1 Contents CHAPTER 1 Agriculture in India CHAPTER 2 Agri Export Zones: An Introduction CHAPTER 3 Performance Review CHAPTER 4 ASSOCHAM Recommendations ANNEXURES
2 CHAPTER 1 Agriculture in India Introduction Indian economy with a well diversified financial sector, rich raw material base, a vast reservoir of technical as well as unskilled labour, comfortable foreign exchange reserves, deep and robust capital market and a huge expanding domestic market is scaling new peaks of growth. It continues to sustain its momentum with a vigorous 9.1 per cent growth in first half of the current fiscal. With the revision of growth estimates for to nine per cent from 8.4 per cent envisaged earlier, mainly on account of a higher than anticipated output in agriculture, hopes of achieving an overall growth rate of 8 per cent during the Tenth Plan period ending March 31, 2007 are being roused. The Eleventh Plan aims to achieve a growth of 9 per cent in the Gross Domestic Product (GDP) of the country. Evidently, Indian economy is on a roll and beginning to be recognized as a potential economic superpower. Even as the incessant salutary economic performance has broadly been appreciated, slide in agriculture, the mainstay more than two-third of Indians, has caused jitters. Though, the farm sector grew by 6 per cent in as per the quick estimates released by the Central Statistical Organisation, the overall picture remains dismal. While the share of agriculture in GDP has declined from around 35 per cent in to about 20 per cent in , the fall in the population dependent on the sector has not been proportionate. Agriculture employing close to 650 million is the backbone of Indian economy. With 151 million hectares of arable land and 55 million hectares of irrigated land it ranks second and first respectively in the world. India is blessed with potential to cultivate vast range of agricultural produce owing to its diversified agro-climatic condition. We are first in production of milk, fruits, cashew nuts, coconut and tea; second in wheat, vegetable, sugar and fish; and third in tobacco and rice. In terms of share in total exports by India, agriculture accounts for a mere 10 per cent. Green revolution significantly increased the foodgrain production in the country, but off late production appears to have reached a plateau. The output of wheat has stagnated at about 70 million tonnes and of paddy or rice at 90 million tonnes. The production of pulses, which are a staple in India, has also peaked at 14 million tonnes. Oilseeds output is 27 million tonnes. It is imperative to devise ways to enhance production to narrow the gap in foodgrain production, which is projected to be about 27 million tonne in What is ailing Indian Agriculture? OUR COUNTRY HAS 16 per cent of the world human population, 15 per cent of the world livestock heads, BUT ONLY 2 per cent of the world geographic area, 1 per cent of the rain water, 1 per cent of the forests cover and 0.5 per cent of pasture land. To feed the ever increasing population more and more food has to be produced from less and less land, water and other natural resources. Agriculture, despite subsidies, suffers from low productivity and under-investment. Farm holdings are small, the extent of land under assured irrigation is limited, and farming is not regarded as a remunerative occupation by most farmers. The water
3 quality is deteriorating because of the nitrate and arsenic content as also the soil health because of imbalanced use of NPK and micro nutrient deficiency. There has not been a major technological breakthrough in seeds or the use of fertilizers in the last twenty or more years. Subsidies are growing at an alarming rate while the investment is falling leading to widening of Investment-Subsidy gap. In fact, subsidies are 5-6 times the public investment in agriculture. Food subsidy bill increased from Rs. 2,500 crore in to Rs. 26,200 crore in with the share in GDP increasing from 0.44 per cent in to 0.98 per cent in and 0.83 per cent in Public investment in agriculture has been low. Capital formation in agriculture has remained relatively stagnant during to , the latest years for which data is available. Agriculture is the biggest private sector economic activity in India. Ironically, the Gross Fixed Capital Formation for private sector has witnessed a decline over the same period. However, now efforts are being made to mark a reversal. The challenge is to increase public investment in agriculture, especially in irrigation; to enhance the productivity of farming, especially in paddy, wheat, pulses and oilseeds; to adapt genetic sciences to the needs of Indian agriculture; and to promote private investment, including investment by the corporate sector, in prefarming and post-harvest activities in a manner that will not affect the sacred relationship between the tiller and the land. One of the major constraints to private sector participation is the state's monopsony in creating and maintaining markets. The pace of market reforms in agriculture is extremely slow. Infrastructure & institutional bottlenecks, low price discovery, poor market intelligence & information system and length of value chain add to the woes. Other problems include: Low marketable surplus High transaction costs Poor access to technology Low access to credit and insurance sector Lack of non-farm employment opportunities Growing indebtedness in rural areas due to adverse cost-risk-return structure of farming Fluctuating prices and food safety issues (Sanitary and Phytosanitary issues or SPS issues) in the global markets It is high time that we made a shift from agriculture to agribusiness and revisit the incentives structure in agriculture.
4 CHAPTER 2 Agri Export Zones: An Introduction The Concept With the removal of quantitative restrictions on imports, efforts were being made to strengthen the integration of Indian economy with the global economy. Agriculture was identified as one of the most promising sector with potential competitive advantage. However, there were too many issues to be addressed in the entire supply chain. Thus, a new concept of Agri Export Zones (AEZ) was introduced under chapter 16 of Exim Policy 2001 to address the entire value chain. Agri Export Zone was an attempt to take a look at an identified produce/product or a group/ a group of produce/products sourced from a geographically contiguous area with a view to comprehensively address all the issues relating to each stage of the entire value chain. Areas of focus The concept aimed at providing remunerative return to the farmers community in a sustained manner. An improved access was to be provided to the produce or products of the agriculture and allied sectors in the international markets. It was expected to address all aspects of agriculture such as production, research, development, extension, post harvest management and marketing in a focused manner for successful implementation. It further involved setting up of appropriate produce-specific post harvest infrastructure and introduction of post harvest practices, right from farm to market. Another important area of focus under AEZ was marketing- market promotion and market development for Indian produce. The concept recognized the need for market oriented research, development and extension activities and appropriate activities proposed to achieve both near term and long term goals of the Indian export industry. It entailed appropriate interventions at the Government level and producer-exporter level. The scheme is implemented by the Ministry of Commerce, through Agricultural and Processed Food Products Export Development Authority (India), the nodal agency for AEZ. Parties involved A number of specific activities or interventions, agencies responsible for implementation and funding were planned to be identified. Interventions were suggested in the areas of production, post harvest management, marketing and research and development areas. Responsibility for coordination was entrusted with the state nodal agency. The nodal agency with support and cooperation from the State s Department of Horticulture, the Department of Agriculture, the Department of Industries, the Department of Finance, State Electricity Board (SEB) and other agency/agencies were responsible for implementation of AEZ in a time bound and effective manner.
5 The various organisations involved and their role is depicted in the following representation. Objective The concept aimed to achieve the following objectives: Strengthening of backward linkages with a market oriented approach. Enhancement of product acceptability and its competitiveness abroad as well as in the domestic market. Value addition to basic agricultural produce. Bringing down the cost of production through economies of scale. Better price for agricultural produce. Improvement in product quality and packaging. Promotion of trade related research and development. Generation of employment opportunities. Requirement of funds were proposed to be met from private and co-operative sector with subsidies or grants from the Central and the State Governments and loan availed from bank and financial institutions. Measures envisaged Financial Assistance The Central and the State Governments and their agencies provide a variety of financial assistance to various agri export related activities including training and extension, R&D, quality upgradation, infrastructure and marketing etc. All these facilities were proposed to be dovetailed and extended to promote agri exports from the proposed Zones in a coordinated manner.
6 Fiscal Incentives The benefits under Export Promotion Capital Goods Scheme, which were hitherto available only to direct exporters, were extended to service exporters in the Agri Export Zones. Thus, the service provided to ultimate exporters was eligible for import of capital goods at a concessional duty for setting up of common facilities. They had to fulfill their export obligation through receipt of foreign exchange from ultimate exporters who shall make the payments from their Exchange Earner s Foreign Currency Account. Exporters of value added agri products were made eligible for sourcing duty free fuel for generation of power, provided the cost component of power in the ultimate product was 10 per cent or more and the input-output norms were to be fixed by the advance licencing committee of the Directorate General of Foreign Trade (DGFT). Relevant excerpts from the Foreign Trade Policy Chapter 1B: Special Focus Initiatives With a view to doubling our percentage share of global trade within 5 years and expanding employment opportunities, especially in semi urban and rural areas, certain special focus initiatives have been identified for the agriculture, handlooms, handicraft, gems & jewellery and leather sectors. Agriculture (a) A new scheme called the Vishesh Krishi Upaj Yojana (Special Agricultural Produce Scheme) for promoting the export of fruits, vegetables, flowers, minor forest produce, and their value added products has been introduced. (b) Funds shall be earmarked under Assistance to States for Infrastructure Development of Export (ASIDE) for development of Agri Export Zones (AEZ) (c) Import of capital goods shall be permitted duty free under the EPCG Scheme (d) Units in AEZ shall be exempt from Bank Guarantee under the EPCG Scheme. (e) Capital goods imported under EPCG shall be permitted to be installed anywhere in the AEZ. (f) Import of restricted items, such as panels, shall be allowed under the various export promotion schemes. (g) Import of inputs such as pesticides shall be permitted under the Advance Licence for agro exports. (h) New towns of export excellence with a threshold limit of Rs 250 crore shall be notified.
7 Chapter 3: Promotional Measures Merchant as well as Manufacturer Exporters, Service Providers, Export Oriented Units (EOUs) and Units located in Agri Export Zone (AEZs) shall be eligible for applying for status as Star Export Houses. Chapter 5: Export Promotion Capital Goods Scheme EPCG for agro units: In the case of EPCG licences issued to agro units in the agri export zones, a period of 12 years reckoned from the date of issue of the licence would be permitted for the fulfillment of export obligation. The agro units in the agri export zones would also have the facility of moving the capital good (s) imported under the EPCG within the agri export zone. An LUT/ Bond in lieu of BG may be given for EPCG licence granted to units in the Agri Export Zones provided the EPCG licence is taken for export of the primary agricultural product (s) notified in Appendix 15 or their value added variants. Fixation of Export Obligation Service provider in Agri export zone shall have the facility to move or shift the capital goods within the zone provided he maintains accurate record of such movements. However, such equipments shall not be sold or leased by the licence holder. The entire model hinges primarily on convergence, partnership and focus. This is described in the following depiction.
8 MARKET IDENTIFICATION OF PR & QUALITY PARAMETERS MARKETING INPUTS SEEDS, FERTILIZER, NU WATER, PESTICIDES, C TRANSPORATION RESEARCH & PRE HARVEST TECHNOLOGY & P DEVELOPMENT PACKAGING PROCESSING SORTING & GRADING TRANSPORTATION POST HARVEST HARVESTING TECHNOLOGY & P CENTRAL GOVT. & ITS AGENCIES 1. APEDA 2. NHB PARTNERSHIP 1. DOA 2. DOH 7. RESEA 3. MFPI 3. MARK 4. SFAC 4. SIDC 5. DGFT 5. SEB 6. MOA 6. FINAN
9 APEDA: Agricultural and Processed Food Products Export Development Authority NHB: National Horticulture Board MFPI: Ministry of Food Processing SFAC: Small Farmers Agri-Business Consortium DGFT: Directorate General of Foreign Trade MOA: Ministry of Agriculture DOA: Department of Agriculture DOH: Department of Horticulture SIDC: State Industrial Development Corporation SEB: State Electricity Board Stages for setting up of Agri Export Zone The stages for setting up of AEZ are as follows: Preparation of proposal by the State Governments. Clearance by the Steering Committee chaired by Commerce Secretary. Signing of MoU between the Central (APEDA) and the State Government undertaking commitments Nodal Officers appointed Detailed action plan for each activity and monitoring by the inter departmental Coordination Committee. Notification by Directorate General of Foreign Trade Advertisement by State Government/Agencies inviting private investment Detailed Project Report and execution of the detailed action plan.
10 CHAPTER 3 Performance Review An overview of the performance There are sixty Agri Export Zones sanctioned so far spread across twenty states with fifty nine operational AEZs. Maharashtra has the maximum number of zones, followed by West Bengal and Madhya Pradesh with eight, six and five zones respectively. Uttaranchal, Andhra Pradesh, Uttar Pradesh, Tamil Nadu and Karnataka each have four sanctioned zones. While Gujrat and Punjab have three, Jammu and Kashmir, Rajasthan, Kerala and Sikkim have two zones each. Rest of the six zones are located in Himachal Pradesh, Assam, Tripura, Bihar, Jharkhand and Orissa. The sixty Agri Export Zones sanctioned by the Steering Committee chaired by the Commerce Secretary envisaged an investment of Rs crore and export of Rs crore over a period of five years from the date of signing of Memorandum of Understanding between the Central and the State Government. However, against these projections the investments and exports made so far as per the figures reported by APEDA in January 2007 are less than half of the expectations. The actual investments made in these zones are Rs crore and actual exports are Rs crore since their commencement. As many as 54 AEZs have not been able to make the envisaged exports and 54 AEZs have been unable to attract the envisioned investments. The details of the envisaged and actual exports and investments are annexed at the end of the study. AEZ for Gherkins in Karnataka and Onions in Maharashtra are the only zones who have met the expectations. Almost half of the MoUs were signed in Schedule of signing of MoUs Year No. of MoUs signed Total 59* *MoU of AEZ for Darjeeling Tea, West Bengal is awaited The Centre had received 34 more proposals for setting up of AEZs but it was decided that instead of sanctioning more AEZs, efforts should be made to strengthen the existing zones with exceptions being made only if there are "strong and compelling" reasons.
11 Bottlenecks ailing the concept The concept of Agri Export Zones aimed at strengthening the income and livelihood of farmers leading to integrated rural development. But unlike Special Economic Zones, they have not been successful to attract due attention of the Central and the State Governments. Agri Export Zones is not a new scheme; it is convergence of existing schemes of the Government of India and the State Governments representing partnership among various agencies of the Central and State Governments with a focus on exports. Nonetheless, the concept has failed to witness any convergence, partnership and focus. Neither the Central nor the State Governments have taken initiative to help the concept deliver, largely because there is lack of ownership among the Governments at both levels. Agri Export Zones (AEZs) have failed to attract investments due to lack of incentives, absence of investment window and inadequate infrastructure. Essentially, the present incentives are drawn from various existing schemes without any additional incentives. Thus, it doesn t woo additional funds in the zone. The bad shape of infrastructure including power, transport and communication facilities is one of the major bottlenecks. Few zones have indeed attracted investments, but they are not because of the congenial environment created by the AEZs. In most of the cases the money came in on account of already existing lucrative business opportunities such as AEZ for Gherkins in Karnataka. Also, in many cases the investments made have not been planned. They have been rather random and did not address the entire chain. Such expenditure is unproductive and wasteful. In few other cases the cost of already existing units is also recorded as investment. Consequent to lack of adequate push by the Union and the State Governments and lower than expected investments there is a lag of more than 50 per cent in the actual exports. In some cases the evaluation reports are unrealistic. There are few zones which have zero reported exports despite the fact that exports are taking place from the zone. The figures of investment are also not properly reported. Few accounted figures are understated while others are overstated. There are few cases where Memorandum of Understanding signed for a project is recorded as actual investment. Co-ordination and Monitoring The concept required effective co-ordination and monitoring both at the Central and State level to ensure that the targets are successfully achieved. In effect the nodal agencies are either not appointed or lack effectiveness. Another big problem is that officials responsible for AEZ including Nodal Officers are changed frequently. As a result there is lack of awareness or ambiguity as to concept among the new administrators themselves. The ultimate result is poor co-ordination and
12 implementation. Moreover, absence of reliable data makes the monitoring of performance of the zones virtually impossible. Performance Appraisal Few AEZs have done well, while rests have been miserable. The zones which are doing well are performing due to demand in the market. Reported investments in some AEZs of pineapple in West Bengal; gherkins in Karnataka; vegetables in Punjab; and Alphonso mango, flower and onion in Maharashtra are higher than estimated. The AEZ of litchi, vegetables and honey in Bihar also attracted higher investments. However, investments in Uttarakhand's flower AEZ, Punjab's potato AEZ, Madhya Pradesh's potato and onion AEZ and Dharampuri AEZ in Tamil Nadu for flowers were lower than estimated, though not by huge margin. Twelve zones out of the total sixty approved zones have not been able to garner any investment and exports are nil. The AEZs with more than expected exports are Gherkins and Rose Onion zones in Karnataka; Grape & Grapewine and Onion zone in Maharashtra; Mango Pulp & Fresh Vegetables zone in Andhra Pradesh and Walnuts zone in Jammu & Kashmir. AEZs with zero Investments and Exports State West Bengal AEZ Project Darjeeling Tea Date of Signing of MoU Not signed Karnataka Vanilla 25 August 2006 Andhra Chilli 29 December 2005 Pradesh Madhya Lentil and 27 May 2006 Pradesh Grams Tamil Nadu Cashewnut 12 April 2005 Gujrat Sesame 13 January 2005 Seeds Sikkim Ginger 26 August 2002 Himachal Apples 17 September 2002 Pradesh Jharkhand Vegetables 15 February 2003 Kerala Medicinal Plant 1 January 2005
13 Rajasthan Coriander 21 February 2005 Rajasthan Cumin 21 February 2005 Zone wise appraisal of few AEZs AEZ for Orange, Madhya Pradesh The AEZ for oranges in Madhya Pradesh covers the areas of Chhindwara Hoshangabad and Betul. Vegetables have been added in the AEZ of oranges vide notification of DGFT in November This zone has managed to attract a major part of its expected investment of Rs. 10 crore, but exports from the zone are nil as per records against envisaged amount of Rs crore. APEDA sanctioned and signed Memorandum of Understanding with National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED) for setting up of one pack house each in Umranala for vegetables, and in Saunsar for oranges and other fruits at the cost of Rs crore. The present status is that NAFED has acquired land for pack houses which is termed as actual investment in the zone. The exports are indeed not nil from the zone, there is an information gap leaving little scope for credible evaluation. AEZ for Organic pineapples, Tripura The exports from the zone of organic pineapples in Tripura have not yet taken off, which were likely to commence from mid An investment of Rs crore has been made in the zone. The problem with this zone is that the exports have to be exported via Calcutta which reduces cost competitiveness. Other zones with zero exports and small investments are mango zone in Tamil Nadu, flowers zone in Sikkim and basmati rice zone in Uttar Pradesh. The Memorandums of Understanding for these zones were signed in February 2003, August 2002 and March 2003 respectively. AEZ for Ginger and Turmeric, Orissa The AEZ of Ginger and Turmeric covering Kandhamal district of Orissa has made exports of close to Rs crore without any recorded investment. Funds however have flown into the zone, but there is no official record. Another zone in Uttrakhand has so far recorded an export of Rs. 1 crore with investments yet to be ascertained. The zone deals in medicinal and aromatic plants including the districts of Uttakashi, Chamoli, Pithoragarh, Dehradun and Nainital. AEZ for Pineapple, West Bengal Pineapple zone in West Bengal has reported investments of Rs crore and exports are worth Rs. 0.2 crore. The investment figure includes cost of the processing units present in the zone.
14 AEZ for Premium Products Investment in AEZs meant for premium products like basmati rice is negligible and Darjeeling tea is zero. India is the leading producer of tea, but has only one zone attributed to tea which is in Darjeeling. It was approved in September 2004 and due to lack of consensus between the Central and the State Government MoU is still awaited. There are only two zones dealing with spices, the above mentioned cherry pepper zone and seed spices zone of Madhya Pradesh. Another premium product zone of durum wheat in Madhya Pradesh has realized an accounted investment of only Rs crore compared to the foreseen amount of Rs crore. Exports too have been worth Rs. 21 crore against the projections of Rs crore. The Minimum Support Price offered by the government is more than what exports fetch that affects exports. Detailed account of few states: Punjab Punjab has three AEZs one each of vegetables, potatoes and basmati rice. So far the Basmati zone has drawn investment of close to Rs crore against the anticipated figure of Rs crore. As per the projections, investment of Rs crore were expected to lead to exports of Rs crore that is more than 100 times. These numbers are clearly questionable owing to the fact that the incremental exports since AEZ notification are Rs crore on all India basis. During the export of basmati rice had reached 11,50,169 million tonnes (All India) as compared to 7,71,475 million tonnes in , depicting an increase of 49 per cent. In dollar terms, the growth has been USD 135 million (USD 483 million to USD 618 million). Since it is difficult to track the origin of the exported rice the contribution of the Agri Export Zone is unknown. Thus, availability of reliable information and unrealistic project reports leave no scope for accurate assessment. The total investment in vegetable zone has touched a level of Rs crore, exceeding the projected investment of Rs crore. Five vegetable processing units have been set up with an investment of Rs. 33 crore. Exports worth Rs crore have been undertaken since the setting up of the AEZ as per the records which are far short of the projections of Rs.129 crore. With outlay of more than Rs. 33 crore exports are miserable. Also, the funds have flown in just one aspect of the value chain. However, the idea of AEZs was to address the entire supply chain. Potatoes zone has got a major part of the investments done, but the exports are negligible. The project envisaged an investment of Rs crore and exports worth Rs. 393 crore of potatoes was expected from this AEZ. The projections peg that the AEZ will be able to generate exports of million tonnes (approximately worth Rs 15 crore) by the year 2007.
15 Performance of AEZs in Punjab AEZ Envisaged Actual Envisaged Actual Project Exports Exports Investments Investments Vegetables Potatoes Basmati Rice Total (In Rs. Crore) Maharashtra Maharashtra has been able to attract the maximum amount of investments in its Agri Export Zones which is about Rs. 365 crore against an entailed outlay of about Rs. 186 crore. Moreover, the state has exceeded the anticipated exports by 66 per cent. The Grape and grape wine Zone envisaged a total cost of Rs. 112 crore in the first stage leading to likely exports of Rs crore. Actual incremental exports of Rs. 287 crore have rather outperformed with an investment of Rs crore. Grapes worth Rs. 105 crore were exported in the current financial year alone. Alphonso Mango Zone has marginally exceeded the expected level of investment at about Rs. 37 crore, but lags behind the aspired export by Rs. 22 crore. The exports made so far are worth Rs. 123 crore approximately. Kesar Mangoes Zone projected an outlay of about Rs crore, but so far it has attracted only Rs. 3.5 crore. Similarly, the zones of Pomegranat, Banana and Oranges have not been successful in drawing the envisioned investments. Agri Export Zone for Floriculture has got Rs. 168 crore invested against the projections of a mere Rs Internal roads have been developed within the AEZ. Work on road and River Bridge is also completed for joining the National Highway. Exports however have been a disappointment with the reported number being Rs. 18 crore. Out of this exports worth Rs. 10 crore were executed only during Onion zone has delivered good results with exports worth Rs. 588 crore by far as compared to the envisaged amount of Rs crore. According to the AEZs status report of APEDA (January 2007), India exported around 8.29 lakh million tonnes of Onion in the current year and Maharashtra contributed more than 5.50 lakh million tonnes.
16 Performance of AEZs in Maharashtra AEZ Envisaged Actual Envisaged Actual Project Exports Exports Investment Investment s s Grape and grapewine Mango (Alphonso) Kesar Mango Flowers Onions Pomegranat e Banana Oranges Total (In Rs. Crore) Government of Maharashtra has declared to adopt Model Act for Agricultural Produce Marketing Committee, due to which permission for Contract farming and private markets will be granted. The state has waived off the APMC Cess. Uttrakhand Uttrakhand has been a miserable performer with minimum investments to exports ratio among all states. None of the zones has made any significant exports. The recorded outlay too has been less than a third of the projections. AEZ Project Performance of AEZs in Uttrakhand Envisaged Exports Actual Exports Envisaged Investment s Actual Investment s Lychee Flowers Basmati rice Medicinal & Aromatic Plants Total Karnataka (In Rs. Crore) Karnataka has four approved zones out of which three are operational. The overall exports from them are approaching Rs. 1,140 crore. This is nearly double of the
17 projections which had put the number close to Rs. 620 crore. Actual investments too have outshined the foreseen figure by 80 per cent. The Government of Karnataka announced exemption of market cess for all the AEZs in the state including the one on gherkins on 11 th March Rose onion zone is the best performing zone among all zones in the country. It was expected that on setting up of this Agri Export Zone there will be an incremental exports of around Rs. 50 crore in five years with a projected investment of Rs crore. The actual figures have surpassed all the expectations. It has reported exports of more than Rs. 182 crore by an outlay of a meager Rs. 13 lakh. As a matter of fact the success achieved so far is demand driven. Productivity levels have gone up consequent to the distribution of good quality seeds. Hitherto lower than expected investments persist to be cause of concern. Gherkin zone has already received an investment of about eight times the projected figure resting at Rs crore. This project initially envisaged an investment of Rs crore and additional exports worth Rs crore in the following five years. As a matter of fact the zone has exported Gherkins of over Rs. 936 crore beating the anticipated amount of Rs crore. Most of the gherkin processing units are connected with the industrial feeder lines from rural feeder lines enabling quality power supply to their processing units. APEDA s efforts and initiatives have resulted in removal of Import Duty on gherkins in USA. Gherkins are the only crop successfully grown under contract farming system. The investments poured in the zone are not because of the concept of AEZs but on account of business opportunities that existed for the commodity. Agri Export Zone for floriculture in Karnataka has not been doing well. It has failed to accomplish the foreseen exports and investments. The investments so far made are only on Flower Auction Centre. The MOU for setting up the vanilla zone was signed with the State Government on 25 th August, Yet, no investments or exports have emanated. Performance of AEZs in Karnataka AEZ Project Envisaged Exports Actual Exports Envisaged Investments Actual Investments Gherkins Rose Onion Flowers Vanilla Total (In Rs. Crore) Mango AEZs There are six zones dedicated to mangoes exclusively and four zones exporting mangoes with other commodities. Thus, the total number of mango zones is ten, which is highest among all commodities. Andhra Pradesh and Maharashtra each has two mango zones. Chittoor district in Andhra Pradesh forming mango pulp and fresh vegetable AEZ has made exports worth Rs so far, the maximum out of the
18 ten mango zones. It is followed by mango zone (Alphonso) in Maharashtra with cumulative exports of Rs crore. The official exports from them all by far stand at Rs crore with accounted investment of Rs crore. All of these zones have failed to meet the expected exports. However, mango zone in West Bengal earns the maximum return on investment in terms of exports. Total investment made is Rs crore and exports made are close to Rs. 74 crore, over 2000 times of investment. The Andhra Pradesh zone has also clocked exports worth more than a thousand times of outlay. Vegetable AEZs India is the second largest producer of vegetables in the world next to China and accounts for about 15% of the world s production. There are seven approved vegetable zones, three of which are exclusively dealing in vegetables. The exports made from the latter zones are merely Rs crore as per records. West Bengal zone alone contributes about Rs crore of exports with a small stated lay out of Rs. 12 lakh. Vegetable zone of Punjab contributed Rs. 3 lakh only. Jharkhand zone has not yet begun operations. Flower AEZs The number of flower zones is six in the country. One out of them caters to cherry pepper also apart from flowers, which is yet to witness exports. A major cause of concern is that while the actual outlay has exceeded the projected investments by a huge margin, the exports are not even ten per cent of the estimations. There is a huge untapped market potential for flowers in international market. Performance of flower AEZs AEZ Envisaged Actual Envisaged Actual State Project Exports Exports Investments Investments Tamil Nadu Flower Karnataka Flowers Uttranchal Flowers Maharashtra Flowers Tamil Nadu Flowers Sikkim Flowers, (Orchids) and Cherry Pepper
19 Total (In Rs. Crore)
20 CHAPTER 4 ASSOCHAM recommends.. Agri Export Zones have failed to attract due attention of the Central and the State Governments owing to lack of ownership among the Governments at both levels. They have been ineffective in attracting investments due to lack of incentives, absence of investment window and inadequate infrastructure. The incentives extended hitherto are derived from the existing schemes, without offering any additional incentives. Also, in many cases the investments made have been random and unplanned. Moreover, in some cases the evaluation reports are unrealistic. The concept lacks effective co-ordination and monitoring both at the Central and State level. Absence of reliable data makes the monitoring of performance of the zones virtually impossible. Agri Export Zones should be seen as growth propellers for rural India. It is needless to overemphasize that to maintain the high growth levels being scaled by the Indian economy agriculture must grow by at least 4 per cent on a sustainable basis. AEZs are the vehicles which have the ability of not only ensuring growth of the rural economy but also helping in their integration with the globe. With the government s decision to put an embargo on sanctioning of new AEZs, efforts are needed to make sure that the existing zones deliver. Making the concept a success would require huge investments for addressing the complete supply chain. The areas like pre and post harvest management, food processing, export promotion related activities, specific crop related support activities, applied research, extension and monitoring of programme need consideration. Agri Export Zones cannot prosper unless there is adequate export quality produce. This will further warrant investments in irrigation, transport, rural electrification and rural telecommunication connectivity apart from other pre and post harvest activities. Thus, a major part will have to be spent on developing rural infrastructure. The ASSOCHAM recommends linking the concept of Agri Export Zones with Bharat Nirman, which is a time-bound plan for rural infrastructure by the Government of India in partnership with State Governments and Panchayati Raj Institutions. It is further required to make the concept a scheme and implement it in a project mode. It is imperative to provide additional incentives to the investors investing in the zones. Mere convergence of the existing incentives will not attract required level of investments. A transparent system for fixing accountability is crucial for the successful attainment of the objectives. Owing to the multiple agencies involvement belonging both the Central and the State governments, proper coordination is the essence of the concept. Registration numbers may be assigned to the farmers. Registered farmers may be provided with short term targets, which are monitored on regular basis. Packaging must be done registration number wise so as allow monitoring of the
21 performance of each farmer. It will also facilitate recording of the produce and exports, and will help in evaluating the performance of various zones. ASSOCHAM further recommends the following for revamping Agri Export Zones: Realistic blue print project reports for attracting investments must be prepared. The report must be made with a comprehensive approach indicating the limitations. Holistic market intelligence reports must be made entailing all the vital market data and background information currently available. Short term and time bound targets must be given to each zone, which must be monitored on regular and pre determined intervals. Consultants evaluating the zone may be made part of the implementation process to avoid unrealistic reports. A separate fund may be allotted for the funding of Agri Export Zones exclusively. Direct Finance by National Bank for Agriculture and Rural Development (NABARD) on concessional terms could be extended. A tripartite agreement must be signed between the farmer, banker and exporter thereby ensuring ready market for the farmer, availability of exportable produce to the exporter and adequate finance for both the parties. The agreement could further be made multi-partite in case food processor is a different (entity other than exporter). Addition of one or more commodities must be encouraged if the present infrastructure and supply chain supports it. Removal of the market cess on the exports is required. Additional incentives may be given for attracting investments in zones present in remote areas to encourage inclusive growth. Income tax incentives could be given to make the investments more lucrative. It is imperative to address all aspects of the supply chain adequately in order to make both - the past and the future - investments more productive. Ensure availability of necessary infrastructure at affordable rates. Power, irrigation and transport form the thrust areas. The zones must be well connected by the appropriate and feasible mode of transport. Marketing strategies in developed nations about Indian produce are warranted.
22 It is necessary to communicate the feedback of the domestic produce in the international market to the farmers apart from the food processors and exporters to encourage the production of food processing variety Subsidies must be well designed and targeted in such a manner that their effect is not negated due to taxes and duties. It could be withdrawn in a phased manner.
23 ANNEXURE INVESTMENTS AND EXPORTS FROM 60 SANCTIONED AGRI EXPORT ZONES* S State No 1 West Bengal (Rs. Crore) AEZ Envisaged Actual Envisaged Actual Project Exports Exports Investments Investments Pineapple Lychee Potatoes Mango Vegetables Darjeeling Tea Karnataka Gherkins Rose Onion Flowers Vanilla Uttrakhan Lychee d Flowers Basmati rice Medicinal & Aromatic Plants Punjab Vegetables Potatoes Basmati Rice Uttar Potatoes Pradesh Mangoes and Vegetables Mangoes Basmati Rice Maharasht Grape and ra grapewine Mango (Alphonso) Kesar
24 7 Andhra Pradesh 8 Jammu & Kashmir Mango Flowers Onions Pomegranat e Banana Oranges Mango Pulp & Fresh Vegetables Mango and Grapes Mango Gherkins Chilli Apple Walnuts Tripura Organic pineapple Madhya Potatoes Pradesh Onion Garlic Seed Spices Wheat (Duram) Lentil and Grams Oranges Tamil Flower Nadu Flowers Mangoes Cashewnut Bihar Lychee, Vegetables & Honey Gujarat Mango and Vegetables Value Added Onion Sesame
25 Seeds 14 Sikkim Flowers (Orchids) and Cherry Pepper 15 Himachal Pradesh 16 Orissa Ginger and Turmeric Ginger Apples Jharkhand Vegetables Kerala Horticulture Products Medicinal Plant Assam Fresh & Processed Ginger Rajasthan Coriander Cumin ENVISAGED EXPORTS ACTUAL EXPORTS ENVISAGED INVESTMENTS ACTUAL INVESTMENTS Rs crore Rs crore Rs crore Rs crore
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