among different corporations.
3) It was not possible to compare KAPPEC with any private owned export company
because of time and resource constraints. 2. REVIEW OF LITERATURE

With a view to evaluate the objectives of the study. It was considered desirable to
have idea of the findings of some of the earlier research studies and the method adopted
therein. Such review of literature connected with the working and performance of Karnataka
State Agriculture Produce Processing and Export Corporation Limited (KAPPEC) in
Karnataka. It was hoped would provide a basis either for confirming the earlier findings for
contradicting them and there by suggest points of departure for further studies.
Consistant with the objectives of the study, the review of literature is presented under
the following heads.
2.2 Growth rate of the institution
2.3 Documentation
2.4 Constraints of the institution.
Natarajan et al. (1980) analysed the working of consumers co-operative in Andhra
Pradesh, and observed that the current ratio of 2:1, quick ratio of 1:1, inventory ratio, net
profit margin, return on assets and return on share capital were the best standards of
evaluation. The results of their analysis showed that the liquidity position was not satisfactory.
Financing in excess of equity, poor inventory turnover, heavy establishment and contingent
expenses in proportion to sales, huge stocks of inventory and ineffective utilization of funds
were the major causes for the poor performance of consumers Cooperative in Andhra
Pradesh.
Ananth (1984) evaluated the performance of the grape growers marketing and
processing co-operative society in Bangalore by employing the ratios such as structural,
liquidity ratio, profitability ratio, turnover ratio, total sales to fixed assets ratios and total sales
to owned funds ratio in order to study the financial position at the various stages of the growth
of the society.
Rama (1984) evaluated the performance of a farmers service co-operative society
(FSCS) in Karnataka, using the solvency ratios, such as total liability to owned funds and
fixed assets to owned funds; the liquidity ratios like liquid assts to total assets, current assets
to current liabilities and acid test ratio; the profitability ratios such as net profits to total assets,
net profits to working capital, net profits to owned funds and net profits to fixed assets; and
the turnover ratios like efficiency of capital, inventory turnover ratio, working capital turnover
gross ratio percentage and operating ratio.
Acharya (1985) employed principal component analysis technique to identify the most
important price and nonprice factors influencing pulse production in Rajasthan state and its
important pulse growing districts. The variables included in the analysis varied from crop to
crop and district to district. Among the various variables, the important ones identified were
lagged area, price, yield, sowing time. Of the results, he selected only first three components
which accounted for major variation (60.70%) in the explanatory variables.
Rayadu (1985) studied the working of industrial co-operative from 1977-78 to 1981-
82 using various financial ratios. It was found that all the industrial co-operatives had more
solvency than liability but was less than the established standard of 2:1 .It was also revealed
that they were not in a position to meet all current obligation immediately, since the
aggregated acid test ratio worked out 0.46:1.
Bhalerao (1985) analysed the business performance of the central arecanut
marketing and processing co-operation limited, using the financial statement analysis
technique. Solvency, liquidity, profitability and other performance variables were used to
measure the overall performance. To measure solvency of the society, ratios of total liabilities
to owned funds were used. To measure liquidity, ratios of liquid assets, to total assets, current
assets to current liabilities and total assets to total liabilities were used. To measure profitability, ratios
of net profits to total assets, net profits to total working capital, net profits to
owned funds, net profits to sales, and net profits to net worth were used.
Shankaramurthy (1986) studied the performance of the Karnataka State co-operative
marketing federation limited and its impact on farm market. He used various financial ratios
like solvency, liquidity, profitability and turnover ratio for the analysis of the performance. He
also used compound growth rate analysis for the selected financial and physical indicators.
He analysed the response from three different groups of respondents by employing cluster
analysis technique.
Thanulingam (1987) analysed the financial performance of thirty hand loom cooperative societies in
Paramakudi town, Tamilnadu for the period 1980-84 using liquidity,
profitability and turnover ratios. The study revealed that financial performance of the societies
was poor due to factors like accumulation of heavy stocks, very low gross profit margin and
large quantity of debtors created high current ratio resulting in inability of handloom sectors to
meet short term obligations.
Bishnupriya (1990) studied the working capital management in Orissa state cooperative milk producers
federation (OMFED) limited. He has used various concepts like
gross working capital, net working capital in the analysis.
Mattigati (1990) while conducting a study on the performance of milk producers Cooperative societies in
Dharwad district, made use of different financial ratios to asses the
financial position of the societies. He found that, 1) increasing trend of gross ratio was due to
the increase in the business turnover,2)net worth in the case of below average societies was
lower but positive and net capital ratio was more than unity. He inferred that the lower net
worth did not affect the strength of the below average societies.
Patil (1991) studied the financial position of Karnataka state milk producers
Cooperative Federation using different ratios such as, solvency, liquidity, profitability,
turnover, efficiency, and strength. He drew the following conclusions decreasing trend in the
liquidity ratio was due to accumulation of more fixed assets, higher liabilities represented by
increasing trend of solvency ratio was due to higher sales turnover and this will not affect the
solvency position of the organization and higher inventory turnover ratio represented the
higher existing stock rate and chances of inventory carrying or unsalable were limited.
Padmini et al. (1992) studied the financial performance of Shree Narayana power
loom industrial co-operative Society by employing various financial ratios such as turnover
ratio, liquidity ratio, sales ratio, etc. The analysis revealed that the liquidity position of the
society was very poor, thus financial performance of the society is not up to the level.
Dash (1996) analysed the financial performance of the District co-operative Banks of
Maharastra through composite index. To study the financial performance following ratios were
used they were Owned funds to working capital, deposits to working capital, borrowing to
working capital, credit deposit ratio, yield on assets, cost of funds, cost of management, net
margin, recovery percentage. He concluded that DCCS banks need great attention from
NABARD, apart from supervision and monitoring.
Singh et al. (1999) analysed the performance of agricultural co-operative service
societies in Punjab. The study was conduced in four districts namely Ludiana, Patiala,
Nawanshahar, and Amrithsar district of Punjab State. Twenty co-operative agricultural service
societies were chosen randomly for data collection from the selected districts. The data were
collected personally with the help of well-structured schedule. Data was put to tabular
analysis. He concluded that efficient management, freedom to work and integrity of attached
staff, particularly chairman were found to be the major attributes of success of any cooperative venture.
Ayenew et al. (2000) studied the performance of primary agricultural co-operative
credit societies in Haryana.They used the secondary data collected from various published
sources for the period 1997-1999.The data with regard to different components of cooperative
credit structure of the society were collected. He noticed that about more than six -fold
increase in the amount of deposits, yet the amount of deposits mobilized by PACS as
compared to loans advanced was found unsatisfactory during the period under study and the
magnitude of deposit mobilized per society had increased by more than four times. Devaraja
(2000) studied the performance of HOPCOMS, Karnataka. He collected
data relating to physical and financial indicators of the society from balance sheet, annual
reports, records and audit reports of the society for a period of 38 years. For financial ratio
analysis he used structural ratio, liquidity ratios, profitability ratios, turnover ratios. He
concluded that there were substantial increase both in the physical indicators and the
financial indicators of the society over the operational period of study.i.e.growth in
membership, rental outlets, share capital, owned funds, total assets, long-term investments
etc.
Nag (2001) analysed the performance of trajectory of public sector banks in India
using self-organizing maps. They used the SOM algorithm for construction of profitability map
of public sector bank in India and stratified them based on their overall level of performance.
Three major clusters emerged out of the analysis. The larger cluster contains most of the
State Bank of India and associated banks points mainly Characterized by highest level of
commission income to total income and lowest level of the ratio of interest income to total
income. The second cluster contains banks with very high levels of staff expenses to total
expenses ratio and intermediation cost to total assets ratio. The third cluster is the smallest
block of homogenous banks, typically characterized by a combination of the level of
commission income to total income and provision and contingencies to total assets ratio.
Soundara et al. (2001) analysed the performance of coir co-operatives in Tamil
Nadu.Secondary data were used foe the study were collected from the directorate of
industries and commerce Chennai for 2000-01. The study covers a period of 10 years. From
the study he concluded that the various facts and findings relating to the working of the coir
co-operatives in TamilNadu clearly indicated that the position of the units was not satisfactory.
Smitha et al. (2003) evaluated the business performance of fishery cooperative
societies in Vasai taluk of Thane district, Maharastra.The study was conducted among eight
fishery cooperatives of 11 existing primary cooperative societies in Vasai taluk. A financial
ratio technique was used to study financial performance of fishery cooperatives. Vasai zone
with a production of 32,643 tons had contributed to the tune of about 32 percent of the total
marine fish landing of thane district in 1995-96, which has comedown to about 9,943 tons by
the year 2002-03.This decline was due to over exploitation of fish and loss of fish stock due to
increasing population level in the area.
Bardhan (2004) evaluated Indias trade performance in livestock and livestock
products. The study is based on the time series data pertaining to the period 1980-2004.The
data were collected from FAOSTAT data base. To examine the changes in exports and
imports compound growth rates were estimated. The growth rates were calculated for two
periods like pre-WTO(1980-94) and post-WTO periods (1995-2000)separately to assess the
implication of WTO on livestock trade. They noticed that the share of livestock to total
agricultural export-although small has shown increasing trend in the recent past, which
implies better growth in export earnings from livestock products than those from other
agricultural commodities. Livestock sectors share in agricultural imports has gone down
drastically in the last two decades, pointing towards Indias potential in achieving selfsufficiency in
meeting domestic demand.
Anjani (2006) evaluated the Livestock sector trade of India : Surging momentum in the
new liberalized regime. The data on export and imports of livestock products, agricultural
exports and imports and total merchandise exports and imports were compiled from monthly
statistics of foreign trade published by DGCIS, ministry of commerce, government of India. All
the values of exports and imports were converted into US dollars to net out the effect of
fluctuations in the exchange rates. To analyse the performance of exports and imports of
various livestock products, the triennium averages (TF) were computed to minimize the wide
fluctuations.
Murugesan (2006) evaluated the performance indicators of primary agriculture credit
societies (PACS).By the available literature, eight broad categories of indicators have been
developed namely organizational, functional, self reliance, profitability, cost, democratic,
participation and social efficiency .He concluded that any attempt to analyse the performance
of co-operative we should be comprehensive to include the economic and social dimension. 2.2 Growth
rate of the institution
Krishnaji (1980) examined the methodological issues in measuring the growth.
According to him, though R
2
is not a very reliable guide to choose the correct functional form
yet the common procedure is to choose the form of regression that has the highest value of
R
2
from among a set of trend functions.
Bhalerao et al. (1981) studied the growth of arecanut marketing societies in India for
the period 1967 to 1977. The year wise analysis of growth considered variables such as
number of societies, membership, share capital, working capital, reserve funds, deposits and
per member average of all these indicators. The study indicated that the growth was not
consistent and there were annual fluctuations in the variables considered.
Chandrakanth (1983) commenting on the suitability of different functional forms of
growth, basis of selection of a model and method of measurement of growth rates opined that
in any time series study R
2
value alone would not determine the goodness of fit. The
computation of Durbin Watson statistic (DW) suggested to know the extent of auto
correlation so that some corrections can be made in raw data so as to reduce the same.
Rao (1985) analysed the growth rate of certain variables like share capital,
membership, total assets in his study on business performance of the Central Arecanut
Marketing and Processing Cooperative Ltd., Mangalore, Karnataka from 1973-74 to 1980-
81.The growth functions of both exponential and modified exponential form as given below
were fitted to a certain performance variables.
Y= ab
t
exponential function.
He observed that annual rates of increase of different performance variables were not
uniform. The growth of paid-up share capital, membership, total assets, working capital and
purchases increased steadily, while in the case of sales, the growth rate was high in the initial
years and declined in later years (from 1977-78).
Winfred (1985) analysed the operational growth of land development banks by
measuring the rate of growth of operations like membership resources, Government support,
floating of debentures, investments, loan operations, overdues, cost of management, profit
and the extent of credit disbursed weaker sections for a period of ten years from 1969-70 to
1978-79.The compound growth rate was calculated by using formula
Y
t
= Y o (1+ r / 100)
t
Where,
Y o = Base year value;
Yt
= t
th
year value;
t = number of years and
r = compound growth rate.
He found that banks with limited loan transactions, non-diversification of their lending
programmes and mounting overdue could not make any marked impact in the field of
agricultural credit.
Shankarmurthy (1986) used compound growth rate analysis of exponential form while
studying the performance of Karnataka state co-operative marketing federation Ltd. The
important physical indicators considered were membership, branches/depots, total number of
employees, direct recruits and deputations. The indicators related to share capital, owned
funds, fixed assets, total liabilities, inventory, total sales, sale of fertilizers, sale of other
commodities and establishment expenses. In the case of financial indicators, constant price
was followed for the sub-periods and for the aggregate period to account for the inflationary
trend in the economy in order to get real picture of the situation.
Jitendrakumar (1990) in his study of performance of dairy co-operative on milk
production, income and employment in Chitoor District, Andhra Pradesh, used the compound
growth rate analysis for various physical and financial indicators of the selected milk producers co-
operative societies. The exponential function of the following type was
employed to estimate the growth rates.
Y= ab
t
Where,
Y=Indicator
a = constant
b = Regression coefficient
t = Time (Years)
He also used the financial ratio analysis to evaluate the performance of a business
organisation.
Pradeep (1993) used growth rate to analyse the growth in physical and financial
performance indicators of horticultural producers co-operative marketing society limited,
Bangalore. The indicators considered were membership, share capital, owned funds, sales,
inventories, fixed assets, current assets, total assets, current liabilities and total liabilities.
Ayenew et al. (2000) studied the performance of primary agricultural co-operative
credit societies in Haryana.They used the secondary data collected from various published
sources for the period 1997-1999.The data with regard to different components of cooperative
credit structure of the society were collected and compound growth rates were worked out by
using the least square method of fitting the following exponential function by assuming that
the variables are moving geometrically.
Y = ab
x
Where, Y = variable
a = Constant
b = (1+r), r being the growth rate
x = the time period in years.
He found that the membership, paid up share capital, owned funds, deposits,
borrowings, working capital, loans advanced, loans outstanding, over dues and cost of
management registered annual compound growth rates of about 5, 14, 16, 27, 16, 16, 23, 17,
11 and 19 per cent respectively.
Soundara et al. (2001) Analysed the performance of coir co-operatives in Tamil
Nadu.Secondary data were used for the study were collected from the Directorate of
Industries and Commerce, Chennai for 2000-01.For analyzing the changes in the variables
such as production, sales, employment, capital and profitability compound growth rate was
used. To fit the compound growth rate, a simple regression model was used as indicated
below.
Y = a b
t
Where, Y = Variables
a ,b = Parameters to be estimated
t = time period.
He concluded that the various facts and findings relating to the working of the coir cooperatives in
TamilNadu clearly indicated that the position of the units was not satisfactory.
Anjani (2006) evaluated the Livestock sector trade of India : Surging momentum in
the new liberalized Regime. In their study compound annual growth rates (CAGR) were
estimated to examine the growth trends in exports and imports of various livestock products.
The study explicitly demonstrated that the livestock exports have registered a commendable
rise and liberalization policies seem to have further augmented their growth. The imports of
most of the livestock products have been insignificant. India has the potential to significantly
increase and expand the export of livestock products. 2.3 Documentation
Perez et al. (1995) studied the Short-term impacts of irrigation management transfer
in the Hakra 4R Distributary canal in Pakistan's Southern Punjab. This technical report looks
into the printing, issuing and use of the official documentation for the transport of forest
products and the importance of the adequate handling of these documents for the operational
process of forestry in Michoacan, Mexico. To this end, sites authorized for the exploitation of
resin and wood were inspected, and visits were made to industrial plant and to the offices of
the SARH and the Unidade de Conservacion and Desarrollo Forestal which issue
documentation for the transport of forest products. Moreover, a survey was carried out with
the owners of exploitation sites, industrial plants and contractors. The problems related with
each of the stages of the process of documentation are defined, and how these problems
coincide to the detriment of forest resources are indicated. Some alternative solutions are
suggested for each particular case, all with the objective of reducing the possibility of
'legalizing' shipments of wood and resin from clandestine operations.
Mitra, (2000) Studied the Lack of control in documentation for transport of forest
products: Mexico. Joint forest management (JFM) in a real sense began in Maharastra
(India) in 1996-97. Financial assistance is provided by the state government in a phased
manner for its various components. The micro-plans are prepared in consultation with the
villagers. The progress is monitored at circle and state levels. Process documentation is being
carried out as it is likely to motivate the people. Finally he noticed benefits in the quality of
forest management, moisture regime and better quality of grasses, and some employment to
the villagers.
Rukmini (2001) Studied improving organ donation in Central Saudi Arabia. This
chapter examines the experiences of Seva Mandir, a voluntary organization working in rural
development in Rajasthan, India, in the context of social learning theory. She identified six
avenues for organizational learning and adaptation: feedback from field-level workers;
process documentation; research studies; training programmes; internal conflict and debate;
and interactions with the government. I then examine cases of each learning mode to
illustrate the processes that led to crucial modifications in organizational perceptions,
structure and strategy. Seva Mandir's experience suggests that some redundancies and
apparent inefficiencies in organizational structure and function can actually enhance learning
opportunities and, ultimately, the effectiveness of development interventions.
Bodmer (2004) Wrote paper on Ethnopharm acological studies of antimicrobial
remedies in the south of Brazil. This paper deals with the usage of imitated and falsified drugs
for animal treatment, which may cause risks for consumers as well as monetary and
confidential losses for the producers of branded drugs. First, the current process of medical
treatment and documentation of these treatments is described. Problems that might arise
within this process are shown. A proposal is then developed on how the current process of
documentation of the medical treatment of animals that are meant for human consumption
can be improved. This proposal is used to develop an adequate ER-model designed to cover
the needs of plausibility checks.
Souza et al. (2004) Studied Facilitating process for community-based tourism
management: Mong Community Houy Namrin Village and Chiang Daow Village, Chiang Mai
Province. The study reports the antimicrobial evaluation of the species most commonly used
in Rio Grande do Sul (RS), the southernmost state of Brazil, for treating conditions likely to be
associated with microorganisms. A four-stage process of documentation and evaluation was
conducted: (a) review of RS ethnobotanical studies; (b) analysis of traditional uses; (c)
literature survey on phytochemical and pharmacological data; (d) microbiological screening of
selected plants. From the 149 species initially identified, 49 were cited as being used for
microbial associated conditions in at least two other regions in RS, and 18 were further
selected for screening. The crude methanol extract of these 18 plants were evaluated against
seven microorganisms using the diffusion agar test. Extracts from Chaptalia nutans, Cordia
monosperma, Echinodorus grandiflorus, Eugenia uniflora, Leonurus sibiricus, Luehea
divaricata, Malva sylvestris, Ocotea odorifera, Parapiptadenia rigida, Pluchea sagittalis,
Psidium cattleyanum and Senna neglecta were active against at least one microorganism.
Although preliminary, these results are useful for rationalizing the use of medicinal plants in
established systems of traditional medicine in primary health care. 2.4 Constraints of the institution
Muniramappa (1982) made an exhaustive analysis of the mechanism of linking of
credit with marketing in Karnataka for a period of 12 years (ending 1973-74).The conclusion
was that all was not well with the working of the co-operative marketing structure. Though
certain suggestions were made to improve further, ultimately it was the government that could
play a vital role in this sphere. Further, enlightened co-operators, innumerable agriculturists
and others involved have to put the marketing co-operatives on the right track so that they
could become important instruments of rural upliftment and institutions of financial viability in
assisting the farmers.
Ramaiah et al. (1983) in assessing the performance of 58 farmers service cooperative
societies (FSCS) in Andhra Pradesh concluded that out of the total volume of non
credit services, input supply constituted 91.36 percent , consumer goods accounted for 5.18
percent and customer service formed 2.4 percent and the marketing services 0.04 per cent.
This indicated that the non - credit services were mainly confined to supply of agricultural
inputs and the marketing of agricultural produce was completely neglected by all the FSCS
except one.
Ramesh and Nagabhushanam (1983) in their study on the evaluation of the impact
of Mulkanoor co-operative rural bank in Andhra Pradesh have concluded that resource
utilization on the farms of members was more than that on the farms of non - members. The
benefit cost ratio of the beneficiary farms was 1:1.17 while it was 1:1.06 on the non
beneficiary farms. The resource efficiency was also found to be high on the member farms.
The impact was being felt by way of higher yields and higher returns on the member farms
and this indirectly increased its own business activities. The co-operative bank was
responsible for the overall development of the area of its jurisdiction and it had left an indelible
impression on the members as well as non-members.
Singh (1984) in a study on co-operative marketing societies in India opined that
during the decade 1969-78, the co-operatives made a commendable progress quantitatively
but lacked qualitative improvement. The marketing societies accounted for less than ten per
cent of the marketed surplus of agricultural produce in the country. Further, the study
indicated considerable inter state inequality.
Vithal (1986) studied the working of the co-operative milk societies in Ananthapur
district Andhra Pradesh with the help of field observations and formal discussion with a score
of members of the selected societies apart from the secondary data collected at various
levels. He suggested that-
1. Honesty and integrity should be taken into consideration while appointing the
secretary.
2. The dairy should arrange proper transport facilities to boost up milk procurement.
3. Dairy should ensure proper support price to milk producers by taking into account the
cost of milk production.
4. Different schemes should be backed up with support facilities to make them
successful.
Ram (1988) made an attempt to analyse the organization and working of Jaipur
district milk producers co-operative union limited, Jaipur. The study was conducted through
personal interview with the members of management and other employees of the union. It
was found that the organizational structure and functions performed such as
1. milk collection
2. supply of technical inputs
3. farmers induction programmes and
4. Supervision was analysed.
After analyzing the above variables, some drawbacks were found out and appropriate
suggestions were made. Mattigatti (1990) conducted the interview of 100 farmers-members and 36
policy
makers and officials to elicit the opinion on the performance of dairy cooperative in Dharwad
district of Karnataka state. He considered the indicators like supply of inputs, veterinary
service, better prices, regularity of payments, linking of credit with membership, regularity of
meeting, working of the board, participation of directors, working of officials, transport facility
and price received etc.He observed that for most of the indicators, the majority of the
respondents were satisfied about the performance. In most of the cases the unsatisfactory
opinions were negligible(less than 5 per cent) except in the case like supply of inputs, price
received, credit linking facility and transport facility. In these cases, the unsatisfactory score
was more than 25 percent. The author suggested to the society to provide better input
services along with the better prices.
Singh et al. (1999) analysed the performance of agricultural co-operative service societies
in Punjab. They identified some constrains of cooperative and suggested some points for
improving functioning of the society. They were
1) The agricultural cooperative societies should be emancipated from numerous
unnecessary restrictions pertaining to purchase of fertilizer and other materials including
conusumarable goods from the government.
2) As most of the societies expressed their dissatisfaction with the supply of material made
by MARKED, there was a need to reconsider about the linking of these institutions with
the PACS.
3) Rampant corruption in cooperative sector should be tackled firmly.
Populist policy followed by the government like loan waiving should not be allowed.
Vinod et al (2004) conducted a study with reference to 120 respondents scattered in
six villages of two blocks in rewari district of Haryana to analyze the nature of markets and
role of cooperatives in marketing of milk. It was observed that on medium and large category
of farms the milk sold through cooperative society was found to be higher than the disposal
through milk vendors and directly to the consumers mainly due to more marketable surplus.
While on small farms the disposal was found to be almost equal, i.e., 35 per cent though milk
vendors and directly to the consumers, and the disposal of milk through cooperatives society
was less due to lower marketable surplus owing to smaller heard size. 3. METHODOLOGY
This chapter deals with the description of the study area, organization functions,
organizational structure, achievements, nature and source of data, analytical tools and
techniques used in the study.
3.1 The Study Region
Karnataka is the eighth largest state in India with an area of 1, 91, 791 sq km. It is
situated between 11.5 and 19.0 North latitude and between 74 and 78 East longitude in
the southern plateau. Table 3.1 indicates general and demographic features of Karnataka.
According to 2001 census, Karnataka has a total population of 52.81 million comprising of
26.86 million males and 25.95 million females, with an overall literacy rate of 67.04 percent.
Rural population is about 3.48 million and urban population accounts for 17.92 million. The
population density of the state is 275.5 per sq km. The average annual rainfall of the state is
about 1139 mm from both South-West and North-East monsoons. The mean temperature
ranges from 10C to 44C. The state is bounded by Maharastra and Goa on the North,
Andhra Pradesh on the East and Tamil Nadu and Kerala on the south. On the west, it opens
to the Arabian Sea.
Climate in most parts of the state is moderate due to its relatively high altitude. Being
situated relatively close to the sea, this region has a small range of temperature variation
during the year. The mean temperature of the hottest month (April) is 27.30C and the mean
temperature of the coldest month (December) is 20.5C.The average annual rainfall is about
1200 mm.The major food crops grown in the state are Rice, Ragi, Jower, Bajra, Wheat,
Pulses, etc., and non-food crops grown are Cotton, Groundnut, Sugarcane, Arecanut, Chilli,
Tobacco, Cardamum, etc., The South West Manson sets in the first week of June and
continues its downpour for four months.
The economy of Karnataka is predominately agrarian with about 66 per cent of its
work force dependent on agriculture for their livelihood. Agriculture Sector has been receiving
active support from the Government. The State with its salubrious and moderate climate
accounts for large areas under horticulture crops. As per estimates about 1.59 million ha was
under fruits, vegetables, flowers, spices, condiments and plantation crops representing over
13.00 per cent of the cultivated area with a production of 10.64 million tonnes of variety of
horticultural products. Area under fruits is 2.99 lakhs ha, vegetables 2.43 lakhs ha, plantation
and spices 10.19 lakhs ha and flowers 0.20 lakhs ha. Mango, banana, grapes,
pomegranates, onion, potato, tomato and chilies occupy larger areas while cashew, coconut,
coffee and tea are the major plantation crops grown in the State. Concentration of single
crops like banana, grapes, mango, pomegranate, potato, cashewnuts, coconuts, arecanuts is
observed in specific areas.
The average annual growth in respect of all horticulture crops is estimated at 4.40 per
cent while the production is growing at 5.20 per cent annually indicating productivity
improvements due to the production of high yielding varieties and use of improved
technology. The State has one of the best production tracts for Chillies, Onion, Tamarind,
and Coriander and Betel vine. During the last 10 years area under flowers has doubled. Fig 1: Location
map of the study area Table 3.1. Karnataka at a glance
Sl no Particulars Unit Number
General features
1 Total area Sq. kms 191791
2 Number of districts no's 29
3 Number of sub districts no's 176
4 Number of towns no's 270
5 Number of villages no's 29406
6 Number of households no's 10401918
Demographic features
1 Population no's 52850562
a. Males no's 26898918
b. Females no's 25951644
2 Decadal growth rate Percent 17.51
3 Sex ratio no's 965
4 Literacy rate (total) Percent 66.6
a. Males Percent 76.1
b. Females Percent 56.9
Source: Directorate of Economics and Statistics (2006-07) 3.2 Organization and Working of Export
Promoting Industry in
Karnataka
The state of Karnataka has been one of the pioneer states in exporting agriculture
and horticulture commodities in the country. A number of export promotion boards are
working in Karnataka for the promotion of agriculture and horticulture produce. Some of them
are Visveshvaraya Industrial Trade Center (VITC), a registered society functioning under the
Directorate of Industries and Commerce, is at present, the Nodal Agency for promotion of
exports of all products from the State. VITC is regularly conducting seminars, workshops and
training programmes related to exports, organizing or participating in Trade Fairs or
Exhibitions both at the National and International levels, sponsoring Trade Delegations
abroad, counseling exporters resolving grievances of exporters etc., and is working in close
co-operation with Export Promotion Councils or Commodity Boards, Customs and other
related Central and State Government Departments or Organizations to promote exports
from the State. It is proposed to restructure VITC as Export Promotion Board of Karnataka
which shall be the Nodal Agency to guide and provide assistance to exporters as well
as facilitate in obtaining clearances from regulatory departments and resolving operational
problems of exporters in Karnataka. In addition to all these committees Karnataka State had
brought out an agricultural policy in 1995. Several recommendations were made for the
allround development of agricultural sector which includes horticulture and floriculture. One of
the recommendations was to establish an organisation for promoting exports. Accordingly
Karnataka State Agricultural Produce Processing and Export Corporation Limited (KAPPEC)
was established on 22nd April 1996.
3.3 Functions of KAPPEC
1. Encouraging budding entrepreneurs to take up exports by guiding them the procedures,
formalities, market information like demand and supply position for export of potential
commodities.
2. Conducting seminars or symposium in the growing areas to create awareness among the
farming community about the need to grow export quality produce steps to be taken on
pre and post harvest techniques and publication of literatures in this regard.
3. Supply of good quality inputs.
4. Participating in international exhibitions to promote the export of Karnataka products.
5. Encouraging research activities on the export potential crops to enhance the quality,
productivity and production as per international standards.
6. Conducting periodical meetings with the exporters in order to address their greivances.
Also interaction with all the concerned stakeholders like exporters processors, bankers,
Government agencies, customs authorities, growers, research agencies etc., to
understand their difficulties and try to address them in the best interest of the industry and
growers in particular and State as a whole.
7. Getting the Agri Export Zone (AEZ) sanctioned for the export potential crops in order to
give special emphasis to boost the export of such crops. Example Bangalore rose onion,
Gherkins, flowers etc.
8. Encouraging joint venture equity participation for the development of infrastructure for
exports.
3.4 The Karnataka State Agricultural Produce Processing and
Export Corporation Limited (KAPPEC)
As per the recommendations of the Agriculture Policy of the state to develop and
promote the production, processing and export of agriculture, horticulture and floriculture
products, government has established Karnataka State Agricultural Produce Processing and
Export Corporation Limited (KAPPEC) on 22
nd
April 1996.The main aim of the KAPPEC is to
develop and promote the export of agricultural, horticultural and floricultural products. Since inception
till 31-01-2008, KAPPEC has handled about 3, 07,029 metric tonnes of agricultural
and horticultural commodities valued at Rs 48,739 lakhs. In addition to grapes, KAPPEC has
also exported Mangoes, Pomegranates, Drumstick, Watermelon, Red split lentils, Niger
seeds, Menthe seeds, Coconuts, Onions, Potato, Chillies, Garlic, Coriander, and Turmeric to
USA, U.K., Singapore, Srilanka, Malaysia, Middle-East, Turkey, Australia, Netherlands,
Mexico, Brazil etc.
3.4.1 Investment
The authorised share capital of the Corporation is Rs 500 lakhs. So far the state
government has released Rs 75 lakhs out of which Rs 50 lakhs as share capital and Rs 25
lakhs as grant. In addition to this the Government has released an amount of Rs 10 crore in
the budget for the creation of post harvest infrastructure facilities in the state based on the
potential in a phased manner in order to boost the export of agriculture and horticulture
commodities from the State. The Government of Karnataka and Government of India are
eligible for investment.
3.4.2 The Structure of the Board
The Board of Karnataka State Agricultural Produce Processing and Export
Corporation Limited has three directors, representative of the Government of Karnataka. The
Board is headed by Chairman, Honourable Minister of Agriculture.
3.4.3 Organisational Structure
3.4.3.1 Managing Director: Managing Director being the Chief Executive of the company, has
the overall authority/powers to run the day to day affairs of the organization subject to the
superintendence and control by the board.
3.4.3.2 General Manager: The general manager is the second line officer supporting the
Managing Director in decision making process besides co-ordinating various activities of the
corporation.
3.4.3.3 Assistant Finance Manager: Assistant Finance Manager duties generally cover book
keeping and finalization of accounts and general administration matters of the corporation.
3.4.3.4 Field Officer: To look after the field level activities of procurement, grading, packing
and export of agri and horticulture commodities.
The supporting staff assists the top level management in smooth carrying out of the
business.
3.4.4 Objectives of KAPPEC
1) To develop and promote the production, processing and export of agriculture, horticulture
and floriculture products.
2) To identify the modern technology for increasing the productivity, production, processing
and storage of these commodities and to implement the same in the state.
3) To create post-harvest infrastructure facilities for the development and export of
agricultural products (including horticulture and floriculture) and also to promote the
private participation in this sector.
4) To establish processing units by KAPPEC or with joint venture participation with private
entrepreneurs.
5) To supply agricultural inputs or technology required by farming community.
6) To undertake market research about the export quality products and disseminate the
information to both the exporters and growers.
7) To conduct seminars, meetings involving farmers, scientists, bankers and other related
parties to create awareness among them and also to educate them about the potentiality
of agri exports. Fig 2: Organizational structure of KAPPEC 8) To organise exhibitions, buyer seller meets,
participate in domestic as well as overseas
exhibitions, study tours abroad involving farmers to create awareness in them about the
technologies adopted by their counterparts to increase both production and productivity.
To undertake market research about the export quality products and disseminate the
information to both the exporters and the growers.
3.4.5 Achievements
1) KAPPEC has been designated as the One Star export House of the Govt.of India for
export performance in agriculture or horticulture commodities.
2) KAPPEC has been appointed as one of the canalizing agency for export of all varieties of
Onions from the country.
3) KAPPEC is the nodal agency for the implementation of AEZs in Karnataka.
4) KAPPEC has been awarded with the Silver Trophy and a Citation for the best
performing AEZ in the country by Govt.of India and Silver Trophy and a Citation for the
overall export performance during the years 1996-2000 from Government of Karnataka.
5) KAPPEC provided all the necessary facilities and support for the activities of WTO CELL
established by the Govt.of Karnataka. This cell has studied the impact of WTO regime on
Karnatakas agriculture and horticulture and submitted its report to the Honorable Chief
Minister of Karnataka. Karnataka was the first State in the country to establish an
exclusive cell on WTO and prepared a report on Impact of WTO Regime. This report of
the WTO cell was circulated to all the Honorable Members of both houses of Parliament,
Govt.of India and Honorable Members of the State Legislative Assembly and Council.
This report became a guide to Government of India for further discussions and
negotiations with WTO in various forums.
6) KAPPEC has signed an MOU with the University of Agricultural Sciences, Bangalore for
development of high yielding lustrous and bold seeded varieties with high oil content in
Niger seed. The financial implication of this research project is Rupees seven lakhs.
KAPPEC has sanctioned funds for this project from its own resources.
7) KAPPEC is purchasing good quality variety of Bangalore Rose Onion seeds from the
National Horticultural Research and Development Foundation, Nasik and distributing to
farmers of the state directly and also through the Department of Horticulture.
8) KAPPEC is helping budding export entrepreneurs by providing them proper guidelines
and advice in order to increase exports of agriculture and horticulture commodities from
the state.
9) In order to encourage the floriculture industry, KAPPEC has participated in the equity in
International Flower Auction center Bangalore Ltd., promoted by Karnataka Agro
Industries Corporation Ltd., Bangalore.
10) KAPPEC has successfully exported Thompson seedless Grapes, Sharada seedless
Grapes and Pomegranates to Europe and Russia from Bijapur and paved the way for
boosting export of agriculture and horticulture commodities from the area.
11) In order to give a boost for horticulture exports from Bijapur and surrounding areas,
KAPPEC has advanced an interest free refundable soft loan of Rs 11.90 lakhs to the
Bijapur District Grape Growers Processing and Marketing Co-operation Society Ltd.,
Bijapur for modernizing their existing pre-cooling and cold storage facility and also to
create additional pre-cooling unit to facilitate exports.
3.5 Nature and Sources of Data
Secondary data was used to evaluate the objevitves of the study. The data on several
aspects of KAPPEC were collected from different sources. The data relating to the financial
aspects of the KAPPEC were abstracted from the balance sheet, profit and loss account,
receipts and payment were abstracted from the annual reports and records of the KAPPEC
for the periods of ten years i.e. from 1997-98 to 2006-07. Further the opinion of managing
directors and general manager were also sought to identity the constraints in the working of
KAPPEC. Though KAPPEC started in 1996-97 and did benefits and had some values for selected
indicators, they were negligible compared to later years values. Hence, the value for
selected indicators for the first years was not considered for analysis.
3.6 Analytical Technique Employed
The data collected from the secondary sources were analysed in multiple stages. The
data were subjected to statistical analysis through the following techniques.
1) Tabular analysis
2) Ratio analysis
3) Growth rate analysis
4) Principle component analysis
5) Index method.
3.6.1 Tabular Analysis
Tabular presentation was employed to study the performance of the KAPPEC in
terms of its financial indicators and different activities. This method of presentation has also
been used in analyzing the constraints the KAPPEC. Simple statistical measures or tools like
average, percentage and ratios have been used in the study.
3.6.2 Ratio Analysis
Financial ratio analysis was used in the study to evaluate the business performance
of KAPPEC.
The purpose of ratio analysis was to optimize performance and to facilitate
comparison over time of an industry. In this study the following groups of ratio were
employed:
1. Structural or Solvency ratio,
2. Liquidity ratio,
3. Profitability ratio,
4. Test of strength
5. Test of efficiency
3.6.2.1 Solvency or Structural Ratio
The medium term and long term solvency position of the institution was assessed by
these ratios. These ratios indicate owners involvement in the total resources and provides
basis for measuring leverage ratio. The various ratios employed were as follows.
3.6.2.1.1 Total liability to owned funds
This ratio was obtained as given below,
Total liabilities
Total liability to owned funds = ------------------
Owned funds
The total liability includes paid up share capital, reserves and surplus, deferred tax,
liabilities, trade dues and other current liabilities. And then item such as funds, net profit,
reserves and surplus were included under owned funds of the corporation. The inclusion of
these items was in conformity with the suggestions made by the all Indian Rural Credit
Review Committee (1969).
This ratio gives us an estimate of the amount of money the corporation owned to its
creditors in relations to the amount of money invested in the corporation every year. 3.6.2.1.2 Fixed
assets to owned funds
This ratio is computed using the equations given below.
Fixed assets
Fixed assets to owned funds = ----------------
Owned funds
Fixed assets include land, buildings, plant and machinery, computer and peripherals,
furniture and fixture, office equipment and vehicle- cars. These fixed assets of the corporation
were fairly permanent and of atmost importance to a growing business entity. The owned
funds of the corporation include the item as explained earlier.
3.6.2.1.3 Debt-Equity Ratio
This ratio compares the owners stake in the business with outside term liabilities. This
ratio is also called as leverage. Lower value of the ratio indicates that the leverage effect will
be restricted to the minor role of debt and the major capital being equity, the institution is
supposed to be trading on thick equity and when the ratio is high, it signifies dominant
leverage effect and the major capital being the borrowed capital. The equity capital plays
minor role indicating thin equity on which the institution is functioning.
Long term liabilities
Debt equity ratio = --------------------------
Net worth
In the above ratio the debt represents only long term liabilities which include paid up
share capital, reserves and surplus , while equity refers to the net worth after deducting
intangible assets.Net worth include statutory reserves, revenue and other reserves.
3.6.2.2 Liquidity Ratio
Liquidity provides a measure of the institutions ability to meet its current obligations.
Since liquidity is basic to continuous operation, it was found necessary to examine the degree
of liquidity of the organization and to ascertain its ability in meeting the current financial
obligations.
3.6.2.2.1 Current Ratio
This ratio measures the degree of liquidity of the company in the short term .It
indicates whether the current assets are sufficient to repay the current liabilities.
Current assets
Current ratio = --------------------
Current liabilities
The current assets included in this study are interest accrued on deposits,
inventories, Sundry debtors, cash and bank balances, loan and advances, deposits, other
liabilities.
Current liabilities includes dues to SSI undertaking, other liabilities, and other
provision and liabilities.
A very high current ratio is not desirable as it would mean less efficient use of funds.
Similarly a low current ratio would mean too much of strain on working capital resources. It is
generally believed that a good current ratio should be between 1.5:1 and 2:1.Generally higher
the value of this ratio, better would be the margin and financial solvency of the company. 3.6.2.2.2
Liquid Assets to Total Assets:
This ratio was computed by dividing liquid assets with the total assets.
Liquid assets
Liquid assets to total assets = -------------------
Total assets
The liquid assets consist of current assets like cash on hand and current bank
accounts which can be readily withdrawn. The total assets include bank balances,
investments, advances and fixed assets like land, building, machinery and equipment,
vehicles, etc.
3.6.2.2.3 Acid Test Ratio
This ratio is called quick ratio or near money ratio. This represents the ratio between
quick assets (current assets less inventory) and the quick liabilities.
Quick assets
Acid test ratio = ------------------
Quick liabilities
Quick assets include cash in hand; cash at bank. Quick liabilities include interest
accrued, other provision and interest paid.
The ratio indicates the extent to which the capital is financing the current assets
which carries a low degree of liquidity.
3.6.2.3 Profitability Ratios
These ratios can be used to asses the financial status and overall efficiency of the
institution. These ratios were used to compare the returns over the investments. The following
were the important ratios.
3.6.2.3.1 Net Profit to Total Assets Ratio
This ratio indicates the ratio of profit on the total assets of the institution and their
employment. The ratio was computed as follows.
Net profits
Net Profit to Total Assets Ratio = --------------------
Total assets
An increasing trend over the years indicates the overall efficiency of the institution.
3.6.2.3.2 Net Profit to Net worth Ratio
Net worth means present value of assets minus all liabilities. The ratio of net profit to
net worth shows whether profitability is being maintained.
Net profit
Net profit to Net worth ratio = --------------
Net worth
A decline in the ratio should be a cause of inquiry. 3.6.2.3.3 Net Profit to Fixed Assets
The ratio indicates whether the fixed assets are being used properly. A decline in the
ratio shows either the assets are being kept idle or that business conditions are bad.
Net profits
Net profit to fixed assets = ----------------
Fixed assets
The lower ratio indicate that the adequate depreciation was not written off so that the
assets were not worth what they are stated to be. Further, it may mean that the assets were
such that they may exist for a short period. The fixed assets consisted of land, building,
furniture and fixtures and depreciation on assets.
3.6.2.4 Tests of Strength
The following measures were used to measure the real worth of KAPPEC.
3.6.2.4.1 Net Worth
It indicates what the business owes to the owners of business. It measures the
excess of assets over liabilities. A positive difference of higher magnitude indicates the
soundness of the institution.
Net Worth = Total assets Total liabilities
3.6.2.4.2 Net Capital Ratio
This ratio indicates the degree of liquidity of the business in the longrun. It measures
the degree of availability of assets to pay off the long term liabilities.
Total assets
Net capital ratio = -----------------
Total liabilities
Higher the net capital ratio, greater would be the margin of safety against decline in
the prices of major assets of the institution. This ratio would throw light on the real financial
strength of the institution.
3.6.2.5 Efficiency Ratio
Following two ratios were adapted to asses the efficiency of the institution and they
were.
3.6.2.5.1 Gross Ratio
This ratio helps to ascertain how efficiently the gross income of the institution was
utilized and the ratio was computed as follows.
Total expanses
Gross ratio = --------------------- X 100
Gross income
The total expanses include both the interest expenses and non-interest expenses. In
the same manner, the Gross income of the organization comprises of both interest income
and non-interest income. 3.6.2.5.2 Operating Ratio
This ratio indicates the proportion of gross income being used for the proportion of
Gross income being used for meeting the operating expenses.
Operating expenses
Operating ratio = --------------------------- X 100
Gross Income
The operating expanses include cost of sale, cold stroge expanses, selling and
distribution expanses, pre-operating expanses. An increase in the ratio indicates a decline in
the efficiency of the institution.
3.7 Compound Growth Rates
The compound growth rate was estimated for the various financial indicators of the
corporation which were considered for the performance study. Also the growth trend of
important commodities handled by KAPPEC and its different markets were analyzed.
An exponential function of the following type was employed to estimate the growth
rates.
Y = ab
t
Where,
Y= Indicator or variable
a = constant
b = Regression coefficient = (1- r / 100)
(Rate of change in Y per unit of time)
t = Years (time)
The financial indicators were Total liabilities, Total assets, Current assets, Liquid
assets, Net profit, Expenses, Operating expenses, Gross income , Net worth and export value
of commodities and growth trend was calculated for important commodities handled by
KAPPEC and markets like Domestic market, Export market, Import market in terms of vale
and quantity.
Principal components are a set of new variables which are mutually uncorrelated and
exhibit maximum variance, which are the linear combinations of Xs.
P1=a11X1+a12X2+. + a1k Xk

P2=a21X1+a22X2+. + a2k Xk
.
PK=aK1X1+aK2X2+. + aKk Xk
The method of principal components has wide applications in the social and biological
sciences. In econometrics it is appropriate in two cases
1. When the number of explanatory variables to be included in the model is very large
relative to sample size. 2. When K is greater than n, the function cannot be estimated. Even with large
sample if
K is greater, the computation becomes difficult and degrees of freedom to check the
reliability would be low. This method is suggested as a solution to the problem of
multicollinearity.
The method is also being used in the field of index numbers in order to assess the
reliability of such indexes.
The method of principal components is a special case of the more general method of
Factor Analysis. The aim of principal component is the construction out of a set of variables
Xjs *j=1k of new variables (Pi)+ called principle components which are the linear
combinations of Xs.
P1=a11X1+a12X2+. + a1k Xk

P2=a21X1+a22X2+. + a2k Xk
------------------------------------------------------------------
PK=aK1X1+aK2X2+. + aKk Xk

Principal component can be carried by using,
1. Original value of Xjs.
2. Their deviations from means. xj=Xj-Xj
3. Standard variables, Zj= (Xj-Xj)/ SXj
In the study, the variables which had factor loadings more than 0.7 were selected and
those with less than 0.7 were deleted.
3.9 Index method
The data on different constraints faced by KAPPEC was collected by interviewing
officials of KAPPEC, and was analysed using a three point scoring method as given below.
Details Score given
Common 3
Moderate 2
Least common 1
Mean score are calculated by using the formula,
(N1*3+ N2 *2 + N3 *1 )/N.
where,
N = N1 + N2 +N3
N1 = Number of respondents who said the constraints was common.
N2 = Number of respondents who said the constraints was moderate.
N3 = Number of respondents who said the constraints was least common.
The opinion index was calculated based on the scores by using the formula.
Obtained scores of respondents
------------------------------------------------ X 100
Maximum obtainable score 4. RESULTS
This chapter is devoted to the presentation of the detailed results obtained in the
present study. The results of this study are presented under the following heads.
4.6 Documentation
4.1 Basic Information of KAPPEC
The Karnataka Agricultural Produce Processing and Export Corporation Limited., was
established in the year 1996-97.It started handling agricultural and horticultural produce from
initial year i.e. in 1996-97,but it started exporting of the produce from 1997-98.The details of
the financial parameters of the KAPPEC are presented in the Table 4.1.
Over the years amount of share capital remained constant. The total liability of the
KAPPEC has been increasing over the years. In 1997-98 it was Rs 181.63 lakhs and
increased to Rs 1921.56 lakhs in 2006-07.The profit of the KAPPEC have substantially
increased over the years baring some years in between, registering peak of Rs 205.00 lakh in
2001-02.
KAPPEC has made an equally good progress in terms of increasing its assets both
total assets and current assets. The total assets and current assets have increased from Rs
180.36 lakhs and Rs 173.91 lakhs during 1997-98 to Rs 1984.76 lakhs and Rs1709.70 lakhs
in 2006-07 respectively. Many of the variables exhibited the similar trend.
4.1.1 Growth Rate of Financial Indicators
The compound growth achieved with respect to financial attributes were calculated
and are presented in the Table 4.2.
The growth in operating expenses, total expenses, quick assets and gross income
were found to be negative. However, the total expenses and gross income indicators were
found to be non-significant. Further, the variables like export value of commodities, liabilities,
assets, current assets, net worth and profit were found to be positive.
4.1.2 Projection for Selected Financial Indicators
Projections of selected financial indicators of KAPPEC are given in the Table 4.10.
The total liability would be around Rs 1974.07 lakhs in 2012 it may increase to Rs 2630.61
lakhs by 2017. The total assets and current assets would be Rs 2034.20 lakhs and Rs
1814.36 lakhs in 2012 by 2017 it may increased to Rs 2710.90 lakhs and 2402.16 lakhs.
The liquid assets would be Rs 4.03 lakhs in 2012 by 2017 they may decreased to Rs
0.95 lakhs.
The projection of total expanses of the KAPPEC would be Rs 249.71 lakhs in 2012
and may decrease to Rs 52.83 lakhs by 2017. Table 4.1: Financial indicators of KAPPEC
(In lakhs)
Year
Export Value
of
commodities)
Share
Capital
Operating
Expenses
Total
Expenses
Total
Liabilities
Total Assets Profit
Gross
Income
Current
Assets
Liquid
Assets
1997-98 45.86 50.00 163.10 181.58 181.63 180.36 0.38 193.91 173.91 77.62
1998-99 1953.74 50.00 2123.82 2339.68 342.48 347.05 83.86 2423.91 339.62 36.24
1999-00 4123.99 50.00 2191.59 2586.69 486.26 502.89 122.22 2770.35 491.64 34.24
2000-01 578.57 50.00 1572.46 1625.20 467.46 490.22 92.00 1717.49 471.12 35.32
2001-02 5820.04 50.00 1364.28 1419.21 663.27 697.87 205.00 1624.44 668.95 16.24
2002-03 4868.89 50.00 727.68 785.09 840.70 860.38 106.00 891.15 830.38 25.49
2003-04 6350.09 50.00 520.97 581.85 709.05 728.39 27.00 608.88 693.23 5.32
2004-05 3168.89 50.00 245.38 289.59 822.79 845.72 21.00 312.46 798.11 21.29
2005-06 4215.06 50.00 624.18 669.05 831.28 847.09 28.00 697.03 798.90 42.80
2006-07 4731.63 50.00 1309.35 1370.68 1921.56 1984.76 46.30 1416.98 1709.70 6.46 4.2 Financial
Analysis of KAPPEC
The financial ratio represents the relationship between two accounting figures
expressed mathematically. In financial analysis, a ratio is used as an index or yardstick for
evaluating the financial performance or status of institution against certain standards. Ratio
analysis technique is popular in the accounting system of enterprises in general and helps in
spotting trends towards better or poor performance. It is helpful in finding significant
deviations from an average or pre-determined standard. The financial ratios were relevant to
KAPPEC are grouped under different categories namely Solvency ratio, Liquidity ratios, Tests
of strength, Profitability ratios and Efficiency ratios.
4.2.1 Test of Solvency
Solvency of a business refers to the ability of the institution to meet its obligations as
and when they fall due Thus, it is a measure of financial strength of the organization. The
solvency of the organization was assessed by using the ratios of total liabilities to owned
funds, fixed assets to owned funds and debt equity ratio. These ratios were presented in
Table 4.3.
4.2.1.1 Total liability to owned funds
This ratio is fluctuating over the years. In the initial year i.e. in 1997-98 it was 0.87
and increased to 0.91 in 2006-07 .The average ratio for the period of study was 0.70.
4.2.1.2 Fixed assets to owned fund
This ratio was increasing over the years except some years in between. In 1997-98
the ratio was 0.03 and remained same in 2004-05 and 2005-06. In 2006-07 the ratio was
0.10.The average ratio for the period of study was 0.04
4.2.1.3 Debt equity ratio
This ratio compares the owners stake in the business with outside term liabilities.
This ratio was fluctuated over the years. In the initial year i.e. in 1997-98 it was 0.65. In 1999-
2000 it was 0.11 and increased to 0.65 in 2005-06. But in 2006-07 the ratio decreased to
0.35.This shows that the KAPPEC was slowly building up equity in relation to its long term
obligations. Overall, the ratio was 0.34.
4.2.2 Liquidity Ratio
This ratio was used to measure the ability of the KAPPEC to meet its current
obligations, since liquidity is basic to continuous operation. The liquidity of the corporation
was assessed by using the ratios of liquid assets to total assets, current ratio, acid test ratio
or quick ratio. These ratios were presented in Table 4.4.
4.2.2.1 Current ratio
The ratio of current assets to current liabilities is termed as current ratio. In the initial
year (1997-98) current ratio was 3.20 and in latter years it was fluctuated. In 2003-04 the ratio
was the highest of 4.83.In 2006-07 it became 1.50.The average for the study period was 3.21.
4.2.2.2 Liquid assets to total assets
The ratio of liquid assets to total assets shows the proportion of liquid assets in total
assets. The ratio was 0.42 in 1997-98.Next year it was decreased to 0.10. Since then it
deceased gradually barring a few years in between. In 2006-07 it was 0.003. The average for
the study period was 0.80.
4.2.2.3 Acid test ratio
Acid test ratio or quick ratio provides a better measure of liquidity than the current
ratio. In 1997-98 this ratio was 1.33.In later years this has shown a fluctuating trend, reaching
a peak during 1998-99 with a value of 3.39. In 2006-07 the ratio was 0.08.The average for the
study period was 0.70. Table 4.2. Growth Rates of Financial Indicators
** Significant at 5 per cent level of significance
* Significant at 10 per cent level of significance
SI
No
Financial Indicator Compound
Growth Rate
(%)
R
2
value t - value
1 Export value of commodities 37.71* 0.36 2.12
3 Operating expenses -16.47 0.06 -0.76
4 Total expenses -3.09 0.13 -1.09
5 Liabilities 21.07** 0.69 4.31
6 Total assets 21.27** 0.68 4.27
7 Current assets 20.19** 0.73 4.66
8 Quick assets -16.02* 0.41 -2.39
9 Gross income -6.50 0.16 -1.25
10 Net worth 3.74 0.03 -0.49
11 Profit 14.54 0.05 -0.67 Table 4.10: Projection for Financial Indicators
SI No
Financial Indicator
Projection value for
2012
(Rs. in lakhs
Projection value for
2017
(Rs. in lakhs)
1 Export value of commodities 7592.32 9701.08
2 Share capital 50.00 50.00
3 Operating expenses 295.30 46.15
4 Total expenses 249.71 52.83
5 Liabilities 1974.07 2630.61
6 Total assets 2034.20 2710.90
7 Current assets 1814.36 2402.16
8[ Profit 28.39 4.82
9 Gross income 262.16 50.90
11 Liquid assets 4.03 0.95 Table 4.3: Test of Solvency
RATIOS
Years
Total liability to
owned funds
Fixed assets to
owned funds
Debt equity ratio
1997-98 0.87 0.03 0.65
1998-99 0.96 0.02 0.08
1999-00 0.73 0.01 0.11
2000-01 0.69 0.02 0.17
2001-02 0.67 0.02 0.22
2002-03 0.74 0.02 0.38
2003-04 0.69 0.03 0.48
2004-05 0.71 0.04 0.65
2005-06 0.80 0.04 0.65
2006-07 0.91 0.10 0.35
Average 0.70 0.04 0.34 0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Ratios
1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Years
Total liability to owned funds Fixed assets to owned funds Debt equity ratio
Fig.3: Test of Solvency
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Ratios
1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Years
Current ratio Liquid assets Acid test ratio
Fig. 4: Liquidity ratio of KAPPEC 4.2.3 Tests of Profitability
The profitability of the corporation was assessed by using ratios like net profit to total
assets, net profits to net worth and net profits to fixed assets and were presented in the table
4.5.
4.2.3.1 Net profit to total assets
The ratio of net profit to total assets was 0.002 in 1997-98. In the later years this has
shown a fluctuating trend, reaching a peak during 2001-02 with a value of 0.29,then declined
to 0.12 in 2002-03.This indicates that profits over the assets increased from 1997-98 to 2001-
02 and declined later on. The rate of return on assets was 0.02 in 2007, indicate a poor profit
ratio. Average for the study period was 0.12.
4.2.3.2 Net profit to net worth
The ratio of net profit to networth was -0.30 in 1997-98.In later year this has shown a
fluctuating trend. It was high in 2002-03 with a value of 5.38.The profit over net worth
fluctuated over the years. In 2006-07 the ratio was 0.73.Average for the study period was
4.61.
4.2.3.3 Net profit to fixed assets
The ratio of net profit to fixed assets shows the average rate of return on fixed assets
over the years. The value was 0.06 in 1997-98.It has increased to 11.28 in 1998-99 and
showed fluctuations upto 2005-06. In 2006-07 the ratio was 0.17.Average for the study period
was 3.96.
4.2.4 Efficiency Ratio
The efficiency of the corporation was assessed by using the ratios like gross ratio and
operating ratio were presented in the table 4.6.
4.2.4.1 Gross ratio
This ratio was highly fluctuating over the years. In the initial year i.e., 1997-98 it was
94 percent and in later years it was fluctuated. In 2006-07 it was 97. The average ratio for
whole period was 94
4.2.4.2 Operating ratio
This ratio was highly fluctuated over the years. In 1997-98 it was 94 percent. Later
years it showed fluctuating trend. In 2006-07 ratio was 92 percent. The average ratio for the
study period was 72.
4.2.5 Tests of Strength
Strength of the corporation was assessed by using the ratios like net worth ratio and
net capital ratio were presented in the Table 4.7.
4.2.5.1 Net worth
The networth of the corporation increased considerably over the years. In 1997-98 it
was Rs -1.26 lakh. It increased to Rs 63.20 lakh in 2006-07.The average for whole study was
Rs 21.83 lakh.
4.2.5.2 Net capital ratio
This ratio was more than one in all the years except 1997-98. The ratio was the
higher of 1.05 in 2001-02.The average for whole period was 1.02.
Growth rates of important commodities handled by KAPPEC in terms of quantity and
market like domestic, export, import markets of KAPPEC in terms of quantity and value were
computed to know the growth trend of KAPPEC over the years and were presented in the
Table 4.8 and 4.9. Table 4.5. Test of Profitability
RATIOS
Years
Net profit to total
assets
Net profit to net
worth
Net profit to fixed
assets
1997-98 0.002 -0.30 0.06
1998-99 0.24 18.32 11.28
1999-00 0.24 7.34 10.86
2000-01 0.18 4.04 4.82
2001-02 0.29 5.29 7.09
2002-03 0.12 5.38 3.53
2003-04 0.03 1.39 0.77
2004-05 0.02 0.91 0.44
2005-06 0.03 1.77 0.58
2006-07 0.02 0.73 0.17
Average 0.12 4.61 3.96
-2
0
2
4
6
8
10
12
14
16
18
20
Ratios
1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Years
Net profit to total assets Net profit to net worth Net profit to fixed assets
Fig. 5.Test of Profitability Table 4.6. Test of Efficiency
RATIOS
Years
Gross ratio Operating ratio
1997-98 94 94
1998-99 97 87
1999-00 93 56
2000-01 95 78
2001-02 87 44
2002-03 88 60
2003-04 96 40
2004-05 93 78
2005-06 96 89
2006-07 97 92
Average 94 72
0
10
20
30
40
50
60
70
80
90
100
Ratios
1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Years
Gross ratio Operating ratio
Fig. 6.Test of Efficiency Table 4.7. Tests of Strength
-10
0
10
20
30
40
50
60
70
Ratios
1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Years
Net worth (Rs. lakhs) Net capital ratio
Fig. 7.Tests of Strength
RATIOS
Years
Net worth (Rs. lakhs) Net capital ratio
1997-98 -1.26 0.99
1998-99 4.57 1.01
1999-00 16.63 1.03
2000-01 22.76 1.04
2001-02 34.60 1.05
2002-03 19.68 1.02
2003-04 1.93 1.02
2004-05 22.93 1.02
2005-06 15.81 1.01
2006-07 63.20 1.03
Average 21.83 1.02 4.3.1 Growth trend of important commodities handled by KAPPEC
Growth rate of Mango in both domestic and export markets were negative i.e. -13.40
per cent and -4.39 per cent respectively. Export of Onion growth rate was 69.40 per cent,
Pomegranate growth rate was 71.56 per cent and export of Niger seeds rate was negative i.e.
-66.08. The import growth rate of cloves was -35.03 per cent.
4.3.2 Growth Trend of KAPPEC Markets
Growth rate of KAPPEC in domestic market in terms of quantity showing decreasing
trend i.e. of 61.09 percent and growth rate in value was also decreasing over the years i.e.
of -45.58 percent. Growth rate of export market in terms of quantity was 31.18 percent and
growth in value was 32.06 per cent. This indicates that KAPPEC export market was
increasing over the years. Import market trend showing negative growth for both quantity and
value i.e. of about 58.88 percent and -55.43 percent respectively. This shows that import
market of KAPPEC in terms of quantity and value has been decreasing over the years.
However, growth in value of domestic market and export quantity were found to be significant.
4.3.3 Projection for KAPPEC export Market
Projections of KAPPEC export market are given in the table 4.11. The export market
in terms of quantity and value would be 52459.37 metric tonnes and Rs 7213.94 lakhs in
2012 and 66530.25 metric tones and Rs 8849.46 lakhs respectively by 2017.
4.4 Principal Component Analysis : Identification of Indicators
Influencing the Performance of KAPPEC
Principal component analysis technique was used to identify the financial indicators
closely associated with the performance of the KAPPEC. The analysis was done on export
value of commodities, operating expenses, expenses, liabilities, total assets, profit, gross
income, net worth, current assets, and liquid assets. Two principal components were selected
for detailed analysis.
It was apparent from the Table 4.12, that seven variables were assumed to have had
their influence on the performance of the KAPPEC. The first two components accounted for
79.75 percent. Of the total variation 43.45 percent was explained by the first component itself,
36.49 percent by the second component. The variables extracted by the first component were
liabilities, total assets, current assets, liquid assets. The variable extracted by the second
component was expenses, gross income and net worth.
4.5 Documentation
Exporting activity not only includes only shipment of materials, but also includes
several commercial and regulatory procedures. These procedures involve considerable
documentation which was refered to be the most important tedious job for a fresher to export
process. Export documentation work constitutes a heavy change on our export activity. It is
complex and cumbersome. This is partly due to the nature of export trade which includes a
number of intermediary organizations and authorities at different stages of export activity
between the seller and buyer. All these in turn generate a lot of paper work and procedure
formation.
4.5.1 Importance of Document
The method of operation of document was susceptible to errors and discrepancies
which even though minor, causes delays at different stages in the processing of documents,
costly hold up of consignment at check points and terminals, and ultimately in the realization
of export proceeds. Thus the process of documentation needs to be carefully handled.
4.5.2 Role Players
It could be seen from Table 4.13 shows the role players in the process of
documentation are many. KAPPEC plays the role of the exporter and CWE acts as an
importer. Trupthi international is the supplier for the exporter and Indus bank act as the bank
for exporter and Bank of Ceylon acts as the bank for importers. Government of India port
health organization issues the health certificate for the goods. Table 4.8. Growth trend of important
commodities handled by KAPPEC
** Significant at 1 per cent
* Significant at 10 per cent
SI No
Commodities
Compound
growth rate
R
2
value t value
1) Domestic market
a Mango -13.40* 0.37 -2.18
b Potato -41.01** 0.64 -3.83
2) Export market
a Mango -4.39 0.005 -0.21
b. Potato -12.70 0.24 -1.61
c. Onion 69.40** 0.71 4.47
d. Pomegranate 71.56 0.08 0.85
e. Niger seeds -66.08 0.28 -1.78
3) Import market
a. Cloves -35.03* 0.35 -2.08 Table 4.9. Growth Trend of KAPPEC Markets
* Significant at 10 per cent level of significance
Table 4.11. Projection for Export Marketing
SI No Markets
Compound
growth rate
R
2
value t value
1) Domestic Market
a Quantity -61.09 0.13 -1.11
b Value -45.58* 0.32 -1.93
2) Export
a Quantity 31.18* 0.51 2.88
b Value 32.06 0.26 1.68
3) Import
a Quantity -58.88 0.13 -1.08
b Value -55.43 0.21 -1.44
SI No Export market
Projection value
for 2012
Projection value
for 2017
1
Quantity (in metric tonnes)
52459.37 66530.25
2
Value ( Rs in lakhs)
7213.94 8849.46 Table 4.12. Principal Component Analysis
Components
Attributes
1 2
Export value of commodities 0.770 0.146
Operating expenses -0.669 0.337
Expanses -0.140 0.967
Liabilities 0.913 -0.005
Total assets 0.914 0.002
Profit 0.050 0.747
Gross income -0.139 0.981
Net worth 0.100 0.984
Current assets 0.933 0.000
Liquid assets -0.844 -0.300
Percent of variation 43.45 36.49
Cumulative percentage of variation 43.45 79.75 Table 4.13. Role Players in the Process of
Documentation
SL
NO.
PLAYERS ROLE PLAYED
1. KAPPEC Exporter
2. CWE Importer
3. Trupthi International Supplier for the exporter
4. Indus Bank Exporters bank
5. Bank of Ceylon Importers bank
6. V.Eskai Pilliai C and F agent of exporter
7. Stewart Surveyors and Asseors Pvt .Ltd. Surveyor assigned by exporter at the
port of loading(POL)
8. Indian Overseas Bank Importers bank
9. Romav Ltd., Carries
10. Moonlight Shipping Services Pvt. Ltd., Carries
11. Customs Authority Govt. Officials at POL
12. Indian Chamber of Commerce Certifying Indian origin
13. GOI Port Health Organization Issues health certificate
14. SCS Inspection Services Joint surveyor Table 4.14. Documentation Process for Export
SI NO DOCUMENTS
1. Tender enquiry from CWE to KAPPEC
2. Enquiry of KAPPEC with suppliers and quotation for the same
3. Quotation of KAPPEC to CWE through local agent at Importing country
4.
Confirmation letter from CWE to KAPPEC and request for performance
guarantee
5. Contract No. from CWE to KAPPEC for acceptance and signature.
6.
Performance guarantee by seller through both seller and buyers bank to
CWE.
7.
L/C from CWE to KAPPEC on receipt of performance guarantee from
KAPPEC.
8.
Confirmation to its supplier by KAPPEC to make arrangements for the
execution of the contract.
9.
Assigning Buyers surveyor (Stewart s. A.P.LTD.,) for the consignment from
CWE.
10. Movement of goods to Tuiticorin (POL)-grading and packing.
11.
Goods required documents for export
KAPPEC Invoices and packing list
Indian Chamber of Commerce and Industries - certificate of origin
Customs customs Challan
GOI ,port health organization Health certificate
Romav Ltd.,(carriers) - Bill of loading
Moonlight shipping services P.LTD., - Bill of loading
GOI Ministry of Agriculture Officials Phytosanitary
Certificate
12. Dispatch of material from POL.
13.
Submission of all documents by KAPPEC to its bank (Indus bank) and a copy
to importers for realizing materials at POD against bank guarantee.
14.
Indus bank negotiates the bills and credits the amount to KAPPEC provided
all documents submitted are as per L/C terms.
15.
Inspection of material at POD by SCS(Joint Surveyor appointed by both
importer and exporter and certificate of quality , weight, packing and condition
upon arrival and a copy sent to both CWE and KAPPEC.
16. KAPPEC credits to its suppliers.
17. Letter to CWE from KAPPEC for returning performance bond.
18. Return of performance bond to KAPPEC by CWE. Fig. 8. Flow chart of documentation process 4.5.3
Documentation Process for Export
The documents required for export are seen in the Table 4.14. Tender enquiry from
cooperative wholesale establishment (CWE) to KAPPEC was the first and for most document
which initiate the export process. The quotation from the supplier and exporter was prepared
based on the prices of the commodity prevailing in the local market. Confirmation letter was
sent to KAPPEC after analyzing all quotations. The importer assigns surveyors on behalf of
him at the port of credit. The health certificate issued by Government of India port of health
organization certifies that the goods being exported are fit for human consumption.
4.6 Constraints of KAPPEC through Index Method
The severity of constraints of KAPPEC through index method was shown in Table
4.15. From the table it was cleared that low financial assistance by the Government to
KAPPEC was one of the major problem faced by KAPPEC, which received an index score of
92.34, lack of postharvest infrastructure facility received an index of 90.00 and also low
productivity per unit area .However, unfavorable tax structure and non existence of organized
and strong domestic market were not severe problems of KAPPEC having an index score of
76.67.
Table 4.15: Constraints of KAPPEC through index method
Sl no. Problems Index scores
1. Low financial assistance 92.34
2. Low productivity per unit area 90.00
3. Post harvest infrastructural facilities 90.00
4. Comparative cost advantage and production efficiency
achieved by the traditional exports
87.20
5. Trade barriers against horticulture/ floriculture exports by
many countries
86.67
6. International prices are unpredictable 83.33
7. IPRs regime 83.33
8. Non-availability of quality produce for export and processing 83.33
9. High interest cost 80.00
10. Unfavorable tax structure 76.67
11. Non-existence of organized and strong domestic market 76.67 5. DISCUSSION
The results presented in the previous chapter are discussed in this chapter. The
discussions are presented under the following headings:
5.6 Documentation
It could be seen from Table 4.1 that the paid up share capital of the corporation was
constant over the years. This is because the contribution of share capital from the
Government depends on the policy of the Government. No favorable decisions were made by
the Government to enhance share capital of KAPPEC. Hence, it remained constant over the
years.
The assets position of the corporation improved considerably during the last ten
years. The assets position increased eleven times during the study period. The current
assets and liquid assets increased by 9.83 and 0.08 times in ten years. This reflected the
increase in the volume of business of the corporation.
The total liabilities also displayed a similar trend and it has increased by 10.57 times
in ten years.
The total operating expenses increased by 8.03 times from 1997-98 to 2006-07 and
total export value of the commodities registered 103.17 times increase from 1997-98 to 2006-
07 and as the volume of business increased, the total expenses and gross income also
increased to an extent of 7.50 and 7.30 times, respectively.
The profit earned by the corporation varied during the study period. It made the
highest profit of Rs. 205.00 lakhs in 2001-02. Profit increased by 121.84 times in ten years.
The foregoing discussion of the basic financial features of the KAPPEC revealed both
the dark and the bright aspects of the business and it can be concluded that the performance
of KAPPEC was satisfactory over the study period, except in some years. The performance of
the state level organization of this type had to be viewed from the point of discharging the
social responsibilities with respect to the export development as well as from the point of its
performance for its own survival. Further, the ratio analysis might give additional information
about the performance of KAPPEC.
5.1.1 Growth rates of KAPPEC
Compound growth rates were worked out in order to find out the annual growth and
its level of significance. It was worked out for ten performance variables of the institution like
paid up share capital ,Export value of commodities, Total assets, Current assets, Liquid
assets, Liabilities , Expenses, operating expenses, Gross income, net worth and Profit .
The export value of the commodities was significant at 10 per cent level of
significance for the overall period. While the Gross income, Net worth, Operating expenses
and total expenses revealed their non-significance in growth. Liabilities, Total assets, current
assets were significant at 5 per cent level of significance and quick assets were significant at
10 percent level of significance. The compound growth rates of current assets, total assets and quick
assets were
20.19, 21.27 and -16.02 per cent. Total assets and current assets were significant which
showed a good growth, but the liquid assets decreased over the years and it was also found
to be significant. Hence, KAPPEC has to take care in increasing its liquid assets.
The total liabilities also registered a high growth rate and were statistically significant
at 5 per cent level of significance. This was not a healthy sign for KAPPEC. This could be
considered as a weak point or spot in the growth and development of KAPPEC. But the
growth rate of total liabilities (21.07 per cent) was little less, than that of the total assets (21.27
per cent). Hence the organization was managing its financial position soundly.
The compound growth rates of gross income, profit and net worth were -6.50, 14.54
and 3.74 respectively, but these three were non significant.
The export value of commodities had registered a growth rate of 37.71 per cent,
which was maximum compared to the growth of other variables. Such a high growth rate was
due to the good establishment in the export market.
The overall growth rate of total expenditure and operating expenditure over all the
periods was -3.09 and -16.47 per cent and were found to be non-significant. This indicated
that the KAPPECs operating expenses and total expenses were decreasing over the years.
The above growth rates for the important variables revealed that the overall progress
of KAPPEC with respect to financial structure was satisfactory. There were, however, some
disparities in the growth rates.
5.1.2 Projections for selected financial indicators
Projections were worked out for selected financial variables of KAPPEC. The total
liabilities of the KAPPEC as projected, would be to the tune of Rs. 1974.07 lakhs in 2012 and
Rs. 2630.61 lakhs by 2017.
By 2012 and 2017, considering an increase in total assets; current assets would be
expected to increase in KAPPEC. The projection for this indicator would be Rs.
2034.20 lakhs and Rs. 1814.36 lakhs, respectively in 2012, and in 2017 it may increase to Rs.
2710.90 lakhs and 2402.16 lakhs, respectively. But liquid assets would be Rs. 4.03 lakhs in
2012 and Rs. 0.95 lakhs in 2017.
The projected figure for the gross income and profit would be Rs. 262.16 lakhs and
Rs. 28.39 lakhs in 2012. By 2017 it is expected to be Rs. 50.90 lakhs and Rs. 4.82 lakhs,
respectively. The total export value of commodities would reach a record figure of Rs.
7592.32 lakhs in 2012 and Rs. 9701.08 lakhs by 2017.
While total expenses and operating expenses would be Rs. 249.71 lakhs and Rs.
295.30 lakhs in 2012, these may decrease during 2017 to Rs. 52.83 lakhs and Rs. 46.15
lakhs, respectively. The projected values of operating expenses are decreasing over the
years.
The forgoing analysis revealed that though there is an increase in export value of the
commodities, but the magnitude was less. This led to a decline in operating and total
expenses. As result it may have an adverse affect on the gross income and thereby the profit.
The working of KAPPEC, especially the market information depends to a greater extent on
the Government directions and more over the limited funds and human resources to handle
the business.
The financial ratio represents the relationship between two accounting figures
expressed mathematically. In financial analysis, a ratio is used as an index or yardstick for
evaluating the financial performance or status of institution against certain standards.
5.2.1 Ratio analysis
The purpose of ratio analysis was to optimize the performance and to facilitate the
comparison overtime of an industry. In this study the following groups of ratio were employed,
they are, 5.2.1.1 Test of solvency
The medium term and long term solvency position of the institution was assessed by
these ratios. These ratios indicate owners involvement in the total resources and provided
basis for measuring leverage ratio. The various ratios employed were as follows.
5.2.1.1.1 Total Liabilities to Owned Funds Ratio
This ratio indicated the extent of debt on each rupee of the owned funds of KAPPEC.
Even though the prescribed norm is 3:1, the ratio varied from 0.87 to 0.91. This shows that
KAPPEC had used the external funds to the tune of 0.91 times the owned funds. This
indicated that the KAPPECs ability to cover its short term and long term obligations were
little bit worsened over the years. The overall ratio (0.70) was less than the prescribed norm.
This indicated the strong solvency position of the corporation.
5.2.1.1.2 Fixed Assets to Owned Funds
This ratio showed an increasing trend over the years except in the initial years. This
indicated that the KAPPEC tended to increase its fixed assets during the period of the study.
The construction activities like cold chain facility in Bijapur and Kustagi; and food processing
in Hubli were largely responsible for the relatively higher ratio of fixed assets to owned funds
of the KAPPEC. The grant received from the Government and other institutions were used in
creating infrastructural facilities and the same were treated as owned funds.
5.2.1.1.3 Debt- equity ratio
This ratio showed the fluctuating trend during the study period. It was found to be less
than one in all the years. In the initial year the ratio was 0.65 because the equity of the
corporation was low. After this year the ratio increased upto 2005-2006 (0.65) due to increase
in long term liabilities of the corporation. In the next year, i.e. 2006-07, the ratio decreased to
0.35, indicating that the long term liabilities of the corporation decreased. The average debt
equity ratio was 0.34 which signified the dynamism of the organization.
5.2.1.2 Liquidity Ratio
Liquidity provides a measure of the institutions ability to meet its current obligations.
Since liquidity is basic to continuous operation, it was found necessary to examine the degree
of liquidity of the organization and to ascertain its ability in meeting the current financial
obligations.
5.2.1.2.1 Current Ratio
The current ratio is widely used among all the typical balance sheet ratios. This ratio
was greater than unity in all the years. The average ratio was 3.21 and it may be pointed out
that irrespective of the organization, generally a standard ratio of 2.0 is preferred. Although no
standard norms are prescribed for corporations, it is considered better for the corporation to
continue maintaining a current ratio of greater than unity. Natarajan (1980), Kucchal (1979),
Foulsce (1974) considered that a current ratio of two was ideal. Flink and Grunewald (1969)
observed that the value above unity indicates a firms ability to meet current obligations. Thus,
it could be concluded that corporation had maintained a reasonable level of liquidity position.
5.2.1.2.2 Liquid assets to total assets
This ratio was more in the initial year and tended to decline over the years. This
tendency was very close to reality because KAPPEC maintained more liquid assets giving
priority to the working capital during the initial years (Kunnal, 1994). Further due to the
acquisition of more fixed assets the ratio was reduced over the years. It can be concluded
that KAPPEC had maintained a low level of liquidity assets but good level of liquidity position.
5.2.1.2.3 Acid test ratio
Since this ratio gave no consideration to the inventory, it could be considered a better
test of financial strength of the corporation. The nature of this ratio was fluctuating over the
years. In the initial year, the ratio was more than unity and during later years the ratio was
less than unity. In initial years corporation had acquired the ability to meet its current
obligations without depending much on early sale of its inventory, but in later years the
corporation was depended on whole of its inventory to meet its current obligations. Since this ratio gave
no consideration to the slow moving inventory, it could be considered a better test
of financial strength of KAPPEC, than the current ratio.
5.2.1.3 Test of Profitability
These ratios can be used to asses the financial status and overall efficiency of the
institution. These ratios were used to compare the returns over the investments made. The
following were the important ratios.
5.2.1.3.1 Net profit to total assets ratio
The ratio of net profit to total assets was 0.002 in the initial years as the corporation
made a very low profit during that period. The ratio showed a fluctuating trend upto 2001-02
and later the ratio decreased. The ratio was found to be highest (0.29) in 2001-02 i.e., the rate
of return on assets was 29 percent. After 2001-02 the ratio was low which indicated a
marginal profit. The results indicated that profit level was low in relation to total assets. Hence,
efforts should be made to increase profit by decreasing the expenditure. Returns on assets
were one of the best standards of evaluation. The heavy establishment and contingent
expenses as a proportion to sales were some of the causes of poor performance. Natarajan
et al. (1980) observed a similar phenomena for consumer co-operative in Andra Pradesh,
Pradeep Kumar (1993) for Horticulture producers cooperative marketing and processing
society limited (HOPCOMS), Bangalore . L.B. Kunnal (1994) for Karnataka seeds corporation
limited and T.S. Devaraj (2000) for HOPCOMS.
5.2.1.3.2 Net profit to net worth
The ratio of net profit to net worth is yet another important indicator of financial
efficiency in the utilization of funds in the business ( Ramachandra Rao 1976 ; Walker 1976).
The ratio varied between minus 0.30 to 0.73 with an average of 4.61. A close observation of
the ratio in the light of the service objective of the corporation revealed that it had failed to
achieve a fair return on the net worth, Mohsin (1977) suggested 15 per cent as a standard
norm for profits on net worth. Since this ratio was directly influenced by managements policy
regarding trading on net worth (Walker 1976), a low efficiency in the utilization of net worth
was reflected by the organization.
5.2.1.3.3 Net profit to fixed assets
The ratio of net profit to fixed assets shows the average rate of return on the fixed
assets over the years. The ratio which was 0.06 in 1997-98, by the next year it was increased
to 11.28 and later decreased. The average during the study period was 3.96. Though fixed
assets have less importance in a trading organization than in manufacturing concerns, its role
in increasing trading activities has to be given due recognition. The ratio of net profit to the
fixed assets, though increased in 1998-99 had decreased by the next years which was not a
healthy sign. This decline was due to lower profits made during the last couple of years in
relation to the fixed assets, i.e., profits have not increased in proportion to the growth in its
fixed assets.
Thus, an evaluation of the profitability ratios over the years revealed that KAPPEC
was not maintaining fair level of profit. The main aim of KAPPEC was to develop and promote
the export of agricultural and horticulture produce from the State. Hence, the extent to which
KAPPEC was able to meet its social obligations was important. The declining profits in the
recent years could be due to the phenomenal increase in the operations of KAPPEC. But
there was no room for complacency on the part of the management. Efforts were called for by
the management to achieve the minimum level of profit to keep the organization self sufficient
and survive to function efficiently and achieve its social goals, increase in its turnover and
expansion of its activities throughout the State may help to increase profitability of the
organization.
5.2.1.4 Test of Efficiency
Following two ratios were adopted to assess the efficiency of the institution, they
were, 5.2.1.4.1 Gross Ratio
This ratio measured the total expenses for every rupee of Rs.100 gross income. This
ratio showed an increasing trend in the first years and fluctuated in reaming years. The ratio
was less than hundred in all the years except 1997-98. The average ratio was found to be 94.
This means that for gross income of Rs. 100 the corporation spent Rs. 94. Keeping in view
the service objective of the corporation, the expenses incurred was less than its income.
5.2.1.4.2 Operating ratio
The ratio did not show any particular trend over the years. In all the years, the ratio
was less than hundred. As the ratio measured the extent of operating expenses to the gross
income and it also reflected the operating efficiency of the corporation. The ratio within
hundred indicates that the corporation spent less than what it earned in carrying its
operations. This speaks about the high operating efficiency of the company.
5.2.1.5 Tests of Strength
The following measures were used to measure the real worth of KAPPEC.
5.2.1.5.1 Net worth
The net worth of the corporation showed an increasing trend over the years barring
few years in-between. The net worth which was minus 1.26 lakhs in initial year but rose to Rs.
63.20 lakhs in a period of ten years. From the above ratio (table) it could be inferred that the
KAPPEC was financially strong during the study period. The excess of liabilities of the
corporation in the process of development in the initial period was responsible for its negative
net worth.
5.2.1.5.2 Net Capital Ratio (NCR)
The NCR for KAPPEC in initial year was 0.99 which was the lowest ratio among all
the years and in all the other years the ratio was more than unity which indicated that the
assets of the corporation were sufficient to cover all its liabilities. KAPPEC appeared to have
built up a good strength by possessing assets worth of Rs.1.02 for each rupee of liability.
5.3 Compound growth rates of KAPPEC
Growth rates of important commodities handled by KAPPEC in terms of quantity and
its market like domestic, export, import markets of KAPPEC in terms of quantity and value
were computed to know the growth trend of KAPPEC over the years.
5.3.1 Growth trend of important commodities handled by KAPPEC
In the domestic and export market, the compound growth rate of mango and potato
were found to be negative. This could be mainly due to the Government policies which in turn
affected the market of these two crops. For onion, the compound growth rate was found to be
positive and significant; this was due to increase in demand in the foreign countries and
Government of India appointed KAPPEC as a canalizing agency for export of onion. Mango,
potato and niger seeds were found to have negative compound growth rate and were also
non-significant. The import market for cloves had a decreasing compound growth rate, it may
be attributed to the fact that the production of clove had increased in the country.
5.3.2 Growth Trend of KAPPEC
The compound growth of domestic market in terms of quantity and value were -
61.09 and -45.58 per cent. The negative sign indicates decreasing growth rate over the years
i.e., the intervention of KAPPEC in the domestic market was decreasing. The growth in terms
of quantity in domestic market was non-significant but the value of the domestic market was
significant at 10 per cent. By this we can conclude that KAPPECs role in domestic market
has been decreasing over the years.
The compound growth rates of export market of KAPPEC in terms of quantity and
value were 31.18 and 32.06 per cent, which indicated higher growth rates compared to other
markets of KAPPEC (Domestic and Import market).Value of growth rate was positive, which
indicated an increasing trend over the years. The export marketing of KAPPEC in terms of quantity and
value were increasing during the study period and the export market in terms of
quantity and value was significant at 10 per cent level of significance.
The compound growth rates of import markets of KAPPEC in terms of quantity and
value were -58.55 and -55.43 per cent. The negative sign indicates a decreasing growth rate,
which means, over the years the import market of KAPPEC was decreasing. Import market of
KAPPEC in terms of quantity and value were non-significant. The above discussion indicated
higher intervention of KAPPEC in the export market and a lower participation in import and
domestic markets. The intervention of KAPPEC in these markets again is directed by the
Government policy and hence the differential treatment.
5.3.3 Projected value for export market of KAPPEC
In the near future KAPPEC has many plans to promote exports by various strategies
such as procurement and supply of good quality inputs, conducting commodity and crop
specific seminars, workshops in growing areas, providing guidance and information to
budding entrepreneurs to undertake exports, creation of post harvest technologies at
Chitradurga, establishing a State of art processing unit at Gulbarga and Hubli in North
Karnataka, establishing six Vanilla Processing units in different vanilla growing areas and
creation of post harvest infrastructure (cold chain) facility at Bidar. Hence the creation of these
infrastructure facilities would definitely boost the export from these areas. It is expected that
by 2012 export market in terms of quantity would increase to 52459.37 metric tonnes and the
value of export market would be Rs. 7213.94 lakhs and by 2017 these may increase to
66530.25 metric tonnes and Rs. 8849.46 lakhs, respectively.
5.4 Principal component analysis of financial indicators
Financial indicators which were highly associated with the performance of KAPPEC
are discussed here in detail.
Four variables had higher factor loading in the first component which extracted 43.45
per cent of total variation (Table 4.11). Three variables in the second component obtained
36.49 per cent of the variation.
The first component extracted the variables related to the assets of the KAPPEC.
Consequently this component was named as growth in assets. Total assets, liquid assets
current assets, gross income, net worth indicated the financial soundness of KAPPEC. The
computed growth rates of these variables also corroborated the findings since they showed
increasing growth rate over the years. Even the financial ratios like current ratio and acid test
ratio indicated that the current assets position of KAPPEC was good.
The second component extracted the variables like total expenses, gross income and
net worth. The growth rates of these variables also corroborated the findings since gross
income and total expenses showed a decreasing growth over the years and net worth
showed an increasing growth rate. The total expenses which were inversely related to the
performance of KAPPEC showed a normal expense compared to the income earned by the
KAPPEC. This was also corroborated by the financial ratio analysis. The gross ratio revealed
that KAPPEC was making appropriate expenses in its business transactions. Since the
second component captured the variables having close association with profit it may be
termed as Profit component.
The two component put together were able to capture nearly 80 per cent of variation
in its performance. The results of the principal component analysis not only by and large
reiterated the findings of the financial ratio and growth rate analysis but also made the
conclusions more valid.
5.5 Documents
Export activity not only includes shipment of materials, but also includes several
commercial and regulatory procedures. These procedures involve considerable
documentation which was referred to be the most important and tedious job for a fresher for
export process. Export documentation work constitutes a heavy change on the export activity.
It is a complex and cumbersome process. This is partly due to the nature of export trade
which includes a number of intermediary organizations and authorities at different stage of export
activity between the sellers and buyers. All these in turn generate a lot of paper work
and procedure formation.
5.5.1 Role players in the process of documentation
Table 4.14 gives the list of role players in the process of documentation, KAPPEC
acts as an exporter which exports the material based on the requirement of importer as per
terms and conditions of letter of credit and cooperative wholesale establishment act as an
importer which imports the materials based on the requirement from the exporter. Trupthi
International is a supplier for the exporter (i.e., for KAPPEC) which supplies materials to the
KAPPEC as per its requirement. Indus Ind Bank acts as an exporters bank i.e., it performs all
the transactions related to exports on behalf of KAPPEC. Bank of Ceylon and Indian
Overseas acts as importer bank which performs all the transactions related to imports on
behalf of the cooperative wholesale establishment (CWE). V. Eskai Pillai and son acts as cost
and freight (C & F) agent of exporter. V. Eskai receives the materials from KAPPEC, grades
them and packs it as per terms and conditions of letter of credit and prepares documents
which are required for loading and ships the lane to the importer. Stewart Surveyors and
assessors Private Limited acts as surveyor for exporter at the port of loading (POL). Romav
Limited and Moonlight shipping services private limited acts as carriers. Customer authority
collects customer cell or duty and gives the receipt for the same. Indian Chamber of
Commerce issues certificate of origin stating that the materials to be exported is of Indian
origin. Government of India port health organization issues health certificate by checking the
container and the materials which are to be exported. Lastly SCS inspection Services which
act as Joint Surveyor which surveys the materials at port of delivery (POD) and issues and
certifies quality, weight, packing and condition upon arrivals and sends certificate copy to both
cooperative wholesale establishment (CWE) and KAPPEC.
5.5.2 Documents required for export
5.5.2.1 Tender enquiry from cooperative wholesale establishment (CWE) to KAPPEC
Tender enquiry from cooperative wholesale establishment to KAPPEC is the first and
foremost document which initiates the export process. The tender letter will be provided by
the importer i.e., CWE specifying his requirements in the enquiry letter. This includes the
specifications like,
a. Specifications of material required in terms of both quality and quantity
b. Specifications of packing
c. Specifications of delivery date and mode of delivery
d. Certificates needed for the process
e. Bills, payment terms, last date for submission of quotation and samples.
f. Shipment, load of survey, validity of offers, samples etc.
5.5.2.2 Quotation to KAPPEC from the supplier Trupti International
The quotation from the supplier is prepared based on the price of the commodity
prevailing in the local market including the overhead costs in activities such as grading,
packing, shipment, validity, port of loading etc.
5.5.2.3 Quotation of KAPEC to CWE through local agent
The quotation from the exporter is prepared based on the price of the commodity
prevailing in the local market (as specified by the supplier) including KAPPEC margin and the
quotation will be sent to the importer. It includes the following,
a. Item quoted for
b. Quantity offered
c. Specifications of the products
d. Price
e. Bankers name and address f. Shipment period offered
g. Validity of quotation
h. Payment terms
i. Port of loading
j. Name and address of local agent.
The local agent of KAPPEC who resides in importing country submits the sample
along with the quotation of KAPPEC to CWE.
5.5.2.4 Confirmation letter from CWE to KAPPEC
The importer (CWE) sends confirmation letter to KAPPEC after analyzing all the
quotations submitted by different exporters, prices they quoted, samples, etc. Apart from the
specifications in the enquiry it also includes contract number and request for performance
guarantee.
5.5.2.5 Contact number from CWE to KAPPEC for acceptance and signature
Contract number is sent by Importer to exporter for the acceptance and signature.
This contact is sent back signing it towards contract This included specifications as
- Quantity and commodity
- Packing
- Price
- Marks and numbers
- Payment
- Specifications of material
- Country of origin
- Total value
- Insurance
It includes the signature of concerned personal of both importer and exporter as
acceptance.
5.5.2.6 Letter to supplier from KAPPEC for agreement of material to be exported
This letter is sent to Truipti International by KAPPEC for arrangement of material to
be exported for example Table potato as per delivery schedule and quality specification.
5.5.2.7 Performance guarantee bond to importer from KAPPEC
The performance guarantee bond is given by the exporter through its bank (Indus Ind
Bank) and by Importers bank (Bank of Ceylon) to Importer. This acts as a security bond.
Here in this case the exporter needs to keep USD 975 which is 10 per cent of the value of the
order as the performance guarantee. It ensures the Importer that the exporter will perform the
task of export.
5.5.2.8 Assigning of surveyor by importer at Port of loading
The importer assigns a surveyor (Stewart Surveyor and Assayers Pvt. Ltd.) on behalf
of them at the POL, whose job is to inspect whether material meets all terms and conditions
as per L/C or not. He issues CERTIFICATE OF EXAMINATION which includes the details
like,
- Shipper
- Importer permits number.
- Invoice number.
- Date of Inspection and Place
- Packing - Receiver
- Contract number.
- Bill of lading number and date
- Commodity, quality and quantity
- Container stuffing.
5.5.2.9 Opening up of L/C (Letter of Credit)
It is a document of authority containing the guarantee of a bank to honor the draft on it by
an exporter under certain conditions and up to a certain amount. Essential parties to a
commercial letter of credit are as detailed below,
The opener or importer or the buyer who opens the credit
The issuer the bank that issues the letter of credit on behalf of importer.
The beneficiary seller in whose favor the credit is opened. Exporter is the beneficiary
because he gets the payment there of.
In practice however, there may be additional parties introduced in order to perform
certain necessary functions. The confirming bank in the beneficiary country, which, at the
request of the beneficiary, guarantees the payment and acceptance of the sellers draft. The
advising bank located in the beneficiarys country notifies the seller of opening of the credit.
The advising and confirming banks may be the same the paying or accepting banks is the
one on which the draft are to be drawn.
It is the safest method of exporting the material by the exporter. It is of the highest
importance among all other export documents. Here the exporter after dispatch of his material
from POL submits al documents to his bank, which in turn checks the documents. If they are
as per L/C then the bank credits amount to the exporter. Here the importers bank and
exporters bank will be in the contract, and not the buyer and seller. This includes all the
terms and conditions as per contract. This is referred to be a negotiation of export bills.
5.5.2.10 Preparation of required documents commercial invoice
It is a document of contents. It is exporters bill for goods and sets forth the terms of
sales. Invoice is a basic document, which will fully identify the overseas shipment and serve
as a basis for the preparation of all other documents. The exporter should strictly follow the
requirements of the importer in regard to invoicing.
The commercial invoice contains the following information
The name and address of importer and exporter.
Commercial invoice number and date
Description of goods with parameters like quality, quantity, weight and packing
specifications.
Terms of delivery and payments
Port of discharge and final destination
L/C number and date.
Amounts in terms of USD since it is the largest currency universally accepted by the
bankers.
Cost involved in freights
Signature of authorized official of the company exporting the products, which
declaring of above information is true and correct.
5.5.2.11 Packing list
Packing list is a consolidated statement of contents of number of cases or packs or
bags. Since, KAPPEC is into export of agro products which are associated with
perishability, hence it has to go for various types of packing, which suits the products.
The importers specification takes special importance in this section to export the
products in good condition. It will be helpful in estimating shipping cost prices to export and
for the purpose of insurance. It is also used in determining lost bags or packages.
5.5.2.12 Bill of loading
The bill of loading is a document where in the shipping company gives its official
receipts of the goods shipped in its vessel and at the same time contents to carry them to
POD. It is also a document of title to the goods and as such, is freely transferable by
endorsement and delivery. The main purposes of this document are :
As a document of title to the goods
As a receipt from the shipping company
As a contract for the transportation of goods.
Each shipping company has its own bill of loading. The shipping company prepares
the bill of loading, which contains all details of the consignment.
The information contained in the bill of loading includes.
Name of shipping company and destination agents name.
Name and address of shipper or exporter
Name of vessel or voyage number, container numbers and port of loading
The number of packages (as specified in L/C)
Freight pay modes and discharge.
When freight charge is paid at the time of shipment or in advance the bill of loading is
marked freight prepaid, if freight charge is not paid then it is to be collected from the
consignee on the arrival of goods, the bill of loading is marked freight to collect.
Bill of loading is acceptable only when it is marked as clean on board by
International Chamber of Commerce. The bill of loading is clear when the carrier see no
evidence of damage to the packing or condition of the cargo. Hence the bill of loading
regulates the receivable cargo in good order and condition without exception or irregularity.
5.5.2.13 Certificate of origin
This document is prepared by the exporter, which specifies the country of production
of the goods. This certificate has to be produced before clearance of goods and assessment
of duty, for the customs law of importing country which may require certificate of origin.
A certificate of origin may be obtained from the chamber of commerce, Export
promotion councils and various traders associates, which have been authorized by the
Government.
5.5.2.14 Importance of certificate of origin
It ensures that particular goods from India are not banned for exporting or importing in
the country and at the same time it also confirms that goods have not been reshipped by the
exporter who had earlier imported from some other country.
5.5.2.15 Phytosanitary certificate
KAPPEC is in to agro products exports, where in the importer wants the products to
be free from pests, the government of India Ministry of Agriculture, Directorate of Plant
Protection, Quarantine and storage will issues phytosanitary certificate. This certifies that the
plants or plant products inspected are considered to be free from quarantine and injurious
pests.
5.5.2.16 Health certificate
Health certificate was issued by the Government of India Port of Health Organization,
and certifies that the goods being exported are fit for human consumption. The inspection
carried out by these officials will be on the request of surveyor assigned by importer. 5.5.2.17 Shipping
bill
Shipping bill is issued by Tuticorin custom house which includes cess payment details
like, SB number. payment date, vessel name, etc.
Shipments of material are done after fulfillment of all the terms and conditions as per
L/C.
5.5.2.18 Letter to exporters bank by exporter (along with documents specified) for
negotiation of bills
After the shipment, KAPPEC submits all the documents along with L/C to its bank
(Indus Ind Bank) for negotiation of bills and requests for crediting the account and send a
copy to importers for realizing material at port of delivery against the bank guaranter.
5.5.2.19 Negotiation of bills by exporters bank
If all the documents are as per terms and conditions of L/C, the bank negotiates the
bills, credits the amount to the exporters account and sends the same to Importers account
and the importers bank for getting payment from Importers bank.
5.5.2.20 Bills from suppliers and C & F agent
Bills from supplier and C & F Agents are sent to the KAPPEC (exporter) for the
payment.
5.6 Constraints faced by KAPPEC analysed by index method
Low financial assistances was one of the major constraints faced by KAPPEC. This
was mainly due to the irregular supply of funds by the State Government. In addition to export
business KAPPEC has also been involved in creating awareness about exports and
establishment of infrastructure facilities. For these activities huge investments were needed.
The stiff competition from traditional exporters was another problem. The traditional exporters
have diversified their business covering a large number of commodities and already have well
established relation with growers. Over all, the low productivity per unit area was a bottleneck
to attain exports competitiveness in the international market. The non-existence of an
organized and strong domestic market was among the least problematic for KAPPEC, since
its intention was to capture the foreign market. 6. SUMMARY AND POLICY IMPLICATIONS
This chapter gives the summary of the findings of the present study and policy
implications emerging from it.
Indian agriculture has a distinct position in the World agricultural production. It is the
second largest producer of Rice, Wheat, fruits and vegetables and largest producer of milk.
Still, in the world agricultural trade, its share is very meager. The share of Indian agriculture in
the world export is less than one Export of agricultural products is an important component of
the countrys agrarian scene. Its present position in the Indian economy is quite significant as
exports contribute a great deal to the development of an economy through the foreign
exchange earnings. Agricultural exports comprised about 30 percent of the total exports from
India during 1980-81 and the share dropped to 19 percent in 1990-91.Agricultural exports in
1995-96 constitutes 19.87 percent in the total exports from India and this share has been
decreased to 15.08 per cent in 1999-2000. In 2000-01 agricultural export constitute 14.1
percent in the total exports from India and this share has been decreased to 10.4 percent in
2006-07.Though the proportionate share of agricultural products in total exports declined, the
value of agricultural exports increased during this period.
Karnataka state is predominantly an agriculture State. About 33% of total gross
domestic product is derived from agriculture and 66% of the workforce dependent on
agriculture further 70% of state population is still living in rural areas and are completely
depending on agriculture for their livelihood. As such if the state has to prosper and progress
economically, it is possible only through the development of the agriculture sector. There is
ample scope for the development and increase of agriculture exports from the State.
To promote the exports and provide an inadequate post-harvest infrastructure
facilities like procurement centers, grading washing, waxing, packing units, cold storages etc.,
with in the state and by the recommendations of the agriculture policy of the State,
Government has established Karnataka State Agricultural Produce Processing and Export
Corporation Limited (KAPPEC) on 22
nd
April 1996.The authorized share capital of the
corporation is Rs 500 lakhs. So far the State Government has released Rs 75 lakhs out of
which Rs 25 lakhs as grant and Rs 50 lakhs as share capital. In addition to this the
Government has also released an amount of Rs.10 crore in the budget for the creation of post
harvest infrastructure facilities in the state based on the potential in a phased manner in order
to boost the export of agriculture and horticulture commodities from the state.
Since inception till 31-01-2008, KAPPEC has handled about 3, 07,029 metric tonnes
of agricultural and horticultural commodities valued at Rs 48,739 Lakhs. In addition to Grapes,
KAPPEC has exported Mangoes, Pomegranates, Drumstick, Watermelon, Red split lentils,
Niger seeds, Menthe seeds, Coconuts, Onions, Potato, Chilies, Garlic, Coriander, and
Turmeric to USA, U.K., Singapore, Srilanka, Malaysia, Middleeast, Turkey, Australia,
Netherland, Mexico, and Brazil etc.
The present study is an attempt to asses the performance of the Karnataka
Agricultural Produce Processing and Export Corporation Limited (KAPPEC) during the past
10 years from 1997-98 to 2006-07 during which the KAPPEC not only raised its volume of
business but also greatly diversified its economic activities. The over all objective of the study
is to analyse and evaluate the performance of the KAPPEC.
Specific objectives of the Study:
1. To analyse financial indicators of Karnataka State Agricultural Produce
Processing and Exporting Corporation Limited (KAPPEC).
2. To analyse the trend of agricultural and horticultural commodities exported by
the KAPPEC.
3. To document the export procedure followed for agricultural and horticultural
Commodities.
4. To identify the constraints in the functioning of KAPPEC and suggest appropriate
policy measures. Special feature of the study
1. Special techniques like compound growth rate analysis, principal component analysis
and index method were used in the analysis.
2. About 10 financial performance indicators were carefully identified for the analysis.
3. The opinion survey was deliberately broad based by including in different
management levels separately interviewing officials of KAPPEC.
Methodology
The Karnataka Agricultural Produce Processing and Export Corporation Limited
(KAPPEC) was purposively selected for an indepth evaluation of its performance because of
its tremendous growth and its key role in promoting and developing agricultural and
horticultural produce exports from Karnataka within a span of 10 years.
The opinion of managing directors and general manager were also sought to identify
the constraints in the working of KAPPEC.
Data collection
The secondary data on several aspects of KAPPEC were collected from different
sources. The data relating to the financial aspects of the KAPPEC were abstracted from
balance sheet, profit and loss account, receipts and payment were abstracted from annual
reports and records of the KAPPEC for the period of ten years i.e. from 1997-98 to 2006-07.
Analytical Techniques Used:
The statistical tools employed were percentages, ratios, compound growth rates and
financial ratio analysis.
The principal component analysis was adopted for analyzing the performance and
working of the KAPPEC for identifying the underling dimensions and importance of the
variables in explaining the total variability.
The simple index method was employed to analyse the severe constraints of
KAPPEC. In this method opinion of number of respondents are taken and for their opinion per
centage is calculated. Based on that value we conclude the severe constraint of the KAPPEC.
Findings of the study
The important findings of the study are summarized below.
The tabular analysis
There were substantial increases in the financial indicators of KAPPEC over the
period of study.
The increase in the business of the KAPPEC was manifold. The rapid expansion of
the business of the KAPPEC was observed in activities of the KAPPEC.
The financial ratio analysis
The total liabilities to owned funds ratio were less than one in all the years. The
company is able to cover its short term and long term obligations of business.
Fixed assets to owned fund ratio is increasing over the years. It indicates that
company is increasing its assets over the years.
Debt equity ratio indicated fluctuating trend over the years. The entire ratio signified
the dynamism of the organization.
Current ratio was greater than unity in all the years. By this we conclude that
corporation had maintained a reasonable level of liquidity position.
Acid test ratio revealed that organization was dependent on sales of its inventory to
meet its current obligations and liquid assets to total assets revealed that the KAPPEC had
maintained a low of liquid assets but good level of liquidity position. Net profit to total assets, net profit
to net worth and net profit to fixed assets ratio
revealed that eventhough there was an increase in sale, assets over the years the net profit
was low not upto the mark. There by business of the KAPPEC was not very sound or
satisfactory.
The gross ratio indicated the clear trend of increased expenses in the business of the
KAPPEC and operating ratio showed the low operating expenses compare to volume of sales
of the KAPPEC.
Net worth ratio indicated that KAPPEC was financially strong during the study period
and net capital ratio revealed that the assets in the business of the KAPPEC were sufficient
enough to cover all liabilities.
Compound growth rate analysis
The compound growth rates of financial indicators, like total liabilities (21.07), total
assets (21.27), export value of commodity (37.71) and all significant except for total
expanses, operating expenses, gross income, profit, net worth.
Principal component analysis
The principal component analysis of the financial indicators revealed that there were
seven main dimensions existing in the performance of the KAPPEC. The first Component
explained 43.45 per cent of variation, the second component explained 36.49 per cent of
variation. The variables like total assets, liabilities, expenses, gross income, net worth, current
assets and liquid assets were highly associated with the performance of KAPPEC.
Index method
About 92 per cent of respondents opinioned that low financial assistance is the major
constraints of KAPPEC. Lack of infrastructure facility in every district and low productivity per
unit area is another constraint of KAPPEC.
POLICY IMPLICATIONS
The implications of the findings of the present study are as follows.
1. The total liability of KAPPEC registering high growth rate which is not a healthy sign
for its growth. Hence, Government must provide sufficient funds for its proper
functioning.
2. The gross ratio of KAPPEC was found to be higher. Hence, efforts may be made to
reduce the same by improving efficiency.
3. Low productivity was observed to be one of the constraints for export. Hence,
KAPPEC was indirectly involved in increasing the productivity of export related crops
by facilitating inputs and technical guidance in collaboration with scientific bodies..
4. Domestic market adds to the income of KAPPEC and its found to be decreasing over
the years. Hence, efforts may be initiated to improve their marketing strategies for the
domestic market.
5. The projection of selected financial indictors revealed a lower value for business
income and profits. Hence, efforts may be made to increase the volume of export
business to earn higher profit.
6. KAPPEC is concentrating only on two commodities which was found to be a risky, so
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Land .Bank. J., 23 (3) : 21-30. PERFORMANCE OF KARNATAKA STATE
AGRICULTURAL PRODUCE PROCESSING EXPORT
CORPORATION AN ECONOMIC ANALYSIS
DEEPA TALLIKERI 2008 Dr.S.B.HOSAMANI
Major advisor

ABSTRACT
The objective of the study was to evaluate the performance of Karnataka state
agricultural produce processing export corporation, Limited. Secondary data were used for
the study for the period 1997-2007.The statistical tools like tabular analysis, ratio analysis,
compound growth rate, principal component analysis and index method were used to
evaluate the objectives of the study.
The solvency ratio revealed that solvency position of the corporation was strong
during the study period. Liquidity ratio showed that corporation maintained a reasonable level
of liquidity position. The results of profitability ratio showed that the corporation has not
maintained a fair level of profit because more importance was given to social obligation than
the profit and the operation efficiency of the corporation was high.
Compound growth rate of financial indicators like total liabilities (21.07), total assets
(21.27), export value of commodity (37.71), current assets (20.90), quick assets
(-16.02) and net worth (3.74) were significant and total expenses (-3.09), operating expenses
(-16.47), gross income (-6.50) were found to be non significant. The growth rate of Onion
export was positive and significant, where as growth rate of Potato, Mango and Niger seeds
were found to be negative and non significant. The compound growth rate in terms of quantity
and value of domestic market, import market showed a negative growth rate but export
market growth rate was positive with increasing trend over the years.
Low financial assistance was one of the major constraints faced by KAPPEC. This
was due to irregular supply of funds by the state Government and low productivity per unit
area was another bottleneck to attain export competitiveness in the International market.

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