Dr BK Mukhopadhyay
A noted management economist and an international commentator on business and economic affairs. He may be reached at firstname.lastname@example.org
The importance of this sector does not call for afresh introduction. The exploration of horticultural crops’ potentialities increases the diversity of the production system, which, in turn, promotes agricultural and ecological sustainability, while contributing to domestic food production.
It is well known a fact today that while the potentialities are placed at a higher level till now the implementation level has been remaining at a palpably low level for many of the economies in the developing block.
The purpose here is not to downgrade the efforts which have been on, but to focus that it is a gold mine practically speaking!
For developing economies there remain reasons to be proud of. India is the second largest producer of vegetables and fruit in the world, with the UAE, the Netherlands, UK, Russia and Saudi Arabia being top destinations for export of fruit.
Yes, shipment of fresh fruit has witnessed an increase at a time when India’s overall exports have declined. Overall exports have fallen fruit exports have picked up, when India exported its first consignment of grapes to Canada and pomegranates to the US very recently; it offered a ray of hope for the otherwise dismal exports scenario of the country.
No doubt, grape exports increased due to development of new markets in Canada, Australia and Russia along with a rise in production due to adoption of international certification like The Thompson and Global GAR which are among the key requirements for exporting grapes to European markets.
The fruit exporters are presently hopeful that demand for Indian mangoes, grapes, bananas and pomegranates has increased and the country has sent trial shipment of fresh fruit to new markets over the last few months. This year India expect to export more to Japan, the US and Europe. Incidentally, it may be mentioned here that last year saw Mauritius opening its market for Indian mangoes, while grape exports to Europe doubled.
Though the latest trends indicate increasing demand pattern in the agriculture sector major problems loom large: lack of a broad raw material base in terms of the kinds and varieties of fruits and vegetables suitable in all respects for processing and their availability in commercial quantities at prices economical to the processing industry. Invariably, the cost of the raw material is high; low productivity and poor quality of the produce as compared to the very high levels obtained in the advanced countries affect processing and none of the processing units work to full capacity utilization.
What is more of the produce taken up for processing is devoid of the quality attributes or characteristics required for processing. Lack of a proper marketing strategy to meet the raw material requirement of processing units and ensuring a sustainable export market for the processed products has been keenly experienced.
Due to poor infrastructure in handling, transport, marketing and processing, horticulture as an industry has failed to register commendable growth in economies like India. Infrastructure stands tall to block the prospects – particularly transportation, road networks and freight and cargo facilities (the freight rates in India are reported to be higher than those prevalent in some other countries, the very fact that does very little to improve our competitiveness), cold storage facilities, etc coupled with inadequate post-harvest management which affect the produce and products. Poor and inconsistent quality of processed products and inadequate export promotion are also hindering the growth prospects. It is the residual rather than the fresh produce that is often taken up for processing, which has a bearing on quality.
It is a fact that fruits and vegetables are generally constrained by poor price support, credit support and delivery system. Inadequate supply of power, water and research and development support exist as no less constraints. The quality of packaging also leaves much to be desired – simply not market-oriented – as importing countries demand specific packaging for each produce and the use of biodegradable materials resulting in high cost of packaging.
It remains a fact that while China processed about 30 per cent of the food (fruits and vegetables) , the Indian food processing industry has been set a target of raising the level of processing perishable products from six per cent to 20 per cent by 2018. The $70-billion Indian food processing industry is dominated by small and medium enterprises, which do not have the capacity to undertake large-scale processing of fruits and vegetables.
A recent study by YES Bank showed India stored only two per cent of its horticulture products in temperature-controlled conditions, while China stored 15 per cent and Europe and North America stored 85 per cent of their products in such conditions. Adequate cold storage facilities were available for just about 10 per cent of India’s horticulture production. Of the total annual production, 30-40 per cent was wasted before consumption. During the peak production period, the gap between the demand and supply of cold storage capacity was huge. As per National Centre for Cold Chain Development, “The biggest wastage happens during the transportation of horticulture products from the farm gate to mandis and thereafter. The answer lies in minimizing the wastage that happens during transportation.” From a farm gate to a consumer, a horticulture product passed through seven different distribution channels, and in every step, there was a loss of five-seven per cent. 9.18 Processing losses also abound.
The global market for these products is a tremendous one and it goes without saying that if systematically tapped there lies immense scope ahead, especially for the least developing economies as the latter virtually depend on a handful of agri-commodities to earn foreign exchange. Of course the absolute advantages as well as comparative advantages must be fully reaped. For example, India produces grapes twice a year – a rare advantage and gift of nature which other leading producers do not have.
Especially, trade in fruit and vegetable products has been among the most dynamic areas of international agricultural trade, stimulated by rising incomes and growing consumer interest in product variety, freshness, convenience, plus year-round availability. Undoubtedly, advances in production, postharvest handling, processing and logistical technologies — coupled with increased levels of international investment — have played a facilitating role. Specifically, for developing countries, trade in these products has been attractive in the face of highly volatile or declining long-term trends in the prices for many traditional export products. This is also a fact simultaneously that in spite of the fact that many developing country suppliers have entered the field (process is on: Venezuela, Bangladesh in mango market), relatively few have achieved significant, sustained success, which, in turn, adequately reflects the fact that the industry is intensely competitive plus rapidly changing.
What is more, these commodity markets de facto exhibit a complex political economy – domestically and internationally. Undoubtedly, the arcane nature of many policy interventions in these commodity markets and the many heterogeneous interests exacerbate this complexity. It must be agreed upon that identifying superior policy options is not difficult, but what is pertinent on this score is the fact that the feasibility of reform depends on the power of vested interests and the ability of governments to identify tradeoffs and possible linkages that will allow them to pursue multiple goals (food security, income transfers, expansion of domestic value addition etc) more efficiently.