Increase in food production :

Background

• India’s agricultural production has shown a growth of 2.7% p.a. over the last 40 years. The growth in agriculture, would need to be stepped up to 5% p.a. in the next millenium to feed our growing population and to meaningfully participate in world trade
  
  
• The agricultural strategies for the future will entail augmenting the existing land and water resources through public and private investment, harnessing new technologies to increase the productivity of natural and other resources, implementing realistic pricing policies and creative management practices that optimize input use

Issue 1

The gross capital formation in agriculture has declined. The allocation for agriculture in the eighth five year plan has declined from 5.8% to 5.1%

Action Plan 1

• Increase the plan allocation for agriculture in the 9th five year plan from 5.1% to 7.1%
  
  
• Encourage investment in sectors like irrigation and rural infrastructure like roadways

Issue 2

Inadequate rural credit and working capital is a major area of worry for small farmers. The agro and food industry needs a specialised development finance institution

Action Plan 2

• Set up an autonomous Food Development Bank of India (FDBI) and a revised credit system which will be "farmer friendly" and will deal with the following on an urgent basis:

• Lending to small farmers who own less than 2 hectares of land at concessional rates
  
  
• Process loan applications expeditiously and provide timely credit to farmers

• Rural and cooperative banks need to professionalise their operations and to shore up their equity through one – time recapitalisation
  
  
• No waiver of farmers loans should be permitted as it distorts the basic principles of banking

 

Issue 3

Crop insurance is complicated and does not cover all crops. It has a complex system of loss assessment and is not widely accepted by farmers

Action Plan 3

Set up Agriculture Insurance Corporation (AIC). Revise insurance scheme. Cover all crops, input costs and cash requirements following a year of loss. Charge actuarial premiums. Subsidize only small and marginal farmers within the scheme

Issue 4

Only about 35% of agricultural land is irrigated. There is a potential to increase irrigated land from the current 33 to 53 million hectares

Action Plan 4

• An increase of 1% in total irrigated area generates a 1.6% increase in crop output and an ROI of 17%. We must target to bring 20 million hectares under irrigation in the next five years
  
  
• A taskforce to immediately implement 75% of the existing 300 incomplete irrigation projects. This should be completed between 2 - 3 years
  
  
• All states should review and announce 5 year water rates. The well known Maharashtra model should be followed

Issue 5

The forecasting techniques for agricultural production do not provide for any time to take corrective action. The onion and potato crises and the spiraling prices of vegetables are cases in point. Such issues have a major bearing on Indian public opinion

Action Plan 5

• International collaboration should be sought at a government to government level, to set up a National Centre for Crop Forecasting
  
  
• A multi-cropping map of India should be drawn up and information technology used to forecast, predict and analyze cropping patterns and harvest. Mandate officials at block level to provide timely information and disseminate it through internet, TV and radio

Issue 6

Excessive and imbalanced use of water, pesticides, fertilisers etc.have reduced the productivity of land and yield of most crops. This is due to inappropriate and disproportionate subsidies and an inadequate seed policy

Action Plan 6

• Government must reorient subsidies to ensure balanced and efficient use of inputs and nutrients.
  
  
• Consolidate the Seed Act 1966 and the Plant, Fruits and Seeds (Regulation of Import into India) Order 1989 so that better quality seeds are available through enhanced production and imports
  
  
• Mandate select Agricultural Universities to focus research on specific high yielding varieties seeds for items of mass consumption

Issue 7

Farmers skills need constant upgrading.The annual growth rate of expenditure on Agricultural Research and Education is woefully inadequate.This is sub-optimal

Action Plan 7

• Farm Training Institutes should be set up for skill development in the agricultural sector (Replicate ITI model)
  
  
• Increase R&D expenditure to double of current levels
  
• The Indian Council for Agricultural Research should be made autonomous and should become a pro-active body which is responsible for the achievement of clearly defined objectives. It should work jointly with all sectors of the agro industry

Issue 8

Fragmentation of land holdings have led to lower economies of scale. At the same time there are large amounts of arable land which are currently unsuitable for cropping due to

• wasteland
  
  
• degradation, salination and water logging

Action Plan 8

Ideally, repeal Land Ceiling Act. Alternatively provide ways to consolidate farming by

• Contract Farming : Andhra Pradesh Model
  
  
• Cooperative Farming
  
  
• Lease of Land: replicate Rajasthan model for wasteland development for crops and afforestation
  
  
• Panchayats should identify degraded land. Co-operatives of landless farmers should be permitted to use this for afforestation and cropping

Issue 9

The cropping pattern is heavily influenced by the farmers perception of risk and anticipated market conditions. Currently support prices are for select crops only

Action Plan 9

Announce realistic "floor" price vis-à-vis current "support" prices. Restrict FCI procurement of cereals to the extent of targeted PDS requirements. Savings as a consequence will enable the government to announce floor prices for more commodities

Utilise and market the food we produce :

Background

• The demand for foodgrains is expected to touch 215 million tons by the year 2002. This increase in demand can be met by enhanced agricultural production and by reducing the high level of wastages that occur during the harvesting, procurement and storage stages. India wastes more grain than Australia produces
  
  
• The complex food chain in India from the farmer to the consumer involves several intermediaries with multiple-point handling and long transit periods. The value of wastages in the food chain is estimated to be Rs 50,000 crores
  
  
• Our production of 127 million tonnes of fruits and vegetables is one of the highest in the world. India wastes more fruits and vegetables than UK consumes. We process less than 2% of our horticultural produce as compared to 70%in Brazil and 78% in Philippines

NON PERISHABLES

Issue 1

The current system of food procurement and storage has built-in inefficiencies which inhibit the development of an efficient market economy

Action Plan1

• The present system of announcing high support/procurement prices based on "extraneous considerations" should be discouraged. The prices proposed by the Agricultural Price Commission should be adopted as floor prices and no further "bonuses" should be announced
  
  
• The storage limits on wheat and rice should be abolished

Issue 2

India's wastage of 20 million tonnes of foodgrains at the first stage of harvest is equivalent to Australia's entire production

Action Plan 2

The agri-industry should be permitted to play a major role in creating warehouse space and developing bulk handling facilities in order to minimize wastage levels. As these are capital intensive projects, the state governments will need to provide land at extremely concessional rates. FCI should subcontract its warehousing to agri-industry to reduce wastage and operating costs

Issue 3

There is a need to develop commodity exchanges (futures market) for wheat and rice

Action Plan 3

A healthy commodity exchange system based on the lines of the Chicago Board of Trade and the Kansas City Board of Trade should be established. It needs to be appreciated that the futures market is not "satta" as is commonly understood in India. It would be best managed by an autonomous organisation

PERISHABLES

Issue 1

The cold chain in India is woefully inadequate to meet the growing production of "perishables" such as fruits and vegetables,milk, fisheries and poultry for the domestic and export markets

Action Plan 1

• The cold chain industry should be treated as a continuous process industry and awarded priority status for power like airports and hospitals
  
  
• Incentives would be required to attract investments in this nascent business: import duty on cold chain equipment to be reduced to 4%; excise duty on local freezer cabinets to 3%; 8-year tax holiday; 100% depreciation on equipment; FDBI, FIIs and banks to provide lending at agricultural interest rates.
  
  
• Empower BDO to allot land to cold chains at nominal rates

Issue 2

Investment approvals in the Food Processing industry in the last 7 years was Rs 70,000 crores. Actual implementation is only 15%, mostly in soft drinks and liquor/beer

Action Plan 2

• Task force to be appointed in Ministry of Food Processing to investigate reasons for non-implementation and formulate and set-up single table approval system
  
  
• Use Food Development Bank of India and Banks and FI’s to fund Food Projects

Issue 3

The processing of fruits and vegetables is as low as 2% in India.

Action Plan 3

• Quick action and demonstration effect from the government. Set up three specialised food parks focusing on the produce of the region with maximum potential. The Information Technology Parks of Bangalore and Hyderabad to be used as models
  
  
• Select milk & fruit as initial thrust areas
  
  
• Select three states to change laws to make this happen - such as contract farming, movement of food, abolition of sales tax
  

Create an enabling environment :

Background

Liberalisation of the economy over the last 7 years has concentrated on the industrial and financial sectors. We now need to focus on a New Food Revolution. The key dimensions are:

• Realign tax framework
• Comprehensive review of food legislation
• Restrictive administrative framework

Realign tax framework for creating demand and growth

In processed foods, India is amongst the highest taxed in the world. No where else in the world is there a taxation differentiation between branded and unbranded foods. On the contrary, incentives are always given for a movement from unhygienic unbranded foods to hygienically packed processed food

Action Plan

• No excise duty or sales tax on processes for "preservation" of horticultural produce
  
  
• Reduction in excise duty on processed food from existing levels to 3%
  
  
• No distinction to be made between branded and unbranded sector
  
  
• 100% modvat should be available on all inputs in the agro food processing industry
  
  
• 8 year tax holiday for investment in the cold chain infrastructure sector
  
  
• 100% depreciation should be allowed on freezer cabinets and other cold chain equipment
  
  
• Import duty on all capital equipment for food processing and cold chain sector should be reduced from existing levels to 4%
  
  
• Excise duty on local freezer cabinets to be reduced from 18% to 3%
  
  
• Abolish cess on agri products to

  • encourage free movement of agri products
  • reduce the cost of agri products

• Persuade state governments to abolish sales tax on wheat & rice, the two main cereals and all other foodgrains
  
  
• Nil excise duty on packaging materials for basic foods like milk in tetrapack
  

Restructuring The Administrative Framework

Issue

The structure of governance in the Agriculture sector is complex. This results in compartmentalised decision making and lengthy lead times. The administrative framework needs to be restructured

Action Plan for Short Term

• Set up a Cabinet Committee of the Ministries concerned with Agriculture, Food and Civil Supplies, Food Processing, Rural Development, Dairy and Animal Husbandry and other associated ministries to review, co-ordinate, monitor and implement decisions in a totally integrated manner
  
  
• The amalgamation of APEDA, MPEDA, Cashew Promotion Development Council, National Cooperative Development Council and the National Horticultural Board under the Ministry of Food Processing will go a long way in streamlining the efficacy of the decision making process

Action Plan for Long Term

Create a single Ministry for Agriculture, Fisheries and Foods like in the UK where it is called MAFF. The new set-up will continue to play its traditional role but with a wider perspective of balancing and integrating our highly complex food chain from production to processing and marketing. It will also be able to have a unified approach for managing and integrating essential aspects like food safety and environmental concerns

Food Legislation: Promoting Safety And Quality

There is no issue of greater importance for the well being of the people than an assurance of adequate and safe food supply. We must therefore ensure that laws are realistic, enforceable and modern in terms of science and technology to protect the interest of the consumer

Issue 1

Multiplicity of laws governing food quality and safety

Action Plan 1

Food Regulation Authority to Set up (FRA)

• One comprehensive legislation to be exercised by a Food Regulatory Authority (FRA) concerning domestic and export markets with a view to formulate and update the food standards for all food products for the domestic and export markets
  
  
• The FRA needs to revamp the PFA Act 1954 to conform to international standards. Ten specific recommendations to various sections of this Act have been set out in the main report
  
  
• CODEX prescribes International Standards under WTO. We recommend the harmonisation of Indian standards with those of the quality norms of GMP and HACCP to meet WTO deadlines ie. 3 years
  
  
• The industry and the government should work together to ensure that India is fully represented and heard at international forums

Issue 2

The Central Committee of Food Standards (CCFS) which operates under the aegis of the Ministry of Health and Family Welfare approves manufacturer of non-standardized food products, flavours and colours. The CCFS has met just 42 times in the last 44 years which makes the introduction of new products very time consuming

Action Plan 2

We recommend that the CCFS should be replaced by the FRA Governing Body which must meet three times a year for this purpose alone

Focus for exports :

Background

India is the second largest producer of food in the world. Its exports are just 0.9% of the world food trade despite the inherent strengths it has in tea, spices, rice, floriculture, mangoes and grapes. Agricultural and processed food exports continue to be residual and aren’t a strategic part of our Food Management Policy

Issue 1

India is not seen as a reliable and quality supplier of agri and food products in international markets

Action Plan 1

• Focus on specific products in specific growing areas for exports like tea, spices, rice, mangoes, grapes, floriculture, etc. to establish credibility
  
  
• Mandate all food processing units to obtain GMP/HACCP within three years. These units to be accorded benefits similar to ISO 9000 certified units in Exim Policy
  
  
• Permit regulated exports of specific surplus commodities on annual basis and honour international contractual terms

Issue 2

Inadequate infrastructure for handling export of perishables. Limited cold storage facilities at ports/airports

Action Plan 2

Cold storage facilities should be enlarged and made available at all ports and major airports

Issue 3

Indian freight rates are around 50% to 100% higher than other countries

Action Plan 3

Generally freight subsidy is 25% of IATA rate or Rs 10 per Kg in India. Like in other countries, this has to be increased to 25% of actual air freight paid or Rs 25 per Kg whichever is lower

Issue 4

Multiplicity of agencies leading to lack of co-ordination

Action Plan 4

One central agency: Agro and Food Development and Export Promotion Council to be set up. The existing agencies such as APEDA, MPEDA, etc. to be integrated in the new council

Issue 5

Funding of exports

Action Plan 5

Announce specific package for horticulture and floriculture EOUs

• provide term loans for Grading, Packing and Cold chain units as well as processing units at the rate of 9% per annum. Horticulture Board could subsidise these
  
  
• 3 year moratorium on repayment of term loan and interest
  
  
• NABARD to provide 100% refinance to banks and financial institutions for funding exports of horticulture products and produce