1. Introduction: SilkSilk, the Queen of Textiles, spells luxury, elegance, class and comfort. The inherent affinity for dyes with vibrant colours, high absorbance, light weight, resilience and excellent drape has made it an irresistible and inevitable companion of the eve all over the world.[footnoteRef:1]Due to its high elasticity, this fibre is regarded as the strongest of all natural threads. Unlike some other threads used in textile industry, clothes made up of silk thread do not change their shape or shrink. [1: Handloom, Textiles and Handicrafts Department, Government of Odisha What is silk?, Available at: http://218.248.11.68/textilehandloom/WhatSilk.asp?lnk=4&PL=1, Last visited: 22nd Sept, 2013.]

Chemically speaking, silk is a natural protein fibre that is valued for its use in fine fabrics and textiles. It is produced by fluid secretion of a caterpillar called silk worm. These silkworm caterpillars feed on selected food plants and spin a 'protective shell' called cocoon around them before entering into silk moth phase. Man interferes at this stage of silk worm life cycle to obtain silk. This process of rearing of silkworms for the production of silk is known as sericulture and the thread obtained through this processes is called raw silk which consists about 48 individual silk fibres. The colour of the fibre produced differs depending upon the spaces and the feed provided during production. There are five types of silk grown in India namely Mulberry, Oak (Temperate) Tasar, Traditional (Tropical) Tasar, Eri, and Muga. Out of these, mulberry is the best known variety of silk produced by the silkworm Bombyx Mori. With a domestic demand of 28000 MT and a production of 18500 MT, India is the second largest producer of raw silk and cocoon after China and largest consumer of silk products. India's share in the global production is over 16 per cent. [footnoteRef:2] [2: TOI (2012) 'Gap between demand, supply plaguing silk industry' Dated April 13, 2012]

To cater to the demand supply gap, however, India has to import about 5000 MT of raw silk and about 4000 MT of silk fabric. It employs more than 60 lakh people in rural and semi-urban areas of whom 30 percent are from the backward sections of the society and tribals.[footnoteRef:3] Of the 6.29 lakh villages in the country, sericulture is practised in about 69000 villages.[footnoteRef:4] [3: Ahmed, Mohammad K. (1997) Economics of silk reeling with reference to production and marketing in Karnataka Published at: University of Mysore] [4: Kasi, Dr. Eswarappa (2011) DevelopmentalInitiativesand Sericulture In aSouth Indian Village Published at NIRD, Hyderabad.]

About 92% of Indian raw silk produced in only 5 states of Karnataka, Andhra Pradesh, Tamil Nadu, West Bengal and Jammu and Kashmir. India exports about 166 MT of silk and silk products which is estimated to be Rs 3000 crore business. In India, mulberry forms about 80% of the total raw silk production.

2.Benefits of Sericulture[footnoteRef:5] [5: Ahuja, Hitesh (2013) Sericulture: A model for maximizing value generation for farmers through unconventional crops; Available at http://www.hcdconnect.org/stories/sericulture-a-model-for-maximizing-value-generation-for-farmers-through-unconventional-crops/, Last visited: 22nd of Sept, 2013]

The following merits of sericulture make it an attractive and promising alternative agricultural practice:1. Ideal for smaller farmers and weaker sections of the societySericulture is a viable option for even very small land holdings as it needs low capital, (INR 12000 15000, excluding cost of land and rearing shed for an acre of mulberry plantation and sericulture) to start. An acre of land can support a three member family without any additional labor requirement. Mulberry once planted can be used up to 15-20 years in sericulture.2. Higher Return per acre of land to the farmersSericulture provides higher economic returns, upto INR 30,000 per acre annually, to a farmer as compared to conventional crops(around 15 to 20 thousand per acre annually). The Internal Rate of Return (IRR) from sericulture is estimated to be about 40% which as good as most high return yielding businesses.3. Higher share of value chain for the farmersOut of the total revenue generated in the whole value chain about 55% goes to farmer for cocoon production while reeling & twisting gets about 15-16%. Only 30-35% of the revenue is accrued to the weavers and traders. Hence it is the farmer who gets the major share in this value chain.

4. Short gestation periods and higher no. of cropsUnlike the conventional crops, sericulture has a shorter gestation period and therefore a farmer can have 8-12 crops per year. It is also an all season crop and thus provides round the year employment.

5. Robust demand and sustainable market for silkIndia is the second largest producer of silk in the world after China and still imports about 20% - 25% of its domestic demand from China. This shows the great demand and sustainable market available for this industry.6. Potential for multiple crops / Inter croppingMulberry, a deep rooted plant can be intercropped with shallow rooted plants, short term pulses, vegetables and flower plants, provided that there is no use of insecticides. This results in additional income for the farmer.7. Women FriendlyOnce the plantation is done, all the other downstream activities like mulberry garden management, leaf harvesting, silk worm rearing can be done by women, which forms about 60% labour force in sericulture. 8. Economic potential of by-products produced during the silk farmingThe by-products or waste generated at each stage of sericulture has an economic use. While the mulberry twigs left after feeding silkworms can be used as fuel, the dead moths can be used for feeding fish in pisciculture.3.Silk Industry AnalysisWe have used Porters Five Forces Model to carry out the industry analysis which has been discussed below.1. CompetitorsThe competitors in the silk industry will be the various varieties of silk which are available in the market, thus the competitors are Tasar, Eri, Muga, Oak Tasar and the Bivoltine silk which is superior in quality and most of which is imported from China. The switching cost within the industry is high as different varieties of silk are specific to a region because of the agro-climatic conditions of that area. It is also difficult to switch from Multivoltine[footnoteRef:6] to Bivoltine because of the difference in contribution towards the income of the farmer. Apart from this the yarns produced by charaka cannot be used by the power looms as they are not very consistent, thus there exists high asset specificity. One time cost of exit is not very high as silk industry does not require much investment apart from investing in high end reeling machines like Multiend reeling machines, the usage of which is as low as .38% in India as most of the reeling is done using charaka. The product differentiation is high in the industry because of the quality and the work done on the cloth. Thus, the competition and rivalry within the silk industry is high. [6: Multivoltine and Bivoltine are two varieties of the mulberry silk which differe in various sways like Bivoltine is reared twice a year, thus yielding lesser income to the farmer as compared to multivoltine which can be gown 12 times in a year. Bivoltine silk is although of superior quality and thus there is more demand for it. Of the total mulberry production only 10% comes from Bivoltine. ]

2. SuppliersThe suppliers in the silk industry are the seed providers like the government grainages, NSSO( National Silkworm Seed Organisation) and the various licensed seed producers.As switching is easy from one seed producer to another the concept of number of important suppliers does not exist in the silk industry. Silk suppliers do not usually integrate downstream. Suppliers contribution towards the quality is high as the characteristics of the cocoon will depend on the breed supplied. The bargaining power of suppliers is less as they are dispersed and unorganised. 3. SubstitutesSubstitutes of the produce of silk industry are cotton, Nylon, Polyester et cetera.The switching cost for a producer to the various substitutes is high as different substitutes involve different value chains, processes and machineries. Availability of the substitutes is high in the market making it easier for the consumer to switch. Thus, the threat of substitute products is high for silk industry.4. BuyersThe buyers for the silk industry are the end consumers who buy Sarees.As the buyers are dispersed they dont command the bargaining power. The switching cost for a buyer is low as there is easy availability of substitutes and the price at which the substitutes are offered is considerably low as compared to the price of the silk.5. New EntrantsThe Economies of scale in the silk industry are low, thus there is not much advantage to the incumbents. The capital requirement is moderate as it does not require huge capital investment. The access to distribution channels is easy for the new comers. The learning curve and experience required is moderate to function in the silk industry. The government protection provided to the industry is high as import duty is imposed on the silk imports from China, however the consistency of these policy is low which keeps on varying. Thus the threat of new entrants is high in the silk industry.Porters Five Forces

Potential EntrantsThreat of new entrants is High

SuppliersGovernment Grainages, NSSO and licensed seed producersBargaining Low.BuyersConsumers of SareesBargaining power is LowIndustry CompetitorsTasar, Eri, Muga, Oak Tasar and the Bivoltine silkRivalry is High

SubstitutesCotton, Nylon, PolyesterHigh Threat

Silk Value ChainThe various stages 1) Breeding of silk worm eggs This is done at facilities established by the Central Silk Board, Grainages established by the state government and licensed private players. 2) Mulberry Production This is taken up by farmers. There are three kinds of mulberry leaves produced in the country. Multivoltine, cross breed and bivoltine. Multivoltine and cross breed both yield upto 6 crops per year, while bivoltine yields only 2 crops per year.3) Cocoon rearing Cocoon rearing is done mostly by the farmers themselves, i.e. most of the people who cultivate mulberry also rear silk worms. The cocoon rearing has a cycle of 25 days. After this the cocoons are sold in the markets. 4) Boiling, reeling and twisting Before extracting the silk thread from the cocoon, the worm inside the cocoon must be killed. This is done by boiling. If the worm stays alive, it produces certain enzymes which can cause the silk fibres to break down in length. Once the worms are killed due to the heat, the cocoons are reeled to extract the thread out. Twisting is important because the Indian cocoons are of low quality and for them to be strong enough to withstand weaving, they have to be twisted. Twisting is done for the cross breed and the multivoltine cocoons. The bivoltine cocoons produce sturdy yarn which does not require to be reeled. Reelers buy the cocoons from the market and take it to the boilers. 5) Dyeing Different colors are applied to the extracted silk before selling to the weavers. This happens in cases where the reelers are able to source orders for specific colors of silk threads. If the reelers dont have orders for specific colours, the dyeing is done by the weavers themselves based on the requirements they have from their clients.6) Weaving Weaving takes place on handlooms as well as powerlooms. Powerlooms are very well suited for the bivoltine silk, since it is strong and sturdy. Only 10% of the mulberry silk produced in India is of the bivoltine variety. The rest of the silk is of the cross breed and multivoltine variety. The handlooms prefer the cross breed and the multivoltine variety. 70% of the looms in the country are handlooms. The rest are powerlooms.7) Silk products The products are sarees, shawls, carpets, handicrafts which are sold in the markets through retailers and exported. The sarees made out of bivoltine silk have a huge export market. 8) India still imports 20 % - 25% of its domestic demand from China. In the year 2011, domestic consumption of silk was around 28733 MT while India produced only 23060 Mt of raw silk. This means that India not only has a strong captive domestic market, but also a huge export potential9) The major problems faced by the silk industry in India are multi dimensional and need a multi pronged approach to tackle them. The three major problems plaguing the silk industry in India are- gap between demand and supply, quality of cocoons and outdated reeling machines.Problems in the silk industryIndia still imports 20 % - 25% of its domestic demand from China. In the year 2011, domestic consumption of silk was around 28733 MT while India produced only 23060 Mt of raw silk. This means that India not only has a strong captive domestic market, but also a huge export potentialThe major problems faced by the silk industry in India are multi dimensional and need a multi pronged approach to tackle them. The three major problems plaguing the silk industry in India are- gap between demand and supply, quality of cocoons and outdated reeling machines. Sericulture is becoming an unviable option for many farmers, reelers and weavers who are dropping out of the industry because of the low remuneration. These farmers who produce cocoons for raw silk manufacture face a market where the price volatility is very high. Also, since these are mainly small and medium farmers with limited landholding, their produce does not have sufficient volume. All these factors lead to a lack of bargaining power among these farmers and hence because the prices of their outputs keep fluctuating, they find it hard to meet their costs. The problems are further accentuated when the reelers, who purchase the cocoons from the open market are faced with erratic supply conditions. If the prices at the Mandi shoot up, it adds to their cost of production, which is then passed on to the subsequent stages. A more serious problem is that these reelers, cannot procure substantial volumes at fixed prices. The prices of the cocoons change every day and the quantity sold in the mandi also varies. The average monthly price of cocoon sold in Ramanagara stayed above Rs 197.21 a kg for 14 months starting February 2009, before slipping to Rs 168.63 a kg in June, government data shows. The average daily price on 3 December was Rs 156 a kg. On 6 November, a shipment of cocoon sold for a mere Rs 50 a kg. But a year earlier, on 31 December 2010, the highest bid for cocoon from Ramanagara was Rs 427 a kg.The second part of the problem is that the quality of the produce from the farm is very low. The farmers do not follow the best silkworm rearing practices and hence, the domestically produced silk is not competitive in the foreign market and also fails to fetch a good price for all the actors involved in the value chain. Institutionally there is no support for training the farmers about quality cultivation and ensuring adherence to standard techniques of silk production (cooperatives are working on this area mainly not too many). This is coupled with the outdated reeling machines used to draw out silk fibres after the cocoons are stifled and cooked. Chinese silk is of uniform quality as the reeling is done at factories using automatic machines. On the other hand, reeling in much of India is primarily a cottage industry, and consequently the quality of silk varies from household to household. This is disadvantageous for weavers especially when theyre producing in bulk. The automatic reeling units, which are as low as 0.38% in India ( check ) can use the domestically produced raw silk and for high speed rapier powerlooms owing to the consistency in size along with reduced losses during degumming and less winding breaks. Our multi end silk units can also work on the locally produced multivotltine cocoons to produce a fine grade silk. Hence to increase the quality of the domestically produced silk and to reduce the reliance on Chinese raw silk, we need to increase the quality check measures on the farm and couple them with more automatic reeling machines. Since the working capital required for such a venture would not be available with the farmer, institutions providing credit need to be explored. Also once the number of automatic reeling units increase, they would essentially require being fed with a constant supply of cocoons to utilize their capacity. In this regard it is of utmost importance that the measures to increase productivity and smoothening of cocoon supplies are taken up. . A major road block is that there is no system in place for grade based pricing. The quality of cocoons is established by the traders through visual examination and hence is not standardized. This practice has a disincentive for farmers to adopt better rearing practices to ensure a high quality produce. The farmers need to be incentivized to adopt better rearing practices. This incentive should come in the form of paying them higher if they bring a high quality produce which is tested scientifically. A better quality of cocoons would ensure better returns to the reelers and the weavers, most of which would trickle back to the farmers.About 55% of total revenue generated in the entire cycle of silk production (from mulberry plantation to fabric weaving and trading) is from the mulberry plantation and silk worm rearing. Reeling & twisting gets about 15-16% of the revenue. Only 30-35% revenue accrues to the weavers and traders. Hence sericulture provides the farmer a unique opportunity of being the majority shareholder in the value chain of an agriculture based product

Agro climatic conditions for mulberry:Climate Mulberry can be grown upto 800 m MSL. For the optimum growth of mulberry and good sprouting of the buds, the mean atmospheric temperature should be in the range of 13oC to 37.7oC. The ideal temperature should be between 24 and 28oC with relative humidity of 65 to 80 percent and sun shine duration of 5 to 12 hours per day.Mulberry can be grown in a rainfall range of 600mm to 2500mm. Under low rainfall conditions, the growth is limited and requires supplemental irrigation. On an average, 50mm once in 10 days is considered ideal for mulberry.SoilMulberry can grow practically on any type of land except on very steep lands. Good growths, however, are obtained when it is raised on either flat land or gently sloping or undulating lands. On more slopy or steep lands, necessary attention to proper soil conservation methods as contour drains, contour planting or even bench terracing should be given. Slightly acidic soils (6.2 to 6.8 pH) free from injurious salts are ideal for good growth of mulberry plant. Saline and alkaline soils are not preferred. best growth is obtained in loamy to clayey loam soil.

Conditions for Cocoon Rearing: The environmental conditions play a very vital role in determining the quality of cocoons. The quality of cocoons is a factor of ideal temperature and humidity in which cocoons are reared. Therefore, to keep the temperature and humidity range within the limit is absolutely essential for rearing silkworms.Temperature:With the rise in temperature, the metabolic activities of the worm are increased while they are slackened when the temperature is low. Therefore, at higher temperature the growth of the larvae is fast and consequently the duration of larvae period is shortened. On the other hand growth becomes slow at low temperature and it favours to prolong the larval duration. Therefore, to keep the temperature range with in the limit is absolutely essential for rearing silkworms. The temperature varies from season to season. Generally, the rearing practice starts in the month of September depending on the leaf availability. The room temperature is considerably low during winter and rainy seasons, thus it becomes a hurdle for rearing. For providing required optimum temperature the room has to be heated with electric heater or charcoal fires. Rearing of cocoons requires proper temperature of 23-25o C.Humidity: The role of the rearing humidity upon the growth and health of silkworm is similar to that or rearing temperature. It directly involves to influence the physiology of silkworm larva while indirectly influences the rate of withering of leaves in the larval beds. Therefore, for the suitable rearing the optimum humidity for the growth of silkworm is about 70-80%. Moreover, ventilation should be proper because in a desiccated room the worms are unable to eat mulberry leaves and if the air of rearing room is moist, the silkworms become vulnerable to diseases and pests.Table: Optimum temperature and humidity requirements of silkworm during various stagesEnvironmental factorsIncubationI instarII instarIII instarIV instarV instarSpinningCocoon preservation

Temperature

25C

28C

27C

26C

25C24C25C25C

6570%70%80%

24C

25C

25C

Relative humidity

7580%

8590%85%

80%

7075%

6570%

70%

80%

ReelingReeling industry is an ideal cottage industry. Reeling is done on the cocoons for unwinding the silk filament for value added benefits such as processing and weaving. More than 50 per cent of silk is reeled by a village using country Charka and in this way contributing to cottage industry. Process

Reeling is a process of converting the agricultural produce (viz cocoons) into an industrial product known as the yarn. The main actors involved in reeling are households or enterprises. The different stages of reeling process can be illustrated as below:

Problems faced by the Reeling Community

Silk reeling is a weak link in the sericulture chain. The main problems of this stakeholder community are associated with raw material availability and working capital constraints. Oneof the chief concerns in silk reeling is the quality of cocoons which gives low yield of silk.The reeling sector still remains highly unorganised and fragmented and mostly uses traditional reeling techniques. Low yield of silk due to improper quality of cocoons, price fluctuation due to Chinese exports and dumping, and shift in preference among the weaving community from the traditional Indian reelers to imported silk are major concerns of the reelers. Another problem faced by the reelers is their inability to procure loans from banks for their working capital requirements, mainly because of their poor financial condition and the already existing loan defaults. Reeling in much of India is primarily a cottage industry, and consequently the quality of silk varies from household to household. This is disadvantageous for weavers especially when theyre producing in bulk.

The current import duty structure in silk sector is inverted with higher duty on raw materials and relatively lower duty on finished products. This imbalance needs to be corrected, while keeping in view the price sensitivity of the sericulture sector

Cocoon prices

The prices of the cocoons change every day and the quantity sold in the mandi also varies. For example, the average monthly price of cocoon sold in Ramanagar (specific to Karnataka) was above Rs 197.21 a kg for 14 months starting February 2009, before slipping to Rs 168.63 a kg in June (Government data sources). The average daily price on 3 December was Rs 156 a kg. On 6 November, a shipment of cocoon sold for a mere Rs 50 a kg. But a year earlier, on 31 December 2010, the highest bid for cocoon from Ramanagara was Rs 427 a kg. This is coupled with the outdated reeling machines used to draw out silk fibres after the cocoons are stifled and cooked. Chinese silk is of uniform quality as the reeling is done at factories using automatic machines.

Reeling Units

It is of interest to note that despite enormous increase in the production of man-made fabric. In recent years, global silk production has maintained steady levels. The building in which cocoons are reeled for the production of raw silk is called a filature.

Charka and Cottage basin are still predominant reeling units used by the reeling community. There is a slow transition towards automatic reeling units. The automatic reeling units, which are as low as 0.38% in India can use the domestically produced raw silk and for high speed rapier powerlooms owing to the consistency in size along with reduced losses during degumming and less winding breaks. Our multi end silk units can also work on the locally produced multivotltine cocoons to produce a fine grade silk. According to the latest statistics available on income per day is Rs. 45.16 in the reeling machines compared with Rs. 10.36 in country charka.

Filature is carried with sophisticated automatic machines to ensure production of raw silk of desired qualities. The filature concept is seen in developed countries where the raw materials (cocoons) are of superior quality. But in other countries (where cocoon quality is not good) highly efficient Multiend reeling machines with auxiliary equipment are installed and rational techniques of production are adopted.

Impact on WeaversSince domestic production of silk is insufficient to meet the domestic demand and export orders, and the supply is also uncertain in nature, there is increased dependence of the weavers on imports. Moreover, the domestically produced silk is available in small quantities and also lacks uniformity in quality, which makes it difficult in being used in power looms as it affects the weaving process.

Technology

Inadequacy of scientific method of sorting (grading) of cocoons results in mixing of bad quality cocoons in the auction market. This results in wastage of cocoons during the reeling process, resulting in increased cost of production to the reelers.

Support from Government and Central Silk BoardThe Government, with a view to support the reelers, announced various schemes to support silk reelers. The highlights of these are as below: The objective of the current scheme is to encourage the production of quality Bivoltine silk by the private and co-operative reeling units. This envisages payment of an incentive of Rs.100 per kg of Bivoltine silk reeled on Multiend / Automatic reeling units in the States of Karnataka, Tamil Nadu and Andhra Pradesh and Multiend / Automatic /Cottage basin reeling units in all the other States. Incentive of Rs.100 per kg of Bivoltine silk reeled on Multiend / Automatic reeling units in the States of Karnataka, Tamil Nadu and Andhra Pradesh and Multiend / Automatic /Cottage basin reeling units in all the other States should be provided. Establishment of reeling and dupion reeling infrastructure to produce import substitute quality silk. Concessional duty of 5% under Sl. No 252 of Appendix-A (List-32) on Silk machinery such as Automatic Silk Reeling, Silk Weaving, Twisting, Arm Dyeing, Fabric Dyeing, Finishing Machinery, etc. The incentive amount to be shared by CSB and State in the ratio of 50:50 (general States) / 90:10 (NE and special status States) in respect of the Bivoltine silk reeled on Multiend / Cottage basin units. Bivoltine raw silk which falls 2A Grade and below should be eligible for an amount of Rs.100/kg and the raw silk which falls 3A grade & above should be provided with an additional incentive of Rs. 50 per kg

Production Risks in silk productionThere are various reasons of production risks in farm occupation which are caused by climatic conditions, pest attacks and disease, human error and imprudent use of technologies. In the process of mulberry cultivation to silkworm rearing and cocoon production to silk thread rearing, the process goes with a series of risksProduction risks in pre cocoon operations:The production risks in pre cocoon operations include the constraints faced by the farmers in mulberry cultivation and silkworm metamorphosis into silk coccon. The mulberry plant and cocoons are vulnerable to diseases and pests like tukra, leaf roller and papaya mealy bug in mulberry and Uzifly, White Muscardine and bacterial and viral diseases in silkworms. Therefore, to prevent diseases, good sanitation methods and hygienic rearing techniques must be followed.Production risks in post cocoon operations:The post cocoon harvesting operations include various stages such as cocoon stifling, cocoon boiling, reeling, setting. Dyeing and weaving. There are risks associated with each stage. However, the main risk is associated with cooking and storing of cocoon. Cocoon cooking: The risk associated with cooking process of cocoon is related with the overcooking and undercooking of the cocoons. Cooking is interconnected with the wastage occurs in the reeling process. The overcooked cocoon clogs the reeling button and increases the number of breaks during the reeling process. The undercooked cocoon creates hitches in unknotting it which also results in breakage of the filament which in turn produces waste.Storage of cocoon: After the cooking the cocoons they are completely dried before storing. The storage room should not be moist. If the rooms are not kept dried even the completely dry cocoons are damaged by mould attack. Other risk in storing is betel pest attacks.Bivoltine cultivation- advantages, road blocks, Chinese imports and the way ahead.China is the leading producer of high quality bivoltine silk with a production of 90000 MT. As a stark contrast to this fact, India produces only 1600 MT of bivoltine silk which amounts to only 10% of Indian silk production. 90% of the silk produced in India is Multivoltine silk. Since there are weavers who have powerlooms installed for meeting the domestic and global demand for high quality bivoltine silk, these figures are sufficient to explain why Chinese raw silk has found inroads into the domestic silk industry. Left with no alternative to feed their highly efficient powerlooms and to prevent them from running under capacity, these weavers rely heavily on Chinese imports.In China cocoon production is undertaken by small farmers and the conversion is done by automatic silk reeling units on large scale thus ensuring uniform quality. Majority of our cocoon production is done by small and marginal farmers (rearing 50 to 100 DFL) by the family members not depending upon outside labour. On account of good price, this is remunerative today and encouraged by this price benefit, more families are eager to take up this avocation in spite of various negative aspects. This is a positive note of the industry and the authorities should take this opportunity to turn our cocoon growers to take up bivoltine cocoon production by offering region wise/season wise races, disinfection etc., by the department and periodical extension programmes. The cocoon marketing is remunerative in Karnataka with transparency, which is an added incentive to the growers and payment system. The proceeds of the sale are available to the grower immediately. This was the foresight of the then Director of Sericulture, Karnataka, who had prepared a detailed project report while availing World Bank loan.[footnoteRef:7] [7: http://www.fibre2fashion.com/industry-article/48/4704/good-price-for-green-cocoons-is-it-a-boon-or-curse1.asp ]

The demand for high-grade bivoltine silk is continuously rising from the side of powerlooms and we have no option but to produce bivoltine silk domestically.[footnoteRef:8] [8: http://www.fibre2fashion.com/news/Association-news/central-silk-board/newsdetails.aspx?news_id=103700 ]

There are reasons as to why farmers should adopt cultivation of Bivoltine silk worms. The table below shows the advantages of using bivoltine silk worms for producing silk. They have higher productivity, better quality and hence higher profits.

The productivity of uni/bivoltines is better than that of multivoltines though they require more favourable temperature and humidity condition. Bivoltine pure or local race cocoons fetch premium price than reeling cocoons. Thus large number of farmers rear commercial hybrids i.e. female local X male bivoltine or female bivoltine X male bivoltine. New breeds released by Central Silk Board (CSB), i.e. Nandi a bivoltine hybrid is more popular in Karnataka.The table below show the prices of bivoltine cocoons as on 6th September, 2013. It is clearly evident that these cocoons fetch a higher price.SILK FLASH NEWS DATED 06/09/2013 [ Rate:.//Kg.]

GoodsMarketMin..Max..Avg..Qty.(MT) (..)

Cross Breed Cocoons Ramanagaram / 25040532724.050

Sidlaghatta / 26845839425.520

Dharmapuri(TN)/()2704113490.248

Hindupur (AP) / ()*#2223712900.824

Bivoltine Hybrid Cocoons Ramanagaram / 32549440410.291

Dharmapuri(TN)/()2565114320.860

Hindupur (AP) / ()*#2404564072.259

BivoltineSeed Cocoons Bengaluru Bivoltine 550550550

Raw Silk ( Filature) ()KarnatakaSilk Exchange 202033802536

*Rates as on 24.08.13 #No Tansaction due to Bandh since 25-8-13 [footnoteRef:9] [9: http://www.csb.gov.in/statistics/silk-flash/]

Also since the government has now raised the import duty on Chinese raw silk from 5 % to 15%, the weavers would find it more costly to buy this imported silk. In regard to that, they would look towards the domestic producers to meet their supply needs. The government has taken this step to promote more and more farmers to take up bivoltine silk cultivation. It augments its efforts by disbursing credits and subsidies for these farmers. The government also plans to raise the production to 5000 MT of bivoltine production and aims at setting up 400 automatic reeling units that are more efficient.The reasons as to why the farmers have not rendered a high scale of production of bivoltine cocoons are many. Chief among them are-1. The main problem faced by the farmers of bivoltine seed cocoon was incidence of pest and diseases while rearing seed cocoons. Pest and disease attack on silk worm decrease the quality and quantity of seed cocoon and ultimately farmers get low prices for their seed cocoon in market.2. These cocoons can be reared only twice in an year unlike the multivoltine cocoons which can be reared every month. Hence farmers, used to selling their produce every month would not switch to a product that yields returns twice in a year.3. Majority of the reelers use charkhas or filatures for reeling. These equipments are generally suited for multivoltine silk cocoons and hence the incentives for farmers to take up bivoltine silk production is limited.

PLAN OF INTERVENTIONArea of operation:Our targeted area of operation is Siddalaghatta market in the state of Karnataka. Siddalaghatta is the biggest market of cross breed cocoon trading in India and second biggest cocoon market in Asia. There are approx 3500 reeling centres in the surrounded area of Siddalaghatta. Most of these units work as home industry, in which about 10,000 people are engaged directly. It gives us a high scope of targeting the cocoon farmers and reelers and leveraging our intervention further. Moreover, Karnataka is the highest producer of cross breed cocoon. The agro-climatic conditions of Karnataka are also favourable for cocoon production. Based on these factual arguments, we have chosen Siddalaghatta as our area of intervention. The area has approximately 100 villages but we are intended to target and cover 60 villages within 20km radius of Siddalaghatta market. [footnoteRef:10] [10: Annual Report of Central Silk Board 2011-2012 (pg. 81)]

The silk industry is grappling with the problems mentioned above. We attempt to tackle these problems by building a collective which deals with these problems in a phased approach. The broad objective is to collectivise the mulberry and cocoon cultivators, reduce their transaction costs by purchasing inputs collectively and pooling the output so that the transportation costs of the small and marginal farmers can be reduced. Since the pooling would ensure volumes, the bargaining power of the collective would increase and the prices would be remunerative. To reduce the cost of operation of the collective, the cultivation cycles of the farmers would be planned so that all the farmers in one village are ready with their output on the same day every month. In this way different villages would be covered in such a way that there is a certain amount of cocoon being produced every day. The plan is to have an everyday cycle with a guaranteed supply. This would also ensure that reelers do not face a supply shortage. Subsequently when volumes are built up, the collective will aim at bringing the reelers under its ambit by bypassing the mandi and selling volumes at fixed prices to the member reelers. This assured supply at reasonable prices and fixed times would work as an incentive for the reelers to purchase the cocoons from the collective. This plan is aimed at reducing the gap between demand and supply by aligning the time and the volume at which the output comes in the market. This would be followed by training the cultivators to adopt better rearing practices and encouraging the use of automatic reeling units. This would ensure that the quality of the silk is enhanced and hence curtail the encroachment of Chinese silk into the markets. Grade based pricing would buttress the endeavour to motivate farmers to adopt quality enhancing measures. Phase I- The first phase would mark the entry of the collective in the village. It would begin with studying the cultivating cycle of the silk worm rearers with an aim to align their production cycles so that all of them are able to harvest at the same time. This would ensure volumes of supply and garner a better bargaining power to the silk worm rearers who are plagued with unremunerative prices because of their small scale of production. The output will be aggregated and the reelers who use these cocoons as an input, are assured of continuous supply. The collective would take up this initiative so that the farmers can place their trust on the collective, once they see that the exercise helps them earn more per kg of cocoon produced while also reducing their transaction costs. Additionally because they would be assured of better prices due to the volume, they would get higher profits than they would have obtained by selling their low volume produce.

For the collective, the cost it would incur is the cost of storing the produce obtained from the villages before it is sold in the open market. Also since the collective would be collecting the produce from the villagers, the transportation cost would be at its expense. The payments would be released 2 days after the produce is sold and the dues of the collective have been deducted. The collective would use this approach to gather produce from 15 families in 15 villages nearest to the Siddlaghatta Mandi to begin with. The financial transactions involved in this process are enlisted in the table below.Number of villages targeted15

number of families targetted in each village15

Total families targeted225

Average production of each family60 Kg

average price of coccoons per kgRs 394

Price paid to unpooled produceRs 384

Realisation to individual farmer prior to poolingRs 23040

Total output procured13500 kg

Total value realisedRs 5319000

Realisation to individual farmer after poolingRs 23640

Surplus generated for each farmer in lieu of poolingRs 600

Total Surplus generatedRs 135000

The cost of operation of the collective for the first month is listed below. The costs of acquiring space for storage and warehousing has not been included since it is a capital investment which is to be depreciated in the following years.

COSTS

Transportation cost for 15 villages@ Rs 400/villageRs 6000

Cost of operation of the collective

Building RentRs 3000

Salaries for 4 employees @ Rs 6000 per monthRs 24000

Adminstrative ExpensesRs 2000

Total CostRs 35000

The table below shows the net surplus that the farmers would receive as a result of collectivisingTotal SurplusRs 135000

Costs incurredRs 35000

Net surplusRs 100000

Net surplus to each farmerRs 444

Phase 2 - Selling to reelers.Once a steady supply is established and the farmers are sure of the operations of the cooperative, the cocoons can be directly sold to the reelers instead of the Mandi. By directly selling to the reelers, the farmers would totally save the transaction costs that they incur at the Mandi. On the other hand, the reelers pay less than what they have to at the Mandi, to get a kilo of cocoons. By selling to the reelers directly, the farmers add another 2 % to their monthly incomes. Meanwhile, the farmers can be guided on the practises that will help in growing better mulberry leaves.Phase 3 Grading of the cocoons.By helping the farmers adopt better practises to grow mulberry, the quality of the mulberry leaves can be improved which would translate into better quality of cocoons. Grading of cocoons is a very important value addition in the entire value chain. Reelers are on the look out for graded cocoons so that they dont have to negotiate with weavers on the prices. Visual grading only assesses a sample of the whole lot of cocoons. By employing proper grading techniques ...From the market, it has been found out that the top most quality of cocoon is priced Rs 40 more than the average market price. When a sericulturist produces cocoons of top quality, it brings in 30% more to his present family income.Annexure:Varities of Silk found in India Phase-4Now we assume that at least 50% of the reelers would agree to supply their produce to us. This is a conservative figure that we are having taking into consideration the already existing relationship of reelers with some weavers. Its hard to break this age long relationship. Another major reason is that a large number of reelers from different parts of the country come in this state to buy coccons and therefore it would be difficult to trace them all and moreover reaching to them would have higher cost. As we would have a regular supply of raw silk from 50% of our reelers, we can join hands with weavers to assure them regular raw silk supply. Also we would procure zari for these weavers and would sell to the weavers at reduced price. Moreover, garments from these weavers would be distributed to various retail shops, malls, etc. This would not only provide them regular market but also an increased income of Rs 150 per saree.Here we are not looking into opening our own retail chains as we are in a business of single type of silk saree while most of the existing retail shops have a wide product mix (eg. Mysore silk saree, Kanchipuram silk, Banarasee saree, etc.) providing more options to the customers. Also since a huge cost is involved in opening a retail shop along with a fluctuating demand showing a high seasonal trend, it is not profitable to enter into this business with a single type of silk. Rather we can increase our sales by linking to different existing distribution channels as explained above.