From: Hindu Business Line, New Delhi/Chennai/Bangalore/Hyderabad / By Devinder Sharma
As if the damage from the national agricultural policy is not enough, the government now plans to come out with another national policy -- for the food processing industry. And the next in the trilogy would obviously be a national policy for the biotechnology industry.
After unveiling a nationwide plan to usher in corporate agriculture through the agriculture policy, the government is under pressure to announce fiscal incentives and facilities for infrastructure development for the food-processing industry. Reallocating limited and scarce resources, which should have genuinely gone to a starved agriculture and irrigation sector, will now be diverted to the food-processing industries -- and that too in the name of sustainable agriculture and food security.
The industry is already upbeat. Fiscal incentives like excise and duty exemption, sales tax exemption and tax holidays are on the cards. Fiscal sops and interventions also include prime land at a throwaway price, creation of industrial estates, generic market promotion and building backward and forward linkages for a sustained supply of raw materials at a particular price level. After all, isn't it the government's duty to ensure that any entrepreneur and industrialist should not face any hurdles?
It is, however, another matter that the government turns a blind eye when farmers in Punjab wait endlessly for days, sitting over heaps of recently harvested paddy, in the mandis for want of buyers. The government has already announced that it is not interested in procuring the foodgrains in future. It has made it clear that the minimum support price will gradually be withdrawn because farmers are already getting a very high price. It is no longer interested in maintaining the public distribution system, after all the poor and hungry are a hindrance to economic development and growth!
With so much of foodgrain rotting and going waste, minimising post-harvest losses is the only answer, economists would say. As if it was not known earlier, the British consultancy firm, Mckinsay Ltd., has done an elaborate study for the Confederation of Indian Industry (CII), concluding that more than 40 per cent of the fruits and vegetables produced in India goes waste for want of post-harvest handling and processing. It, therefore, suggested laying a strong foundation for the food-processing industry. With the industry lobbying for it, a policy framework for the food-processing industry - being dubbed as a sunrise industry -- has to be a national priority.
What does food-processing entail for an average Indian consumer? Let us try to understand what implications it has for the national economy and of course the farm producers. Wheat and paddy producers have already faced the music. It is a known fact this year that wheat and rice growers have resorted to distress sale to dispose off their stocks. In the years to come, it is going to be increasingly tough for the small and marginal farmers constituting nearly 70 per cent of the country's farming population.
Since food-processing will mainly target fruits and vegetables, let us try to come to grips with the changing scenario in an area which is popularly called as the "rainbow revolution". Orange, for instance, is one of India's most popular and common fruit. Popular varieties like "Nagpur oranges" over the past few years have, however, disappeared from the fruit shops. In many other production centres, oranges go waste in the absence of an organised market. Many consider this to be the ultimate fate for fruits, for which adequate attention has not been paid for post-harvest handling, processing and marketing.
In any case, Mckinsay Ltd., has already told us that 40 per cent of oranges are wasted in post-harvest handling. To protect the economic interests of the producers and the consumers, the legitimate answer, therefore, is to process the fruit. No one will disagree with this. Already three popular brands of nicely packed orange juices in tetra-packs - Onjus, Real and Tropicana -- have hit the market. Three more brands are likely to soon enter the Rs 100-crore orange juice market. Isn't this the right recipe? It certainly is, till the time you carefully read what is written on the tetra-packs: "Made from the finest oranges from America".
Will this help rejuvenate the dying orange sector? The answer is an emphatic no. It will, in reality, help the American farmers. In fact, the percentage of fruits and vegetables which go waste in India will instead rise to 80 per cent in due course if the Ministry for Food Processing Industry allows this misadventure to prevail. And believe me, orange is not an isolated produce. Whether it is pop-corn or green peas or even honey, a majority of the food-processing industries that are coming up are sourcing the raw material from America, Europe and Australia. In reality, the domestic food-processing industry is protecting the economic interests of a few million farmers on either side of the Atlantic.
Add to this the little understood implications of the WTO's Agreement on Agriculture. Like the great mistake in re-locating automobile manufacturing units to India, ostensibly in search of cheap labour, the same mistake is being repeated in food-processing. Not realising that in the days to come, India will have to open up the automobile sector for the import of second-hand cars, many of the major automobile manufacturers have shifted their base to India. By the time they realised the mistake, it was too late.
Similarly, if one looks at the bound duty structure of agri-processed food products, India has already opened up its huge market to cheaper and highly subsidised processed foods. Processed and frozen chicken from America, for instance, has been selling in India at a price of 10 cents per pound. In America, it can be bought off the shelf for no less than 49 cents. In any case, the average import tariff structure for processed foods in India hovers around 30 per cent. And at this rate, it will be practically impossible for the domestic food-processing industry to compete with the imported products.
In the bargain, entrepreneurs and new entrants into the food-processing industry sector would disappear after taking advantage of the fiscal sops and incentives. Remember the fate of the industrial estates? How many of the original allottees are still operating the small-scale industries? They have already sold off the land and that too at the then prevailing market price and walked off with other fiscal incentives. The fate of the domestic food-processing industry will be no different.
Policy decisions of the Ministries are myopically based on the lobbying capabilities of the industry and are rarely drawn in the public interest. Is it not, therefore, important for the Ministry to draw lessons from the mistakes and the emerging trends of the global trade policies?
(The author is president, Forum for Biotechnology & Food Security, New Delhi):
