Ensuring supply chain continuity; a first exploration of the working methods of fish meal and fish oil plants in Karnataka, India

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Ensuring supply chain continuity; a first

exploration of the working methods of fish meal

and fish oil plants in Karnataka, India

Bachelor Thesis Human Geography

Human Geography and Urban Planning, University of Amsterdam Student: Elmer Boulonois (10611290)

Email: Elmer_boul@hotmail.com Telephone: +31655938718 Supervisor: Dr. Maarten Bavinck Second reader: Dr. Dennis Arnold

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1. Introduction

Nowadays, small pelagic fish makes up about 37% of global marine landings (Alder et al, 2008; Tacon & Metian, 2009). Although small pelagic fish is rich in nutrition’s and therefore has a high nutritional value for humans, the majority of caught small pelagic fish in the world is destined for non-food use. One of these non-food uses is the reduction of it into fish meal and fish oil. This powder and oil is an important ingredient in compound food for poultry, pigs and aquaculture (FAO, 2016; FAO, 2014a). Moreover, it is used in industries such as the pharmaceutical and leather industry. The production of fish meal and fish oil takes place in processing plants, or FMFO plants for short. Raw materials get through processes of cooking, pressing, drying and grinding, to result in a powder and oil. The raw materials used are whole fish (mainly small pelagic fish), fish remains and other fish by-products such as heads, bones and tails.

This study focuses on FMFO plants in Karnataka, India. Due to the growing amount of FMFO plants in India, demand for small pelagic fish is increasing and therefore putting pressure on available stocks (Draft National Policy on Marine Fisheries, 2016). Several scholars argue that this could have negative consequences for the sustainability of marine fisheries and the food security of the poor (Alder et al, 2008; Tacon & Metian, 2009). Small pelagic fish forms one of the trophic levels in a marine ecosystem. Overfishing of these particular fish species could therefore lead to disturbance of this system. Furthermore, small pelagic fish has a high nutritional value for humans. When the amount of small pelagic fish destined for reduction into fish meal and fish oil is increasing, less will become available for direct human consumption. Mainly the poor will be disadvantaged by these developments, since small pelagic fish is low in monetary value and is therefore an affordable and important source of nutrition for them.

Karnataka is home to at least 22 different FMFO plants. In order to get a better understanding of what impact the activities of FMFO plants have on the food security and environmental sustainability of Karnataka, more in depth research is required. This study tries to initiate this by providing a starting point for further research on this subject. In existing academic literature there is very little written about the working methods of FMFO plants and how these are influenced by contextual factors. In particular, the supply side seems to be underexposed (procurement, sourcing of raw materials, etc.). Therefore, the goal of this study is to answer the following research question: How do FMFO plants in Karnataka ensure that they have continuity in their supply of raw materials for reduction into fish meal and fish oil?

Answering this research question will be done through the use of the supply chain approach. In supply chain analysis, a specific entity of a FMFO plant (e.g. procurement of raw materials) is seen as part of a larger interdependent whole (Swaminathan et al, 1998). Therefore, in order to understand the supply side of FMFO plants in Karnataka, the other entities within the supply chain need to be considered as well. This will be further elaborated in the theoretical section of the paper.

The research consists of a multiple case study of three different FMFO plants in Karnataka. In the next section, the theoretical foundations for the research will be lain by discussing the supply chain concept. In the section that follows, the methodology used to gather and analyse the data, the data collection process and the decisions in regard to validity and ethics of the research will be described. Subsequently, two contextual sections will provide in-depth background information in order to create a better understanding of the industry and the controversies around it. The two topics that will be discussed are: the production process of fish meal and fish oil in general, and, FMFO plants in relation to food security and environmental sustainability. The section that follows discusses the

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5 contextual factors under which FMFO plants in the research area operate, such as geography, government regulations, licenses and certificates. Hereafter, three sections will follow in which the three different cases/FMFO plants will be discussed. For every FMFO plant the geography, organisational structure, procurement methods, outlet, certificates and influence of governmental regulations is described. At last, in the concluding section the research question is answered, a discussion on how the findings can be related to supply chain theory is provided and recommendations for further research are made.

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2. Theoretical framework

To explain in what theoretical spectrum the research problem is situated, this chapter consists of a description of the theory related to supply chains in general. It discusses topics such as supply chain management, resilience, social responsibility, traceability and governmental regulations.

2.1 Supply chains

The supply chain is a widely used concept by academics and business people (Cox et al, 1995; APICS, 2016). It is defined in different ways, depending on the context in which it is used. For this research, definition of Quinn (1997: 30) is used. He defines a supply chain as “all of those activities associated with moving goods from the raw-materials stage through to the end user. This includes sourcing and procurement, production scheduling, order processing, inventory management, transportation, warehousing, and customer service”. Since this research mainly focuses on the sourcing and procurement side of FMFO plants, this part of the chain will be of most interest for the study. However, as Swaminathan et al (1998) argue, the supply chain is not a standalone process in which one entity of the chain could be analysed apart from the others. Instead, the chain should be considered as an interdependent whole with different interacting entities. The performance of one entity (e.g. procurement) is dependent on the performance of the remaining entities in the chain (e.g. order processing, transportation, etc.). This will become more clear in the remainder of this section.

Complementing the concept of the supply chain is the activity of supply chain management (SCM) (APICS Dictionary, 2016). The APICS dictionary defines SCM as “the design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, synchronizing supply with demand, and measuring performance globally”. Most literature about supply chains and the management of it focuses on large scale multinational corporations and therefore does not directly relate to the relatively seen small scale FMFO companies in India. However, this does not mean that such literature is irrelevant; problems and challenges of managing a large scale supply chain could be similar in nature to the problems and challenges of managing a small scale supply chain. Furthermore, as became clear in the introduction, fish meal and fish oil are sold to animal feed industries, pharmaceutical companies and other industries. This makes the production of fish meal and fish oil part of other larger supply chains.

One attribute that poses problems and challenges in managing a supply chain is resilience. The concept of resilience is key when it comes to ensuring continuity in the supply of raw materials. Wieland & Wallenburg (2012: 300) defined the resilience of a supply chain as “the ability to cope with change, either proactively or reactively”. So, the resilience of a supply chain is both the ability to take action before it is a final necessity (proactive), and the ability to recover after experiencing a crisis (reactive). Bakshi and Kleindorfer (2009) call the former “agility” and the latter “robustness”. They define agility as the ability of a supply chain to rapidly change its operation state in response to uncertain and changing demands placed upon it. Robustness on the other hand, implies that the supply chain is able to retain its stable situation despite disturbances. These disturbances could be anything that restrains the supply chain from operating normally. To sum it up, resilience means that the supply chain performs well under varying conditions and scenarios and endures disturbances rather than responds.

Another attribute that is of importance when discussing supply chains is corporate social responsibility (CSR). Due to pressures from different groups of people, such as suppliers, customers, employees, community groups, governments and shareholders, many firms are concerned with the social responsibility of their activities (McWilliams & Siegel, 2001: 117). The goal of CSR for a firm is to

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7 comply its activities to ethical standards, laws and national or international norms. McWilliams & Siegel describe it as “activities that appear to further some social good, beyond the interest of the firm and that which is required by the law”. By doing this, a firm gains a better reputation, which often has positive consequences in terms of profit. By relating it to supply chains, Wieland & Handfield (2013) broadened the concept of CSR. They argue that the CSR of a supply chain is dependent on the social norms of the country in which it is situated. By social norms they mean working conditions, norms in relation to the natural environment, etc. When the supply and manufacturing side of a supply chain is located in countries with low social norms (e.g. India), and a part of the consuming side is located in countries with strong social norms (e.g. Germany), the chain is likely to face problems in regard to CSR because of the conflicting norms between countries.

The problem of conflicting norms is further expressed through the concepts of visibility and traceability of a supply chain (Wieland & Handfield, 2013). Increasingly, social concern exists about issues such as food safety, environmental sustainability and child labour. The CSR that comes with this asks for more visibility and traceability in supply chains. As a result of this, firms put more effort in supervising and comprehending their own supply chain. Hereby demanding other firms within the chain to be transparent with their activities and to meet certain quality and safety standards.

Next to social pressure, the supply chain is also heavily influenced by governmental regulations. Depending on where the chain is situated geographically, there is a wide variety of regulations that can be of influence on supply chains; ranging from import tariffs and export regulations to rules in regard to environmental pollution and labour conditions (Arntzen et al, 1995; Hall, 2000). These regulations are imposed by authorities from the local to the global. Therefore, when a supply chain transcends multiple national boundaries, it is subjected to several regulation regimes.

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3. Methodology

This research has the form of a first exploration. By using a qualitative approach, the goal was to gradually get to know more about the industry. Furthermore, it allows the use of unstructured research methods, which are crucial for a first exploration.

In the remainder of the section, attention will be paid to how the study is conducted and through which methods the data has been collected. It does this by describing which decisions are made in regard to the research area, research design, methods used, validity of the findings and ethical considerations.

3.1 Research area

Figure 1: FMFO plants located in the Udupi and Dakshina Kannada districts in South India.

Source: Author (GIS).

As became clear in the introduction, this study focuses on FMFO plants in Karnataka state. Since the majority of plants are located in only two districts of Karnataka, the decision is made to further demarcate the research area to Udupi and Dakshina Kannada (Ponnusammy et al, 2012) (see Figure 1). For the sake of convenience, this area will be called UD district in the remainder of the paper. The area counts 22 FMFO plants in total. During fieldwork, the area went through a period of scarcity of the Indian oil sardine, which is the main raw material for the industry. This meant that most plants were not producing to their full capacity and some plants were not operational at all. Because of this, getting a clear picture of the size and extent of the industry was hard. However, at the same time it gave the opportunity to see how the industry deals with periods of hardship.

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3.2 Research design and methods

The research consists of a multiple case study, in which three different FMFO plants have been studied. The choice for a multiple case study design is because of two reasons. First, a multiple case study design allows a qualitative and unstructured approach, in which new insights gained decide the remainder of the research. This suited the exploring nature of the research well. Second, because a multiple case study design is loosely defined, it could be executed within the limited timeframe that was available (one month of fieldwork).

Data was collected by using qualitative research methods such as observations, unstructured and semi-structured interviews, informal conversations, document analyses and desk research. Prior to the fieldwork, a research proposal has been made in which the topics of interest are formulated. These were used to prepare the questions for both semi-structured and unstructured interviews. The knowledge gained through interviews and conversations often resulted in new insights which led to the formulation of new questions. This way, the required data unfolded itself as the research progressed.

3.3 Data collection

Before the research commenced, uncertainty existed over whether FMFO plants would be willing to cooperate. According to a professor from the Fisheries College, FMFO plants usually do not share information. Eventually, one of the key informants – the Chief Executive of the Indian Fishmeal and Fishoil Exporters Association (IFAFEA) – gave certainty. He managed to arrange three meetings with three different FMFO plants in UD district. These three particular plants became the cases on which most of the findings are based. Next to arranging these meetings, the Chief Executive of the IFAFEA played a crucial role by providing general information about the industry in UD district.

During the research, Mangalore functioned as the base from which the research was conducted. On arrival, the research started immediately with a meeting with a professor from the Fisheries College. During the remainder of the research this professor has been of great help. He provided background information, contacts and functioned as a guide. To begin, it was important to get a basic understanding of the supply chain of FMFO plants. The idea was to start at the marine landing sites in Mangalore and Malpe, and from there work up the supply chain. The professor provided two contacts that work as civil servants for the government at both landings sites. Their job was to rapport marine landings and to check whether fishermen obeyed to the rules. At the landing sites, observations have been made and unstructured interviews with the civil servants, fishermen and procurement agents of FMFO plants have been conducted. Next to functioning as guide, the civil servants translated in case a respondent did not speak English. After the landing sites, the three different FMFO plants have been visited. At each plant, a semi-structured interview has been conducted with a person that holds a senior position within the company. In addition, a guided tour through the plant was provided during which questions could be asked. At last, a visit to the Marine Products Export Development Authority (MPEDA) was paid to gather data on total fish meal and fish oil exports. Unfortunately, MPEDA did not have the data sought for.

At the end of fieldwork, many documents, pictures, written out observations and interviews had been collected. The collected geographical data in combination with GIS has been used to map out the locations of FMFO plants in UD district. The rest of the data has been analysed and will be further discussed in the following sections.

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3.4 Validity of the research

Because of the exploring goal of the study, the case studies have been executed in an objective manner. This means that the findings that will be presented in the following sections are only based on empirically observable data. Thus, to improve the validity of the research, subjectivity of the researcher has been left out.

Each case study specifically focused on one FMFO plant. Therefore, the findings are context specific and cannot be generalized to the industry in Karnataka as a whole. However, the findings do provide a good first impression of the industry which could function as a starting point for further research.

While analysing the gathered data, a problem arose in regard to the amount of FMFO plants that are found in UD district. The various data sources show different total amounts of FMFO plants in Karnataka. To overcome this problem, one source has been used for the total amount of FMFO plants. This amount only functions as an indication; to give an idea of the size of the industry. It should therefore not be considered as completely valid. Furthermore, there existed a few minor gaps in the gathered data. By emailing the informants of the plants, most of these information gaps could be filled.

3.5 Ethical considerations

The results that will be presented here have been written with confidentiality in mind. As mentioned earlier, before the fieldwork commenced there was uncertainty about whether FMFO companies would be willing to ‘open up’ and share information. At last, three plants were willing to cooperate which allowed the case studies to be conducted. Because the findings of each case study will be presented with the names and locations of the plants, it is important that confidentiality will be maintained. Therefore, all the findings of the case studies that will be presented here, are only based on empirically observable phenomenon’s and what the informants have told. Whenever an informant made clear that certain information should not be publicized, this has been maintained. Furthermore, sensitive information such as profits, revenues and the names of informants have been left out.

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4. Context: production process

In order to understand decision making when it comes to procuring raw materials, it is important to have a basic understanding of the production process. The production of fish meal and fish oil is performed in slightly different ways around the world (FAO, 1986). However, it all comes down to the same basic principle.

4.1 Raw materials

Practically, every fish species or other form of marine animal life could be reduced into fish meal and fish oil (FAO, 1986). However, certain species are more suitable and yield more than others due to biological composition. The biological composition of raw material determines the nutritional content it carries. In the FMFO industry, proteins and omega-3 fatty acids are the most important nutrition’s. Therefore, in deciding which marine species is used as raw material, the industry mainly looks at the protein and fat content. As will become clear in one of the following sections, the composition of marine species differs throughout time. Take for example the interrelationship between water and fat content of fish. Water is a complementary constituent to fat, which means that during certain periods of time a fish carries more water in its flesh than fat. This could be the other way around as well, in which a fish carries more fat in its flesh than water. A high fat content is favoured by the FMFO industry, since this results in higher fish oil yields.

Another factor that is of influence on total yield is deterioration (FAO, 1986). As fish or other marine animals deteriorate, the nutritional content decreases. Especially if the raw materials have a long journey ahead of them to the production plant, preventing deterioration can be a big challenge for FMFO companies. There are several preservation techniques available to reduce deterioration, such as icing, chilling and chemical preservation. To what extent and in what way the raw material deteriorates, depends on which preservation technique is used.

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4.2 Production process in UD district

Figure 2: Production process of fish meal and fish oil in UD district.

Source: Shireen Exports 2016.

Figure 2 shows in the form of a flowchart how the production process of fish meal, fish oil and fish soluble in UD district looks like. The procured raw material goes through a metal detector first. This machine separates scrap metal from the raw material. When the raw material is completely free of metal, it is put into a cooker. In the cooker, a process of ‘heating’ takes place, which is done to coagulate the protein in the raw material, rupture the fat depots and liberate the oil and physio-chemically bound water (FAO, 1986). Subsequently, the cooked raw material is put into a screw press. In a process called ‘pressing’, a large fraction of the liquids is being separated from the mass. This results in ‘press liquor’ and ‘press cake’. From the press liquor, the fish oil and fish soluble is extracted. Fish meal on the other hand, is a product of press cake. The cake gets through processes of ‘drying’ and ‘milling’ to reduce the press cake into a fine powder. Since fish meal is high in temperature after milling, it gets cooled to room temperature before it gets stored in bulk. This is done to prevent the nutritional content from deteriorating.

In UD district the average production ratios of fish meal, fish soluble and fish oil are as follows. When 1000 kg of raw material is used for production, about 200 kg of fish meal, 50 kg of fish soluble and 100 kg of fish oil is produced. Thus, the production ratios are 5:1, 20:1 and 10:1 respectively. As mentioned, this is an average, based on data from the three FMFO plants that have been studied. The exact production ratio differs each day of operation, because of variability in the raw materials used (species and biological composition). The price that FMFO plants in UD district pay for raw materials ranges from 17 IR (Indian Rupee) per kg to 25 IR per kg (Mohammed I, 2015). FMFO plants in UD district usually do not pay more than 25 IR per kg, since then production becomes unprofitable.

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5. Context: FMFO production in relation to food security

and environmental sustainability

5.1 FMFO production in relation to food security

Globally seen, the production of fish meal and fish oil is not without controversy. Several academics argue that the large scale production of fish meal and fish oil in Global South countries could have a negative impact on food security of the poor and needy (Tacon & Metian, 2006; Alder et al, 2008). For the production of fish meal and fish oil, mainly small pelagic fish species are used as raw material, such as mackerels, sardines, herring and anchovies. These species have a high nutritional value and a low monetary value. This makes them ideal for the reduction into fish meal and fish oil, but, as several scholars argue, for direct human consumption as well.

Therefore, Tacon & Metian (2006) speak of a competition in Global South countries for small pelagic fish species for direct human consumption and non-food uses (e.g. reduction into fish meal and fish oil). As been mentioned in the introduction, when small pelagic fish species are used for reduction into fish meal and fish oil, they indirectly benefit humans, either through the non-food products that are made of fish meal and fish oil (e.g. pharmaceuticals, leather tan, etc.), or through the food products that result from the use of fish meal and fish oil in the animal feed industry (e.g. chicken, fish, etc.). However, because of these value adding activities, the indirect benefits are only experienced by the people that can afford the added value. The poor are often unable to afford this, and therefore do not fully experience the indirect benefits of the reduction of small pelagic fish into fish meal and fish oil. For this reason, Tacon & Metian argue that instead of reducing the majority of small pelagic fish landings into fish meal and fish oil, direct human consumption of it should be promoted. Without the value adding activities, small pelagic fish is more affordable, which enables the poor to benefit as well. This could help in the fight against the number one killer in Global South countries: mal- and undernutrition.

However, the International Fish Meal and Fish Oil Organisation (IFFO) (2011) argues that, when parts of a catch are not economically viable, the reduction of it into fish meal and fish oil should be promoted. Thus, when the total landings of small pelagic fish species exceeds the demand for direct human consumption, reduction into fish meal and fish oil is ethically sound. By this, the IFFO is trying to make clear that the FMFO industry is not the problem, but human consumption patterns are. Furthermore, the IFFO points out that the FMFO industry is not only using whole fish as raw material, but fish waste and trimmings as well.

5.2 FMFO production in relation to environmental sustainability

As of 2010, the estimation is that the aquacultural sector alone utilised 73% of the total fish meal and 71% of the total fish oil produced globally (FAO, 2014b). According to Alder et al (2008) and Deutsch et al (2007), the aquacultural sector is expanding. Therefore, as long as there are no price competitive alternatives, demand for fish meal and fish oil is increasing. To keep up with the demand, FMFO plants are willing and able to pay higher prices for their raw materials. This automatically puts pressure on available stocks of small pelagic fish species, since fishing for these species becomes more viable. Small pelagic fish species play an essential role in marine ecosystems. They form the trophic level that transfers energy from the plankton to larger marine animals. Thus, by overexploiting these species, the marine ecosystem could get out of balance.

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14 Tacon & Metian (2008) belief however, that despite the aquacultural sector is still growing, its use of fish meal and fish oil will decrease in the long run. This is due to a variety of factors. What it comes down to is that the supply of small pelagic fish for reduction into fish meal and fish oil is static/diminishing, due to increasing fishing costs and increasing demand of small pelagic fish for human consumption. As a result of this, fish meal and fish oil prices are increasing, which makes it no longer the relatively cheap source of nutrition’s it once was. Therefore, substitutes for fish meal and fish oil will become more attractive.

As of 2014, fish meal and fish oil remains to be a major ingredient in compound feeds for the aquacultural sector (FAO, 2014). Yet, based on a downward trend, the Food and Agricultural Organisation expects the percentage of fish meal and fish oil used in the aquacultural sector to decline in the long run as well. Whether this indeed will be the case, is yet to be seen.

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6. FMFO plants in UD district: contextual factors

Like most businesses and organisations, FMFO plants are influenced by ‘external forces’ or determinants. These forces create the conditions under which FMFO plants operate. Therefore, in order to understand the working methods of FMFO plants, having a solid understanding of external forces such as physical location, climate, government regulations, licenses and certificates is of great importance.

6.1 Geography

6.1.1 Locational factors

Figure 3: FMFO plants in the UD district.

As mentioned before, the FMFO plants this study focuses on are all located in Karnataka state, which forms a part of the west coast of India. Karnataka state is with a marine fish production of 357325 metric tons the 6th_{largest producer of marine fish in India as of 2012-2013 (Karnataka Fisheries}

Department, 2015). When scaling down to the district level, statistics show that Dakshina Kannada district is with a total fish production of 138146 metric tons the largest producer of marine fish in Karnataka state, followed by Udupi district with 125138 metric tons and Uttara Kannada district with 94040.97 metric tons.

Based on data of the Indian Fishmeal & Fishoil Exporters Association, UD district is home to 22 FMFO plants. Figure 3 shows that the majority of plants (14) are located in Ullal, a town south of Mangalore. The remaining 8 plants are found in Mukka (3), Pithrody Village (3), Malpe (1) and Kota

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16 (1). When looking at the distribution of plants, two things are remarkable. First, all FMFO plants are located in close proximity to the seacoast. This positions them nearby major marine landing sites in the area, such as Malpe harbour and the old Mangalore port. Second, most plants, except the ones in Malpe and Kota, are clustered together. A good example is the one in Ullal.

The cluster in Ullal consists of 14 FMFO plants closely packed together on a spit. This spit is called the industrial area of Ullal and forms a part of the inlet water entrance of Mangalore. It has a size of about 7.33 hectares. Next to FMFO plants, a common effluent treatment plant (ETP) is found in the area. This plant came into being as a reaction to protests from surrounding residents and pressure from the Karnataka State Pollution Control Board (KSPCB) (The Hindu, 2012a). The 14 FMFO plants decided to fund the construction collectively, so they could all benefit and share the costs. The purpose of the plant is to dispose of effluent resulting from the production of fish meal and fish oil.

6.1.2 Seasonal variation

Based on the Köppen climate classification system, UD district is dominated by a tropical wet climate (ClimaTemps, 2016). This means that the area experiences moderate to high year-round temperatures, heavy rainfall during the monsoon season and a long dry season. The monsoon season usually lasts from May to October. The rest of the year is characterised by little rainfall and long droughts. With this variable climate comes significant variations in both the population and the composition of fish species throughout time (Pillai et al, 2003). Take for example the Indian oil sardine, which is the main raw material used by FMFO plants for reduction into fish meal and fish oil in India (Ponnusammy et al, 2012). This species is known for its strong fluctuations in population and composition on a seasonal, annual and decadal scale.

In their study on how environmental parameters have influenced fluctuations of oil sardine and mackerel fisheries, Krishnakumar et al (2008) found that sea upwelling (driven by wind) to a certain extent correlates with sardine landings. Periods of intense upwelling in the past coincide with periods of poor sardine landings, while periods of mild upwelling coincide with periods of good sardine landings. However, their findings are not very strong. The reason for this is that upwelling is just one of the many factors that are of influence on total oil sardine landings.

Chitra Som and Radhakrishnan (2013) on the other hand, focused on variability in the chemical composition of the Indian oil sardine. Their findings show that due to differences in sea water temperature, lifecycle stages and food habits, the chemical profile of oil sardines varies strongly between individual sardines and throughout time. The study looked at the omega-3 fatty acid profiles of oil sardines at four seasonal catches. Between spawning and winter season there appeared to be large differences in fatty acid profile. As became clear in earlier sections, omega-3 fatty acids are important nutrition’s for production of fish meal and fish oil due to the high nutritional value.

In Karnataka, peak season for FMFO plants in regard to oil sardine availability, is from the beginning of September to the end of November. Off season is from beginning of June to end of July, due to the fishing ban, which will be discussed in next subsection. Like mentioned earlier, many other factors contribute to variability in oil sardine landings, which will not all be discussed here. However, two factors; overfishing and human induced climate change, have become of great significance in the past two decades (Mohamed et al, 2011; Krishnakumar et al, 2006). To date, the health of Karnataka’s current marine fish stocks is unclear. However, many scholars believe that because of overexploitation of certain marine species and changing regimes due to climate change, Karnataka’s marine ecosystem is getting out of balance. If nothing changes, this could lead to depletion of fish stocks and thereby declining fish production in the future.

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6.2 FMFO plants in relation to regulations, licenses and certificates

6.2.1 Regulations

There are several regulations imposed by the government that directly and indirectly influence FMFO plants in UD district. The most prominent one is the fisheries ban (Fisheries Ban Order, 2016). By prohibiting all fishermen with motorized boats to fish for a period of 61 days, the central government tries to promote sea safety and the conservation of marine ecosystems along the coasts of India. The ban goes into effect at the start of the monsoonal season, which is for the west coast on a different date than for the east coast. As of 2016, the ban lasts from the 1st_{of June till the 31}st_{of July at the}

west coast. At the east coast it lasts from the 15th_{of April till the 14}th_{of June. Since FMFO plants are}

dependent on large scale fisheries for their supply of raw materials, the majority of plants closes down during this period (Ponnusammy et al, 2012).

Another regulation that affects certain FMFO plants is the Coastal Regulation Zone (CRZ) (Notification CRZ, 2011). Plants located directly at any water that experiences the tidal effects of the sea are located in the CRZ and have to obey to certain rules. Examples of rules are: no development in the area up to 200 meters from the high tide line, no setting up of new industries and expansion of existing industries in the CRZ, etc. FMFO plants located within the CRZ therefore have limited expansion possibilities.

As with most industries, the production of fish meal and fish oil produces waste and pollutants. To monitor whether industries obey to pollution related acts and rules, Karnataka state has its own pollution control board (KSPCB, 2016). Next to controlling industries through inspections, the board also grants consents to industries that meet the requirements outlined in the pollution acts. In the case of FMFO plants, the board monthly checks whether requirements related to air pollution, effluent, solid waste and noise pollution are met.

6.2.2 Licenses

In order to start a FMFO plant, several licenses are required. First, a municipality or trade license is needed (Start Company in India, 2016). This grants permission to carry on the particular trade or business – in this case the production and trading of fish meal and fish oil – for which it is issued.

Second, a factory license is required (Department of Factories, 2016). According to the Factories Act 1948 and the Karnataka Factories Rules 1969, all manufacturing firms need to obtain this license before commencement of manufacturing activities. The license is granted when the firm in question complies with the rules outlined in the acts mentioned earlier. The rules are related to machinery used, layout of plant, safety, activities around the factory and habitation.

6.2.3 Certificates

Certification allows FMFO plants to prove to the outside world that certain requirements are met. This opens doors to markets which were previously inaccessible. There are several certificates available that are of great value for FMFO plants. The most common ones are ISO certificates (ISO, 2016). ISO is an independent non-governmental organisation that provides certification for a whole range of topics. By setting standards internationally, export and international trade is promoted. Mainly the food safety, environmental management and food quality certificates are relevant for FMFO plants. These certificates are granted when production systems of FMFO plants meet the safety and quality standards set by ISO.

The government of India itself has a certification system in place as well (EIC, 2016). Products produced for export in India have to meet quality standards set by the Export Inspection Council (EIC), as described in the Export Act 1963. Next to setting these standards, the council also checks whether

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18 firms comply to them. When they do, they are granted a certificate of approval. In addition to the EIC the government tries to promote export through organisations such as the Marine Products Export Development Authority (MPEDA, 2016). If they meet the requirements, FMFO plants can become recognized as exporter by this organisation.

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7. Case 1: Raj Fish Meal & Oil

Raj Fish Meal & Oil is one of the pioneering and largest fish meal and fish oil producers in UD district. With ten production lines in total it has a production capacity of 800 tons of raw material per day. The company was founded 1967 by the then Chief Minister of Karnataka, Late. S. Nijalingappa (Raj Fish Meal, 2016). Back then, the company was called Coronet Fish Meal & Oil. In 1987 it changed its name to what it is today: Raj Fish Meal & Oil company. Today’s head of the company is Mr. Madhwaraj, a Member of the Legislative Assembly of Udupi.

The company produces three different products: steam dried fish meal, crude fish oil and fish soluble. The latter is a by-product, which is also used in the animal feed industry (FAO, 1986). As for every plant in UD district, the main raw material used is the Indian oil sardine. The production process of the plant is similar as explained before. However, according to the informant, the Indian fish meal industry uses a pulveriser to grind dried press cake, which is unique compared to the rest of the world. Since fieldwork took place while the available stocks of the Indian oil sardine were low, the plant was not producing to its full capacity during the visit.

7.1 Geography

Figure 4: Raj Fish Meal & Oil Co in Malpe.

Raj Fish Meal & Oil company is found in Malpe, a suburb on the west side of Udupi city. The place is mainly known for its fishing port and St. Marys Island, which is located close to the seacoast of Malpe

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20 (see Figure 4). In addition to being a major hub for marine landings, Malpe is also a beach town. Several hostels and beach shacks are found along the coast.

Raj Fish Meal & Oil company is located in the middle of the town, roughly 300 meters from the coast (see Figure 4). It is surrounded by palm trees, houses, fish drying fields and an oil petrol pump station. The plant has easy access to raw materials, due to its location just 700 meters away from Malpe harbour. Furthermore, the Malpe-Udupi road connects the plant to Kochi-Panvel highway, the highway that connects all the coastal areas in UD district.

7.2 Organisational structure

The companies organisational structure is as follows (see organogram in Appendix). At the top of the hierarchy is the proprietor. This is the owner of the company, who already has been mentioned at the start of this section. the subsequent level of the hierarchy consists of five different general managers. First, the general manager of finance and personnel. This person takes care of human resources and related financial tasks. Second, the general manager of purchase. This individual is involved in the purchasing of raw material for the reduction into fish meal, fish oil and fish soluble. Together with an assistant, the purchase manager ensures that enough raw materials are procured to keep the production profitable. How this is done exactly will be described in the next subsection. Third, the general manager of marketing. The job of this person is to mainly focus on selling the fish related products and getting market share. Herein he gets supported by an assistant as well. Fourth, the general manager of production. This individual has several persons working beneath him in the hierarchy. The tasks of these persons are all related to the production itself, such as managing the warehouse, supervising the production, supervising the incoming raw materials, quality control, etc. At last, the general manager of accounts and bank. This individual takes care of the overall finance of the company. To sum up, the factory workers, the various managers and the proprietor together form the organisational structure that keeps the company in operation.

7.3 Procurement methods

Raj Fish Meal & Oil company has a high demand for raw materials because of its sheer size. As mentioned in the introduction of this section, at the time of visit there were not enough raw materials available to keep the plant running to its full potential. Since the Indian oil sardine stocks were exceptionally low, the company uses mainly other fish species and trash fish or ‘chult’ to keep the production going. Chult is often considered as bycatch and consists of a mixture of small fish species, shellfish and damaged fish (see Picture 1). Which raw material is used, largely depends on the price-quality ratio and whether a species is suitable for reduction into fish meal and fish oil. This varies from day to day due to differences in daily marine landings, and, when seen on a longer timeframe, because of seasonal variation.

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Picture 1: trash fish or ‘chult’

Source: Author.

To acquire the raw material, Raj Fish Meal & Oil uses two different methods. The first method is through the use of procurement agents. At the daily auction of multiple marine landing sites, agents procure raw materials on behalf of the company in exchange for money. These agents are independent, which means they are not affiliated to the company. When they see a batch of raw material at the auction that suits the requirements of the company, they call the purchase manager with specifications. Based on the specifications, the purchase managers communicates the price range of what the company is willing to pay for it. Once a purchase has been done, the raw materials are ready for transport. Depending on the distance it needs to travel, the raw materials are iced and loaded into insulated trucks. The amount of agents that work for the company depends on the season; at peak season a higher amount of agents is active than at low season (the time of visit). As became clear in the geography subsection, Malpe harbour is only about 700 meters away from the company. This short distance and the large size of the harbour makes Malpe the most important source of raw material. Therefore, the company has supervisors working at the harbour to take care and manage the procurement process. Once the raw material arrives at the plant, it is directly put for production. The company does not store raw materials.

The second method is by having fishermen with fisher boats working directly for the company. These boats are also independent, which means they are not owned by the company. By hiring fishermen with fisher boats, one intermediary – the auctioneer – is no longer needed. This results in lower costs. Furthermore, it gives more certainty when it comes to acquiring raw materials, since the entire catch will be property of the company.

The company sources the raw materials from a whole range of marine landing sites in India. To keep the transport and preservation costs low, nearby marine landings sites are preferred over distant ones. This makes Malpe, which is located in close proximity to the plant, the main source of raw material. Furthermore, on the west coast, the company sources their raw material at landing sites all the way from Kollam, Kerala, to Ratnagiri, Maharashtra. On the east coast, sourcing takes place all the way from Kanyakumari, Tamil Nadu, to Chennai.

7.4 Outlet

Raj Fish Meal & Oil company produces both for domestic and international markets. Countries the company is exporting to are mainly Asian, such as Taiwan, Thailand, Indonesia and Japan. For which market channel is produced at a particular moment, depends on which market is most profitable. However, the majority of produced fish meal, fish oil and fish soluble by the company is destined for domestic markets.

The company produces two different grades of fish meal. The difference between these grades is their nutritional value. For example, grade I – which is the most expensive one – has a protein content of 60% to 62%, while grade II has a protein content of 50% to 55%. Both grades are mainly sold to animal feed industries, such as poultry feed producers and aquaculture. Fish oil on the other

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22 hand, is produced in only one grade. This grade is sold to animal feed industries, leather tanning industries, leather chemical industries and pharmaceutical companies. At last, fish soluble, is also only produced in one grade and is being sold to animal feed producers.

7.5 Government regulations and certificates

Just like the fisheries sector, Raj Fish Meal & Oil company is heavily influenced by the fisheries ban imposed by the government each year. Since raw materials are very scarce during this period, the plant closes down for two months from the first of June to the end of July. The rest of the year, from August to May, it is operational.

Another regulation that is of influence on the company is the Coastal Regulation Zone (CRZ). With its location close to the sea coast, it falls under the rules of the CRZ. As a consequence, the company will have limited possibilities to further expand its activities in the area. However, during the visit, the company was building a new production facility to be able to enter the European market. The company could do this because the location of the facility is on the landward side of the plant, which does not fall under the CRZ (further than 500 meters away from the high tide line). This shows that there are still possibilities to expand.

Environmentally seen, Raj Fish Meal & Oil has taken several measures to reduce pollution to the allowed amount as stated in the pollution related acts. Because the plant processes fish, it emits a strong odour which is unpleasant to the surrounding residents. To fight this, the company has installed a deodorizing unit. According to one of the managers, surrounding residents are still complaining about the smell. To explain this, he pointed at the fish drying fields located next to the plant. According to him, these fields produce the still persisting smell. Furthermore, to clean the liquid waste resulting from production, the company has an effluent treatment plant (ETP) in place. This plant treats the effluent by separating waste from the liquid.

When it comes to certification, Raj Fish Meal & Oil is acknowledged as an exporter by the Marine Products Export Development Authority. Furthermore, it is an ISO 9001:2008 certified company, which means that their quality management system meets the international standards set by ISO.

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8. Case 2: Bawa Fish Meal & Oil Co.

Bawa Fish Meal & Oil company is a medium sized fish meal and fish oil producer in UD district. The plant itself was founded in 1978 by the father of today’s head of the company: Mr. Riaz Bawa. With three production lines in total it has a maximum production capacity of about 300 tons of raw material per day. Just like Raj Fish Meal and Oil Co., the company produces three different products: steam dried fish meal, crude fish oil and fish soluble. To produce this, the company uses the Indian oil sardine as main raw material.

8.1 Geography

Figure 5: Bawa Fish Meal & Oil company in Mukka

Bawa Fish Meal & Oil company is found in Mukka, a suburb north of Mangalore (see Figure 5). The most prominent features of Mukka are the Srinivas institutions found in the area, such as the Srinivas school of engineering, the Srinivas institute of medical sciences and the Srinivas Hospital. Furthermore, the suburb is bordered by the Nandini river on the north side and has the major highway of Karnataka coast – the Panvel-Kochi highway – passing right through it.

The company itself is located directly at the coast along the Sasihitu Road, surrounded by greenery on the east side and a beach on the west side. The Sasihitu Road provides a good connection to the Panvel-Kochi highway, which leads to major marine landing sites such as Malpe in the north and Mangalore in the south.

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24 Bawa Fish Meal & Oil company is not the only plant found in the region. The south side of the plant is bordered by H.K. Bawa & sons, another fish meal plant which, as the name suggests, belongs to the same family. This plant is with a maximum production capacity of 250 tons of raw materials smaller in size than Bawa Fish Meal & Oil. When heading further south of both plants, one finds a FMFO plant called Mukka Sea Food Industries. With a maximum production capacity of 600 tons of raw material per day, this plant is the largest in the area.

8.2 Organisational structure

The data gathered on this subject for the company consisted of only a summary, therefore the organisational structure presented here may be incomplete. The organisational structure of the company is as follows. At the top of the hierarchy is the Managing director (MD), Mr. Bawa. He is the owner of the firm and therefore has most authority. The next level in the hierarchy is made up of the general manager and the manager of accounts. The general manager is concerned with overlooking all the different tasks within the company, such as production, purchase and marketing. He has several managers and supervisors underneath him in the hierarchy, who are concerned with dispatching of the fish related products, production, quality control and purchase of raw materials. Most of these tasks require financial resources. This is where the manager of accounts comes in.

8.3 Procurement methods

Bawa Fish Meal & Oil was facing the same problems during the visit as Raj Fish Meal & Oil in regard to procuring raw materials. Low availability in oil sardine stocks have forced the company to use substitutes to keep the production running, such as other whole fish species and trash fish. Which species is used depends largely on price-quality ratio and whether the species is suitable for production into fish meal and fish oil. Examples of other fish species used are the Indian scad, mackerel, small red snappers and the pink perch. However, these species are often too expensive for the reduction into fish meal and fish oil. Therefore, during periods of hardship, mainly trash fish is preferred.

Procurement of raw materials takes place daily, early in the morning at auctions of several marine landing sites. Independent agents procure raw materials on behalf of the company in exchange for money. The procurement process is similar to how it has been described for Raj Fish meal & Oil in the previous section. The main difference is that Bawa Fish Meal & Oil does not have boats directly working for them. All the raw materials are procured through the use of these independent agents. The amount of agents working for the company depends on the season. At peak season, the company commissions more agents than during low season. Once the raw material arrives at the plant, it is directly put for production. The company does not store raw materials as well.

Most purchasing of raw materials takes place at nearby marine landing sites, such as Malpe harbour and Old Mangalore port, to keep transport and preservations costs low. In addition, the company also has agents commissioned in more faraway places, such as Kerala and Goa. However, the companies reach does not extent further than the South Indian west coast.

8.4 Outlet

Bawa Fish Meal & Oil produces both for domestic and international markets. According to the informant about 70% of the end products are sold to international customers. The remaining 30% is sold to domestic customers. However, this ratio fluctuates depending on global and domestic fish meal and fish oil prices. Customers of the company are found worldwide, in countries such as Japan, Bangladesh, Canada, The Netherlands, Korea, Chili, Peru, United States, Australia, Taiwan and China.

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25 The products are sold to similar industries as the industries Raj Fish Meal & Oil is selling their products to. Thus, mainly animal feed producers, pharmaceutical companies and leather industries. The company does not differentiate between grades of fish meal, fish oil or fish soluble.

8.5 Government regulations and certificates

Due to the fisheries ban imposed by the government each year, the plant closes down during June and July. The remainder of the year, from August to May the plant is operational.

Since the plant of Bawa Fish Meal & Oil company is located right next to the seacoast, it falls under the regulations of the CRZ. This means that the company has limited possibilities to expand its production facilities in the area. Although the CRZ did not exist in 1978, to get permission to build the plant in the area was already challenging according to the informant. Before the construction of the plant, the area was designated as residential area and mainly used by fisher folk. To get permission, the company first had to get a recommendation by the Karnataka Fisheries Department.

In order to meet the requirements set by the government in relation to pollution, Bawa Fish meal & Oil has an effluent treatment plant and a deodorizing unit installed. Every month, the Karnataka Pollution Control Board visits the company to check whether the company does not exceed the allowed amount of vapour emissions, water discharges and boiler smoke.

Bawa Fish Meal & Oil has three different certificates. Just like Raj Fish Meal & Oil, the company is ISO 9001:2008 certified. Furthermore, it is recognized as an export house by the Ministry of Commerce and approved as exporter by the Export Inspection Council. At the moment of visit, the company was working on obtaining a GMP+ certification. This certificate is specifically designed for the international animal feed industry. It is granted to the company when the produced fish meal, fish oil and fish soluble meets specific quality requirements.

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9. Case 3: Yashaswi Marine Ingredients

Yashaswi Marine Ingredients is relatively seen one of the newer and more advanced companies in the fish meal and fish oil industry in UD district. The plant was founded in 2007 and is owned by chairman Sadhu Salian and managing director Udaya Kumar Salian. With a total of three production lines it has a maximum production capacity of 600 tons of raw materials per day. What is remarkable is that the maximum production capacity per line is much higher than the maximum production capacity of the lines of the two plants discussed in previous sections.

The company produces two different products: steam dried sterilized fish meal and crude fish oil. Like the two plants discussed previously, the Indian oil sardine is used as main raw material for the production of fish meal and fish oil. During the visit, Yashaswi Marine Ingredients also faced the consequences of the collapse of oil sardine fisheries in the area. Therefore, the plant was not running to its full production capacity.

9.1 Geography

Figure 6: Yashaswi Marine Ingredients in Pithrody Village.

Yashaswi Marine Ingredients is found in Pithrody village, a small village located about 3 kilometres south of Udupi city (see Figure 6) (Udupilive, 2016). The village mainly consists of residences and small agricultural land. On the south and west side, the village borders the Udyvara river. This river also separates it from the coast. Fishing forms the main source of income for the village, which is done both at sea and at the Udyavara river. The village is connected to the Kochi-Panvel highway by a

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27 nameless road that runs through it. With its location close to Udupi, the nearest marine landing site is Malpe harbour.

Yashaswi marine ingredients is located on the south side of the village, directly next to the Udyavara river (east of the plant) and the nameless road (west of the plant) (see Figure 6). Similar to Bawa Fish Meal & Oil, the company is not the only fish meal and fish oil producer in the area. On the opposite side of the nameless road, two other FMFO plants are situated: Unity Fish Meal & Oil and Hindustan Marine Industries. During the period of visit, the former was not in operation. The latter one was however, and has a maximum production capacity of 200 tons of raw materials per day. According to the managing director of Yashaswi Marine Ingredients, there is not much cooperation between the plants in the area.

9.2 Organisational structure

The organisational structure of Yashaswi Marine Ingredients is as follows (see organogram in Appendix). At the top of the hierarchy are the two managing partners Mr. Sadhu Salian and Mr. Udaya Kumar Salian. These are the owners of the company and thus have most authority. In the subsequent level of the hierarchy are six different managers. First, the manager admin. This person manages a wide array of tasks within the company, such as security, sales & marketing, human resources and finance. To successfully do this, he has several supervisors and managers beneath him in the hierarchy that focus on these tasks. Second, the manager of despatch and warehouse. This individual is concerned with the dispatching of end products to the customers and manages the warehouse where all the fish meal and fish oil is stored. Third, the manager of purchase. This person manages the procuring process of raw material. What this entails, will be further elaborated on in the next subsection. Fourth, the manager of production and maintenance. For production itself, the company has assigned multiple supervisors to overlook the different parts of the production process; ranging from in-process quality assurance and control to taking care of mechanics. Fifth, the manager of quality. The task of this person is to assure and control the quality of the fish meal and fish oil that is produced by the plant. This is done by testing the end product in a laboratory. At last, the manager of utilities and others. The company tries to keep the plant hygienic and in good condition. This manager is assigned to achieve this and to ensure that required utilities are present.

9.3 Procurement methods

When it comes to which species is used as raw material, Yashaswi Marine Ingredients is similar to the previous two discussed FMFO plants. The Indian oil sardine always has the preference, due to its relatively low monetary value and high nutritional value (high oil content). However, because of the collapsed oil sardine fisheries at the time of visit, the company was forced to use other fish species to keep the production running. Therefore, mixed fish and trash fish were the main raw materials used.

The procurement strategy of Yashaswi Marine Ingredients is again through the use of agents. Six agents are employed by the company, which means they are directly affiliated to it. The employed agents earn a standard wage, regardless of the amount of raw materials they procure. Next to these employed agents, the company also has independent agents working for them at several marine landing sites. The amount of money these agents earn depends on the amount of raw materials they deliver. The procurement process is again similar to how it has been described for Raj Fish meal & Oil in an earlier section. However, like Bawa Fish Meal & Oil, Yashaswi Marine Ingredients does not own or hire boats. All the raw materials are procured through the use of independent and employed agents. Once the raw material arrives at the plant, it is directly put for production. The company does not store raw materials as well.

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28 Procurement takes place along the South Indian west coast from Kanyakumari, Tamil Nadu, to Ratnagiri, Maharashtra. The main source of raw materials is Malpe harbour, because of its size and nearby location to the plant. Old Mangalore port functions as second most important source.

9.4 Outlet

Yashaswi Marine Ingredients produces both for domestic and international markets. For which market is produced, depends on the overall demand. At the time of visit, fish oil was due to high international demand mainly produced for export. Fish meal on the other hand, was because of high domestic demand mainly sold to domestic companies. According to the managing director, this reflects the most common situation. However, fish meal is sometimes exported as well. Customers of the company are found all over the world, except Europe.

The products are sold again to similar industries as the industries Raj Fish Meal & Oil is selling their products to. Thus, animal feed producers, pharmaceutical companies and leather industries. However, most of the end products are sold to aqua feed companies. They offer four different grades of both fish meal and fish oil: standard, prime, super and superior. The higher the grade, the higher the nutritional value of the product (more proteins or more omega-3 fatty acids).

9.5 Government regulations and certificates

Because of the fisheries ban imposed by the government each year, the plant of Yashaswi Marine Ingredients shuts down during June and July. The remainder of the year, from August to May the plant is operational.

The company has faced several problems in the past relating to environmental pollution and complaining residents (The Hindu, 2012b). According to the surrounding residents, Yashaswi Marine Ingredients together with the other plants in the area have been discharging their effluents in the Udyavara river, which would have resulted in fish death. Furthermore, residents are complaining about the bad smell that the plants produce and how the smoke that comes from the chimneys affects their health. The companies have denied this and state that all the treated effluent is being discharged in the sea. According to the managing director of Yashaswi, the company is taking several measures to reduce pollution, such as the effluent treatment plant and a deodorizing unit. To his opinion, the surrounding residents need to be educated and shown that there is very little pollution because of these measures.

One way of showing that the company takes measures to reduce pollution is by the ISO 14001:2004 certification. This certification is granted whenever a company can show that they have an environmental management system in place, which meets the requirements set by ISO. Furthermore, the company is ISO 22000:2005 certified (food safety), recognized by the Ministry of Commerce as export house and has a certificate of approval from the Export Inspection Agency.

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10. Conclusion

The goal of this research was to explore the FMFO industry in Karnataka, India, to get a better understanding of how the industry operates and how contextual factors influence these operations. Hereby, providing a solid starting point of descriptive information on which further research could build. The research focused on the supply side of FMFO plants, since in-depth information on this part is lacking. By using a supply chain approach, the specific research problem (supply of raw materials) has been analysed as being part of a larger interconnected whole. This means that to fully understand the supply side, other parts of the supply chain (e.g. production process, outlet) have been studied as well.

What became clear is that the FMFO plants in UD district are all located in close proximity to the seacoast. With major marine landing sites such as Malpe harbour and Old Mangalore port nearby, the plants have good access to raw materials. The area is dominated by a tropical wet climate, which causes variation in availability and biological composition of raw material on a seasonal, annual and decadal scale. The plants are subjected to several regulations, standards, laws and acts imposed by authorities and organisations from the international level to the local.

When taking the findings of the three different FMFO plants that have been studied together and relate it to the supply chain concept, the chain can be described as follows. It starts at several marine landings sites, mainly located along the west coast of India. At the auctions of these landing sites, raw materials are procured by either independent or employed agents on behalf of the FMFO companies. Which raw materials are procured depends on the price, quality and suitability; whole fish – in particular the Indian oil sardine – is preferred over damaged and trash fish. Once procured, the raw materials are, depending on the distance it needs to travel, transported in regular or insulated trucks to the plant. At the plant the raw material is used to produce fish meal, fish oil and in some cases fish soluble. After production, the products are packaged and stored in the warehouse of the plant; destined to be sold at domestic or international markets. The buyers at these markets are various companies, such as leather producers, pharmaceutical companies, paint producers and mainly animal feed producers (feed for poultry, pigs and aquaculture).

Now that the overall supply chain of the studied FMFO plants is clear, the research question can be answered:

How do FMFO plants in Karnataka ensure that they have continuity in their supply of raw materials for reduction into fish meal and fish oil?

As mentioned in the theoretical section, resilience of a supply chain is key when it comes to supply continuity. A supply chain is resilient when it performs well under varying conditions and scenarios and endures disturbances rather than responds. The most significant disturbance for the supply chain of the three studied FMFO plants is the fisheries ban of 61 days imposed by the central government. As a consequence of this, the FMFO plants close down their operations. Furthermore, the variable nature of the availability and biological composition of raw material poses several challenges to ensuring supply continuity. To deal with this, the plants procure their raw materials at multiple marine landing sites. By having multiple sources, the risk of low availability is dispersed and thereby the chance of running out of raw materials reduced (increases robustness). Moreover, FMFO plants are able to use different raw materials for the reduction into fish meal and fish oil. This allows them to adapt to changing availability of raw materials by using substitutes (e.g. trash fish). However, for the production to be profitable, the plants are bound to price and quality requirements. In addition, one of the plants used another method to ensure continuity in their supply. By commissioning fishermen with fishing boats to directly work for the plant, competition between other plants for raw materials is avoided and a steady supply is achieved.

Since all of the three FMFO plants produce for international markets, their supply chains transcend national boundaries. As a consequence of this, the chains are subjected to multiple

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30 international standards and regulation regimes. The influence of international standards is reflected in the certificates that the FMFO plants have or are trying to get, such as the ISO and GMP+ certificates, which require certain quality and safety management systems to be in place. This shows that foreign buyers of fish meal and fish oil demand the FMFO plants to have a visible supply chain. Furthermore, the influence of international regulation regimes is for example reflected through the certificate of approval by the Export Inspection Council of India. These certificates enable FMFO plants to export their end products and thereby broaden their outlet market.

The use of whole fish and the large quantities of trash fish (during certain periods) as raw material, raises the question what the implications are for the environmental sustainability and food security of UD district. This research mainly focused on the operations of FMFO plants themselves and how these are influenced by contextual factors. However, how FMFO plants in turn influence these contextual factors, is still unclear. Further research should therefore focus on the effects of the FMFO industry on the surrounding environment instead. For example, more research is required on the current state of marine ecosystems in the area and how the FMFO industry affects it. Moreover, more recent and reliable statistics are needed on total FMFO production and the amount of raw materials used.

Ensuring supply chain continuity; a first exploration of the working methods of fish meal and fish oil plants in Karnataka, India