Economic analysis and value addition in chilli powder processing in Nagpur district

Introduction

Agro-processing has become an important component of agricultural development as it converts raw agricultural commodities into products with greater convenience, improved marketability, and additional economic value. The spice sector is particularly important in India because of the wide domestic consumption and strong export demand for spices. Dry chilli (Capsicum annuum L.) is one of the major spice crops and is valued for its colour, pungency, flavour, and diverse applications in food preparation. Globally, chilli production covered about 18.03 lakh hectares and reached nearly 58.22 lakh tonnes in 2023, while India contributed approximately 27.82 lakh tonnes. Among the different products obtained through chilli processing, chilli powder is widely used in households, restaurants, food industries, and commercial food preparations. Converting dry chilli into powder involves activities such as cleaning, grading, destalking, grinding, sieving, and packaging, which transform the raw material into a convenient and commercially useful product. Maharashtra is an important region for chilli production and trade, while Nagpur district provides favourable opportunities for chilli processing because of its market connectivity, transportation facilities, availability of raw material, and presence of processing enterprises. In the selected study area, chilli powder was produced by all six processing units, demonstrating its importance as a value-added chilli product. Processing can provide opportunities for income generation, employment creation, product diversification, and improved utilization of agricultural produce. Hence, evaluating the economics of chilli powder processing is important for understanding the expenditure incurred, returns generated, and value created through processing. The present study was conducted in selected chilli processing units of Nagpur district during 2025-26. The objectives of the study were to estimate the cost and returns of chilli powder processing and to work out the value addition resulting from the processing of dry chilli into chilli powder.

Methodology

The study was conducted during 2025-26 in selected Chilli powder processing units of Nagpur district using primary data collected through structured interviews. The analysis focused on estimating the cost and returns of Chilli powder processing and assessing the value addition achieved through the processing of dry Chilli into Chilli powder.

International Journal of Agriculture and Food Science 2026 ; 8(8): 736-740

Selection of Area

This study was carried out in Nagpur district, as it was an important area for Chilli cultivation and processing. Many small and medium Chilli processing units were operated here, which made the district suitable for studying valueadded Chilli powder. For the selection of processing units, three tahsils of Nagpur district, namely Kalamana, Kamptee, and Ramtek, were selected for the study.

Selection of Sample

In this study, randomly three tahsils were selected. From each tahsil two processing units were selected. Thus, a total of six units were selected for the study.

Data Collection

Primary data were collected from the selected processing units. Data were collected through personal interviews with the owners or managers of the units. A specially designed schedule was used to collect information related to cost, returns and processing of dry Chilli.

Period of Study

The data were collected for the period of year 2025-26.

Selection of Product

Chilli powder was selected as the value-added product of dry Chilli.

Analytical Tools 3.6.1 Fixed Cost

It includes data on the cost of machinery, building, furniture, wages of permanent employee, labour license, insurances and taxes. The data were collected from each processing unit on the above item etc.

Variable Cost

Variable cost consists of expenditure on purchase of raw material, wages of casual labour, oil and lubricants, energy charges, repair maintenance of machine, packing cost and interest on working capital.

Total Cost:

Total cost of processing was composed of the total fixed cost and total variable cost and was calculated by adding these costs together.

Total Cost = Fixed Cost + Variable Cost

Gross Returns:

The gross return was defined as the total rate of returns on an investment before the deduction of any expenses.

Gross Returns = Quantity of the product × Price per unit

Net Returns

Net returns referred to the return after deducting all expenses from the gross return generated by the investment.

Net Returns = Gross Returns -Total Cost

Benefit-Cost Ratio

The benefit-cost ratio compared the present value of all benefits with that of the cost and investment of the project.

Value Addition

Value addition due to processing of dry Chilli into Chilli powder was worked out by comparing the value of the processed product with the cost/value of the raw material and processing inputs involved in obtaining the finished product.

Result and Discussion

The results regarding the cost, returns, processing performance, break-even point and value addition of Chilli powder are presented and discussed in accordance with the objectives of the study.

Estimate the cost and returns of Chilli powder processing

To fulfill the first objective of the study regarding the estimation of cost and returns of chilli powder processing, the results obtained on the cost incurred and returns generated from chilli powder processing units are presented and discussed as follows. The average gross return from Chilli powder processing was ₹571.78 lakh/year, based on an average production of 2,30,667 kg/year and a selling price of ₹247/kg. The highest gross return was obtained in Unit 4 (₹807.50 lakh), while the lowest was recorded in Unit 2 (₹318.50 lakh). The variation in gross returns was mainly due to differences in production quantity and selling price among the selected processing units.

Establishment Cost for Chilli Powder Processing

Net Return from Chilli Powder Processing

Work out the value addition due to processing of dry Chilli into Chilli powder

To fulfill the second objective of the study regarding the estimation of value addition due to processing of dry chilli into chilli powder, the results obtained on the cost of processing, gross value addition and net value addition are presented and discussed as follows. The processing of dry Chilli into Chilli powder resulted in an average gross value addition of ₹35.23/kg and net value addition of ₹20.81/kg, with an overall value addition of 16.64 per cent. The average raw dry Chilli cost was ₹211.77/kg, while the total processing cost was ₹226.19/kg against an average selling price of ₹247/kg. The percentage value addition ranged from 15.01 per cent in Unit 5 to 19.05 per cent in Unit 2, indicating that processing substantially increased the economic value of dry Chilli.

Value Addition Due to Processing of Dry Chilli into Chilli Powder

Conclusion:

Chilli powder processing was found to be an economically viable value-added activity, generating a positive average net return of ₹36.19 lakh per year with a B:C ratio of 1.07. The processing of dry Chilli resulted in an average net value addition of ₹20.81/kg, with an overall value addition of 16.64 per cent. The high margin of safety of 98.57 per cent further indicated a favourable operational position of the selected processing units. Overall, Chilli powder processing provides considerable potential for increasing the economic value of dry Chilli.

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