With a production of over 230 million tonnes of fruits and vegetables over an area of 20 million hectares , the horticulture sector in India is now a significant contributor to the agricultural GDP of the country , but its contribution to farmers’ incomes livelihoods, nutrition, export earnings, ecology and equity does not get the prominence it deserves because our political discourse and economic commentary is geared to the ‘meta narrative’ of food security , MSP and PSS for wheat , rice , pulses and oilseeds . In fact one has to be grateful to the runaway inflation of the humble ‘onions and potatoes’ that perishables made it to the national attention grid, but for the wrong reasons! While it is true that the sector has received more funds than ever before, and production has increased manifold, the sector now faces the problem of ensuring that the primary producer gets a ‘fair and remunerative share ‘ of the consumers rupee, as in the case of ‘primary crops ‘like wheat and rice.
How then does one look at the horticulture sector’s growth scenario. As in Dickens’s classic ‘A Tale of two cities’: it was the best of times, it was the worst of times! It is the best of times because few other sectors have seen such exponential growth in terms of funding ….from just about Rs 700 crores in the seventh Plan to Rs 15,000 crores in the eleventh Plan. The sector now boasts of the National Horticulture Mission, the Horticulture Mission of the Himalayas and the North East, the National Mission on Micro Irrigation and the national Bamboo Mission, besides substantial funding and policy support for the National Horticulture Board and the Coconut Development Board. Besides there are smaller , but focused missions like the Saffron Mission for Jammu and Kashmir, and the National Bee Board. Many state governments are creating ministries and departments exclusively for horticulture, and there is a general sense of ‘can do ‘attitude!
However the primary challenge to the sector emanates from the fact that almost every policy instrument which regulates this sector was designed primarily for wheat and rice, and by extension, pulses, oilseeds and millets. Thus when it comes to financial inclusion of farmers, provision for fertilizers, price support, and especially the marketing arrangements, the sector faces the ‘worst of times’. This does need further elaboration. Take the Kisan Credit Card for example. The very design of this financial instrument which is responsible for providing agriculture credit of more than four hundred thousand crores to the farmer at a concessional rate of interest through interest subventions caters to the ‘wheat-rice’ cycle, and its norms are designed to cover seeds, fertilizers and pest/weed management. Fortunately, the humble potato fits into this cycle as an alternate crop in West Bengal, Punjab and UP, but the marginal farmer who wants to grow strawberry, egg plants, broccoli or okra for the vegetable market, or wants inputs for the small poly house that s/he has created out of NHM funds does not have access to this concessional credit. Thus the vegetable grower must take credit at usurious rates of interest, often from the intermediary, who then gets a control over the produce even before the cultivation cycle starts. True, there is no ‘bar’ to the KCC financing vegetable crops, but unless the ‘norms’ for funding are circulated to the banks and co-op institutions, pious intentions do not get translated into ground reality. Therefore the first point to note is that the horticulture farmer pays a higher ‘cost’ of credit.
This financial exclusion leads to a vicious spiral: because his crop has not been financed, it cannot be insured. Thus, in the case of a crop loss on account of adverse weather conditions and/or pest attack, the horticulture farmer does not have a ‘right’ to get compensated. He has to depend on ‘patronage’ and a visit by a central team to assess the damages, and receive a ‘pittance’. Even in the revamped agricultural insurance scheme, and the Weather Based Insurance, horticulture is an ‘add-on’. However, horticulture crops are more sensitive to climate change, and therefore require urgent attention. This essayist has made a strong case for convening a meeting with the insurance companies, farmers associations and insurance regulator to take the first steps towards designing product portfolios for the vast range of horticulture crops – from saffron in Jammu & Kashmir to areca nut in Karnataka!
Let us now move to agricultural inputs, including seeds, nutrients and pest/weed management strategies. In addition to the National Seeds Corporation and the State farms corporation of India, almost every state, and many agricultural universities have their dedicated corporations to address the issue of seed supplies. Their primary focus has been to HYVs and hybrids for the major crops, and because there is still a very wide gap between demand and supply in this ‘core sector’ the horticulture sector, more or less fends for it. True in the case of potato, the CPRI has taken the lead role in the development of Foundation seed, and the Indian Institute of Vegetable Research at Varanasi and the IIHR at Bangalore have developed several varieties, the challenge is not the development of a good seed/planting material in the lab – but to ensure its commercial production, certification and regulation to ensure that the farmers are not given spurious seeds. Again, the focus of the seed certification labs in the country is primarily geared to ‘crops’, rather than fruits and vegetables, and face severe capacity constraints in most states. If horticulture were to add its own portfolio, the backlog would be so high, that entire seasons would be missed, thereby rendering the exercise redundant.
From Products to Processes: Accrediting Nurseries, and Redefining their Roles
As such, a better option would be to move into a regime of accrediting nurseries which can supply planting materials and seeds, besides stocking seeds of companies which have their own testing regimes, or have the credibility and brand name, backed by internal research. The National Horticulture Board has recently taken up the task of accrediting nurseries, and the number of stars assigned to each will depend on periodic review and inspection. Thus while getting the ‘five star status’ will be great for a nursery, being able to retain it will be greater, and the possibility of losing the status will impel the nursery to take all steps in this direction. It may take a few years time, but by the end of the XII Plan period it would be possible for the NHM to give directions that state procurement should only be from ‘accredited nurseries’. Over time, the accredited nursery movement may evolve a dynamic of its own, and these could also be the centres for sale of horticulture equipment, bio fertilizers, and other agri inputs.
Breaking the ‘land holdings barrier’: Protected Cultivation and Micro Irrigation
Taken together, protected cultivation and micro irrigation can break the ‘land holdings barrier’, which has been the bane of Indian agriculture. Given the fact that India is a land of marginal and small holders, and that it will not be possible to increase the per capita farm size, the only option is to increase the productive capacities multifold to make incomes rise at a pace which compares with the services sector. This is where horticulture sector brings in its unique competitive advantage : with shade nets and poly houses, fan –belt systems and micro irrigation, it is possible for a 300 square meter plot of land to generate an income of up to Rs 3 lakh per annum( an impossibility in a rice-wheat /cotton/sugarcane cycle) True, this will involve higher capital costs – but given the support under NHM , with supplementary grants by the state and institutional funding, it would be possible for the new generation of agripreneurs to break free of the ‘ land holdings barrier ‘. The question is: are we prepared to invest in the sector on the scale that we are doing for airports and national highways? To cover just 1% of India’s cultivable land under protected cultivation, the requirement of funds could be as high as Rs 25,000 crores (back of the envelope calculations). This can however generate incomes and livelihoods in a ‘virtuous cycle’, and may be more productive than other interventions, especially as this involves a ‘public private partnership’ in the real sense!
Reducing Transaction Cost and Time: Repealing APMC Acts
Getting funds for breaking the land Holdings barrier may be easier than getting this Act amended. The ‘vested interests’ which control these Markets are not agriculture producers, but traders and intermediaries, and because they have ‘controlled’ these institutions for the last fifty years, they have perfected the art of finding both creative and coercive reasons of holding the system to ransom. While the DAC has been reiterating the need to amend the Act, several states including Punjab, Haryana, UP, Rajasthan and Delhi – to name few- have not accepted this. Of course every political party sings paeans for the ‘toiling farmer’ but his right to sell his produce at his farm gate has been compromised by every party across the political spectrum. The time has come to make it abundantly clear that unless Act is repealed, higher production and yields will not translate themselves into incomes for farmers. True, the subject falls under the domain of the state governments, but if an Empowered Committee of State Finance Ministers could take the lead in establishing the VAT regime in the country, this can also be done. The APMC Act was designed to ensure that the farmer brings his produce to the Mandi so that he has greater choice: today the choice is being restricted because of the Act itself. Moreover the markets under APMC have failed to keep pace with technology: as a country which prides itself in IT skills, and BPO sector, less than 1% of our agriculture produce is sold through electronic auctions with transparent price discovery. It was time the Competition Commission of India took suo motto notice of the restrictive provisions of the APMC Acts which had virtually restricted the entry of any new player in this sector, and also prevented any member to introduce systems to usher in a monopoly.
While NHM has been supporting ‘terminal markets’ and many states have come forward to take assistance of up to Rs 50 crores (one third of the anticipated project cost ), this has not caught on like wild fire, because any modern system will keep a record of transactions, but the ‘guild’ which controls the trade does not want any trail. This is perhaps one of the largest ‘unorganized sectors’ in the country. Can one believe for example, that the total requirements of fruits and vegetables for the NCR region are less than Rs 2 crores per day?
This is the third and the concluding part of a freewheeling essay on the future of horticulture in India, and the steps that could be taken to put this sector on a high growth trajectory, especially as it the sub sector within Indian agriculture which can help increase farmers’ incomes exponentially, besides ensuring that wealth generation , distribution and capitalization takes place in the agrarian region , which will be more equitable and ecologically sustainable . However the critical element here is connecting farmers to consumers, a challenge which is formidable, but not insurmountable!
And the comparison with the support available to the cereal crops is inevitable ….
Linking Farmers to Markets!
To a large extent, these issues have been thought through in the National Vegetable Initiative, which, in the first phase, aims to connect cities with a population of 1 million with farmer’s clusters. Typically, a city with a population of this size should have at least five to seven thousand vendors, providing door to door, or at least, ‘walking distance’ service to the home makers and/or institutional consumers. Ideally, with such high volumes the market should have evolved on its own – after all the production and supply chains are in place, even if they are non- transparent and ‘cartelized’. However, markets depend to a large extent on information about production, warehousing, logistics, distribution channels and their financial holding capacity and consumer behavior. This is where the challenge lies– for unlike the agricultural production estimates, which start giving data from the ‘sowing stage,’ itself, there is no organized system for collection of horticulture statistics. True, the National Horticulture Board brings out a Horticulture date base at the end of the year, and the Marketing Division within the GoI maintains a dynamic portal which records arrivals in the Mandi, the challenge lies in anticipating production, and putting this information in the public domain. Moreover when multiple agencies give information based on their understanding of some crops in limited areas, it tends to distort the market. Take the case of onions, for example. A report on production losses in the late Kharif onion in some parts of the country on account of unseasonal rains triggered a panic reaction last year (2010), even though the loss of production could have been offset by calibrating the trade policy. However if there was a system to report sown area, expected production and storage capacity at different levels, the scenario would be different. Prices will still vary according to the production season, but the ‘speculation’ which affects both farmers and consumers adversely can be minimized to a large extent. Therefore strengthening the horticulture data base becomes very important if the country has to translate production gains in horticulture into higher incomes for farmers.
Warehousing, Cold Storages and WRs
The next step would be the establishment of a chain of cold storages, much like the warehouses which the FCI, CWC and the state marketing federations have established for cereal crops. It is true that over the last decade, several steps have been taken to enhance the cold chain capacity in the country, but it is still woefully inadequate. With just about five thousand cold storages in the country, with the bulk of them concentrated in UP, Punjab and West Bengal, and for the potato crop, the country needs another twenty five thousand throughout the length and breadth of the country, especially in the NHM districts. The WR (warehouse Receipt )has to be extended to the cold storages as well , because while the ‘receipts/slips’ issued by the cold storage owners are informally traded, there is no legal sanction behind them, and in any case, banks cannot extend loans against these receipts. This is important because the overwhelming majority of cold storages in the country rent out their spaces to small producers.
Distribution Channels
If PSUs have a ‘near monopoly’ in the procurement and a lead role in the distribution of cereals (the main agricultural crops), they are conspicuous by their absence in the distribution and marketing of perishables (horticulture crops). With the sole exception of Mother Dairy’s ‘Safal Brand’ of outlets in the NCT of Delhi, the distribution is in the hands of private ‘guilds’ which do not encourage the entry of new players. The APMC Act helps them for it does not encourage new players, and the existing channels do not find any good reason to invest in a modern distribution channel. As long as the entire produce has to come to a central aggregation point, there is no incentive for primary level grading, sorting and value addition at the farmers’ field. The intermediary’s profit comes from his ‘discretion’ in sorting, grading and assigning value to different lots, and pushing those to different wholesalers and retailers. Thus the NVI s emphasis on formation of farmers’ groups, and training them to sort, grade and do primary level value addition(lot sizes, lot mixes) can go a long way in improving farmers control over his produce. This will of course, call for professional assistance in organizing these clusters into FPOs (much like the co-op support services which NDDB provided to the dairy sector). However, the general consensus is that beyond this level, aggregators will be required to establish and upgrade the supply chains – both to the existing vendors, and to thousands of other ‘Karana’ stores which are currently not in this domain as they do not have the facility of a ‘cold chain’ in their premises. In fact more than the distribution of pre graded, pre packaged vegetables, is the issue of logistics support for the new push cart, with pneumatic tires and temperature controlled chambers. The vegetable vendor also has another set of issues, which are beyond the ken of horticulture: these relate to municipal zoning, livelihood, credit and ‘inspectors’ of different departments- from health to legal meteorology and of course the police!
However, when farmers’ incomes, and the health of the consumer is at stake, horticulture department will have to encourage and support these networks, and use agencies like the SFAC, NHB and Nafed to take these forward with support from all stakeholders, including corporate and municipal bodies.
Strengthening the Department
The manifesto for the horticulture sector is therefore quite ambitious, and it also has the financial resources and policy matrix clearly laid out. What needs to be done is well known – the question is – how does one begin? The fact of the matter is that the department does not have the foot-soldiers to implement the vision that has been laid out. Most states have staff vacancies ranging from forty to seventy percent, and the staff position itself needs to be reviewed in the light of the new responsibilities and challenges which the sector faces. It has become quite fashionable in policy circles to be critical of the role of government staff, but in the extensive tours which your essayist has taken across states – it is obvious that the departments will have to be restructured to leverage the challenges mentioned above into ‘double digit ‘growth opportunities!
In this freewheeling essay, written exclusively for the Think India’s special issue on Agriculture, the author gives his perspective on how the horticulture sector has done well, but can do much better. More than financed, the sector requires policy support to enable the farmer to access the market at terms which are fair and equitable to both the farmers and consumers. Fortunately, technology is in place to facilitate these transactions, but the policy bottleneck has to be overcome!