Building_Exponential_Growth_in_Agro_Exports

|S. No. |Particulars | |i. |Abstract | |1 |Introduction. | |2 |Sectoral Analysis | | |Processed Foods | | |Fresh Produce | | |Livestock | | |Agricultural Commodities | |3 |The Wheels of Revolution: Growth Drivers of Indian Agricultural Exports | |4 |The Future of Indian Export: New Challenges and New Threats | |5 |Recommendations | Abstract Introduction Sectoral Analyses . The Wheels of Revolution: Growth Drivers of Indian Agricultural Exports . The Future of Indian Export: New Challenges and New Threats The Future of Indian Export: New Challenges and New Threats Recommendations About APEDA About Technopak Sanjay Sethi Vice President - Food & Agriculture Technopak Advisors Pvt. Ltd. 4th floor, Tower A, Building 8, DLF Cyber City, Phase II Gurgaon - 122002 (National Capital Region of Delhi) T:+91-124-454 1111 F: +91-124-454 1198 sanjay.sethi@technopak.com www.technopak.com APEDA principal Contact ----------------------- Achieving Exponential Growth in Agro Exports CONTENTS Over the past two decades, there has been a rapid expansion of agricultural and processed food exports from India, replacing traditional manufacturing and industrial exports. However, this development and its policy implications have received little attention in the literature. This report aims to redress this oversight by providing an overview of key characteristics and growth patterns of agriculture and processed food exports from India. The determinants of structural changes toward processed food exports are examined. The results suggests that trade policy openness, large domestic market, good macroeconomic management especially in terms of price stability, as well as adequate financial support and infrastructure are the key factors that influence the structural changes toward agricultural and processed food products. 1 As one of the strongest and fastest-growing economies in the Southeast Asian region, India has become an important export-oriented destination. For India, growth is an imperative, to be counted as a major economic powerhouse by the end of this century’s first quarter, India needs to accelerate its economic growth beyond the existing rates of 5-6% per annum. India has transformed itself from a manufacturing economy to a food and agriculture -based economy with one of the highest GDP in the Southeast Asian region. The food and agricultural contribution in the GDP is 17 %. Agricultural and Processed Food Products Export Development Authority (APEDA) is the governing body responsible for implementing and enforcing all the agricultural and processed foods exports from India to numerous destinations. The export basket consists of wide range of products containing fresh fruits and vegetables, poultry, dairy and processed products to name a few. There has been a structural change in the composition of food exports from India over the past couple of decades. Traditional exports have continuously declined and have been replaced by agricultural and processed food exports. Expansion of agriculture food production and exports has become an important trend for India since such exports have intrinsic characteristics of manufactured goods. The structural change in food exports is believed to generate superior growth performance. Reasons for this belief include knowledge spillovers, and terms of trade gains. In particular, food production, especially in the final stage, appears to be labor-intensive. Food exports from India and other developing countries are expected to continuously expand in the future since world demand for agricultural and processed food continues to grow in response to diet upgrades resulting from rising incomes, growing health consciousness, and urbanization. 2 Processed Foods Background: Processed food products are penetrating the large potential in a rapid motion presented by Indian population. The demand has been rising at accelerating pace and there is enough latent market potential waiting to be exploited through developmental efforts. This demand for these foods has captured a large amount of the food retail market in India. Major factors driving the change are changing lifestyle, eating and cooking habits, increasing young population and more working women Globalization has been the primary catalyst for the growth of this section in Indian food which is set to witness many more changes with newer offerings being available. The international markets have shown a positive response to Indian cuisine with Non-Resident Indian (NRI) communities and foreigners expecting to grow this market in the years to come. Another observation is that consumers are on the lookout for processed foods that are offered to them in hygienic, nutritional and attractive packaging at an affordable cost. Great care is needed during their packaging, so that they remain prevented from impurities. Amongst the emerging trends is that the consumer is looking for innovative flavors and new tastes, which is a big challenge for the food industry. The advantages that the processed foods offers to the domestic/international markets has resulted into the increase in the export of processed food products from Rs. 6674 crores in the year 2006-07 to Rs. 9065 crores. in the year 2007-2008 From the export perspective the sector can be branched in to two major categories. Firstly the processed fruit and vegetables and secondary the other processed foods including Alcoholic beverages, Aerated drinks, Snacks and Confectionery etc Sectoral Analysis – Processed foods are evolving as a vast upcoming sector in the domestic market and also for the extensive market overseas. The sector has shown a linear growth in the past years and with the new efforts this is presumes to be expanding exponentially. Indian export market on the basis of value generated has gained a percentage change of approx 34% in 2007 – 08 from its previous year (2006-07) which was approx 21 percent when compared to 2005-06. If these growth rates are valued in terms of quantity then there is a percentage increase of approx 96 percentage in 2007 – 08 from its previous year (2006-07) which was approx 92percent when compared to 2005-06. The major categories in this sector which are at the apex growth are confectioneries. Majority of categories have shown a vast growth in 2006-07 compared to 2005-06 but the same growth has not been achieved in 2007- 08. The same can be inferred from the exhibit [pic] The reasons can be collective but the concentration should be on pruning them out. A framework is figured which can be adopted to increase the export rate of his sector manifold. The frame work consist of the following extensions [pic] The competitive edge: It’s an established fact that the processing level in India in comparison from other developing countries is very minute. Within the country, there are wide variations in productivity levels. Punjab, Haryana, Andhra Pradesh, Tamil Nadu and Kerala may have attained productivity levels of a world average. But other regions are way behind. The production potential reveals that the processing can be a vital option to bring the exponential growth in reality. India ranks first in global fruit production and second in case of vegetables. The ranking on processing level is so low that it need not be commented on. There are various interventions initiated by the government to increase the level of processing but the adoption level is at nascent stage On ground it has been observed that there is a shift in cropping pattern in favor of horticulture in India in the past couple of years as it supports food processing. Analysis of the economic and processing feasibility of this shift away from cereals to fruits and vegetable shows that it’s economically viable and beneficial to shift towards horticulture production, but this diversification needs to be planned in a systematic manner in the same line of value addition and sustainable processing The Indian food processing industry is primarily export oriented. India’s geographical situation gives it the unique advantage of connectivity to Europe, the Middle East, Japan, Singapore, Thailand, Malaysia and Korea. One such example indicating India’s location advantage is the value of trade in agriculture and processed food between India and Gulf region Certain strategies and policies are also adopted by the government in this regard. The main steps adopted by the government to boost Indian food processing at global prospect are – ▪ Food processing industries have been listed as one of priority sectors for bank lending. ▪ Zero excise duty on fruit and vegetable processing units ▪ Foreign equity up to 100 per cent is permitted for most of the processed food items ▪ Zero excise duty on items like fruits and vegetables products, condensed milk, ice cream, meat production ▪ The excise duty on ready to eat packaged foods and instant food mixes has been brought down to 8 percent from 16 percent ▪ Excise duty on aerated drinks has been brought down to 16 per cent from 24 per cent India is globally competitive and has comparative advantage in production. These major production states should be targeted for enhancing the export potential of the country. Lessons from other developing countries tell us that we should focus on the growth of the processing industry through increased participation of small and marginal entrepreneurs in a manner to facilitate a sustainable up-gradation for the industry. Industry Interface: The food processing industry is emerging in India at a fast pace. At present it is ranked fifth among different industries of India. Nearly, one third of the entire Indian food market share comprises of processed food. With policy measures from the government, the food processing Industry accounts for 13% of the country's exports. The food processing industry is presently growing at 14 per cent against 6-7 per cent growth of last few years. The food processing industry received foreign direct investments (FDI) a sum of Rs.7190 crores in 2007-08 against Rs. 285 crores in the previous fiscal. The cumulative FDI received by the industry from April 2000-January 2009 stood at Rs. 38016 crores However, India’s share in exports of processed food in global trade is only 1.5 per cent; whereas the size of the global processed-food market is estimated at Rs.160 trillion. Nearly 80 per cent of agricultural products in the developed countries get processed and packaged. The cheap raw material availability and efficient labor connection is attracting plenty of global players in Indian food processing industry. Other than Indian products these processors are manufacturing various other international foods. For these investors India is an efficient food processing base for their products demanded worldwide. Some of the new investor landed to India for food processing interventions covers Del Monte, Danone and other majors. It is estimated that by 2012, India’s processed food output is likely to grow by 45 per cent to touch Rs. 450,000 crores, while packaged food sales will increase by 65 percent to reach Rs. 108,500 crores On a per capita year basis, per capita packaged food spending is expected to grow by 55 per cent to Rs. 90,000 by 2012 Besides foreign investors, food processing sector is a major attraction for Indian corporate houses to invest. Reliance, Godrej, Bharti, ITC, DSCL, Tata and Mahindra & Mahindra are prominent corporate houses with end-to-end integrated operations in the food processing. The major destinations for Indian processed food are U.A.E, Iran, U.S.A, U.K and Indonesia. India’s top 10 export destinations based on their percentage share are – |Rank |Destination |% Share | |1 |USA |17 | |2 |United Arab Emirates |8 | |3 |China |7 | |4 |Singapore |5 | |5 |United Kingdom |5 | |6 |Hong Kong |4 | |7 |Germany |3 | |8 |Belgium |3 | |9 |Japan |2 | |10 |Republic of Korea |2 | Conclusion: India with enviable wealth of resources of fruits and vegetables, dairy, marine and agricultural products is set to emerge as a global leader in the processed food business, given of course the right direction and inputs. The government has accorded top priority towards this potential, and is pro-actively prioritizing the food processing industry for growth. The success of this industry, besides other factors, depends largely on backwards and forward linkages, packaging and processing technology. Global marketing of our food products will, to a large extent, depend on our ability to deliver these products in forms that will not only ensure freshness of the edibles but also meet consumer convenience and growing environmental concerns. Horticulture Sector Background: India is the fruit and vegetable basket of the world. India is the second largest producer of Fruits and Vegetables, after China. The diverse agro-climatic conditions prevailing in the country allow production of a large variety of tropical, sub-tropical and temperate fruits and vegetables available in India. Some of the other key players in the horticulture trade include USA, Mexico, Brazil, Chile and South Africa, Australia, China. Out of 500 million MT of fruit production in the world, India with its current production of around 58 million MT of fruit accounts for about 12 per cent. Major vegetables grown in India are potato, onion, tomato, cauliflower, cabbage, bean, cucumber, peas, garlic and okra. The major fruits grown in India are mangoes, grapes, apple, orange, banana, guava, litchi, papaya, and sapota and water melons. The total area under vegetable and fruit cultivation in 2007-08 in India is around 7.8 and 5.7 million hectares respectively. In case of vegetables, potato, tomato, onion, cabbage and cauliflower account for around 54% of the total vegetable production in the country. [pic] *Composite figure for mango, mangosteen and guavas Indian Trade India’s exports of fresh fruit and vegetable has increased by 44per cent in value in 2007-08 from 2005-06 which includes products like fresh onion, mangoes, grapes, walnut and other fresh fruits & vegetables. Over 90per cent of India’s fresh products gets exported to West Asian and East European markets. Exports of mangoes, grapes, mushrooms have started going to the United Kingdom, Middle East, Singapore and Hong Kong. [pic] The area under vegetable covered was 7.8 million hectares with a production of 125.8 million MT in 2007-08.  India’s export of other vegetable has also accorded a rise of 82 per cent in value in 2007-08 from 2005-06. The major markets of Indian vegetables are U.A.E, Pakistan, Sri Lanka, Nepal and Bangladesh. Of the various vegetables that enter into world exports in fresh form, three are important namely tomatoes, potatoes and onions. Vegetables like potatoes, okra, bitter gourd, green chilies have good export potential. India is the largest producer of fruits in the world. The covered area under the fresh fruits in India was 5.8 million hectares with the production of 63.5 million MT in 2007-08. India’s export of fresh fruits has increased from Rs. 606 crores in 2005-06 to Rs. 750 crores in 2007-08. The major import markets for Indian fresh fruits include are U.K, Netherlands, U.A.E, Russia, Bahrain, Qatar, Kuwait, Saudi Arabia, Bangladesh and Nepal. The export of Indian gherkins has maintained a growth of 10-15 per cent per annum. Its current export stands at Rs. 500 crores. The export markets include U.S.A, Russia, and Europe. The current exports of grapes stand at Rs. 317 crores. Currently, India accounts for a 10 per cent share in the world trade of pomegranate exports worth Rs.10,000 million. Export of Major Fruits The export details of various fruits in the past three years are depicted below. [pic][pic] [pic][pic] The export analysis of major fruits is mentioned below: |S. No. |Horticulture Commodity |Production (in |Production areas |Export (in |Key Export Markets | | | |‘000MT) | |‘000MT) |(2007-08) | | | |(2007-08) | |(2007-08) | | |1 |Banana |23,205 |Tamil Nadu, Maharashtra, |16.66 |U.A.E, Saudi Arabia, Bahrain, | | | | |Gujarat, Andhra Pradesh, | |Kuwait, Nepal | | | | |Karnataka, Bihar, WB | | | |3 |Mango |13,792 |Andhra Pradesh, UP, Karnataka,|54.35 |U.A.E, Bangladesh, U.K, Saudi | | | | |Bihar, Gujarat, Maharashtra | |Arabia, Nepal | Export of Major Vegetables The export details of various vegetables in the past three years are depicted in the following graphs [pic][pic] [pic] The export analysis of major vegetables is given below: |S. No. |Horticulture Commodity |Production (in ‘000MT)|Production areas |Export (in ‘000MT) |Key Export Markets | | | |(2007-08) | |(2007-08) |(2007-08) | |1 |Green Peas |2,560 |UP, MP, HP, WB |815 |Pakistan, U.A.E, | | | | | | |Bangladesh, Nepal, Maldives| |3 |Potato |34,463 |WB, UP |78.45 |Bangladesh, Malaysia, Sri | | | | | | |Lanka, U.A.E, Pakistan, Nepal | Source: Technopak Analysis Key Players: Some of the major players engaged in the export of fresh fruits and vegetables are as following: |Company |Products handled |Export Destinations | |Adani Enterprises |Apple, Grapes, Pomegranate |Europe, West Asia | |Bharti Field Fresh |Baby Corn, Okra, Beans |U.K, Europe, Middle East | |Euro Fruits |Grapes, Pears, Apple, Oranges |European Union, Gulf countries, Holland | |Freshtrop Fruits |Pomegranate, Grapes |Belgium, U.K, Netherland | |Global Green |Gherkins, Cherries |France, Spain, U.S.A, Russia, Australia, Canada| |Jain Irrigation |Mango, Onion |U.S.A, Canada, Europe | |K B Exports |Onion, Potato, Green Peas, Okra, French Beans, Bitter Gourds, | | | |Curry Leaf, Broccoli, Carrots, Cauliflowers, Drumsticks | | |Mahaanar |Pomegranate | U.K, U.A.E, Saudi Arabia, Netherlands, Egypt, | | | |Turkey, | |Reitzel |Gherkins |Russia, U.S.A | |Temptation Foods |Frozen Green Peas, Broccoli, Baby Corn |U.S.A, U.K and the Middle East | |Unifrutti India |Apple, Grapes, Banana, Mango, Pomegranate, Kiwifruit, Peaches, |Europe, US, Middle East, Sri Lanka | | |Plums, Pears, Cherries, Lemons | | Source: Technopak Analysis |Mahagrapes |Grapes, mango, Pomegranate |U.K, Netherlands, Germany, Sri Lanka | |Mahamango |Mango |China, Hong Kong | |Mahindra Shubhlabh |Grapes, Pomegranate, Apple |U.K, Netherland, Holland, Norway, Italy, Greece, West and | | | |South East Asia | |Reitzel |Gherkins |Russia, U.S.A | |Temptation Foods |Frozen Green Peas, Broccoli, Baby Corn |U.S.A, U.K and the Middle East | |Unifrutti India |Apple, Grapes, Banana, Mango, |Europe, US, Middle East, Sri Lanka | | |Pomegranate, Kiwifruit, Peaches, Plums, | | | |Pears, Cherries, Lemons | | Source: Technopak Analysis Meat Industry Sectoral Demographics- Background Despite some 50 per cent of the population being vegetation, and cultural issues around eating certain meats, India is a major producer of all animal meats. The share of bovine meat in the total meat production in India is about 60% as against small ruminants (15%), pigs (10%) and poultry (12%). To produce the above quantities, the extraction rates in cattle are about 6%, buffaloes 11%, sheep 33%, goat 38% and pigs 84%. The production of processed meat has crossed 9,00,000 tonnes per annum in 2008. India has 52% (98 million) of the world's buffalo population. As per the latest census of 2003 there was a growth of 7.5% in buffalo livestock during the previous 5 years. Meat is produced from animals procured from disease free zones and processed in the state of the art processing plants following world class sanitary and phytosanitary measures and certified with HACCP and ISO-9002. There is, however, very little processing of meat (1%) for ready to eat meat products. The (buffalo meat) production is expected to increase by 4.5 percent to 2.7 million tons. The buffalo meat export forecast for 2008- 2009 is to hit 850,000 MT (Carcass Weight Equivalent), on account of growing international demand and the cost competitiveness of Indian buffalo meat Export Information India exports more than 4,00,000 tonnes of meat of which major share is buffalo meat and also the fifth largest exporter of bovine meat in the world. India exports, both frozen and fresh chilled meat to more than 54 countries in the world. Last year (2007-2008) the total buffalo meat export was 451,574.8 MT. The major export was of deboned and deglanded buffalo meat, which accounts for 98% of the total meat exports. India exports, both frozen and fresh chilled meat to more than 60 countries in the world, largely South East Asia, Middle East and African countries. |  |2005-06 |% Change |2006-07 |% Change |2007-08 | |QTY-Mts, VALUE-Lakhs |QTY | | Europe |Italy, Spain, Portugal, Germany | | Asia |Vietnam,Malaysia,Philippines,Turkey,Bnagladesh | | Middle East |SaudiArabia, U.A.E.,Qatar, Oman, | | Africa |South Africa, Angola, | Recently, Indian buffalo meat is witnessing healthy demand in international markets due to its lean character and organic nature. More than 75 per cent of total buffalo meat is exported. Egypt is major importer of buffalo meat followed by Iran, Syria, Indonesia, Thailand, Philippines, Russia, etc. are the major importers of bovine meat. There is a government ban on the export of beef (cow's meat) to support religious beliefs of certain sects in the country. India also exports, frozen and fresh chilled meat to more than 54 countries in the world. Mostly in India, large animals which are slaughtered for meat purposes are retired animal, i.e. retired from work or dairy. There is no special breeding or feeding of animals for meat production. This needs to be taken up by export oriented plants so that quality meat is obtained for national and international markets. Competitive Advantage Demand for Indian buffalo meat is gradually growing in export markets due to its cost competitiveness, perceived organic nature and proportion of less fat. Indian exporters have been able to meet international demand by utilizing modern integrated abattoir and meat processing facilities thereby working to improve the quality of Indian product. India is home to a large livestock population - approximately 95 million heads which is around 57% of world buffalo population. As much as the supply is in abundance, the demand, in contrast is rather poor in the Domestic market, which is why the availability for export is abundant. Furthermore, there is a strong chain and availability of modern & integrated meat processing facilities. The fact is that the Indian buffalo meat is 93% chemically lean and is free from radiations. Frozen buffalo meat is competitively priced lend strong support in favor of this. Most importantly, the Indian livestock is free from the dreaded Bovine Spongiform Encephalopathy (Mad Cow Disease) Industry interface If India wants to head towards the "Pink Revolution", what it needs is the lead in the right direction. Driven by buoyant export markets, the meat processing industry in India is growing rapidly. As meat processing is industrialized, hundreds of the smallest butcher firms were absorbed by larger enterprises, which sought out international markets for their meat exports. The biggest bottleneck in expanding the meat processing sector, in terms of both investment and exports, is lack of adequate infrastructure. Without a strong and dependable cold chain, a vital sector like meat and food processing industry which is based mostly on perishable products cannot survive and grow. Meat processing has been driving growth in many developed countries. It has made great contributions to the entire economy, engineered structural changes throughout the system. The EU, the US, Brazil and Canada have some of the largest meat Processing industries in the world. The export of meat and meat products is handled by 15 export-oriented modern combined slaughter houses and meat processing plants registered with the Agricultural Processed Food Export Development Agency (APEDA), Ministry of Commerce. Additionally, there are about 35 meat processing and packaging units (out of which 12 are registered with APEDA), which source dressed carcasses from the government approved municipal slaughter houses for export. The GOI has proposed a financial outlay of $250 million to fund the program ‘Salvaging and Rearing of Male Buffalo Calves’ for the purpose of increasing meat production during the 11th five year plan (2007-12). Few of the leading meat processors in India are Al Kabeer, Allanasons Limited, Alkhan Exports. Al Kabeer: It is the pioneer of frozen and processed foods in the Middle East since 1978. It has a dominant presence in the whole category of frozen foods right from basic meat products to a whole range of ready-to-cook products. Allanasons Limited: It offers a wide range of quality products from frozen buffalo meat. It is one of the leading names in the arena of processed food. The company owns a substantial chunk of domestic and international market. Alkhan Exports: They raise animals on natural feeds for obtaining HALAL MEAT for world-wide consumption. The animals are slaughtered by hand with sharp knife by Muslim clergy as per Islamic Halal method under veterinary supervisions and carcasses are processed, freezed and packed at the cold storages. Ground Reality An Indian meat industry is one of the major meat producers in the world, but still it is a conspicuously unorganized sector and most of the production takes place in old local slaughterhouses. And the conditions of those slaughterhouses are unhygienic which help in increasing stray dog population and spreading diseases like cholera, gastroenteritis, tuberculosis and rabies. In the rural areas, meat is produced in unhygienic circumstances where it is exposed to faeces and urine. Scum from slaughterhouses run through open drains and dumped without adequate treatment. The butchers, small meat traders, marginal farmers and other communities still follow primitive methods and outdated implements for slaughter and processing of meat, which results in wastages and consequent diminishing returns. There is an urgent need to train more people with the latest technologies of humane slaughtering, transport of animals in comfortable posture and animal welfare. Besides, inputs in animal health like vaccination, deworming and animal production like supply of animal feed and artificial insemination, may also prove fruitful. A recent release issued by People for the Ethical Treatment of Animals (PETA) states that, in vast part of the country, animals are transported in poor and crowded conditions without valid health certificates. And in some slaughterhouses animals were slaughtered in full view of each other, which is illegal in India as it is unethical in several beliefs The release also divulges that, Minors are working in the slaughterhouses and many workers are not properly trained for animal welfare or hygiene. PETA also claimed that, unauthorized worker applies the government health mark on carcasses and meat is never adequately checked for safety before it is supplied in the market. Action Plan The loom identified for the livestock sector in the 11th five year plan is to achieve an overall growth between 6 to 7 percent per annum for the sector as a whole, with milk group achieving a growth of 5% per annum and meat and poultry achieving a growth of 10% per annum. The benefit of higher growth should be equitable, benefiting mainly to the small and marginal farmers in the country. It should also benefit poorly endowed areas like drought prone, parched and semi-arid areas. The sector should also provide additional employment opportunities to people in rural areas especially women who manage the livestock in the household, thereby empowering women. Summary In contemporary condition, it will be a great challenge to centralize the million-dollar meat business and the government can attempt to formulate structure for producing the quality meat with hygiene. With rising global market opportunities for the Indian meat industry which have significantly encouraged investment in meat processing also needs to improve the futuristic technology for slaughterhouses and animal farming. There is a sea change in the meat industry during the last one decade. The trend towards establishing feedlots to raise meat animals has started. The state-of-the-art, fully integrated slaughterhouses with meat processing plants will be established soon. The government has launched the FMD Control Programme. All these measures will bring the "Pink Revolution" in the country in the 21st Century. Dairy Industry Background India is the largest milk producing country in the world with 100 million tonnes produced during 2007 and about 120 million tonnes in 2008. An increased demand for value-added dairy products and growing private investment in dairy processing facilities (boosted by liberal credit policies and lower interest rates) are expected to provide further impetus to India’s milk production in the coming years. By 2011, the value of the industry is to reach Rs 520,780 crores, which includes Rs 159,600 crores from liquid milk, Rs 42,680 crores from ghee, Rs 50,500 crores from khoa/chhana/paneer, Rs 9,100 crores from milk powder, Rs 2,250 crores from table butter, Rs 6,150 crores from cheese/edible casein and Rs 25,050 crores from other products. Interestingly, out of the anticipated milk output of 120 MT, the share of liquid milk will rise to 81 per cent or 97.5 MT and only the rest 19 per cent (22.5 MT) would get converted into products. But the organized industry’s share of total milk handling will go up to 30 per cent (36 MT), while the small players will see their share dip to 22 per cent (26 MT). At the same time, higher rural incomes will marginally boost the share of milk retained in rural areas to 48 per cent or 58 MT. The other significant feature is that within the 30 per cent overall share of organized dairies, the major 20 per cent (24 MT) will be accounted for by the private sector. The cooperatives and government dairies will handle 10 per cent or 12 MT of milk, which will be lower than that of the organized private sector. In spite of having largest milk production, India is a very minor player in the world market. India was primarily an import dependent country till early seventies. Most of the demand-supply gaps of liquid milk requirements for urban consumers were met by importing anhydrous milk fat / butter and dry milk powders. But with the onset of Operation Flood Programme, the scenario dramatically changed and commercial imports of dairy products came to a halt except occasional imports of very small quantities. India exports mainly surplus dairy commodities, such as SMP, WMP, butter and ghee. The major destinations for Indian dairy products are Bangladesh (23.1%), UAE (15.4%), US (15.6%) and Philippines (8.9%). In terms of products, SMP is the most important product accounting for about 63% of total export volume, followed by ghee and butter (11.7%) and WMP. Export figures clearly demonstrate that the Indian dairy export is still in its infancy and the surpluses are occasional. Indigenous milk products and desserts are becoming popular with the ethnic population spread all over the world. Therefore, the export demand for these products will increase and hence, there is a great potential for export. |  |2005-06 |% Change |2006-07 |% Change |2007-08 | |QTY-Mts, VALUE-Lakhs |QTY |VALUE |QTY |VALUE |QTY | |QTY-Mts, VALUE-Lakhs | |Total Agricultural Export |15.03 billion | |Total Cereals |3.27 billion | |Basmati Rice |965 million | |Non Basmati Rice |1.64 billion | |Other Cereals |661 million | |Major export destinations of cereals from India are Asia (Malaysia, Korea, | | |Taiwan, Nepal, Hong Kong, SriLanka and Bangladesh; Middle East (Saudi Arabia, UAE | | |and Kuwait); Africa (South Africa, Ivory Coast) and North America (USA). | | | | | [pic] [pic][pic] [pic] The total export of cereals has gone doubled in 2007-08, over the previous year which is a positive indication of overall Indian agricultural economy. The export ban on non basmati rice and the export restriction on basmati rice would drastically lower India’s rice exports in 2008 and 2008-09 to around 2.0 million tons, mostly basmati rice, and some non-basmati rice exports under bilateral agreements/food aid programs. Although India abolished the import duty on rice erective March 21, 2008, through March 31, 2009, no import has taken place so far as world prices are much higher than Indian prices. The export trends of some of the major agricultural commodities (Rs. crores) are given below. Production of other coarse grains includes 7.7 million tons of sorghum, 12.2 million tons of millet and 1.3 million tons barley marketed in 2007-08. The increase is largely in response to higher international prices as India has now emerged as an exporter of corn and there are no export restrictions on corn unlike in the case of wheat and rice. India’s corn exports are estimated at 1.5million tons in 2007-08, mostly to South East Asian countries and the Middle East. Besides corn, India is also exported significant amount of barley in 2008. Key Players Some of the major players engaged in the export of cereals are as following: |Company |Products handled |Export Destinations | |KRBL |Rice |Saudi Arabia, UK, USA | |Rajdhani Group |Basmati rice, wheat products, pulses |Europe, South Africa, Australia, North America, Singapore, | | | |UK | |KLA Rice India |Rice, maize, groundnut, soybean meal and |South Africa, Swaziland, Mozambique, Nigeria, Kenya, UAE, | | |wheat |Saudi Arabia, Iran, Ukraine, UK, Germany, Indonesia, | | | |Malaysia, Singapore, Poland, Russia, Australia, Oman, | | | |Bangladesh, | |Usher Agro |Non basmati rice |European Union, Gulf countries, Holland | |Kohinoor Foods |Basmati rice |UK | |LT Overseas |Brown rice, white rice, steamed rice, |Germany, UK, France, Spain, Middle East, South Africa, | | |parboiled rice, organic rice and flavoured|Mauritius, Australia, Canada, USA | | |rice | | |Lal Qilla |Basmati rice, soya based food products, |USA, Canada, Germany, Australia, Norway, Spain, Italy, | | |jaggery powder green tea |France, Denmark, Austria, Japan, Singapore, Mauritius, | | | |Thailand, Indonesia, Russia, Kuwait, Saudi Arabia, Bahrain | | | |and UAE | Key Opportunities • Preference of region based varieties by ethnic population. Wide diversity in growing conditions implies a wide range of options for diversification and income growth. This is a big strength for Indian agriculture, but this necessitates decentralized research approaches which maximize comparative advantage of different regions. A careful regional prioritization of research is requiring. • Improvement in port infrastructure continuous increase in productivity of agricultural enterprises-crops, animals, fish, is essential. This would ease the subsistence pressure on natural resources, relating them to commercial enterprises. The research system must continue to accord high priority to food crops, particularly those which are of importance to the rural poor and tribal farmers. • Advances in modern sciences, particularly biotechnology, offer exciting opportunities for incorporation of marketable and nutritional qualities in food crops of various kinds. Even as research on genetically modified organisms is accelerated, proper testing and safeguard procedures need to be put in place. The point to note is that this area of research can tackle several constraints inhibiting yield, quality, and nutrition. • More resources should be allocated for nutrition research. There are basic as well as applied research issues relating to indigenous food, nutraceuticals, formulations, food safety, standards, etc. which need to investigated. There is enormous variability in food habits, tastes and preference products across the country and these must be captured and analyzed. • Unmindful pursuit of market opportunities often exacerbates pressure on natural resources and ecology. Safeguarding future production potential and ecological balance should be high priority for research. • Due to socio-economic reasons, women and children are more at the receiving end in terms of micronutrient deficiency and low calorie intake. Nutritional security for everyone would require more extensive availability of grain legumes, edible oils, fruits and vegetables, milk and poultry products. • The challenges of malnutrition, enhanced productivity and crop diversification can be met by better resource management and by breeding more productive, more nutritious and at the same time less resource input demanding crops. • 3 Growth Drivers While global markets have started witnessing pressure in food supply, Indian production systems are not only witnessing continuous growth, but also increased marketable surplus. This surplus is here to stay, especially in high value sectors like fruits and vegetables, dairy products, fish and marine (processed), which is implemental in increased food export from the country. Some of the key factors which have supported the Indian export are as mentioned below – 1. Huge Production Potential India is among the leading global producers of cereals, fruits, vegetables and dairy products. The diverse agro-climatic conditions in the country are favorable for taking up production of a wide variety of crops from cereals and pulses to fruits and vegetables, rearing livestock all round the year. India is the producer of various agricultural crops and varieties like Basmati rice, Alphonso mango, cumin, cardamom, tea, coriander, cashew, a range of vegetables and curries, among others that are popular world over. A rich diversity of secondary food crops, a huge base of rural workers and good rainfall mean, India is able to raise production quickly with limited investments, allowing it to export a bigger surplus to world markets. In addition, India has the advantage of the low cost of production, which provides an unbeatable competitive edge in the global market place. 2. Crop Biotechnology India has significant achievement in the area of crop biotechnology, which broadly includes areas of development of transgenic crops, structural and functional genomics and marker-assisted breeding which is providing the vital breakthroughs to achieve improvements in both quality and quantity in a sustainable manner. Genetic engineering is a powerful tool for improving the yields and quality of both plant and animal foods. Both macro- and micro-nutrient content can be enhanced with the now available and evolving biotech tools. Some promising breakthroughs in improving the protein and micronutrient content of crops, such as maize, rice, rapeseed, tomato, etc., have been achieved. However, safety aspects of GMO foods have become an area of concern and debate, globally. 3. Rising Global Market Increasing exposure of Indian exporters to the global market and frequent increasing interactions with global importers has increased the awareness and capability of Indian producers to produce quality food produce. Increasing willingness of Indian farmers and exporters to embrace global standards like CODEX and Global GAP, adoption of new technologies like irradiation, government focus through National Horticulture Mission, is further strengthening India’s case as processed food exporter. 4. Market Acceptance India has witnessed an increase in exports of fresh produce like grapes and mangoes and processed food - marine, buffalo meat and poultry products in the year 2006-07. Vegetables like gherkins, broccoli and colored capsicum are cultivated exclusively for export value. As quality standard procedures and certification processes are observed with strict stringency, these products usually are accepted widely in foreign countries. Thus, it can be rightly said that the potential for producing and having the capacity to be able to obtain produce, process and export according to approved protocol and quality standards have changed the face of Indian exports. 5. Export Promotion The Ministry of Agriculture and Cooperation and Ministry of Food Processing Industries are the nodal agencies responsible for the quality production and development of the Food Processing sector respectively. While the Agricultural and Processed Food Products Export Development Authority (APEDA) and Marine Products Export Development Authority (MPEDA) are responsible for facilitating the domestic and international trading of food and food products. APEDA is continuous promoting and branding Indian products at various international forums through road shows and event participation such as SIAL Food Show, IFE at London, Eurofruit Congress at Dubai, International Horticulture Fair and Flower Show at Netherlands, among others. At the same time, it is also sensitizing the Indian producers and exporters, for the upcoming export opportunities worldwide and is continuously supporting them to reach these export destinations. 6. Government Support Public policy is now evolving and the productivity can be increased by at least 50 percent through an integrated package of technology, services and public policies. The Government has declared agriculture and food processing a priority sector introducing a number of policy incentives and progressive measures to facilitate quality production and set up food processing units, create infrastructure, enhance investments, support research and development and human resource development. The APEDA is providing the financial support through the following schemes under the 11th five year plan. Schemes for Market Development – ▪ Schemes for Infrastructure Development ▪ Schemes for Quality Development ▪ Schemes for Research and Development ▪ Transport Assistance 2007-12 7. Export Infrastructure: Export of agricultural commodities can be viable and competitive, if required level of investment for creation of physical facilities like transport, cold chain, packaging, port facilities etc., is made. In the last decade, there has been significant development in terms of agri-infrastructure such as port, cold chain and processing infrastructure which has supported to reach Indian producer across the world. Up-gradation of international airports and creation of perishable air cargoes hubs would greatly spur production of fruits, vegetables, flowers and other processed food for export purposes. 4 The broad export strategy for Indian agriculture would be to strengthen and widen the export market for established ‘commercial commodities’ like tea, coffee, spices, cotton, jute, sugar, oilmeals etc., and also to create and capture new export market for ‘dynamic commodities’ like meat, dairy products, poultry, fishery products, vegetables, fruits, floriculture etc., whose demand in the international market is buoyant. The major plank of our foreign trade strategy must be on finding a niche for exports of the above mentioned non-conventional and dynamic commodities. This has to be achieved in the context of stricter control processes under Sanitary and Phytosanitary (SPS) Agreement and other non-tariff barriers viz., Technical Barriers to Trade (TBT), etc. The strategies and action plan for increasing agricultural exports which emerged out of the deliberations are summarized below: Cereals: Since compromise on food security/self-sufficiency is undesirable, the export of strategic cereals should be planned very carefully. Wheat being a major commodity of agricultural exports from developed countries, India will have to face a tough competition from them. Future projections suggest continued upsurge in domestic wheat consumption and relatively small surpluses. While continuing the export of basmati rice targeted mostly to Middle East and to NRIs in Europe and USA, the limited scope for accelerating the export of basmati and other scented varieties will have to be kept in mind. The potential market for rice lies in the Southeast Asian countries like Indonesia, Malaysia and the Philippines and in East Asian countries like Japan and South Korea and also in Sub-Saharan countries. Rice exports to these countries from Thailand have reached a plateau and India has the potential to enter these markets provided we succeed in developing and growing varieties preferred by consumers in these countries and make vigorous efforts to capture the market. Crops like barley and maize hold export potential either as cattle feed or as industrial raw material. The competitive edge can be further improved if the productivity of these crops is raised. Horticultural Produce Opportunities of extended production of various fruits, vegetables and floriculture crops and exporting them to newer markets in Central and South Asian countries and Japan in addition to the traditional markets of Europe, USA, Russia and some countries in Africa, need to be tapped on a priority basis. Efforts are needed for identification of potential markets, choice of cost-effective, eco-friendly and sustainable technologies for product development, value addition and for devising innovative trade practices with emphasis on quality, transparency and timely delivery. Policy interventions and incentive packages leading to regional specialization in production and processing of tradable horticultural products, foreign participation in investment, transfer of technology and buy-back arrangements are also advocated. Commercial Crops The dynamic demand for coffee in the world market opens up splendid opportunities for our country to emerge as a major player. Despite stagnation in international market of tea both in terms of prices and quantities and the stiff competition that Indian tea faces, India should continue to work and aspire for leadership in this crop. The inter-year instability in production coupled with low yields of cotton stand as major constraints for cotton to emerge as a stable exportable commodity. The possibility to keep our presence in international cotton market lies in the increased productivity and enhanced stability in production. India holds a great potential to take advantage of the surge in export of tobacco, especially by improving its productivity. Dairy Products The growth rate of 4.5 per cent per annum in milk production in the country against the world average growth of 1.48 per cent, and its static growth in most milk producing countries indicates the potential of India to emerge as a major player in the export of milk products like whole milk powder, skimmed milk powder, butter, cheese etc., in the rising markets for these products in Southeast Asian countries and the Middle East The emergence of the country from a net importer to an exporter of milk products since early nineties is an indication of pushing the sector from an occasional exporter to a regular exporter in the years to come. The immediate need is to push up the production of milk to a level of making adequate surplus for export after meeting the steadily rising internal demand. To develop dairy products of international standard for export, adequate thrust on quality and clean milk production is required. There is a need to segment milk production systems for catering to different market segments including export market which in turn will demand investment on mechanized milking, chilling systems, quality packaging etc., with strict adherence to Codex Alimentarius Standards and developing branded market for consumers. Aggregation is still a challenge, and hence quality of powdered milk is still under a question mark. Meat and Meat Products Meat and meat products from buffalo, poultry, sheep and goat have a major export potential. Some private state-of-art abattoir -cum-meat processing plants have established a niche in international markets covering the Philippines, Malaysia, Iran, Egypt, Gulf and Middle East countries. The meat export can be further accelerated by modernizing more meat plants with world class sanitary and phytosanitary conditions, by establishing disease-free zones for meat animals and by vertically integrating production of meat animals with meat processing. Apart from addressing the particular issues in the particular sectors, there is a need for broader and non generic efforts that need to be undertaken to increase the inclination of processors towards exports, and hence adopt the practices, operations and procedures that will encourage and boost their interest towards exports. 1. Developing Effective Interface among Various Agencies The most critical parameter determining exportability is efficiency. The challenge for the research system is to shift its focus from increased production to globally efficient production. Reorientation of research agenda for export involves, augmenting production of varieties, meeting quality requirements of importing countries, strengthening of research on non-conventional crops/plants like minor fruits, medicinal plants, seed spices etc., having export potential, establishment of proper linkages with processing industries and export organizations and identification of exportable commodities and also matching of their potential areas of production in terms of agro-climatic conditions and entrepreneurial support are advocated through effective interface of various agencies from primary production to final exports. 2. Investment in Physical Infrastructure Export of agricultural commodities can be viable and competitive, if required level of investment for creation of physical facilities like transport, cold chain, packaging, port facilities etc., is made. Up-gradation of domestic airports into international airports in potential areas like Jaipur will spur production of fruits, vegetables, flowers etc., for export purposes. Special incentives may be offered to encourage both public and private sector investment in various activities related to development of commodity specific physical infrastructure for export purposes. Cold storage facilities, transportation and cold chain linkages for maintaining freshness of the produce are important for items like horticultural products. Efforts should be made to encourage foreign capital and technology marketing tie-ups including joint ventures for sustainable export of agricultural products. 3. Export Promotion The efforts being made for agri-exports by various agencies like APEDA, MPEDA, Spices Board, Coffee Board, Tea Board etc., need to be augmented. Along the lines of these agencies, a Meat Development Board also needs to be established. Contract farming on the lines of the Pepsi Foods in Punjab and replicating the same in Gujarat and Karnataka for commodities like tomato, chillies, groundnut, garlic etc., may be beneficial to the farmers and may facilitate export promotion as foreign buyers get vendor assurance and quality for the items supplied by such agencies. Global Green can be cited as the best example for having done this. Suguna has replicated the same model in poultry in South India, by harnessing the village poultry farmers and local entrepreneurs. 4. Food Safety Requirements Commodity Boards e.g. Spices Board, Tea Board, Coffee Board, National Dairy Development Board (NDDB), NHB, Ministries of Agriculture, Food Processing, and organizations like Bureau of Indian Standards, APEDA, MPEDA should initiate awareness programs in a coordinated manner on Food Hygiene and Hazard Analysis Critical Control Point (HACCP) and other safety measures for export oriented food items so as to avoid rejection and detention of consignments not conforming to quality specifications of the importing countries on the ground of Sanitary and Phyto-sanitary (SPS) Agreement and also Technical Barrier to Trade (TBT) Agreement Efforts are also needed to develop HACCP and other safety measures for each of the potential fresh/processed food items separately, since single system is not universally applicable. Creation of quality testing and certification protocols of international standards would be necessary to fully exploit trade opportunities. 5. Agri-Export Information System In order to develop a common perspective on the constraints, opportunities and other facets of agri-exports by the various stakeholders like producers, research organizations, extension agencies, agro-processing industries, policy makers and exporters, an easily accessible information system including database on aspects such as volume of trade, quality specifications, demand- supply scenario, border prices regulations governing certification and exports of commodities and countries along with inventory of available technologies for meeting the quality is advocated. 6. Developing Managerial Capability As the agribusiness is being enlarged from domestic to international, and multinational to global level, the demand for trained manpower to manage it is becoming more and more explicit and is increasing. Therefore, for managing agribusiness, leadership and managerial ability need to be developed in areas such as agricultural production, procurement, processing, quality management, technology management, international trade, marketing, financial management, logistic management, human resource management and also strategic management. The implementation and adherence to quality assurance measures such as ISO 22000, ISO 15000, HACCP, CODEX, etc. is possible only through trained manpower. Therefore, long-term educational programs and short-term trainings are required for developing manpower for sustainable agricultural exports. In order that agriculture sector contributes to full potential of India’s exports, a long-term policy leading to export orientation by differentiating the exportable items keeping in view the domestic needs, food security, price elasticity, responsiveness to R&D efforts and competitiveness, assumes great significance. 5 Despite abundant production and increasing global demand, India contributes to about 2% in the total agro export. The major challenges plaguing the agro export remain low and inconsistent product quality, poor packaging, poor infrastructure support, constraints in investment in agriculture, lack of synergy among various stakeholders, and inadequate market promotion. Hence, there is an urgent need to build on India’s competitiveness and identify critical success factors. Infrastructure Development: A major impediment in promoting exports is the lack of adequate infrastructure, particularly cold storage facilities and transportation, road networks, freight and cargo facilities. There is a need to encourage public-private partnership in building such facilities and ensuring their proper maintenance. There is no dearth of financial assistance as there are several incentives being provided by Government of India under its capital investment subsidy scheme as well as those available under the schemes envisaged by APEDA. Concerted efforts need to be made in this direction in collaboration with commercial banks. Marketing Strategy: In the current scenario where all the quantitative restrictions have now been removed and there is an increased opportunity for the developing countries to have access to global markets, it is imperative that a marketing strategy is worked out, focusing on major items of import by countries and to concentrate on such products using the comparative advantage. The countries in the European Union, African countries and the CIS countries need to be given greater attention. Proper marketing strategy needs to be geared up to meet the raw material requirement of processing units and ensure a sustainable export market for the processed products. Contract Farming: Contract farming needs to be encouraged not only to provide a broad base for raw materials for processing but also for the supply of the right type of inputs and other linkages necessary for the acceptability of the quality standards for competitive exports Human Resources Development: There is also a vital need for human resources development and to train the exporters about the quality standards and the sanitary and phyto-sanitary measures that need to be complied with. More “Cluster- based” training programs for the organized and unorganized sector need to be organized to upgrade their products and process to comply with the stipulated quality/hygiene standard. Market Access and Information: There is a need to provide continuous updating of data on market information, market access, procedures and processed etc. Biotechnology: India has been recognized as one of the five top biotechnology leaders in the Asia Pacific region. In terms of number of patents filing, India ranks third in Asia. Biotechnology, leads to reduction in cost and improvement in productivity. Given the low-cost but high caliber work force, there is a need for optimal utilization of intellectual and biological resources with a view to bring cost effectiveness in production. Trade Related Intellectual Property Rights: India should launch genetic and legal literacy movements immediately to sensitize panchayats and rural families on the implications of the protection of plant verities and Farmers Rights Act 2001 and Biodiversity Act 2002, since they contain provisions for recognizing and rewarding the contributions of the primary conservers of biodiversity and holders of traditional knowledge. Credit Facilities: The EXIM Bank, in consultation with APEDA and the Ministry of Agriculture, may set up Farm Export Promotion Cells in each AEZ and provide necessary technical support and guidance to the exporters. It can also open offices in each state in order to promote agri-export and also establish overseas branches in countries where Indian exports are favorite destinations. Economies of scale: Economies of scale and brand-banding can only happen when large and big companies enter the sector. In this respect, contract farming and corporate farming should be extended credit facilities with liberal terms and making storage, movement, processing, marketing and trade of farm commodities Despite abundant production and increasing global demand, India contributes to free from regulations and controls. It is necessary to streamline the procedure for export financing of agricultural products which are perishable in nature and making it entrepreneur-friendly. Likewise, since perishable products are traded on commodity basis and export is generally on consignment sale basis, the procedure for obtaining export credit guarantee cover should be streamlined and made exporter-friendly and in this respect a comprehensive insurance cover right from the stage of production to export can also be considered. Policy Interventions: The following policy options should receive our attention at the earliest with a view to prepare ourselves in meeting the full impact of WTO. • Increased investment in agriculture • Increased flow of institutional credit to facilitate agricultural exports • Diversification from cereals to high-value crops such as fruits and vegetables, floriculture, spices, animal husbandry, fisheries, medicinal and herbal crops etc. • Promoting and encouraging public-private partnership to facilitate investment in infrastructure such as in irrigation, agriculture research, electricity, roads, rural markets, cold storage and transportation etc in an endeavour to reduce transportations costs • Organizing farmers into associations that would jointly produce and process commodities for international markets at both the regional and global levels including formation of, and motivation to, SHGs for cultivation, processing, marketing, nurseries, seeds production etc and linking such initiatives through contract farming and corporate farming • Increased investment on developing viable and cost effective seeds industry • Developing institutions and providing support to them for the vertical integration of production, processing, packaging and marketing of agricultural produce with public-private partnership • Policy framework for the contract and corporate farming should be streamlined • Improving sanitary and phyto-sanitary measures as well as the adoption of Codex Alimentarius standards of food safety and simultaneously evolving SPS standards for domestic products as well as imports including strengthening the capacity of the state government institutions for educating the farmers with regard to SPS requirements • More advanced and convenient packaging should be introduced. Internationally there is an increasing emphasis towards eco- friendly packaging using biodegradable materials. Efforts need to be made for reduction of excise duty on packaging material • Government should consider modifying and rationalizing the taxation framework for the agro export sector, scrap excise duty on packaging material for basic foods and reduce custom duty on food processing and packaging machinery. Therefore, there is a need to sensitize the stakeholders to work in collaboration and to deliberate on the issues and challenges, in order to offer wider export opportunities and necessary infrastructure support to Indian exporters. APEDA text…!!! 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