Lesson- 17 Agro-based Industries in India


Agribusiness denotes the collective business activities that are performed from farm to fork. It covers the supply of agricultural inputs, the production and transformation of agricultural products and their distribution to final consumers. Agribusiness is one of the main generators of employment and income worldwide.

Agribusiness is characterized by raw materials that are mostly perishable, variable in quality and not regularly available. The sector is subject to stringent regulatory controls on consumer safety, product quality and environmental protection. Traditional production and distribution methods are being replaced by more closely coordinated and better planned linkages between agribusiness firms, farmers, retailers and others in the supply chains.


Establishment of agro-based industries is based on the availability of raw material.

  • Agro-based industries have to set up at rural areas where raw material may be available in plenty – helps in the up-liftment of the rural economy.

  • Provide rural population an opportunity for employment.

  • Generate income and thereby improve economic condition of people – which in turn creates potential for demand based industries.

  • Provide an opportunity for the dispersal of industries instead of concentrating at a particular place.

  • Solve the problem of exploitation of farming community by traders and middlemen.

  • Farmers could be assured of better price for their produce.

  • Encourage to bring more and more areas under various crops – increase agricultural production and improve nation’s economy.

  • Transportation cost of agricultural products can be minimized – thereby help to minimize cost of finished goods.

  • Avoid wastage of perishable agricultural products.

  • Help to develop backward areas based on their suitability for setting up agro-industries.

  • Prevent migration of people from rural to urban areas.

Industries are divided into four groups.

  1. Resource based

  2. Demand based

  3. Skill based

  4. Ancillary

Again the resource based industries are divided into agro-based, forest based, animal husbandry and poultry based, mineral based, marine based, etc. Agro-based industries are those industries which have either direct / indirect link with agriculture. Industries which are based on agricultural produce and industries which support agriculture come under agro-based industries.


There are four types of agro-based industries.

1. Agro-produce processing units

They merely process the raw material so that it can be preserved and transported at cheaper cost. No new product is manufactured. Ex: Rice mills, Dal mills, etc.

2. Agro-produce manufacturing units

Manufacture entirely new products. Finished goods will be entirely different from its original raw material. Ex: Sugar factories, bakery, solvent extraction units, textile mills, etc.

3. Agro-inputs manufacturing units

Industrial units which produce goods either for mechanization of agriculture or for increasing productivity come under this type. Ex: Agricultural implements, seed industries, pumpset, fertilizer and pesticide units, etc.

4. Agro service centres

Agro service centres are workshops and service centres which are engaged in repairing and servicing of pumpsets, diesel engines, tractors and all types of farm equipment.


  • Suitable to rural areas as they are raw material oriented.

  • For upliftment of rural economy.

  • To solve the problem of unemployment.

  • To generate income and increase standard of living.

  • For decentralization and dispersal of industries.

  • To reduce disparity between rural and urban areas.

  • To encourage balanced growth between agriculture and industry.

  • To solve the problem of exploitation of farming community.

  • To reduce transportation costs.

  • To give big push to agriculture and act as a source of demand and supply.

  • To avoid wastage of perishable agricultural products.

  • To prevent migration of rural people.

  • To develop suitable backward areas.

  • To improve infrastructural facilities.


Following Ministries & Departments at the Centre and State level are at present looking after development of agro based industries.

  1. Ministry of Agriculture: Deals with rice mills, oil mills, sugar mills, bakeries, cold storage, etc.

  2. Khadi and village industries board: Covers traditional agro based industries like “gur‟, handicrafts, khandasari, etc.

  3. Director General of Trade and Development: Looks after the industries engaged in the manufacture of tractors, power tillers, diesel engines, pump sets, etc.

  4. Agro-industries Development Corporation: In each state mainly supply agricultural machinery, inputs and agricultural advisory services to farmers. Some corporations have also undertaken certain manufacturing activities in agro-industries sector.

  5. Small Industry Development Organization: Deals with small agro-industries like hosiery, processing of food products, beverages, food and fruit preservation, agricultural implements, pesticide formulations, etc.


1. Proper guidance is not available to entrepreneurs.

2. It involves some element of risk taking

3. Change in crops / cropping pattern

4. Change in variety of crop due to technological improvement

5. Failure of monsoon may hit the raw material supply.

6. Proper guidance, training for modern and sophisticated agro-industries are not available.

7. As modern small industries are capital intensive, supply of finance will be a considerable problem.

8. Promotional activities such as conducting, intensive campaigns, identifying candidate industries and explaining to entrepreneurs about prospects are inadequate.

9. Uncertainty about future market demands.

10. Absence of information about quantity and quality of market.

11. Multiplicity of agricultural produce and absence of suitable methodology to select best suited industries to a given region.

12. Seasonal supply of agricultural produce may result in under utilization of capacity of the units as the unit will not be working throughout the year. Ex: Sugarcane

13. Industries based on fruits and vegetables may not get the same variety throughout the year, but they may get some other variety.

14. Absence of proper integration among the various agencies of development in the district.


http://mofpi.nic.in/ContentPage.aspx?CategoryId=796 as viewed on 15th May 16, 2012

Vijaya Kumari. R and Raghunatha Reddy G. Lecture notes, Acharya N.G. Ranga Agricultural University, visited on web site http://www.angrau.ac.in/media/1639/AECO%20342.pdf as on 20th may 2013

Suggested Readings:

Mukesh Pandey and Deepali Tewari. 2010. Agribusiness Book: A Marketing & Value-Chain Perspective: Analysing South Asia Textbook Student Edition. International Book Distributing Company

Raghunatha Reddy G and Visnushankar Rao. D. Practical manual. Agribusiness management. Dept of agricultural economics. Acharya N.G. Ranga Agricultural University. Agricultural college. Bapatla.

Last modified: Wednesday, 9 October 2013, 7:48 AM