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Abstract
Value chain concepts and approaches
can be used to understand the integration of producers of high value products
in developing countries with regional and global markets. A value chain is a
description of range of activities that involves processes of production,
delivery and final disposal of the product after use. The value chain analysis
involves the study of the structure, actors, and dynamics of value chains that
connect farm and forest products. The participants, linkages, structure of cost
and benefit and dynamics of the value chain are studied.
The standardization of the
production procedures in case of medicinal plant industry is important to
develop a uniformity and acceptability in all parts of the world. The various
processes of the value chain i.e. cultivation, maintenance, harvesting,
processing, storage, packaging of the medicinal and aromatic plant industry are
required to be standardized to meet the criteria for the certification as well
as for the assessment of the quality and safety norms of the product and
extracts thus produced. Certifications and the standardization define the
safety and quality of the product that are essential in the international
markets for the commodities to be traded abroad. The analysis discusses about
the current scenario of value chain of the medicinal plant industry and how the
standardization of the value addition contributes in the trade of medicinal and
aromatic plants.
Keywords: Value chain; Medicinal plants; Uttarakhand; India; Herbal
industry; Spices
Introduction
Background
Value addition is the process of
economically adding value to a product by altering its current place, time and
from one set of characteristics to other characteristics that are more favored
in the marketplace [1]. Value addition is the process of creating value in
existing value chain of a product. Value addition in medicinal plant industry
starts at grass root level of cultivation of medicinal plants and primary
processing of medicinal and aromatic plants which includes the procedures like
cleaning, drying and sorting of medicinal plants at very initial phase of
collection and harvesting of medicinal plants.
The basic theory for calculating the
value addition at every level of the production process is the difference
between the market price of the product and the total cost of production of the
inputs used for the production (Figure 1).
The demand for chemicals and
products derived from medicinal and aromatic plants is increasing globally and
has opened up opportunities for entrepreneurs to add value to these plants
through processing, thereby generating enormous employment avenues [2]. India
has abundance of medicinal plants with 8000 medicinal and 2500 aromatic species
which are mined for natural chemicals and processed for commercial products
that are then exported globally. An upward trend has been recorded in the exports
of medicinal and aromatic plants’ products in recent years which have
encouraged Government and private organizations for developing processed
products with medicinal plants. Value addition through processing involves
employment of unskilled rural youth and unemployed, educated urban youth. A
number of value added consumer products can be developed from a single
medicinal or aromatic plant for trade in national and international markets.
Value
chain actors
The returns received by the actors
of the medicinal plant value chain namely villagers, middlemen and wholesaler,
constitute the total trade in medicinal plants. The villagers constitute the
first link in the trade in medicinal plants wherein the cultivators separately
or combined collect the medicinal plant produce and take them up to the
processors for further refinement. There upon, the middle men intervene in the
medicinal plant trade and act as facilitators due to the lack of efficient
infrastructure and link the cultivators to the wholesalers for commissions. The
wholesalers are the distributors of the medicinal plant products to the
ultimate markets and they carry out the work through a complex network of
agents and retailers.
The medicinal plant value chain also
included the secondary actors which are the industries that use the medicinal
plants and their extracts as their input materials and then the value added to
them through the processes operated on them through which the end products are
obtained. The Pharmaceutical industries and the Cosmetic industries are the
prime example of the value addition made to the medicinal plants. These
industries use the medicinal and aromatic plants in fixed percentages and the
final products made are the blend of multiple such plants and extracts.
Research
motivation
The medicinal plant industry in the
North Indian state of the Uttarakhand though is established, but the industry
lacks a systematic structure and direction which can grant the various actors
of the medicinal plant value chain proper guidelines and direction to develop
the products that match the international quality standards. The international
trade in medicinal plants and allied products is based on certain qualitative
and safety standards which should be in place to ensure safety of the medicinal
plants traded. The application and adherence of such standards in production of
the medicinal plants in the country is eminent in order to explore the entire
international trade potential of the medicinal plants.
For the purpose of analyzing the
impact of value addition made by different actors of the medicinal plant value
chain and the value added by the standardization of the production of medicinal
plant products, qualitative method of analysis has been used. The existing
studies have primarily focused on determining the value addition made by
various actors of the value chain of medicinal plants. A very limited number of
studies have explored the benefits of standardization of the various processes
that are crucial to the quality of the end products of the medicinal plant
industry. This study attempts to do that.
Objectives
of the research
1. To understand the value chain
processes in medicinal plant industry of Uttarakhand
2. To identify the issues in the
value chain processes of the industry
3. To analyze the impact of
standardization of active ingredients of value chain on the trade
The study begins with the
introduction of the study. The previous studies pertaining to the topic have
been discussed in the literature review section. Research gaps have been
identified in the same chapter and research framework has been formed. In the
next chapter, research methodology has been stated in which the process that
has been adopted during the entire course of the investigation has been
discussed. Data analysis has been discussed in the succeeding chapter. This
chapter is followed by discussions, conclusions, and recommendations for future
work.
Literature Review
Value
chain of MAPs
Value Chain (VC) defines a complete
series of activities which are mandatory to carry the product or service from
beginning through the different phases of production to the end consumer and
discarding the product after its usage [3]. The value chain concept is an
analytical approach that is been deployed used for evaluating the performance
of the marketing initiatives of any industry or organization. This kind of
analysis helps in identifying the loop holes in the performance system of
marketing initiatives and implementing measures for refining the private and
public interventions [4].
Medicinal plants and its related
products have a wide ranging value chain activities associated with it. Recent
estimates suggest that trade related activities of herbs is projected to attain
a financial worth of US$ 5 Trillion by 2050. Realizing this increasing demand,
it becomes important to assess the activities that can be restructured for
smooth flow of medicinal herbs from producers to end consumers. This kind of
analysis helps in understanding the difference that prevails in quality of the
herbal medicines in different market zones and identify superior quality
products over the inferior ones.
The value chain in medicinal plant
industry comprises of the producers, collector, processors, wholesalers,
exporters and distributors and retailer. The producers, or the cultivators or,
the collectors are the upstream actors of the medicinal plant value chain and
they provide the industry with the basic raw material and inputs for the other
participants to function. While the processors, the wholesalers, the retailers,
the traders and the exporters are the downstream actors of the medicinal plant
value chain which provide the raw inputs of the medicinal plants with value and
the capacity to the trade. The downstream actors enhance the utility of the
medicinal plants and impart value to the products through processing and
packaging of the products which increases the shelf life of the products.
Producers
The production system of MAPs
products comprises of three major groups; wild crafters, plantation operators
and cultivators. The three broad categories of producers differ according to
the level of power they own, the practices they employ and the benefits they
draw from these valuable resources. State Forest Departments are anticipated to
control the harvesting of forest produce and are also expected to maintain a
record of such produce. Thus, majority of information about the raw materials
can directly be obtained from people working in the state forest department.
Collectors
Collectors are those middlemen who
gather harvested herbal species from agriculturalists and wild crafters and
make them available to processors. Because of the changeable demand of the
products, collectors do not involve in the gathering process until they receive
an order for the same. Formerly, several cooperative societies in Uttarakhand
were assigned the role of collection process. Bhesaj Sangh, was one amongst the
trusted collecting agency. But in the year 1986, Kumaon Mandal Vikas Nigam
(KMVN) was started by the government officials to undertake activities
pertaining to collection process and regulate the unnecessary exploitation of
the growers. Thereafter, Garhwal Vikas Mandal Nigam (GVMN) was assigned the
authority of regulating the allied activities of the medicinal plant
agricultural sector. Despite this, Bhesaj Sangh, because of its consistent
attention on collection of medicinal and aromatic plants,wasfar more popular in
comparison to their counterpart.
Processors
Processing of the harvested
medicinal herbs is done in two stages; semi-processing and alteration in the
preparations. The first stage of the processing includes activities like
cleaning the organic material stuck to the herbal species by drying; building
concentrates, disinfecting, boiling and grinding. Marketing processed products
adds value to their produce thereby allowing them charge higher prices for the
same. The processing stage involves numerous activities including the drying,
packaging, storage which enhance the shelf life and assist the marketing of the
medicinal plant products.
Wholesalers
and exporters
The wholesalers and the retailers
constitute the organized part of the medicinal plant value chain. The links
like the cultivators, collectors, processors and handlers in medicinal plant
industry in Northern India are inherently unorganized and scattered in nature,
while the downstream actors, the wholesalers and retailers are relatively
formal in their structure. The wholesalers and the exporters provide the
upstream actors of the medicinal plant value chain with valuable information of
the trends and patterns of the consumer demand for the medicinal plant products
in the domestic as well as in the international markets.
Distribution
and retailing
The distributors and retailers play
a crucial role in connecting the consumers to the producers through the
wholesalers and help the consumers in attaining the products they desire. The
medicinal plant cultivation usually is situated in the remote areas of the
countries with abundant and rich biodiversity while a majority of the consumers
are centered in the clusters of urban areas. The retailers provide the function
of connecting the producers with the consumers. The retailers obtain the
medicinal plants from the wholesalers and in certain cases, directly from the
producers (processors) and offer the medicinal plant products in the market to
the consumers for the ultimate consumption. The retail sellers of the medicinal
plant industry also performs the function of acquiring the required credential
sand certificates for the medicinal plants before such products can enter the
consumer markets as the per the national and regional safety and quality norms
[5].
The distributors, on the other hand
perform, similar functions like the retailers but they interact with both the
wholesalers and the retailers while the retailers interact only with the
consumers.
Standardization
of MAPs
Lazarowych et al. [6] in their study
of the Standardization practices of the botanical drugs and the various
strategies used for the standardization, have highlighted the standardization
of the medicinal plants and the resultant botanical drugs has enabled the
development of the required strategies for the enhancement of the quality of
the products of the industry and maintenance of the homogeneity of the
medicinal plant products. Well established system of standardization, according
to Lazarowych et al. [6] can help to establish efficient control mechanisms for
quality of the raw medicinal plants and the processed extracts of the plants.
The need for standardization in medicinal plant industry has been further
accentuated in a paper by Folashade et al. [7] which corresponds to the issue
of standardization of the herbal plant industry. According to Folashade et al.
[7] the standardization of the medicinal plant and the herbal product industry
is eminent because of the act that the medicinal plants and the processes
involved in their value addition are based upon a fine balance of constituents
and are precariously time lined. Any deviation from the balance might lead to
serious implications on the quality and nature of the end product. Without the
standardization of the production and processing stages, the value chain actors
may act independently and the resultant products might not be favorable for the
consumers for the desired treatment of the ailments. The authors lay the
responsibility of ensuring the safety of the consumers and the products that
they consume on the Authorities’ shoulders and the safe procedures of
production, harvesting, processing and packaging ought to be outlined by the
authorities so that the ground rules for the production are set in the industry
which can then be used as the basic criteria for judging the products and the
assessment of the products can be assisted in similar manner.
Research
gaps and framework
Certifications and the standards
provide the products with the scientific seals of safety and quality that are
essential in the international markets for the commodities to be traded abroad.
The current study determines the importance of standardization of value chain
processes by examining its impact on trade volume and trade price of Medicinal
Plants (Figure 2).
Irrespective of the increasing
demand and huge market size of the medicinal products, there is a huge gap in
the amount of studies that have been undertaken in the context of value chain
of medicinal plants, that too specifically in the context of Uttarakhand. There
exist several prior researches which focus on determining the value addition
made by the various actors of the value chain of medicinal plants but not many
studies explore the benefits of standardization of the various processes that
are crucial to the quality of the end products of the medicinal plant industry.
Research Methodology
The aim of the study is to
understand the current status of value chain processes of medicinal plants in
Uttarakhand and the impact of standardization of value chain processes on trade
volume and trade price of medicinal plants. This is done because it has been
observed that majority of the trade in this particular sector was happening in
its raw form. The data has been collected from various government sources such
as State government medicinal Plant websites: NMPB, ENVIS etc. and empirical
research papers related to this area. The analysis provides information about
the certifications the various systems of AYUSH, value chain practices, cost
and benefits and trade related information of medicinal plants. The impact of
standardization on trade volume has been analyzed in the data analysis.
For the purpose of satisfying this
particular objective, analysis has been performed to ascertain the impact of
the standardization on the Indian export of medicinal and aromatic plants and
the allied products, the year in which the standards were established in the
Indian medicinal plant Industry has been used as the benchmark year and
comparative analysis has been done of the Indian trade in medicinal plants five
years prior and five years post the standardization of the industry in order to
gather the overall impact of the standardization on the economy.
The study is descriptive in nature
in the sense that it includes collection of data that explains events and then
organizes to come up as a result. Secondary data related to quantity of
medicinal plants collected/produced/traded have been collected from the records
of the State Forest Departments in many research studies [8,9] (Figure 3).
Findings
Value
chain analysis of MAPs in Uttarakhand
The value chain makes addition at
every level of the production. The value chain actors are responsible for
processing and adding value to the medicinal plants and developing the product
to fulfill global demand. The value chain analysis of medicinal plants is done
to understand the discrepancies in the process and to assess ways to improve
the same.The division of the returns from the trade in medicinal plants among
the various actors in medicinal plant trade has been depicted below. All
through the medicinal plants under consideration, trend continues wherein
wholesalers takes up the largest piece of the pie and get the largest share in
the returns from total trade in the medicinal plants and returns to middlemen
follow soon after for receiving the second highest share in the total returns
from medicinal plant trade. The initial cultivator or villagers are the worst
off group of players in medicinal plant trade.
There have been identified issues
regarding the distribution of income and an attempt has been made to understand
the probable reasons. One such reason can be unregistered and untrained
farmers. Lack of training and understanding of the process and acknowledgement
of market value of medicinal plants is the reason for unequal distribution of
returns arising from sale of medicinal plants.
The analysis of the data set reveals
a larger share of medicinal and aromatic plant trade going to the wholesalers
which is contradicted by the findings of Shahidullah and Haque (2010) in their
study of the relationship between the medicinal plant production and livelihood
enhancement in the case of Bangladesh. Their study indicates that the primary
and secondary- wholesale markets for the medicinal plants are dominated by the
middlemen and not the primary producers and the wholesalers who benefitted from
the trade in medicinal plants. According to their findings, the medicinal plant
cultivation is sustainable for the relatively economically well off cultivators
who usually have access to the better quality of land and the technical
equipments. However, Shahidullah & Haque [10] also agreed that the small
scale medicinal plant cultivators need to organize themselves in order to gain
better holding in the market through an improved control over the quantity
supplied in the market and hence the prices which determines their returns.
The value addition in specific
species was also assessed. The comparative scrutiny of the value addition made
by the cultivators for the given medicinal plants reveals that the value
addition was the highest in the case of Chandramul, Kapur Kachari and
Sarpgandha at Rs. 13680 while Kali Jiri had the lowest value addition made at
the primary stage of cultivation. The value addition in the given data set was
lowest for the plant Kali jiri while Kapur Kachari, Sarpgandha and Chandramul
had the highest value added at the cultivation level of the medicinal plant
value chain.
Standardization
of medicinal and aromatic plants and its impact on trade
The certifications of the value
chain processes improve the tradability of medicinal plants since it assures
the quality of the product to buyers in different countries. Certification
programs have been introduced by Indian agencies as well to improve the
acceptability of Indian medicinal products abroad. However, the compliance is
not made mandatory for the companies and other participants. The systems wise
distribution (%) of good manufacturing practice and non-good manufacturing
practicecompliant Ayurveda, Yoga and Naturopathy, Unani, Siddha, and Homeopathy
pharmacies has been depicted below that suggests that many of the AYUSH
pharmacies do not comply to Good Manufacturing Practices and do not even have
license.
AYUSH:
Ayurveda, Yoga, and Naturopathy, Unani, Sidhha and Homeopathy
GMP: good manufacturing practices: The capacity of trade of
medicinal plants in Uttarakhand has been assessed through number of traders
present in different districts, amount of wholesale trade and trade through
mandis. The district wise distribution of the medicinal plant traders in the
state of Uttarakhand in the period ranging from 2008-09 to 2012-13 has been
depicted below. In the year 2008-09, the total number of traders in the
medicinal plant trade amounted to 571 and the highest number of traders were in
the district of Pithoragarh while the lowest were in the districts of Rudraprayag.
The year 2009-10, the total number of traders was 600 wherein the highest
number of traders was in the Pithoragarh 259 and the lowest numbers of traders
were in the Chamoli district of Uttarakhand. In the next year 2010-11, the
total number of traders was 864 and the highest number of traders was in the
Pithoragarh district while Uttarkashi and Rudraprayag had the lowest number of
traders of the medicinal plants. The year 2011-12 witnessed the numbers of
traders decline to 594 with the highest number of traders in Pithoragarh (337)
and the lowest in Rudraprayag (1). The year 2012-13 witnessed an increase in
the number of total traders to 732 with highest number of traders in the
Pithoragarh district and the least traders in Rudraprayag. The number of
traders in the given period increased from the 571 in 2008-09 to 864 in 2010-11
but declined to 594 thereafter in 2012- 13 (Figure 6).
The impact of standardization on
trade has also been assessed. The voluntary scheme of standardization scheme
introduced in the year 2009 was adopted by many companies involved in the value
processing of medicinal plants. The impact of the scheme on the trade values of
medicinal plants has been assessed and for this, pre and post 2009, figures of
trade, when standardization was introduced for the medicinal plants has been
compared.
The exports figures of the medicinal
plants in the years prior and post the launch of the standardization scheme by
the government in the year 2009-10 have been depicted. The years 2003-04 to
2008-09 have been taken into consideration to grasp the export scenario of the
medicinal plants before the launch of the medicinal plant standardization. In
the year 2008-09, the total exports of the medicinal plant products was 125.4
million USD which was a major improvement since 2003-04 when the Indian exports
of the medicinal plant products to the rest of the world used to be 65.71
million USD. The total exports for the given period amounted to 528.75million
USD. The exports reached a high of 233.7 million USD worth of medicinal plant
export in the year 2014-15. The total exports in the period ranging from
2009-10 to 2014-15 were almost the double of the total medicinal plant export
of the previous period at 1068.22 million USD.The trend of Indian exports of
medicinal plants over the period ranging from 2003-04 to 2014-15 and the effect
of the standardization on the total exports of the medicinal plants of the
country have been analyzed. The year 2008-09 has been taken the bench mark year
in which the National medicinal Plant Board of India introduced the standards
in the Indian medicinal plant industry. The year post the introduction of the
certification policies in the system saw a fall in the export of the medicinal
plants for one year which picked up in the corresponding years. The Indian
medicinal plant exports have improved over the year’s post the standardization
of the industry which implies the positive impact the certification and
standardization has had over the industry exports .
The analysis of the data reveals
that the standardization of the medicinal plant industry does indeed has
improved the foreign trade quantities of the Indian medicinal and aromatic
plants in the foreign which is evident in the study of the pattern of trade
which corresponds five years prior to the standardization and certification
obligation (2004-05 to 2008-09) in the country and five year post the
standardization (2009-10 to 2013-14) of the industry. The comparative analysis
of the figures shows a boom in the Indian exports to the world in the years
after the standardization was made compulsory in the year 2008-09 for the
medicinal plant cultivators, processors and the marketers and traders. The
basic requirement for the standardization of the medicinal plants is explained
by Tierra (2002) in his research article discussing the need for
standardization of the medicinal plants and extracts. Tierra emphasizes that
the standardization of the medicinal plants and extracts would lead to a higher
degree of technological refinement of the products of the industry as compared
to unorganized system of the medicinal plants and the resultant products
provide safer, stronger and more effective products that are supported by an
adequate scientific evidence to substantiate the quality and the authenticity
of the medicinal plants and the extracts and oils derived from them.
The standardization process is
likely to minimize the gap between the prices offered in Indian market and
international markets. Authenticated raw material is the basic starting point
for the development and manufacturing of a botanical product. Harvesting,
storing, processing and formulating methods may effect on the quality and
consistency of the herbal product. Our herbal products are not getting
international market because we are not capable to show the international
standard of our products. A coordinated effort of all the supply chain actors
and improved market facilities is likely to improve the export prices of the
medicinal and aromatic plants; as discussed in Table 3. The rising export
prices from the year 2008-09 till 2012-2012, shows that significant
improvements were made in the traded prices of the medicinal produce.
Thereafter the prices declined might be because of ineffective marketing
strategies or poor market linkages.
Lazarowych et al. [6] in their study
of the Standardization practices of the botanical drugs and the various
strategies used for the standardization, have highlighted the standardization
of the medicinal plants and the resultant botanical drugs has enabled the
development of the required strategies for the enhancement of the quality of
the products of the industry and maintenance of the homogeneity of the
medicinal plant products. Well established system of standardization according
Lazarowych et al. [6] can help to establish efficient control mechanisms for
quality of the raw medicinal plants and the processed extracts of the plants.
The need for standardization in medicinal plant industry has been further
accentuated in a paper by Folashade et al. [7] which corresponds to the issue
of standardization of the herbal plant industry. According to Folashade et al.
[7] the standardization of the medicinal plant and the herbal product industry
is eminent because of the act that the medicinal plants and the processes
involved in their value addition are based upon a fine balance of constituents
and are precariously time lined. Any deviation from the balance might lead to
serious implications on the quality and nature of the end product. Without the
standardization of the production and processing stages, the value chain actors
may act independently and the resultant products might not be favorable for the
consumers for the desired treatment of the ailments [11,12].
Conclusion
The standardization of the
production procedures of the medicinal plant industry is eminent for the
development of a more systematic, uniform and high quality medicinal and
aromatic plant industry in India. The standards of the cultivation,
maintenance, harvesting, processing, storage, and packaging function of the
medicinal and aromatic plant industry are necessary to set up the criteria for
the certification as well as for the assessment of the quality and safety norms
of the product and extracts thus produced. Certifications and the standards
provide the products with the scientific seals of safety and quality that are
essential in the international markets for the commodities to be traded abroad.
Further, the analysis talks about the current scenario in the medicinal plant
industry wherein the returns are unequally distributed among the various actors
of the medicinal plant value chain which leads to the low participation in the
industry as well as the poor performance at the grass root level. The wholesalers
and the middlemen in the state of Uttarakhand take up a majority of the
medicinal plant sector’s revenue while the small scale cultivators receive
little which impedes the performance of the sector. Medicinal plant sector in
the North Indian state of Uttarakhand needs a systematic organization structure
which assists the value chain actors in receiving the quantum of returns due to
them and the injection of standardization and uniformity of the commodities
produced which further enhances the value of the products in the domestic and
the international markets. There are various issues identified in the value
chain process of medicinal plants such as distribution of income among the
various value chain participants, lack of training and understanding of the
process and acknowledgement of market value of medicinal plants and lack of
quality of products. These issues can be addressed through standardization of
medicinal plants value chain and a strong plan to create awareness among the
participants of value chain. The government of India in collaboration with the
national medicinal plant board and the state medicinal plant boards has decided
permissible level of contaminants in the production of selected medicinal
plants. These level needs to be adhered to in order to gain local and state
level permission from the authorities to function in the markets.
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