Context:

• The Agriculture Minister, recently tweeted about the government’s resolve to increase the value of the country’s agricultural exports to $100 billion by 2022-23.
• The Dalwai Committee Report on doubling farmers’ incomes also talked of a similar target. It said, “the aim should be to raise agricultural exports by a minimum of three times by 2022-23, to reach the target of $100 billion”.
• Interestingly, the draft Agricultural Export Policy, that has been put in the public domain by the Minister of Commerce, has a much more modest target — $60 billion by 2022-23.

In a global economy that is highly price- and quality-sensitive, what should be the strategy to double or triple Indian agri-exports by 2022-23?

The draft Agri-Exports Policy rightly identifies two steps:

• Identify commodities in which India holds a global comparative advantage and
• develop clusters in states to create value chains for these commodities. 

How this can be achieved

1. Research conducted at ICRIER can be of help if the government decides to take the first step enunciated in the draft policy
2. Eleven commodities — marine products, rice, meat, spices, cotton, fresh fruits and vegetables, sugar, coffee, groundnut, oilmeals, and cashews — comprised more than 80 percent of the country’s agri-export basket in 2016-17
3. Most crops were globally price-competitive in most years but many of these commodities lost out on competitiveness, due to a fall in global prices.

The Hurdles:

1. The biggest hurdle comes from uncertain domestic marketing and trade policies
2. The inherent “consumer bias” in these policies makes the trading environment unstable and unpredictable
3. Exports are restricted through the use of minimum export prices and bans while the Essential Commodities Act is used to regulate private participation
4. This harms India’s image of a reliable supplier of agri-products and ensures that the country does not get the best price for its exports

The need of the Hour:

1. The first change that is required pertains to mindsets

• Instead of suppressing market prices for farmers to support consumers, the government should protect them through targeted unconditional income transfers
• Restricting markets and compensating farmers through higher MSPs based on the new formula (cost A2+FL+50 percent) will be an inflationary and unsustainable solution to the woes of the country’s agriculturists
• It is likely to hit agri-exports adversely, especially rice and cotton. The exports will become uncompetitive

2. Policymakers should support agri-exports while ensuring environmental sustainability

• Exports of rice must be properly assessed
• Cultivating one kg of rice in Punjab or Haryana needs about 5,000 litres of irrigation water
• This is drawn from underground and has led to a drastic fall in the groundwater table
• Exporting large quantities of common rice from this region is akin to exporting billions of cubic meters of water
• The best way to correct this would be to gradually phase-out power and irrigation subsidies and replace them with a direct income support to farmers while letting the prices of power and water reflect its true value

3. The government must develop efficient global value chains and liberalize land lease markets across all states

• It should encourage contract farming on a medium- to long-term basis
• Exporters and processors must be encouraged to buy directly from farmer-producer organizations (FPOs), bypassing the inefficient APMCs
• Major investments are needed at the back-end to create infrastructure for global and domestic value chains, ranging from produce aggregation to its sorting and grading, packaging, storing and linking the hinterlands to ports for export markets

The Way forward

• Agri investments could have a multiplier effect on the rural economy
• A consumer bias in policy must be redressed and a balance should be struck between meeting the needs of food-insecure consumers and income-insecure farmers

Source:Indian Express