Value Chain Creation

What is a Value Chain?

A value chain is a series of steps that involve the creation of a finished product, from its original form to a value-added and profitable finished product. The chain identifies each step in the process at which value is added, including the sourcing, manufacturing, and creating market linkage for the finished product.

Why Value Chain?

A value chain results from innovation developed in the entrepreneurial minds and helps maximize profits.

For a better understanding let's take the example of potato chips:

Let's say a ? 20 potato chips packet of 50 grams is prepared using 4 potatoes, 6 tablespoons of oil, and a small amount of salt and chilly powder.

So,

1. The maximum cost of 4 potatoes will be around ? 8 during shortage and price rise.
2. 6 tablespoons of oil will cost around ? 2.
3. Salt and chilly powder for seasoning will cost around ? 1.
4. The cost of preparing the chips (including machinery, gas/electricity, labour, etc.) will be around ? 1.
5. The cost of packaging will be around ? 0.25.

So, the overall input cost of preparing a potato chips packet including packing will be ? 12.25.

From the above calculation, it can be concluded that 20 packets of 50 grams/packet chips can be prepared from 1 kg of potatoes.

Now, by calculating the input and output costs, we conclude;

1. Input cost of 20 packets of chips costing ? 20 per packet with 50 grams quantity is ? 20 * 12.25 = ? 245
2. Output cost of 20 packets of chips costing ? 20 per packet with 50 grams quantity is ? 20 * 20 = ? 400

It means the profit earned from converting 1 kg of raw potatoes into a value-added product i.e. chips is ? 155.

Value Chain And Rural Livelihood

The rural economy is heavily dependent on agriculture and its allied activities like Poultry, Dairy, Goatry, Pisciculture (fishery), Apiculture (producing honey), Sericulture (producing raw silk from caterpillars), etc. The source of income for farmers is the sale of produce which can be wheat, rice, vegetables, milk, etc. The problem is that farmers sell their produce in raw form instead of a value-added finished product. This way they reap only marginal profits.

To enhance the income and profits of the farmers the following steps can be taken:

1. Analyze the market and sow the crops accordingly. For example, organic food crops are in high demand and are expected to rise more in the near future. A farmer can start organic farming from a small patch of land and then slowly expand to the whole of the agricultural land. A major advantage of organic farming is that the natural manures, fertilizers, and pesticides such as Vermicompost, Vermiwash, Beejamrit, Jeevamrit, Agniastra, etc. can be prepared by the farmers at their homes at a minimal cost as compared to harmful chemical fertilizers and pesticides.
2. Organize the women of villages into Self Help Groups (SHGs) and start their businesses by processing the raw materials like pickle making, khowa-paneer making, etc.
3. The NRLM (National Rural Livelihood Mission), RSETIs ( Rural Self Employment Training Institutes) of the banks, and CSR organizations can help in training the farmers and women of SHGs and providing the requisite machinery for processing the raw material into finished products and finally helping in market linkage as well.

So, the idea is to harvest the best quality crops and related products, process them at the panchayat level involving the women, and sell the value-added product instead of raw materials.

This way a self-sustaining, women-centric rural economy focused on entrepreneurship & innovation can be catalyzed.