The Hindu Business Line : Plantation problems

THE CENTRE FINDS itself on the defensive over the continued weakness in the prices of plantation crops such as coffee, tea and pepper. Some members of Parliament, especially those from Kerala, fault the liberal import policy for this. The main point of contention is the free trade agreement with Sri Lanka from where low-priced pepper and tea are said to flow in, impacting domestic prices. Succumbing to pressure and in a knee-jerk reaction to the protests against falling pepper prices, the Government has halted duty-free import of pepper from all origins (except Sri Lanka) under the advance licensing system. This is sure to jeopardise India's efforts to promote value-added pepper products.

Are the policymakers barking up the wrong tree? Admittedly, there has been no comprehensive study on the impact of liberalised imports of farm products on the country's agriculture. However, it is clear that after the removal of the quantitative restrictions on imports, India is inexorably integrating with the international market and is subject to all its vagaries and volatilities. The insulation available till now to producers is thinning. Tariff or Customs duty is the only instrument to regulate imports; this fiscal instrument has been fairly well deployed. Based on various measures of import and export competitiveness, the Government found in a report, State of Indian Farmer: a Millennium Study that most of the important agricultural commodities are competitive and that India can withstand competition from abroad at the current levels of tariffs.

In an associated action, the Government has constituted a committee to review the Price Stablisation Fund (PSF) scheme and make it more useful and attractive to growers. The Rs 500-crore PSF was set up to provide relief to growers of tea, coffee, rubber and tobacco when prices fall below a specified level, without resorting to the practice of procurement by government agencies. There is now pressure on the Government to include additional crops such as pepper, ginger, cashew, turmeric, arecanut, cocoa, clove, vanilla, and cardamom under the PSF. It is time the policymakers looked beyond prices and trading interests. Needed are non-price and non-trade initiatives to strengthen the plantation sector. It is necessary to first establish what constitutes a `reasonable' price. Exploring scientific measures or using technology to raise yields, reducing the cost of production, improving quality and rationalising the supply chain is the way forward. Critical is the role of the State governments in improving crop competitiveness, especially in matters such as taxation and labour relations.

In the coming years, the so-called export surpluses in some plantation crops will shrink. It should be viewed as a positive development because the present plight of the plantation sector is linked to its historical over-dependence on exports. Coffee is a fine example of producers ignoring the huge domestic potential to chase ephemeral exports. It is possible that because the promotional agencies — various commodity boards — are under the Commerce Ministry, they failed to service domestic consumers in a sustained manner. It is time they changed the focus and gave to the domestic consumer a good deal; otherwise, overseas suppliers will.