The Hindu Business Line : Helping farm earnings grow

IT IS TIME the Government realised the importance of integrating farmers with markets for high-value agriculture products so that they can focus on alternatives, such as horticulture.

The National Development Council (NDC) meeting on May 28, meant to discuss exclusively the farm sector and its flagging fortune in the face of farmer suicides, stagnancy in cereal production, widening gapin crop yield, technology fatigue and dwindling investments, brought into focus the fragile food security scene in the country. With consumption of cereals showing signs of decline and demand for the so-called high-value agriculture (HVA) products such as fruit and vegetables rising at a faster clip, the future of the traditional farming sector will, it seems, depend largely on a subtle shift towards HVA produce.

That is why both the Planning Commission and the Prime Minister, Dr Manmohan Singh, have stressed the importance of achieving the Eleventh Plan target of 4.1 per cent per cent per annum for agriculture and allied activities; during the Tenth Plan agriculture GDP was a tepid 2.3 per cent.

Fragmented farming

The findings of a recent CSO (Central Statistical Organisation) report on agricultural employment, land-holding pattern and other allied issues also show that an estimated 27 per cent of farmers did not want to do farming as it was not profitable, and as much as 40 per cent felt that, given a choice, they would take up some other occupation.

Even farming as an activity is fragmenting, the downstream and upstream elements covering horticulture and sundry activities, including animal husbandry, are scaling up in response to the demands of a growing economy and steadily rising high-income populace with a distinct consumption pattern.

There is also the problem of land acquisition for industrial development and special economic zones (SEZs) meeting with resistance by small farm holders (the average area per holding in 2002-03 was 1.06 hectares compared to 1.34 hectares in 1991-92, 1.67 hectares in 1981-82 and 2.3 hectares in 1970-71). It is also a known fact that over the last couple of years organised food retailing in the country has been growing at a scorching pace, but the small and marginal farmers have not been part of this value chain by shifting to HVA.

If the UPA Government has been bemoaning the steep fall in investment in agriculture as being responsible for aggravating the agonies of the farmer and for the recent spurt in prices of articles of common consumption, such as pulses, the best it can do now is to show a way out. It can set up infrastructure and institutions that would help farmers shift to horticulture and also establish the requisite links to the markets.

World Bank report

The World Bank, in a recent monograph, brought out the paradox that while India is a large, low-cost agricultural producer, its share in global agriculture exports is meagre. The country produces nearly 11 per cent of all the world's vegetables and 15 per cent of the fruits but their share in global exports is a mere 1.7 per cent and 0.5 per cent respectively. China, on the other hand, is currently the world's largest fruit and vegetable producers, with a 34 per cent share. Notwithstanding strong domestic demand, China is also among the top four developing country exporters of fresh vegetables. And, as for export of processed foods and vegetables, though the share of developing countries as a whole is low, China, along with Thailand, Chile and Turkey, accounts for 58 per cent of it.

The Ministry of Food Processing Industries, citing a report of Rabo India Finance Pvt Ltd, admitted to huge wastage of agricultural produce, estimated at around Rs 58,000 crore, at various stages of post-harvest handling. This is because of fragmented farming and poor transportation and storage facilities.

Problem areas

The World Bank study lists three main factors that undermine India's potential in reaching markets across the globe:

high costs of getting produce from the farm to the market erode any advantage the domestic farmers command by dint of being cheap producers;

the huge gap between domestic and international standards on health, safety and quality. Also, the assessment mechanisms in India are weak;

pernicious forms of trade protection in horticulture, such as those that discriminate against efficient delivery, quotas that impose harsh tariffs on imports above certain levels and a system of special safeguards that is a source of uncertainty for successful exporters.

The report says that in India transportation costs, which are 20-30 per cent higher than those in other countries, affect exports. India's share of exports to any destination plummets ten percentage points for every 1,000 km increase in distance, and markets that are beyond 14,000 km from Indian borders are unlikely to be served at all by our exporters.

For instance, it costs $790 to transport a tonne of grapes from India to the Netherlands — 2-3 times more than it takes to transport the same from Chile, though that country is twice as far from the Netherlands as India. According to the report, the most important items among India's horticultural exports are fresh onions, mango pulp and fresh mangoes, dried walnuts and fresh grapes. Dried and preserved vegetables account for a quarter of all horticultural exports.

One of the authors of the report, Mr Aaditya Matoo, has proposed two broad priorities for reform that would raise farmers' incomes, lower retail prices and enhance the global competitiveness of Indian agriculture. They are: Create an integrated and domestic agricultural market, and improve communication, transport, storage, distribution and agricultural support services. The Food Processing Ministry too concedes high transport costs, lack of trained horticulture manpower, inadequate cold chain and logistics facilities and poor awareness among farmers about producing good quality and safe products as factors that undermine the export potential.

Vision 2015

The Ministry has also drawn up a Vision 2015 for the food processing industry entailing an outlay of Rs 1,00,000 crore. The integrated strategy includes cluster-based and demand-driven farming, integration of food processing infrastructure from farm to market and promoting a dynamic food processing industry that could result in high growth of the processed foods sector, by augmenting the level of processing of perishables from 6 per cent to 20 per cent, value addition from 20 per cent to 35 per cent and share in global food trade from 1.5 per cent to 3 per cent by 2015.

A group of ministers headed by the Agriculture Minister, Mr Sharad Pawar, to look at an integrated strategy for food processing, has held four meetings and incorporated almost all the views voiced by the stakeholders. The suggestions are to be taken up by the Cabinet and a roadmap for the next five years laid out.

It is time that the Government realised the importance of integrating farmers with markets for HVA products so that they could be spurred to take up horticulture. Once this is done, all debate about land acquisition for SEZs and entry of retail stores would be irrelevant. The small farmer, too, will move up the value chain and be adequately recompensed.

More Stories on : Horticulture/Fruits & Vegetables | Insight

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