Horticulture Press Launch

8/4/2019 Horticulture Press Launch

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FROM COMPETITION AT HOME TOCOMPETING ABROAD:

A CASE STUDY OF INDIAS HORTICULTURE

Aaditya Mattoo, Deepak Mishra, Ashish Narain

THE WORLD BANK


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The Indian farmer is globally competitive butIndian agriculture is not. Why?

Source: UN COMTRADE, 2005

63%

53%

0% 20% 40% 60% 80% 100%

Fruits

Vegetables

Indian prices as a % o f world prices (200 1-03)

15%

11%

0% 5% 10% 15% 20%

Fruits

Vegetables

India's s hare in global production (2 001-03)

0.5%

1.7%

0.4%

2.1%

0% 2% 4% 6% 8% 10%

Fruits

Vegetables

India's share in global exports

(2001-03)

(1991-93)


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Previous diagnoses of the problems ofIndian agriculture

High costs ofproduction

Poor

infrastructure

Protectionist

standards

Foreign trade barriers


4/15

The first integrated supply chainanalysis: from farm to retail

Based on primary surveys of 10 horticulturalproducts

Covered 1400 farmers, 200 commissionagents, 65 exporters across 16 major Indianstates

Detailed interviews with major stakeholders


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Commodities Surveyed

Apple , 60

Banana, 100

Grapes, 98

Mango, 110Mosambi, 102

Okra, 106

Onion, 100

Peas, 95

Potato, 101

Tomato, 100

Vegetables

Fruits

Source: Value Chain Survey, The World Bank


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States Covered

Assam, 81B ihar, 20M P, 113

Orissa, 80

Rajasthan, 54

UP, 150

AP , 74

Karnataka, 45WB, 40 Gujarat, 140

Haryana, 126

M aharashtra, 192

HP , 20JK, 20

Uttaranchal, 40

Punjab, 98

TN, 80

High Income

M iddle Inco me

Low Income



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Factors Impeding Indias Exports

Factors

Impeding

Indias exports

High Cost of

Delivery

Standards Gap Trade Barriers


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Logistics and intermediation costs dwarfproduction costs


Farmer, 13.5Intermediary, 5.4

Exporter, 24.2

International freight

& insurance, 53.6

Importer, 23.5

0

20

40

60

80

100

120

1Different stages of the supply chain

RsperKilogram

Farmgate price=Rs.13.5

Retail price=

Rs.120.3

CIF price=

Rs.96.8

FOB=Rs.43.2

Wholesale price=Rs.18.9

Farmers share in retail price

India:15-20%

Thailand, US: 30-40%


9/15

Indias international transport costs are

higher than those of competing countries

655476

1338

874

167 88

649 958

315

785

505

479

0

200

400

600

800

1000

1200

1400

1600

1800

Pakistan India Chile India Netherlands India

Difference in the price

betw een originating port and

the destination port (Specific

countries)

Price at the originating port

(All countries)

Mango

UK ($/per MT)

Potato

Saudi Arabia ($/per MT)

Grapes

Netherlands ($/per MT)

Source: UN COMTRADE, 2005


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Why?

Air TransportUnpredictability and low volume (shadow prices)

Excessively high taxes on fuel and airport charges

Restrictions on ownership and entry

Inadequate and under-utilized infrastructure

Maritime Transport

Inflexible functioning of major ports

Lack of multi-modal transportCost-plus tariff policy


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The Standards Gap

Some foreign standards are protectionist

But weakness in domestic standard setting legitimize foreignbarriers

And mandatory official standards are becoming less important

than quality standards imposed by buyers

M anifestatio n of rising standards on Indian exports

0%

0%

0%

0%0%

3%

8%

10%

19%

24%

35%

0% 5% 10% 15% 20% 25% 30% 35% 40%

one/periodic rejection by external buyer

one/periodic rejection by external official agency

ban/temp ban on exports by Indian authorities

ban/temp ban on imports by foreign authorityother

one/periodic rejection by Indian authorities

frequent product rejection

reduced price from buyer

warning from buyer of official agency

cut back in orders from important buyer

no response


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Trade Barriers

Average tariff is low but that can be deceptive

Minimum entry price

Seasonal variation of tariffsTariff quotas

Preferential access, e.g., Turkey in the EU, Mexico in

the US, Everything but Arms deal for Africa.Tariff escalation Higher tariffs on processed products

than on fresh fruits


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Trade Barriers


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The combined effect of three factors isfar greater than the sum of their parts

Poor logistics lead to delays and wastage, and weakenfarmers incentives to improve quality.

Limited standardization makes physical inspection a

must before any transaction, further adding to costs.A protected domestic market can increase transportcosts for exporters because low imports mean thatexporters must not only bear the cost of the outward

journey, but also the unutilized capacity on the way into

the country.High delivery costs increase the burden of foreign tariffs

because they are imposed on the final product price.


15/15

Key Priorities

Creating an integrated and competitivesupply chains for agriculture

Radical reform in transport, storage anddistribution services

Pro-active engagement in internationaltrade negotiations

Documents

Horticulture Press Launch