Horticultural marketing-Plugging the wastage: Agro-processing units and their limitations

There is a larger market in India for fruits & vegetables in fresh, rather than processed, form.

Written by Pravesh Sharma | Published: June 16, 2016 2:25:33 am
national agricultural market scheme, karnataka agricultural market, modi govt, narendra modi, union budget, farmers, agricultural sector, agricultural markets, indian agricultural markets, rashtriya electronic market scheme, rems, india news If F&V were to enter the cold chain at the farmgate, the controlled temperature conditions would have to be maintained right till the retail sale point, as in the case of milk.

In a recent media interaction, Union food processing minister Harsimrat Kaur Badal announced the government’s intent to set up 25 small agro-processing clusters at an estimated cost of Rs 5,000 crores. “With this,” she said, “India has started moving towards zero tolerance of food wastages.”

The minister’s sentiment should be applauded and one hopes the proposed clusters do materialise soon. Moreover, since she specifically mentioned fruits and vegetables (F&V), we can presume that the clusters seek to particularly address the inefficient supply chain and large wastages in this segment. That, again, is to be welcomed.

But it needs to still be asked: Does the solution to the inefficient supply chain and wastages in the F&V sector lie in further subsidy outlays for establishing farmgate level agro-processing units and cold chain networks? The answer is no, for which I can offer at least three reasons.

Firstly, if F&V were to enter the cold chain at the farmgate, the controlled temperature conditions would have to be maintained right till the retail sale point, as in the case of milk. This aspect is often missed even in the most well-meaning policy prescriptions. One must, in fact, question the very need for incurring the huge capital and recurring costs towards creation of cold chain infrastructure. This is even more so, when nature actually allows us to market F&V in ambient conditions round the year.

Should millions of cool F&V vending carts be unleashed in our cities — like the ones selling ice cream — whose added costs will eventually be borne by the consumer? A cold chain may be vital for the marketing of milk or vaccines, but certainly not F&V. Potatoes may be an exception, but there is no dearth of already built cold storage capacity in this case.

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Secondly, the sheer diversity of India’s agro-climatic conditions makes it possible to cultivate fresh produce in some region or the other throughout the year. Consumers in Delhi, for instance, enjoy fresh greens arriving from the hill states of Himachal Pradesh and Uttarakhand even in the middle of the harsh north Indian summer. In six to eight weeks following the peak heat season, the sourcing of produce shifts southwards to the Deccan Plateau and then back to the northern plains during the winter.

All this has been further enabled by rising incomes, which has also led to growth in demand for F&V. That, in turn, has boosted both acreages as well as production of horticultural crops. In tonnage terms, India’s horticultural output is today higher than production of foodgrains (i.e. cereals and pulses), while growing at a much faster rate than the latter. To put it simply: When supply of fresh produce is always available and for which there is ready demand, is it worth going in for processing and storage of F&V at high cost?

Thirdly, Indians are conditioned to process fresh produce in their own unique ways at home on a daily basis. Cultural and culinary diversity also means every region has its elaborate norms for storing, cutting, dressing, cooking and preservation of F&V. No wonder that the reactions of foreign visitors to our obsession with food range from curiosity and amusement to exasperation. In a country where over two-thirds of households report themselves as vegetarian — this includes ‘lacto-vegetarians’ or those who aren’t meat-eaters but consume milk products — demand for raw unprocessed F&V at the household level is unlikely to diminish for the next thirty years at least (we cannot predict the next generation’s culinary preferences).

It is important to point out here that nowhere in the world is such huge quantity of fresh produce moved daily across vast distances to reach so large numbers of consumers. Also, our F&V supply chains are fragmented. There are too many intermediaries, with poor facilities for marketing of produce at APMC mandis. All these contribute to higher costs, wastages and loss of value.

However, one could suggest alternate policy interventions for meeting the laudable goal of ‘zero wastage’ in F&V, as envisaged by the food processing minister.

F&V production is now dominated by small and marginal farmers, having little bargaining power in the market. Aggregation of these farmers into clusters, producer companies and other collectives can go a long way in helping them realise better prices as well as lowering wastages and improving quality of produce. Such collectives need to be encouraged, more so in the vicinity of urban centres, so that fresh produce can travel the minimum possible distance from the farm to the consumer. Regional supply chains, too, could be incentivised by reforming APMC regulations that will allow direct sourcing from farmer producer organisations for supplying to retail outlets in urban areas.

At the front end, policy should recognise the role of the ubiquitous urban street vendor in providing the last-mile solution for F&V marketing. This unsung hero uses muscle power for supplying fresh produce to millions of homes on a daily basis. And he does this even while managing a hostile business environment of pavement mafias and rent-seeking public servants.

Given exorbitant real estate costs in cities, it is unlikely that India will see food supermarket chains coming up in a big way in urban centres. Nor is e-commerce going to be a dominant player in F&V; it has not been so anywhere in the world. In such a scenario, ensuring ease-of-doing-business for the street vendor could play a significant part in reducing wastages and smoothening prices of F&V.

Agro-processing clusters or promoting foreign direct investment in food retail are, no doubt, welcome ideas. But let’s not ignore the potential of the ‘smaller’ idea of strengthening home-grown supply chains, which offer both inclusiveness and cost efficiency when it comes to F&V marketing.

The writer, a former IAS officer, is co-founder and CEO of an agri marketing start-up.

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