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‘We must create a separate department for commodities’

‘We must create a separate department for commodities’
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First Published: Tue, Jul 10 2007. 12 19 AM IST
Updated: Tue, Jul 10 2007. 12 19 AM IST
Kochi: Minister of state for commerce Jairam Ramesh says that an independent plantations department needs to be created in the agriculture ministry to ensure adequate focus on a sector on which 10 million Indians depend for their livelihood. He also says that price discovery in the futures trade is not taking place on commodity exchanges.
In an exclusive interview with Mint last week, Ramesh spoke of his long-term strategy for the commodity sector.Edited excerpts:
You have been touring various plantations and holding discussions with people. What are problems in your opinion and how do you plan to address them?
I am addressing the issue from four fronts—productivity, technology, marketing and price. Senility (ageing crops) is the single biggest issue for tea, coffee, rubber, spices, cashew and coconut. Because of low productivity, we are losing out to our competitors—be it Guatemala in cardamom or Sri Lanka in tea. Unless we tackle this, we are not going to be internationally competitive. Domestic competitiveness is equally important.
We have launched the Special Purpose Tea Fund for replantation and rejuvenation of tea gardens across India this year. Similar funds will be launched for pepper, cardamom, coffee and rubber and by 30 September, the finance minister has assured me that financial allocations under the 11th Plan will be finalized.
The task is gigantic. We are talking about replantation and rejuvenation for about 200,000 hectares in tea, 90,000 hectares in coffee, 70,000 hectares in pepper, 35,000 hectares in rubber, 30,000 hectares in cardamom, 450,000 hectares in coconut and more than 300,000 hectares in cashew in the next 15 years.
Do we have sufficient planting material for such a replanting exercise of this magnitude?
It is not a simple thing. We will face a serious problem in pepper vines. We have to create the material from nurseries, agriculture universities and private farms to address the issue of productivity.
How do you plan to tackle the issue of technology?
Replanting offers ample scope for using technology. Barring rubber, we haven’t so far had any success in using technology. Our technology is old. We have not addressed issues such as winter dormancy in tea in the North when tea is not produced during the three months of winter. We have not had sufficient investment in research.
Biotechnology is one area that can play a major role. We have a large number of biotechnology researchers who can play a role. In fact, I am looking at the partnership model. I have been trying to get more financial allocations for the research institutes. And they do not need to be national; they can actually focus on regional issues. For instance, in the Dooars region in West Bengal, the single research subject is looper, a caterpillar. In Assam tea estates, it is the issue of the tea mosquito.
Don’t you feel that even as we remain focused on exports, promoting consumption in the domestic market is also important?
The international market is important for us. We need to have more value addition, better packaging and branding and professionally market our products.
Yes, ultimately it is the domestic market that matters. The domestic market accounts for 80% of tea sales; but for coffee it’s only 20%. Even in spices, only 9% of our produce is exported. The Tea Board has launched a domestic marketing campaign while the Spices Board is tying up with Mother Dairy to promote the Flavourit brand in the domestic market.
What is your take on the issue of the futures trade at commodity exchanges which is now being studied by the Abhijit Sen committee?
Some commodities have high price volatility.
Earlier, we had the price stabilization fund, but that was a complete failure. We are looking at an alternative now.
The Rangachary task force has suggested some insurance measures and Kerala’s planning board vice-chairman Prabhat Patnaik has also made some suggestions.
I have discussed them with the Planning Commission and the finance ministry. We would like to bring in some amount of stability without getting into the guaranteed minimum support price mechanism.
On the issue of futures markets, the mechanism for price discovery in the futures trade is not taking place.
It’s all speculation. As the Rubber Board chairman told me, there is hardly 2% delivery in rubber in the futures market. If you do not have physical delivery and do not promote it, you are not having a futures market in its proper form. Also, we have to find out who is participating in such trades. It is certainly not the farmer or the grower.
It would seem to be that plantations aren’t getting the attention they deserve under the commerce ministry...
Yes, there are serious organizational problems. The plantation commodities account for just $2 billion (Rs8,080 crore) in the country’s total merchandise export of $125 billion.
They are really marginal to the commerce ministry and residual in the agriculture ministry. Plantation commodities are caught between the two stools.
Only in the case of rubber have we been able to overcome this problem because the Rubber Board is vertically integrated.
We have suffered because of serious policy-making decisions involving the state governments, too, which think it is the responsibility of the central government.
I am increasingly convinced that it is impossible to give this importance to the sector in the ministry of commerce which is more involved in free trade agreements (FTAs), WTO (World Trade Organization) and trade promotions—plantations don’t appear interesting.
So, we must create a separate department for commodities and put them under the agriculture ministry which also deals with state governments. It then gets an administrative focus.
There are a number of FTAs on the cards, the latest being proposed with Vietnam which is a major competitor of India in pepper and rubber. Do you foresee threats for the plantation sector from FTAs?
As far as the Asean (Association of Southeast Asian Nations) FTAs are concerned, the only offers we have made is reducing the import duty by 2018 in tea from 100% to 50%, in coffee also from 100% to 50% and in pepper from 70% to 50%. For all other commodities, there won’t any change in import duties.
Yes, there is a lot of pressure. The Thais wanted to negotiate on rubber but we were firm. Vietnam is a major competitor and we can take steps if we find there is a threat like we did in the case of Sri Lanka.
Let me make it clear that I do not subscribe to the view that imports have posed a serious threat to the plantation sector.
With the replantation programmes that we have undertaken, our productivity will go up by at least 25% when the replantation programme is complete, making us more competitive.
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First Published: Tue, Jul 10 2007. 12 19 AM IST