Infrastructure, not trade barriers, hurting horticulture exports

Infrastructure, not trade barriers, hurting horticulture exports
Comment E-mail Print Share
First Published: Wed, Apr 18 2007. 01 08 AM IST
Updated: Wed, Apr 18 2007. 01 08 AM IST
High delivery costs, caused primarily by a fragmented supply chain, bad logistics, together with poor standards are hurting India’s horticulture exports much more than trade barriers, says a new report prepared by the World Bank for the agriculture ministry.
Despite producing 11% of the world’s vegetables and 15% of fruits at very competitive costs of about 53% and 63% of average global prices, India’s share in global fruits and vegetables trade has remained at only 1.7% and 0.5%, respectively.
Lead economist with the Bank Aditya Mattoo says, “India is paying a huge logistical tax on agricultural products. The inability to compete abroad today might lead to the inability to compete at home tomorrow. And in horticulture, subsidies are not even an issue.” India has been strongly protesting the multilateral trade negotiation rounds against the high domestic farm subsidies enjoyed in the Euro area, the US and Japan.
The report therefore argues for creation of an integrated and competitive supply chain for agriculture along with radical reform in transport, storage and distribution services before India opens up to foreign competition.
The World Bank study, which is based on primary value chain surveys of 10 horticultural items, 1,400 farmers, 200 commission agents and 65 exporters across 17 Indian states, was recently submitted to Union minister of agriculture, consumer affairs, food and public distribution Sharad Pawar.
Horticulture and fisheries now account for half the growth in India’s total agricultural production, currently estimated at 2.6%.
By the time a product like apples or potatoes ends up with the foreign consumer, its price will have gone up nine with 10 times, thanks to the many stages of intermediation and transport costs involved.
Yet, the farmer is not getting any benefit of these high prices the report adds.
For instance, in the case of table grapes, while the retail price in the US is Rs120.30, the farmer gets only Rs13.50, while the intermediaries claim Rs5.40, the exporter Rs24.20, and international freight and insurance claim about Rs53.50. The importer contributes the remaining Rs23.50 to the total cost. Compared to 30-40% in the US or Thailand, the Indian farmer gets to keep only 15-20% of the final price.
It is a similar story within the country too, which means it is cheaper for Tamil Nadu to import apples from Australia than Himachal Pradesh. The cost variation between states can run up to 70%. With as many as six to eight intermediaries coming in the marketing chain, the average wastage between just the farmgate and the wholesale level is around 12%, adding another 7-10% by the retail stage.
“The post-WTO situation is favourable to export of high-value food products. Over 2001-2004, horticulture exports went up to $464 million (Rs1,327 crore) compared with $316 million in the previous three-year period,” says Ramesh Chand, Indian Council of Agricultural Research national professor.
Even international transport costs are 20-30% higher than in other countries. For instance, it costs $790 to transport one tonne of grapes from India to the Netherlands, which is two and a half times higher than what the Chileans are paying, although it is twice as far from the Netherlands as India. This is primarily why, for every 1,000km farther that we export, we export 10% less. Any destination which is beyond 14,000km from India is unlikely to be ever served, argues the report.
The other issue is of standards which remain poorly categorized and enforced despite a plethora of agencies—four ministries, export promotion institutions, state regulatory agencies, some 24 standard-setting bodies and the Central Bureau of Indian Standards.
Mattoo says, “all trades happen only after physical inspection, adding to costs and time. Unless you can credibly enforce standards, you are not in a position to contest the barriers and claims of other countries.”
Comment E-mail Print Share
First Published: Wed, Apr 18 2007. 01 08 AM IST