Developing Entrepreneurship in Value Chains of Cinnamomum tamala (Bay Leaf): Linking Poor Producers to Markets of Essential Oils and Spices

Project Area and Partners

An action research project ‘Developing entrepreneurship in value chains of Cinnamomum tamala (bay leaf): Linking poor producers to markets of essential oils and spices’ was implemented from January 2008 to December 2009  in Chamoli District in Uttarakhand, India, and Udayapur District in Nepal. Regionally facilitated by ICIMOD, the project was implemented in collaboration with the Overseas Development Institute (ODI), UK, with financial support from the International Development Research Centre (IDRC), by the Himalayan Action Research Centre (HARC) in Chamoli and the Federation of Community Forest Users Nepal (FECOFUN) in Udayapur. The project targeted 250 households at the two project sites with the aim of supporting poor mountain households in remote regions to engage more successfully in bay leaf value chains and thus increase their income.

Strategies

  • Value chain development and analysis was a major project component. The project provided a platform to test and validate the relevance of mountain specificities in value chains for high value products (HVPs). The aim was to enable upstream producers to participate and benefit more equitably. The action research showed clearly that mountain value chains are influenced by a set of mountain specificities that are the basis of both comparative advantages and challenges to reaping higher returns. Mountain specificities such as the availability of unique niche products and services, poor accessibility, fragility, diversity, and marginality have a strong impact on value chain analysis and the selection of value chain development options.
  • The research identified key issues in the bay leaf value chain that needed to be addressed at the upstream level. These included lack of organisation of the producers, lack of market information and access, absence of quality practices and low capacity to conform to market requirements, and policy hurdles to accessing the bay leaf resources on government land.
  • Upgrading strategies were developed to address some of these issues using a participatory approach. Collectors and producers were helped to form groups and apex institutions for production and marketing of bay leaves. Market information was gathered through surveys and shared with the groups. Training programmes were organised on group building, bay leaf cultivation, and management and enterprise development. Linkages were facilitated with buyers (local traders and exporters) and contracts were signed. Different government line agencies were mobilised for technical support, and services of the buyers were embedded in the contracts to provide training on collection, grading, sorting, and packaging of leaves. Special emphasis was laid on sustainable harvesting of leaves and plantation development for environmental conservation.
  • The action research focused on integrating the three cross cutting themes of poverty, environment, and gender in value chain analysis and upgrading. The research also promoted cross-border learning and sharing of good practices between value chain practitioners in India and Nepal.

 

Upgrading strategies for pro poor bay leaf value chain development

Upgrading strategies Benefits/gains for target groups
Horizontal coordinationBetter prices, bargaining power, broad based access to knowledge and information; access to finance; empowered women groups.
Vertical contractualisationBetter prices, trust and future gains, and reduced vulnerability.
Product and process upgradingQuality products, reduced losses, efficiency in supply mechanism, and potential to access new and remunerative markets
Support strategiesPolicy change in favour of the poor, markets closer to production sites, better prices, access to support services; potential for scaling up and replication

Results at the project sites

In Nepal, the major value chain intervention was linked to the organisation of producer groups, which finally federated to form a producer’s cooperative. This organisation provided a voice to the producers, helped them integrate quality aspects into their production, and strengthened their bargaining power. A contract was facilitated with a local wholesaler of bay leaves that clearly laid out prices according to the quality grades.

In India, harvesting of bay leaf from the forests was facilitated by steering a policy readjustment that allowed local communities to access the collection permits, and then linking the production to markets by bringing the markets to the producers’ doorsteps. This was done under an innovative modification of the existing mandi system (market yards) called ‘floating mandies’.

The outputs were highly relevant for the target groups in terms of the impacts on poverty, environment and gender. The income of the target groups increased substantially. In Nepal, the average household income from bay leaves increased three-fold in 2009 from NRs 3000 to NRs 9000, leading to a 20% increase in average household cash income. In India, the diversification of income, though small (IRs 3150 on an average), made a major contribution in the rural mountain households. The impact of increased income at the project sites was seen in the improved food security of households, repayment of loans, children’s education, provisioning for clothing, and availability of cash for meeting other HH needs like fitting solar lights in houses.

Learning

The results indicate that value chain interventions at the upstream level can produce immediate benefits to poor producers.

They also show that integration of producers/collectors with local, national, and global MAPs/NTFP value chains has the potential to enhance food security, promote resilience to the global change process, and reduce the poverty of mountain people. This could be replicated and scaled up for wider benefit. 
 
The most important outcome of the action research project is that the processes and methods have a strong scaling up potential. The Government of Nepal through HNCC, and the Government of Uttarakhand through the Forest Department and the Forest Development Corporation, can scale up the efforts initially in all the areas of bay leaf production, and later apply to other NTFP species.