6. THE KARNATAKA STATE FISHERY

6.1 Background

The State of Karnataka lies on the west coast of India and has a coastline of about 270 km with 145 marine fishing villages. The fishing season starts in September and although it finishes in May, about 70 % of the catches will have been taken before the end of January. The important species are oil sardine (Sardinella longiceps) and mackerel (Rastrelliger kanagurta) and the activities of purse seiners are confined to those ports such as Mangalore, Malpe, Gangoli, and Karwar that have appropriate facilities such as berthing, transportation, ice plants, cold storage, oil and fresh water.

The indicators relating to the general health of this fishery are now giving cause for concern (Figures 1 and 2).

The supply situation is becoming increasingly difficult (Table 1) and the problems are accentuated by the increased rate of decline of catches of the more valuable mackerel relative to oil sardine. This reflects on the revenues returned to fishing boats and ultimately on the incomes of fishermen. This situation can be alleviated to some extent if the value of the catch can be raised by improved handling utilization and marketing.

Source: Government of Karnataka Statistical Bulletin of Fisheries 1982–83. Issued by Directorate of Fisheries, Bangalore 560001

Figure 1 Karnataka total catch, 1976–83

Figure 2 Karnataka catch/boat, 1976–83

The problem of transportation of fish from the ports to the markets needs careful consideration. Over long distances the problems are compounded by communication requirements and high costs. Bombay and Mangalore are about 800 km apart and cargoes such as timber, tiles and sand are transported in sailing craft or carrier vessels equipped with sail and engine. The transportation of fish from the Mangalore area to Bombay by sea is not a new idea. It was in vogue in the past but was discontinued about a decade ago as a consequence of competition from road transport.

6.2 Technological Development

The FAO/DANIDA project carried out trials with the use of chilled sea water (CSW) for holding and transporting mackerel and oil sardine on the Karnataka coast of India in October 1979 and March 1980. The results showed very distinctly an increase in the storage life of both species when chilled in CSW immediately after catching.

Trials also served to demonstrate the suitability of CSW as a transport medium over long distances (e.g., Mangalore-Bombay, approximately 800 km). Conclusions drawn were that by utilizing the increase in storage life it would be possible to increase the share used for human consumption and supply better quality fish to the markets. When landings of fish (in particular mackerel and oil sardine, but also other species) are larger than the market demand, the supply can be regulated by holding fish in CSW, preserving the fresh quality for several days. This would help to ensure high quality in the fresh fish market and even out fluctuations in supply. Similarly, it is possible to hold buffer stocks of high quality fish to facilitate an even production flow. Chilling fish in CSW immediately after catch and transporting it either in CSW containers or boxed in ice would greatly increase the supply radius of fresh fish and thereby the size of the potential market.

The objective of the project can be achieved in three different ways:

1. to use the extended shelf life to smooth the fluctuating supply/demand problems and assist in maintaining prices and reduce wastage;

2. in the long term to attract a price premium for improved quality of fish;

3. to use the CSW facility as a buffer storage prior to freezing in periods of glut with a subsequent improvement in quality of frozen fish.

In 1982, a seminar was organized with the aim of bringing together all the parties involved in this fishery in order to transform the positive results arising from the technological trials into a commercial reality.

The operations in the industry were subjected to several economic analyses but the most important proposal arising from the seminar was to invest in a commercial scale project integrating CSW - equipped purse seiners, onshore CSW buffer storage, feeding distant markets such as Bombay. Such distribution would require insulated trucks.

Later investigations have shown that conversion of the existing standard purse seiner to CSW hold cannot be recommended due to non-compliance with the IMCO (IMO) requirements.

6.3 The Pre-Feasibility Study

The introduction of additional purse seiners can only be justified on account of their greater range, flexibility or the possibility for them to extend the fishing season. This can only be achieved with fishing vessels designed with CSW storage holds. The on shore investment must have complementary facilities including CSW buffer storage and insulated trucks for onward distribution.

One of the major difficulties encountered in this project relates to the rapid decline of catch ratios (Figure 2) and under these circumstances it is difficult to secure reliable data.

The investment programme is relatively modest, i.e., 10 vessels over a period of three years, linked with CSW buffer storage on shore which in turn is included at a capacity not less than the daily transport capacity based on deliveries from Mangalore to Bombay.

The purse-seiners in the fishery at 13,7 m length and 102 hp are similar to those currently operating there, and, it has been assumed that they are experiencing similar catch rates.

6.4 Investment Analysis

The total investment package over a 10-year period includes 10 purse-seiners, 28 trucks and CSW onshore storage tanks at a total cost of 13 million rupees. It is assumed in the example that a loan could be secured at 10.25% over 10 years with a 2-year grace period on capital borrowed in years 1 and 2, and zero grace period on capital borrowed in year 3 and afterwards.

The financial analysis shows that this project, based on the assumptions for prices and inputs, is not financially sound with a low internal rate of return (FIRR) estimated at 6.5%. The FIRR is more sensitive to variations of revenues than investment or operating costs, and the risk for this project is high.

6.5 Economic Analysis

The economic analysis is based on financial data modified as follows:

1. prices for capital goods have been adjusted by a factor of 80% to exclude the duty and tax component;

2. the operating costs are assumed to be without tax except for fuel cost which is rated at 20%;

3. to arrive at economic costs and revenues, a standard conversion factor of 80% has been applied to all local currency components;

4. no adjustments have been made for labour costs.

The economic internal rate of return (EIRR) for the project investment is estimated at 13.7%. A 10% reduction in revenues would eliminate any return, and a 10% overrun in investment cost would reduce the EIRR to 10.2%.

Additional benefits from this project could arise from investigations of resource potential adjacent to the current fishing area. There could also be additional employment creation, particularly on shore, and a greater availability of fish, about 5 000 t per year for transportation to distant markets such as Bombay.

6.6 Conclusions

The continual increase of effort in this fishery has created a situation whereby individual vessel catches have decreased to an unacceptable level and the pre-feasibility study shows a low profit situation. The project, as conceived should not go ahead.

The key question arising from this conclusion is whether or not development should go ahead. There are two positive aspects for further development of this fishery and the first relates to the objective to supply large quantities of low cost fish and fish products to needy people and this cannot be achieved without improved preservation and storage on fishing vessels. The second aspect is that exploration of the sea beyond the immediate coastal belt fished by the current fleet is highly desirable. The model used for the prefeasibility shows a potential profit for such an operation, albeit from speculative catch rates. This leads to a recommendation for the introduction of a purse seiner with CSW storage as an integral part of the basic design as a research and development project.

6.7 Brief Description of Analysis Tables for Karnataka

Financial Unit = 1.Rs 1 000

Inland Distribution, Karnataka to Bombay

Karnataka Purser