horticulture press launch
TRANSCRIPT
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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
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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
Source: Value Chain Survey, The World Bank
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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
Source: Value Chain Survey, The World Bank
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%
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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.
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Key Priorities
Creating an integrated and competitivesupply chains for agriculture
Radical reform in transport, storage anddistribution services
Pro-active engagement in internationaltrade negotiations