The Hindu Business Line : Grape gripe

India produces more than a tenth of all vegetables, and 15 per cent of all fruits in the world. F.o.b (free on board) values of our exports are nearly half the corresponding world unit values. Yet, our share in global trade is minuscule: Only 1.7 per cent in vegetables, and a mere half per cent in fruits.

The biggest obstacles to the competitiveness of India's horticultural exports lie outside the sector rather than inside it, says a recent publication from World Bank. The average price at the farm-gate for a typical horticulture product is just 12-15 per cent of the price at which it is retailed. So, a 20 per cent improvement in yields can translate as only 2.4-3 percentage point reduction in the final price, whereas a 20 per cent reduction in international transport costs can reduce final prices by 8-10 percentage points, says the book titled From Competition at Home to Competing Abroad: A case study of India's Horticulture.

The study, edited by Aaditya Mattoo, Deepak Mishra and Ashish Narain, from Oxford (www.oup.com), is `a supply chain analysis of ten horticultural products, based on primary surveys that covered 1,400 farmers, 200 commission agents, and 65 exporters across 15 States'. Apart from quality problems and policy barriers that our exporters have to surmount, an important impediment highlighted in the report is `logistical tax', meaning `high delivery costs which significantly erode the production cost advantage enjoyed by Indian farmers'. Domestic and international transportation cost is the single-largest contributor to the retail price, `accounting for nearly 25-40 per cent of the price'.

As an illustrative exercise, the authors track the journey of a kg of grapes through the supply chain, and show how the farm-gate price of Rs 14 in Hyderabad builds up to a final price of Rs 120 at a supermarket in London. Inland transportation, storage and handling, commissions and taxes, packaging materials, plus margin add Rs 24 to the original price. `Air-freight and insurance charges' of Rs 54 are `the single largest component of the retail price'.

Another grape story to gripe about is on how our costs compare with those of competitor countries. "The distance between India and the Netherlands is 6,858 km while from Chile to the Netherlands it is 12,007 km." However, our transportation costs, at $790 per tonne of grapes, from India to the Netherlands, are `260 per cent higher than it takes to transport the same from Chile'. Grape tales that can make for sour reading. Meanwhile, there is heady news to fill in a few `grape' gaps: Karnataka is talking about a new wine policy, two wine parks, and wine tourism.

"Indian vineyards, which barely existed a decade ago, are increasing production fast," writes Amelia Gentleman in a March 15-dated article on www.iht.com. "Making wine from grapes grown in vineyards in Nashik, a few hundred kilometres north of Mumbai, Sula sold 60,000 bottles when it opened in 2000 and this year expects to sell 1.5 million bottles, an increase of 50 per cent over last year." Dour news, though, awaits you in a press release dated March 14, on www.prweb.com, about `the global oversupply of grapes'. In Australia, for example, the 2006 harvest was huge and some 60,000 tonnes of grapes were left to rot, one learns. "The current problems are a product of the `plant anything anywhere' approach that led to the widespread creation of new vineyards."

A book that demands a sober study.

http://BookPeek.blogspot.com

D. Murali

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