Bet the farm on food processing

Given our agricultural potential and rural needs,greater investment is a no-brainer

Written by Rashid K. Kidwai | Published: October 16, 2012 3:04 am

Given our agricultural potential and rural needs,greater investment is a no-brainer

For all the talk about “inclusive growth”,policymaking could do with greater inclusivity. Has any policymaker asked a migrant worker or slum dweller why they left home? The most commonly cited reason is the lack of opportunity there. But what do people seek,to be able to stay in the village? One of the main problems is the fragmentation of land holdings,which reach a stage where the produce is not enough to sustain growing families and the fact that no non-farm opportunities have been created. The need to establish enterprise and provide worthwhile employment has been spoken about for years. Aside from the enormous benefits of arresting rural migration to overloaded cities,non-farm initiatives are imperative if the lives of the huge population in villages are to be made sustainable.

The food processing sector would be ideal for adding substantially to employment and GDP. The developed world processes over 35 per cent of its agricultural produce. We have,with difficulty,now reached about 4 per cent. We are among the largest global producers of fruit,vegetables and milk. Yet,we have high food inflation and an estimated 40 per cent of our production is lost either in storage or during transportation. The government has been talking about a thrust on agriculture for over two decades,but we do not yet have agro-terminals in place,which would be a basic prerequisite (Bharti’s initiative in Amritsar is at least a start). Countries like Kenya have had such terminals in place since the 1980s,and the developed countries much earlier. Our fresh food exports are uncompetitive because of the lack of such terminals. Even domestically,litchis are barely known in southern India,or mangosteens in northern India for the lack of a supply chain.

In the mid 1990s,I was involved with a large Indian corporation in attempting to export strawberries and asparagus to the developed world. Having brought in planting material and technology from France,we grew world-class products. The problem was the lack of a delivery system to sell in the international market,forcing us to move away from perishables and into semi-perishable products like honey. We were pioneers in exporting honey to the developed world,but we could have got better realisations if the government had acted. Thirty per cent of the honey in India is produced in aviaries,the remaining 70 per cent is forest honey — organic,because who applies fertiliser or pesticide in forests? We do not have the certification infrastructure in place so the returns are much lower. The “hunters” who collect forest honey at great peril to themselves do not get a fair price and often,unscrupulous traders adulterate the honey. Hence,forest honey over the years has been branded as lower quality honey,which is not the case. Are policymakers aware of this?

India,despite having one of the lowest yields internationally,has immense potential to increase volumes from the same acreage. With our vast land mass and variety of agro-climatic conditions,there are few products that we cannot grow,including medicinal plants. Apart from the economic benefits and the reduction of waste,the employment opportunities that food processing would create,especially in rural India,would be huge. Ancillaries would also come up,creating further job opportunities. Entrepreneurs would establish mini-businesses,eating places,photocopying,transportation,construction,etc. With retailing growing in leaps and bounds,the demand for processed foods is also bound to grow. Retailing will also provide better returns to farmers by reducing the number of middlemen.

Farmers would also gain from the food processing unit’s need to procure better quality and quantity and so the factory would provide the necessary expertise and technology to increase the yield and quality in their own interest. Pepsi had established this concept with tomato processing in Punjab in the early 1990s when the government insisted on their engaging in hard currency-earning activity if they wanted to enter the Indian market. They increased the tomato yield about 10 times with technology. Our network of prestigious agricultural universities and extension workers,who took the benefits of this research to farmers,must be strengthened.

Despite the opportunity in food processing having been recognised for decades,why do we still process below 4 per cent of our production? Food processing would be a solution to

addressing the lack of non-farm opportunities in rural India. One hopes that the government’s renewed focus on reform and commitment to retail FDI translates into real gains.

The writer is director,Grassroots Trading Network for Women. Views are personal

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