India's agri exports still have a lot of ground to cover

India is the world’s largest producer of milk, the largest producer and exporter of spices, the second largest producer of food grain, fruits and vegetables and wheat. It is the world’s 10th largest agricultural exporter. But behind these numbers lies an inconvenient reality: India’s agricultural export basket makes up for only 2.15% of the world's agricultural trade, says the Economic Survey 2020-21. This despite the share of agriculture in the country’s GDP growing to 20% for the first time in 17 years, according to the Economic Survey: services sector is 54% and manufacturing and industry sector is 26%.What this means is that while we are exporting a lot, we are nowhere near fulfilling our potential in agricultural exports. Take a look at these numbers: The European Union, with a share of 35.9%, topped the list of agri exporters in 2019, said the World Trade Statistical Review 2020. The second slot went to extra-EU — the region outside the bloc — with a share of 12.6%. The rest of the list had the US (9.3%), Brazil (5%), China (4.6%), Canada (3.7%), Thailand (2.4%), Indonesia (2.4%), Argentina (2.2%) and India (2.15%).This shows that despite India’s stellar performance in this segment, it still has a lot of ground to cover. Many of these exporting destinations are not endowed with the geographical advantages that India enjoys. Yet, they stay ahead by leveraging industry best practices and producing high-yield agri products.To be fair, India’s agri sector has embraced rapid transformations in the recent past. In 2020-21, exports of agriculture and allied products jumped to $41.25 billion, an increase of 17.34%, said Anup Wadhawan, Secretary, Department of Commerce, in June. According to an official statement, India has been able to take advantage of an increased demand for staples after the pandemic began. There was a huge growth in the export of cereals: non-basmati rice grew by 136.04% to $4,795 million; wheat by 774% to $549 million, and other cereals such as millets, maize and other coarse gains by 238% to $694 million. Exports of essential agricultural products also rose 38% in April 2020-January 2021. The country also continued to achieve a record export of over 44.3% in agricultural and processed food products in April-June 2021-22. 86574107Why, then, are we struggling to corner a larger share of global agri trade? For that to happen, say experts, it is important to make some structural changes in our farming system.M Angamuthu, Chairman of Agricultural and Processed Food Products Export Development Authority (APEDA), says getting ranked among the top 10 agricultural exporting countries is a big feat. But that is not enough. “We need both exportable and high-yielding varieties of crops. Our thrust is also on value additions now. We need to increase automation in food processing to bring in economies of scale. Only then will we become cost effective and be able to expand our trade share in the global marketplace. For increasing volume, we need economies of scale.”Queries sent to the Ministry of Agriculture and Farmers' Welfare did not receive any response.Sustained PerformanceThe Economic Survey 2020-21 said since the economic reforms began in 1991, India has remained a net exporter of agri products, and the numbers touched Rs 2.52 lakh crore in 2019-20. Despite Covid disruptions, there was export growth in 2020-21 in oil meals (90%), sugar (42%), raw cotton (79%), fresh vegetables (11%) and vegetable oils (254%). The brightest jewels in the export crown are basmati and non-basmati rice exports. The country produced 7.5 million tonnes of basmati and exported 61% of that in 2019-20, according to the Ministry of Commerce and Industry. In 2020-21, India exported 13 million tonnes of non-basmati rice and 4.6 million tonnes of basmati rice. 86574130This not only a record in both these categories alone but also a record for any country to have exported such volumes, says Vinod Kumaar Kaul, Executive Director, All India Rice Exporters Association (AIREA). He is upbeat that India could soon corner nearly half of the global rice trade. However, Kaul says supply chain issues could limit the growth. Container shortage and rising ocean freight have hurt trade as export of basmati rice in April-July 2021 fell 15% from the year-ago period, he says. But there was a 74% growth in non-basmati rice. A major reason for this was that India shipped non-basmati rice to several countries for the first time and increased the shipment to some other geographies — another indicator that the country is moving in the right direction. “We hope that the government’s decision to extend the RoDTEP (duty refund scheme) to rice value will also have a positive impact,” Kaul says.The export-incentive schemes need to be more liberal, argue industry officials. Elluru Narayan Rao, Managing Partner of logistics and shipping company Vision Global, says traders used to get 10% export incentive in onions, but not anymore. “What will my customer do? He will go to a cheaper option,” he says. Structural BottlenecksThe primary reason agri exports have not grown more is poor infrastructure in handling, transport, marketing and processing, say experts. Most Indian farmers belong to the small or marginal category — around 85% of the total farmers, according to the Economic Survey 2020-21 — with 1 or 2 hectares. They use traditional farming methods, often yielding output suitable only for the domestic market. They also have low spending capacity, so infrastructure and warehousing costs are out of their reach. Freight rates, poor cold storage facilities and inadequate post-harvest management compound their woes. 86574151Indian agriculture is the home of small and marginal farmers, says Priyanka Mittal, Director, KRBL Limited, the world’s largest Basmati exporting firm. Therefore, the future of sustainable agriculture growth and food security in India depends on their performance. Mittal says small holdings also make them face new challenges in integrating with value chains, liberalisation and globalisation, market volatility, adaptation of climate change and so on. They can grow high-yield varieties and do much better if they get adequate support.Farmers, especially the smaller ones, also face a possible threat from a new front now: corporate groups.“When a company gets into the agri sector and gets involved in contract farming, farmers, liaisons, distributors and other people in the supply chain cannot make any money. The profit margin will go down drastically for farmers,” says a Meerut-based marginal farmer, on the condition of anonymity. “SME aur marginal farmers 50 paise pe khelta hai, aur bade player Rs 5 pe.”That is why, he said, there is farmers’ resentment in one form or the other across the country. Many don't get enough to even cover cultivation costs. “They kill themselves due to the burden of the debts taken to just grow crops to feed their own family,” he adds. Addressing Supply Chain NigglesA holistic perspective focused on the “whole of the supply chain” and greater integration with global value chains can help these small farmers. India does not have global trade-focussed supply chains to move commodities in bulk and the capacity to handle quick turnaround of large sea carriers at ports. Another issue is the absence of large quantities of homogeneous quality of agri products, a standard requirement for global trade.Unupom Kausik, the President of National Commodities Management Services Limited (NCML), the country’s largest and integrated post-harvest solution provider, says these “serious” issues have been a barrier to global outreach for Indian agro producers. Volatility in government policies makes global buyers hesitant to accept India as a reliable long-term source of commodity origination point, he claims.To deal with these issues, Kausik says the government should come up with a concerted policy, involving stakeholders such as trade bodies, marketing organisations, certification agencies, multimodal logistics service providers, port and rail infra service providers, inland freight terminals and government policy bodies for agriculture, trade, and commerce, railway and port infrastructure. 86574202Another issue is that we have limited Indian agri exports to a few commodities. This is because apart from access to cold storage facilities and adequate post-harvest management, farmers have also been struggling with poor logistics infrastructure and sub-standard quality of products. Then there is the issue of limited geographies. Varun Khanna, Founder and CEO of Crofarm, a supply chain firm focussed on supporting farmers, says, “For example, unlike the bananas produced in Ecuador or Indonesia, Indian bananas cannot be stored and transported to a destination with a transit time of over 13-14 days. So banana trades are limited to West Asian countries.” Logistics challenges also make it difficult to export bananas from any state far from established ports. The cost makes it uncompetitive.Vision Global’s Rao says freight costs have become a big pain point, especially for the smaller players. “Only players having a vast connection — like a consortium of 2,000-5,000 farmers in their kitty, and having logistics volumes of over 10,000 containers a year — can avail good freight prices and good margin. For the small and marginal SME farmers, the freight part now is almost equal to the cost of one container of the commodity being exported,” Rao adds.Naturally, few would want to export agri goods then.Countering Non-Tariff MeasuresEven if India manages to overcome all these shortcomings, it would have to scale export barriers before entering a country.Foreign governments often cite health risks for citizens and enforce strict standards as a form of protectionism, many under the guise of non-tariff measures (NTMs). Bypassing these barriers has become a challenge for Indian exporters, particularly for SMEs.Mittal says our food exports are mostly grains, and in this product, the country’s reputation for quality has been unfairly and incorrectly undermined by others for their own national agendas. “The most threatening and insidious are the artificial barriers and the undermining of competitive advantage,” she says. “Global trade is seeing new barriers in various forms: for example, origin-specific tenders. These lock out other competitors who may offer better and more competitive goods. Arbitrary standards of phytosanitary conditions and pesticides blockages are other artificial impediments.” 86574262A common issue with NTMs is the lack of information about export requirements. Ashwin Ram Raupathi, Partner at Madurai-based Nadar Spices, says as countries start adhering to stricter food safety norms based on a Food and Agriculture Organization-led initiative, there is often little information on the expected safety standards, specifically for individual agricultural commodities. It is often exporters who get caught in this jam. “With this ambiguity, the entry barrier into high-quality markets remains high and the risk of our goods being rejected at a port of entry is also higher,” says Raupathi.He uses the example of Indian green cardamom to explain the situation. Saudi Arabia, the largest importer of the spice, restricted its entry from April 2018 though a list of acceptable chemical residues, which was, however, finalised only by mid-2020. While countries may have larger trade discussions and resolutions for high-value and essential commodities, most agri commodities lose out in this tussle.Raupathi says the farming community has no choice but to be on a par with international standards. “India has been exporting Indian green coffee to the European market for decades. Hence, coffee farmers and estate owners are accustomed to the EU market’s food safety norms, which is one of the strictest in the world. This should be the case with every agri commodity product from India.”APEDA Chairman Angamuthu says India now strongly contests NTMs. “We now have a very proactive mechanism. The department concerned is very active in such cases. We are such a huge market and these nations also have to come to our market, so these issues can work out in our favour,” he adds.This market heft is what India should use to punch through the problems it is facing in the agri export sector. The segment already has a solid footing to become a food bowl of the world.(Edited by Ram Mohan. Illustrations by Mohammad Arshad)

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