Topic: Cabinet approves Agriculture Export Policy, 2018
Topic in Syllabus: GS Paper 3: Indian Economy
The Union Cabinet chaired by Prime Minister Shri Narendra Modi has approved the Agriculture Export Policy, 2018.
More about on news:
- The Cabinet has also approved the proposal for establishment of Monitoring Framework at Centre with Commerce as the nodal Department with representation from various line Ministries/Departments and Agencies and representatives of concerned State Governments, to oversee the implementation of Agriculture Export Policy.
- The Government has come out with a policy to double farmers’ income by 2022. Exports of agricultural products would play a pivotal role in achieving this goal.
- In order to provide an impetus to agricultural exports, the Government has come out with a comprehensive “Agriculture Export Policy” aimed at doubling the agricultural exports and integrating Indian farmers and agricultural products with the global value chains.
Objectives of the Agriculture Export Policy are as under:
- To double agricultural exports from present ~US$ 30+ Billion to ~US$ 60+ Billion by 2022 and reach US$ 100 Billion in the next few years thereafter, with a stable trade policy regime.
- To diversify our export basket, destinations and boost high value and value added agricultural exports including focus on perishables.
- To promote novel, indigenous, organic, ethnic, traditional and non-traditional Agri products exports.
- To provide an institutional mechanism for pursuing market access, tackling barriers and deal with sanitary and phyto-sanitary issues.
- To strive to double India’s share in world agri exports by integrating with global value chain at the earliest.
- Enable farmers to get benefit of export opportunities in overseas market.
Elements of the Agri-export Policy Framework:
- The policy recommendations in this report are proposed to be organized in two broad categories: strategic and operational.
- The salient features of the proposed agricultural export policy are highlighted below and discussed in greater detail in subsequent subsections.
Current Agri Trade Scenario:
- World agricultural trade has been relatively stagnant in the last five years (2013-2017).
- The sharp drop in oil prices was a major contributor to softening of global agricultural commodity prices. In similar vein, India’s agricultural trade1 dropped by -5% CAGR from US$ 36 Billion in FY13 to US$ 31 Billion in FY172.
- However, a comparative analysis of India’s ten year agri exports reveals an encouraging picture. Indian agricultural exports grew at a whopping 9% compared to China (8%), Brazil (5.4%) and US (5.1%) between 2007 and 2016.
- During this period, exports of coffee, cereals, horticultural produce doubled; while exports of meat, fish, processed products grew between three to five times.
- The scenario of Indian agriculture today is structurally different and more robust compared to the Green Revolution era.
- Between the early-1970s and the late-nineties, India’s annual farm Gross Domestic Product (GDP) expanded from about $25 billion to over $100 billion. During this initial period, the growth was sluggish and it was largely cereals-centric, limited to wheat and rice.
- However, between 2000 and 2014, the country’s agricultural production has surged from $101 billion to $367 billion, driven mainly by high-value segments such as horticulture, dairy, poultry and inland aquaculture.
- No other country has a more diverse food and non-food agriculture base as India and this generates the optimism that India can be a leading player in the world agricultural trade.
Agri Export Policy thus aims at:
- Providing a policy assurance that the processed agricultural products and all kinds of organic products will not be brought under the ambit of any kind of export restriction (viz. MEP, export duty, export ban, etc) even though the primary agricultural product or non-organic agricultural product is brought under some kind of export restrictions,
- The Agri Export Policy will initiate the consultation among the relevant stakeholders and Ministries to identify the commodities which are essential from food security perspective and barring such identified commodities, the effort would be to ensure that other agricultural products would not be brought under any kind of export restrictions.
- Discussions with public and private stakeholders across the agricultural value chain highlighted certain structural changes that were required to boost agricultural exports. These comprise of both general and commodity specific measures that may be urgently taken – and at little to no financial cost. The subsequent gains, however, are aplenty.
- Stable Trade Policy Regime: Given the domestic price and production volatility of certain agricultural commodities, there has been a tendency to utilize trade policy as an instrument to attain short-term goals of taming inflation, providing price support to farmers and protecting the domestic industry.
- Reforms in APMC Act and streamlining of Mandi fee: Agricultural Produce Marketing Committees (APMC) Acts across States have not been able to achieve the farmers’ welfare envisaged in these Acts. The Agri export Policy aims at using the DGFT field offices, Export Promotion Councils, Commodity Boards and Industry Associations to act as advocacy forum for reform by all the states.
- Liberalising Land Leasing norms: The Finance minister, while presenting the Union Budget for 2018-19, has announced the intent on working with the State Governments on liberalizing the leasing policy without compromising the rights of the land owner.
Infrastructure and Logistics Boost:
- Presence of robust infrastructure remains a critical component of a strong agricultural value chain. This involves pre-harvest and post-harvest handling facilities, storage & distribution, processing facilities, roads and world class exit point infrastructure at ports facilitating swift trade
- A comprehensive need-gap analysis of existing export oriented infrastructure across the value chain is critical to formulating an export oriented policy. Ports are a vehicle for economic development.
- The focus shall be to:
- Identify major ports where current/projected bulk and container agri traffic demands infrastructure and modernization initiatives.
- Port development – dedicated perishable berths, agricultural jetties, Railway Reefer Wagons with better Hinterland Connectivity are critical to a smooth and cost effective supply chain.
- Identify the challenges of operationalizing existing defunct infrastructure at ports such as the Centre for Perishable Cargo (CPC) and requirement of new CPCs and other infrastructure at the port of exit.
Whole Government Approach to boost exports:
- Agricultural exports are intertwined with supply side production, food security, processing facilities, infrastructure bottlenecks and domestic food inflation. In India, this involves multiple ministries including DAC&FW, DAHDF, Food Safety and Standards Authority of India (FSSAI), Ministry of Food Processing Industries, Ministry of Shipping & Transport, Ministry of Railways and Ministry of Consumer Affairs, Food & Public Distribution.
- The stakeholders have often talked of a disjointed, single-minded mandates of respective ministries which restrict their ability to successfully influence domestic agricultural production and global trade.
- International trade dynamics play an extremely critical role in the cropping and farming decisions of domestic farmers; guar, rice, pulses and oilseeds are excellent examples.
- Whole of government approach will address issues of (A) R & D for improved varieties, value addition and packaging, (B) Establishment of a good standards regimen, (C) A holistic response to SPS and TBT barriers faced by Indian products, (D) Identification of winning sectors and strategies for augmenting exports in those sectors. These issues are elaborated further in the operational part of the strategies.
What needs to done?
- ‘More from less’ should be the aim of agriculture because rapid industrialization and climate change have raised the scarcity value of land and water.
- Indian agriculture is the victim of the Green Revolution’s success. It has become cereal-centric, regionally-biased and resource-intensive. A rainbow revolution must follow the green and white revolutions.
- Genetically modified crop technologies have ‘significant net benefits.’ Evolved regulation is needed to allay public fears so they can be deployed.
- Pulses and oilseeds must be supported with procurement and support prices that reflect their social contribution – less water use and enrichment of soil with atmospheric nitrogen.
- Advancements in Seed Technology – New varieties need to be tested and seeds of these varieties should be made available to the farmers for cultivation in the regions in which it is suitable.
- Regulatory measures for quality seed production have to be tightened so as to discourage the sale of spurious seeds to the farmers.
- Subsidies on power must end to curb water wastage. Cheap power makes India a net exporter of water through commodities like cotton, sugar and soybean, while China is a net importer of water through soybean, cotton, meat and grains.
- Agricultural research has the biggest impact on yield and profitability but it is weak in states where agriculture is relatively more important (eastern and northern states, except Punjab and Haryana).
- The private sector must be enticed into pulses research (which it has shunned) by offering a ‘disproportionately large enough award’ to the winner for innovating in desirable traits, but the intellectual property rights must vest with the government. There should be equal treatment of the private, public and citizen sectors in this respect.
Critically examine how the agriculture export policy seeks to diversify the country export basket and destinations, by boosting high value and value- added agricultural exports, including focus on perishables.