Farm to Fork

Biz@India

January-February 2017

Indian Prime Minister, Narendra Modi’s home state, Gujarat, shows how to boost food processing, increase farmers’ income, spur investment, generate employment and reduce agro waste, thanks to its Comprehensive Agro Business Policy (CABP). Will it work? It is a classic case of the glass being half-full or half-empty!

India is one of the front-running nations in the production, consumption and export of food products in the world. Gujarat’s contribution to this success is significant

Second to Punjab in terms of the ‘Green Revolution’, Gujarat has achieved agricultural growth at 9.6 pc. Its agriculture growth rate has been three times more than the national growth rate.

This success has been attributed to diversified crops and cropping patterns, climatic range, existence of four premier agricultural universities in the state, strong co-operatives, adoption of hi-tech tissue culture, green and shed-net houses, agriculture export zones, strong marketing infrastructure, including cold storages, processing units, logistic hubs and consultancy facilities.

According to the International Food Policy Research Institute, the three main growth sources are cotton production, rapid growth of highvalue foods such as livestock, fruits and vegetables, and robust wheat production. All of these have seen an annual average growth rate of 28 pc for a decade since 2000. Other major produce include tobacco, bajra, groundnut, cotton, rice, maize, wheat, mustard, sesame, pigeon pea, green gram, sugarcane, mango, banana, sweet potato, lime, guava, tomato, potato, onion, cumin, garlic, isabgol and fennel. About 63 pc of  Gujarat’s population lives in rural areas and depends on agriculture for its livelihood.

Therefore, the focus on boosting the agro sector is natural.

Yet, just over two percent of India’s annual food production is processed — an abysmally low figure when compared to Malaysia (83 pc), China (23 pc) and the US (65 pc).

Nevertheless, Gujarat, under successive chief ministers for more than a decade now, has undertaken initiatives to give a fillip to agriculture.

The CABP 2016-21, announced by Anandibehn Patel in June 2016, is part of efforts by Gujarat policy makers to transform the farming sector. In words of Modi, “My dream is to visualise the Gujarati farmer as a ‘Global Farmer’. I wish to witness a scenario where products cultivated on Gujarat’s soil are sold in the global market.”

Industry optimistic

Piruz Khambatta, chairman, CII National Committee on Food Processing said, “The industry considers the policy as pro-industry. It is about inclusive growth and will benefit both the urban and rural sectors of Gujarat’s agri-business.”

Khambatta observed the need to create awareness of the policy at the rural level.

Other stakeholders raised issues that cannot be ignored.

Dr Anil K Gupta, professor, Centre for Management in Agriculture, Indian Institute of Management, Ahmedabad, raises two valid issues. One, the venture fund for promoting agriculture, like other sectors such as bio-technology, seems to be missing. Second, due to scarce natural resources, such as water, the Indian farm sector has to embrace sustainability and knowledge-intensive practices.

Vijay Sardhana, leading agronomist and Member, Commodity Derivatives Advisory Committee Securities and Exchange Board of India, questions the achievement of the CABP when food processing policies pursued by the federal government and state governments for the last two decades have failed. “It will achieve nothing,” he laments, pointing out to the millions of rupees pumped into the sector.

“Why establish new units when old units are lying idle and underutilised by 20-30 pc of their capacity? Why make them further sick?” he asks.

Pointing out that Indian processed food is often rejected in the global market, Sardhana says that Indian food processing is not competitive because of low-quality raw materials. It is not in line with industry requirements and calls for complete overhaul and auditing of certifying agencies who endorse the substandard products, despite defaulting on standards.

Endowed with natural entrepreneurial skills, a little guidance to the Gujarati farm sector will suffice to serve the global food market. However, this will remain a challenge unless the issues of better farm produce, quality standards and adequate finance for the farm sector are addressed.

Gujarat is second only to Maharashtra in pursuing farmerfriendly policies as per the NITI Aayog’s ‘Ease of Doing Agri-business Index’. Now, Gujarat is planning a policy for ‘Ease of Doing Agriculture’. The objective is to develop an integrated framework and address the issues faced by the farmers to make agriculture a much easier job. It is expected to be released any time now.

Hopefully, the new chief minister, Vijay Rupani, is able to realise and remove these bottlenecks.

The ambition of CABP

The 23-page CABP document envisions food and nutrition security, farm prosperity, strengthening of agrarian economy by tapping vast agricultural resources of the state through an inclusive development. It focuses on building a value chain beginning at the farm level, financing agro processing infrastructure, boosting exports, subsidies and tax incentives.

It aims to increase farmers’ income by strengthening agriculture-related infrastructure and promoting the food processing industry, which at present provides employment to around one million people in the state.

* Five percent project cost subsidy up to INR 5 million to set up, expand, diversify and modernise the agro and food-processing unit.

* 25 pc project cost subsidy, up to INR 50 million for cold chain, food irradiation plant, pack house, food park etc.

* 25 pc project cost subsidy, up to INR 25 million to set up primary processing centre, collection centre in rural areas.

* 7.5 pc interest assistance on termloan – maximum INR 15 million for five years – to set up, expand, diversify and modernise agro and food processing units.

* 7.5 pc interest assistance on termloan – maximum INR 40 million for five years – to set up controlled atmosphere cold storages, food irradiation plants, pack houses, food parks, reefer vans etc.

* Additional one percent interest assistance for socially backward, physically challenged and women entrepreneurs and young entrepreneurs below the age of 35.

* For MSME, 70 pc refunds on the total tax for a period of five years, 50 pc refunds on stamp duty paid for the sale, lease or transfer of land for the project and 50 pc subsidy of the training cost, in the limit of INR 10,000 per employee. Each MSME unit will get a maximum of INR 50,000 for three years.

* Subsidies on air freight for MSME exporters.

The new policy has received a mixed response from stakeholders. Abhay Firodia, chairman of Force Motors Limited sees the CABP in the right direction. “In India, we have never seen agriculture as an industry. Now, there is a need to change this mindset if we want the sector to grow in leaps.” Sudarshan Suryawanshi, CEO of the Indian Society of Agribusiness Professionals says the CABP is the need of the hour. “It syncs with ‘Make in India’, and therefore, needs all the push,” he says.

The implementers are upbeat about the CABP, shaped out of inputs from Brazil and the Netherlands. KS Randhawa, (IFS), MD of Gujarat Agro Industries Corporation Ltd, which will guide the farmers and entrepreneurs, told Biz@India that he expects around 300 Memorandums of Understanding to be signed at the Vibrant Gujarat Summit, to boost the farm and agro processing sector. “CABP 2016-21 will encourage agriculture business and attract over INR 100 billion fresh investments in Gujarat over the next five years.”