Food security without tears

After the Centre imported onions to rein in rising costs, onion prices registered a 20 per cent drop over the following weeks — a clear demonstration of how import facilitation can stabilise the macro condition in the country. The idea of sourcing food imports from South Asian countries is not new. Regional trade has been used to plug the supply and demand gap in the past.

Considering that most Indians spend nearly 30 per cent of their annual household incomes on food, their prices are critical. A robust food trade network developed between South Asian countries will serve as an effective bulwark against such steep price rises. However, there are plenty of challenges posed by non-tariff barriers (NTBs) to setting up such a network.

In the last decade, measures to decrease quantitative restrictions (tariffs and custom duties) have helped ease trade barriers. For instance, the preferential trade agreement between India and Afghanistan reduced the tariffs on black tea, sugar, raisins, apricots and nuts, among others, while the India-Nepal treaty nullified customs duties on a fixed-quota basis for products such as vegetable fats.

Following direct tariff reduction measures, NTBs have now emerged as a trade irritant, often leading to wastage of perishables and pushing up prices. At overland trading posts in India such as Raxaul, Attari or Petrapole, the lack of uniform sanitary and phyto-sanitary measures (SPS) to check for the quality of food imports results in inordinate delays. Reducing trade costs associated with such NTBs can protect from steep price rises.

Although India is the second largest producer of fresh inland water fish, lack of adequate storage facilities and reduced fish catch often constrains availability. Between 2010-11 and 2014-15, with a decrease in imports from Bangladesh on the overland trading routes with India, fish prices often had a dramatic increase in the neighbouring domestic fish markets in West Bengal.

For India and South Asia, seamless food trade is also crucial to food security. With a multitude of national actors involved in imports, operating procedures quickly spiral into a litany of complex processes. Lack of centralised online facilities for filing paperwork, for example, consume more time for truckers entering in India at these trading posts. Container terminal facilities are not designed to handle large, time-sensitive and perishable consignments. Standardising measures for SPS checks through online platforms at trading posts would allow for more efficiency. Uniformity in SPS measures and accreditation by the Indian regulators towards SPS labs in Nepal could curb wastage and eliminate illegal taxes on imports such as ginger from Nepal into India.

The Centre has recognised the need to strengthen SPS mechanisms, yet there has been limited success. In its strategic plan, the commerce department underlined the need to strengthen SPS measures. However, corresponding budgetary allocations have hardly been reassuring: the budget for export/import infrastructure development through the Assistance to States for Development of Export Infrastructure (ASIDE) scheme decreased from ₹700 crore in 2013-14 to a shocking ₹50 crore in 2015-16. This could partly indicate shifting the onus of developing such infrastructure to India’s border States. Yet, this threatens to arrest much of the momentum generated by the Centre with improving import infrastructure. Unless border States such as Tripura or West Bengal see adequate reason to develop import infrastructure, ASIDE-related initiatives could stall.

Recently, Chief Economic Adviser Arvind Subramanian pointed out that India’s trade growth with South Asia was not an priority. This was somewhat shocking given the imperative for India to forge closer and deeper ties with its South Asian neighbours. Given the nature of the markets in South Asia and the lack of a diverse industrial base, absolute volumes of intra-South Asia trade are bound to be limited.

Yet, trading with India and having relatively unfettered access to India’s growing market matters a great deal to most South Asian nations. India features among the top five agro-export destinations for Bhutan, Nepal, Sri Lanka, Bangladesh and Afghanistan. For New Delhi too, introducing easy regulatory oversight and improving SPS infrastructure for importing perishables efficiently into the country will improve its food security situation and also help in macroeconomic stabilisation.

Shivakumar is a research associate and Sharma an intern with the Centre for Policy Research

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