To attract investment in horticulture clusters, first the issues must be resolved

Dr Arpita Mukherjee, Professor at ICRIER, opines that horticulture clusters have been successful in many countries. It helped them to boost production and exports by bringing together the farmers, producers/agribusinesses, exporters, institutions and other stakeholders to create a network to pursue common opportunities and address common challenges.

IBT: Recently, the government has zeroed in on 12 districts under its horticulture Cluster Development Programme (CDP). What benefits will this have for the stakeholders – farmers & exporters in the country?

Dr Arpita Mukherjee: This is the pilot phase of the CDP, in which 12 out of 53 horticulture clusters have been identified for products such as apples, mangoes, grapes, pineapples, and turmeric. Some of the products are already being exported from the identified states like grapes from Maharashtra or pineapples from Tripura. The government plans to first examine the benefits of the pilot project and then scale up to cover the 53 districts in the next 5-7 years.

If the project is successful, according to the Ministry of Agriculture and Farmers’ Welfare, it is expected to benefit around 10 lakh farmers along with other players in the supply chain. Many farmers are small and medium-sized; such initiatives can help them if they are linked to the domestic and export value chains. Within the districts, farmers can be trained in export requirements and can be connected to the exporters.

The CDP aims to improve the exports of the target crop by around 20% and create cluster-based brands. India is the second-largest producer of horticulture crops and accounts for around 12% of the world’s production of fruits and vegetables. Yet the exports are much below the potential. A cluster-based approach can lead to economies of scale, help to improve the efficiency of production and ensure product standardisation.

The programme is designed to leverage the geographical specialization and can lead to GI products. India has much lesser GI products in agriculture produce unlike countries such as China or regions such as the EU. Hence, developing GI products through CDP is a good initiative.

In India, there is a huge wastage of perishables in the supply chain. Government estimates show that around 25-30% of fruits and vegetables are wasted due to inadequate logistical facilities, including lack of refrigerated storage, supply chain delays at interstate borders, poor transport and underdeveloped marketing channels. Proper logistics infrastructure can help to reduce those wastages.

IBT: How can CDP help in boosting the global competitiveness of the Indian horticulture industry? Which international benchmarks can the country seek inspiration from in this regard? What can Indian horticultural clusters learn from them?

Dr Arpita Mukherjee: A cluster-based approach has been successful in many countries. It helped them to boost agriculture production and exports by bringing together the farmers, producers/ agribusinesses, exporters, institutions (for example, standard-setting bodies, local governments, research institutes and universities, laboratories etc.) and other stakeholders to create a network to pursue common opportunities and address common challenges. For CDP to be successful, it is important to learn from global best practices. Success will depend on the ability to link farmers, FPOs, cooperatives, exporters, and other stakeholders in the value chain.

The aim should be to provide state-of-the-art infrastructure, packaging techniques, knowledge, and capacity building to reduce wastage and improve quality and standards. The gaps in infrastructure, technology, and knowledge must be identified and required infrastructure, latest technology, and knowledge should be provided.

Some of the international clusters that are widely studied include the French wine cluster and the Dutch flower cluster. More recently, Vietnam’s success in establishing value chains for five products, namely, rice, cashew, coffee, fish, and pepper, through a clusters-based approach has received global attention.

In India, too, there are successful examples of a cluster-based approach to boost exports. For example, exports of grapes from the state of Maharashtra grew substantially due to initiatives taken by organizations like Mahagrapes. Mahagrapes provides common facilities for pre-cooling, cooling, and storage of grapes, to the cooperative members.

IBT: How can the horticulture CDP be aligned with some of the other schemes of the government such as GI tags, Agriculture Infrastructure Fund, and Mission for Integrated Development of Horticulture (MIDH)? What can be the plausible pros and cons of this move?

Dr Arpita Mukherjee: There is a need for a comprehensive approach, target, and planning and to align the CDP with other schemes and policies of the government. Let us take the example of the Agriculture Infrastructure Fund. In May 2020, the Honourable Finance Minister announced Rs 1 lakh crore for funding Agriculture Infrastructure Projects at farm-gate & aggregation points for farm-gate infrastructure.  This can be used to improve the farm-gate infrastructure in the 12 identified clusters. Too many schemes and policies can confuse private investors.

Further, State Governments have an important role in the success of such cluster-based programs as agriculture is a “state” subject.  Hence, state levels policies and schemes have to be aligned with CDP.

IBT: CDP seeks to attract an estimated investment of Rs 10,000 crore across all the 53 districts. What can be done to achieve this target and accentuate the ease of doing agriculture in the nation?

Dr Arpita Mukherjee: If the private sector is interested, attracting investment will not be difficult. Investors will look at a number of issues like Ease of Doing business and FDI restrictions. There are restrictions on FDI in retail and e-commerce. Foreign e-commerce companies cannot operate through an inventory-based model. Not many global retailers in food have a presence in India.  Many such as Marks and Spencer, who are in the food business globally, have not entered the food business in India. To have such a large investment, we will need FDI. Hence, we may have to relook at the FDI policy.

Also, we need to encourage more processing for products like beverages, which use fruits and vegetables like tomatoes and carrots. There is a need to reduce the taxation of such products to increase purchases by consumers. If there is a demand, producers will produce.

Our survey-based study in ICRIER showed that adult consumers across all income groups in urban India were consuming less than the WHO recommended daily intake of fruits and vegetables, which is at least 400 gms of fruits and vegetables, excluding potato, cassava and other starchy tubers. So there is a need to build awareness about the right consumption.

IBT: What can be done to ensure that the produce will be in tandem with international quality benchmarks?

Dr Arpita Mukherjee: While the Codex Alimentarius is a collection of internationally recognized standards, codes of practice, guidelines, recommendations relating to food labeling, food safety, etc.; in practice, there is no common international benchmark and every country has set up its own standards. Countries are allowed under the WTO to do so as long as there is scientific justification for such standards. So, growers have to be trained on the requirements of key export markets, which may vary.

There is a need to ban pesticides and fertilizers which are banned in markets like the US, EU, UK, etc. There is a premium price for organic produce and hence organic clusters can be tried out in the identified districts. Farmers have to be linked with standard-setting bodies, certification bodies and other stakeholders. International experts can come and provide training or help to develop training manuals for the districts.

IBT: What are some of the challenges that could come in the way of successfully implementing this programme?

Dr Arpita Mukherjee: It is a challenge to attract funding to this initiative due to the growth slowdown. Second, it can be a challenge to bring all the stakeholders together in one platform. Third, infrastructure gaps and core issues faced by each of the clusters can be different. Fourth, there are multiple policies, schemes and programs, and aligning them is a challenge. Fifth, there can be coordination issues across various government ministries/departments at the Centre, states, and local levels. Sixth, demand for the products, branding, market identification, development of value chain, etc., can be a challenge.

IBT: How can CDP help in promoting sustainable agriculture/circular economy?

Dr Arpita Mukherjee: CDP can help to promote sustainable agriculture/circular economy by using organic wastes such as food waste, crop stalks and stubble, leaves, seedpods, and animal waste as bio-fertilizers. These clusters can have GAP (Good Agriculture Practices). They can recycle irrigation water. Technology such as satellite positioning systems like GPS and remote sensing and AI and machine learning can be used to manage the use of inputs like fertilizers, pesticides, and water. Bioenergy can be generated.

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Dr Arpita Mukherjee is a Professor at ICRIER. She has several years of experience in policy-oriented research, working closely with the Government of India and policymakers in the EU, US, ASEAN and in East Asian countries. She has conducted studies for international organizations such as ADB, ADBI, ASEAN Secretariat, FCO (UK), Italian Trade Commission, Konrad-Adenauer Stiftung (KAS), OECD, Taipei Economic and Cultural Centre (TECC), UNCTAD and the WTO and Indian industry associations such as NASSCOM, FICCI, IBA, IDSA and EICI. Her research is a key contributor to India’s negotiating strategies in the WTO and bilateral agreements. The views expressed here are her own.