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Economic Highlights
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Competition Commission Set Up:PROTECTING CONSUMER INTERESTS, by Dr. Vinod Mehta,13 September 2007 |
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ECONOMIC
HIGHLIGHTS
New Delhi, 13 September 2007
Competition
Commission Set Up
PROTECTING CONSUMER
INTERESTS
By Dr. Vinod Mehta
(Former Director
(Research) ICSSR
Competition, say economists, ensures low prices and quality
products to consumers. But in a market
economy there are always dangers that the producers would try to restrict
competition overtly or covertly to maximize their profits.
It may take the form of price collusion like the recent
decision of cell phone companies to jack up the SMS rates or narrow down the
purchase options of consumers by taking over a similar business as is the case
of Kingfisher airline acquiring the low fare Air Deccan. By this move the
option of low fare tickets is gone for the consumer.
Matured market economies like the American or European are
aware of these tactics of the producers and have put in place well set
mechanisms to protect the interests of their consumers. In the USA
it is called the Federal Trade Commission (FTC), in the UK it is the Competition Commission and in Australia it is
called the Competition and Consumer Commission.
The FTC deals with issues that touch the economic life of
every American. It is the only federal agency with both consumer protection and
competition jurisdiction in the broad sectors of the economy. The FTC pursues
vigorous and effective law enforcement; advances consumers’ interests by
sharing its expertise with Federal and State legislatures and U.S. and
international government agencies.
It also develops policy and research tools through hearings,
workshops, and conferences and creates practical and plain-language educational
programmes for consumers and businesses in a global marketplace with constantly
changing technologies
The FTC’s Bureau of Competition champions the rights of the American
consumers by promoting and protecting free and vigorous competition. The
Bureau: reviews mergers and acquisitions, and challenges those that would
likely lead to higher prices, fewer choices, or less innovation.
It seeks out and challenges anti-competitive conduct in the
marketplace, including monopolization and agreements between competitors;
promotes competition in industries where consumer impact is high, like health
care, real estate, oil & gas, technology, and consumer goods; provides
information, and holds conferences and workshops, for the consumers, businesses
and policy makers on competition issues and market analysis.
The Bureau of Competition is also committed to preventing
mergers and acquisitions that are likely to reduce competition and lead to
higher prices, lower quality goods or services, or less innovation. In most
cases, the Bureau receives notice of proposed mergers under the Hart-Scott-Rodino (HSR) Amendments to
the Clayton Act.
Bureau lawyers, along with economists from the FTC's Bureau of Economics,
investigate market dynamics to determine if the proposed merger will harm the consumers.
When necessary, the FTC may take formal legal action to stop the merger, either
in a Federal court or before an FTC administrative law judge.
The Competition Commission in UK is an independent public body,
which conducts in-depth inquiries into mergers, markets and the regulation of
the major regulated industries. The Competition Commission was established by
the Competition Act 1998. It replaced the Monopolies and Mergers Commission on
1 April 1999.
Like FTC of USA, the Competition Commission of UK also
conducts in-depth inquiries into mergers, markets and the regulation of the
major regulated industries. Every inquiry is undertaken in response to a
reference made to it by another authority: usually by the Office of Fair
Trading (OFT) but in certain circumstances the Secretary of State, or by the
regulators under sector-specific legislative provisions relating to regulated
industries. The Commission, however, has no power to conduct inquiries on its
own initiative.
Now with the passing of the Competition (Amendment) Bill,
2007 last week India
has also joined the league of matured market economies to protect the interests
of the consumers and promote competition in the economy. (The Competition Act was enacted by the Parliament
in 2002 but due to some reservations could not be implemented).
The new body will be known as the Competition Commission of
India (CCI) and will replace the Monopolies and Restrictive Trade Commission
(MRTPC) of the license raj era.
While the job of the MRTPC was to stop the emergence of monopolies, the
task of the CCI will be to ensure competitive conditions in the market.
The CCI as an expert body will function as a market
regulator to prevent and regulate anti-competitive practices and would have
advisory and advocacy functions in its role as a regulator. It will also look
into mergers and acquisitions of companies in India.
Mergers and acquisitions of similar businesses are becoming
very important. Before this Amendment
was finally passed we have witnessed three important mergers of airlines: one,
merger of Air Deccan with Kingfisher, two, of Jet Airways with Sahara and the merger
of State owned airlines Air India
and Indian Airlines.
Had the CCI been in place a few months earlier all these
mergers would have been first referred to it to see if these were in the best
interests of the consumers or whether they would restrict competition and lead
to higher airfares which are inimical to the interests of the consumers. Since these mergers are now a reality the CCI
cannot do anything about it.
However, on the positive side many small players at the
regional level are waiting in the wings to start their airlines. Which are
likely to ensure competition in the airlines business.
That apart, each merger and acquisition may not restrict
competition and always harm the consumer interest. Each case will have to be dealt with
separately on its own merit and within the context of the industry concerned.
For instance, acquisition of an ailing business by a
stronger one may actually help the weaker one to get rehabilitated. This could have been the case with some
textile units or public sector units manufacturing drug or photo film which were
forced to close down as they were not allowed to be acquired by healthier
firms. Had the acquisition and mergers
of these units been allowed as a policy we wouldn’t have been saddled with a
large number of sick units today.
But we have to be very careful about the mergers, price
collusion of new businesses such as cell
phone companies which are known for restrictive trade practices, covert price
collusions etc the world over. As also air lines, drug manufacturers, car
manufacturers, fast moving consumer goods and so on.
The CCI is going to have the onerous task on its hands in
the coming years. How far it will
succeed in its task of protecting the interests of the Indian consumers depends
largely on developing its expertise in such matters.
The Competition Commissions the world over have appointed
economists, financial analysts and legal experts to help them in nailing down
industries which restrict competition and fleece the consumer. We also have such expertise available in the
country and now it all depends upon the Commission to make the right selections
and start the work. ---- INFA
(Copyright India News & Feature Alliance)
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Don’t Play Politics:CREATE MEGA BANKS, by Dr Vinod Mehta, 5 September 2007 |
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ECONOMIC HIGHLIGHTS
New Delhi, 5 September 2007
Don’t Play Politics
CREATE MEGA BANKS
By Dr Vinod Mehta
(Former
Director, Research, ICSSR)
The Government has been mulling over the idea of merging
the State Bank of India
with its seven associate banks for
the past few years to create a mega bank. So that it can withstand competition
from other banks and play an active role in the international banking business. In fact,
it also wishes other Public Sector banks to take the initiative to merge and emerge
as mega banks of international standard.
However, the Government has hesitated to move forward
on its proposal because of strong opposition from a few political parties and
trade unions. Globalization demands we have six to seven strong mega Indian
banks which can not only withstand competition from mega international banks
but also play a significant role in the international financial markets.
The shares of the State Bank of India which were held by the Reserve Bank of India have now
been transferred to the Government of India.
The Government is now in a position to offload a part of it in the
equity market. But it can realize a better
price if the associate banks of the State Bank of India like the State Bank of
Saurashtra, the State Bank of Patiala etc. are merged with the main bank.
Notwithstanding, the associate banks have been there
for historical reasons but have all been functioning under the State Bank of India’s administrative
control. Therefore by merging the associates with the State Bank of India prior to
offloading a small part of its equity in the equity market the Government would
kill two birds with one stone: Create a mega bank and get maximum value for its
equity.
This also holds true for other nationalized and
private sector banks. In the next three to four years a number of foreign banks
will enter India
thus the Indian banks too should be ready to enter foreign countries. In fact, the Narasimham Committee in its Second
Report on Banking Sector Reforms, more than a decade ago, had set the tone for the
creation of mega banks by suggesting many sweeping changes in the banking
sector with a view to bringing them on par with the international banks.
The Report covered all the important aspects ranging
from bank mergers to the creation of global sized banks. While making these
recommendations, the Committee had kept in view the inevitable capital account
convertibility, which was likely to result in large inflows and outflows. Also,
the attendant implications for exchange rate management and domestic liquidity
which only very large banks were capable of handling. The time is now ripe to implement the
recommendations of the Narasimham Committee with some modifications keeping in
view the changes that have occurred in the banking sector in the past one
decade.
It has been stated in this column on several
occasions earlier that the finance sector, which was to be reformed at a much
faster pace is the one which is still lagging behind. None of the present Indian banks is able to on
their own stand internationally or to ward of the threat of take-over by
foreign banks. They are surviving
because of the Government backing. All
over the world the strong banks have joined hands or are joining hands to
become mega banks so that they can stand the international competition and
manage the flow of funds in a better way.
Remember, more than a decade
ago two Japanese banks, namely the Bank of Tokyo (which had more international presence)
and the Mitsubishi Bank (which had more national presence) merged to become the
Bank of Tokyo-Mitsubishi. At that time the Bank of Tokyo-Mitsubishi with assets
totaling around US $647.781 billion was the largest bank in the world.
The second largest bank in
the world, in terms of assets is the Deutsche Bank followed by the Credit
Auricle, the Sumitomo Bank and the Industrial and Commercial Bank of China. If India's
largest bank, the State Bank of India,
joins hands with its seven associate banks even then in terms of assets it
would rank 129th bank in the world.
Again if one were to merge,
say, the Bank of India, the Corporation Bank and the Oriental Bank of Commerce,
the merged entity would perhaps rank 331st in the world in terms of assets. All this is to state that we do not have a
single bank of international dimension.
It will take perhaps 8 to 10 years from now for a few Indian strong
banks to emerge as a bank of international dimension, provided some of them are
merged now.
It is in this context that we have to see the
recommendation of the Second Narasimham Committee Report. The Committee was against forced mergers
between strong and weak banks as it feared the weak bank would pull down the
stronger bank as was seen in the merger of the New Bank of India with the
Punjab National Bank more than a decade ago.
Politically, it may be difficult for the Government
to close down the loss making banks but it will have to take stern measures in
this direction. Either the loss making banks should accept the rehabilitation
package worked out by the Government or else accept their closure. The
Government cannot afford to save them all the time by diverting the tax payers’
hard earned money. Had these banks been
in the private sector they would have closed down by now.
One of the reasons for the rut in the banking sector
is the equalization of pay-scales of various levels of bank employees in the
nationalized banking sector. Such an
approach does not make any distinction between an efficient and inefficient
employee. Therefore, it hardly matters
whether the bank is earning profit or making losses since the employees are
ensured of their pay in the regular scale. After the submission of the Narasimhan
Report the bank employees have again threatened that they will resort to
nationwide strikes if any attempt is made by the Government to close down loss
making branches of a bank or loss making banks themselves.
It may be observed that the bank employees are using
their monopoly power to hold the nation to ransom by refusing to cooperate with
the Government in the implementation of financial sector reforms. Despite the Government’s
assurance that none of the existing employee would be forcibly retired. If the employees still adopt a stubborn attitude
and do not cooperate in the implementation of the reforms, the Government
should take a very strong stand and action against the employees within the
legal framework.
The change in the functioning of the banks as well as
their restructuring is inevitable because of the sweeping technological changes
in the banking industry all over the world.
With the advances in information technology, computer technology etc.
the concept of a bank branch has become totally irrelevant.
Again with the costs of real estate going up the everyday
maintenance of separate bank branches is eating into the potential profits of
the banks. All over the world bank
branches are giving way to ATMs and internet banking for carrying out a number
of the banking transactions. Then there are big financial deals to be arranged
like the purchase of Corus Steel by Tatas.
All these are reasons enough for creation of mega banks.
Some of the private sector banks which came up after
1991 have merged like the Centurian Bank and the Bank of Punjab to become the Centurion
Bank of Punjab. It is now reported that the Lord
Krishna Bank has merged with the Centurian Bank of Punjab.
But this is a merger of three relatively smaller private banks. What we need is
the merger of strong public sector banks to create mega banks.
With the economy being sucked into the vortex of
globalization many mega international banks are looking for acquisitions in India. Before
that happens we must facilitate the merger of strong public sector banks to
enable them to become strong mega banks which can stand up to international
banks. ---- INFA
(Copyright India News &
Feature Alliance)
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Birthpangs Of New Retail Order:NO STOPPING ORGANIZED SECTOR, Dr. Vinod Mehta, 30 August 2007 |
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ECONOMIC HIGHLIGHTS
New Delhi, 30 August 2007
Birthpangs Of New Retail
Order
NO STOPPING
ORGANIZED SECTOR
By Dr. Vinod Mehta
The recent attacks on Reliance Fresh outlets in Ranchi,
Lucknow and Varanasi and opposition to their entry in States like West Bengal
and Tamil Nadu shows an uneasy situation between the well-entrenched retail in
the unorganized sector and the attempts of the organized sector to enter the retail
business in a big way.
The unorganized sector fears that their interests are being
hurt and that it would lead to unemployment.
This is especially so in the case of farm produce. If the unorganized
sector is not taking it lying down, the organized sector has the money and the
patience to enter it in a big way.
What one can say at the moment is that both the unorganized
and the organized sectors are testing each other and some new kind of retail
organization will emerge in the next five to ten years which will accommodate
the interests of both the unorganized and the organized sectors. This kind of coexistence
between the unorganized and the organized retail can be seen in many of the
South-East Asian countries notably Thailand,
Malaysia, Singapore, Thailand, Indonesia etc. The retail
business in the West is mainly in the hands of the organized sector.
The important feature of the retail business in India be it in
farm produce or fast moving consumer goods like toothpaste, shampoo, soap, tea,
coffee or durable consumer goods like TVs, refrigerators has been that it is
mainly in the unorganized sector where individual owner/sellers are the main
players, unlike in the West. As far as
the farm produce is concerned the State laws insist that the produce be first
brought to the designated mandi where
the individual farmer sells it to the retailer through a commission agent.
As far as manufactured consumer products are concerned the
companies first sell it to the wholesaler known as the stockist who in turn
sells it to the retailer. Both the
commission agent for the farm produce and the stockist for the manufactured
products charge for their services which increases the cost of the product when
it reaches the consumer.
There are a few countries where there is a middleman between
the producer and the retailer. However,
in regard to the farm produce there is a general feeling that the farmer is not
getting his due while the consumer is paying more. So is this true of manufactured products.
With the farmers and consumers getting price sensitive both
are looking for a kind of organization for retail business where the middleman’s
services could be dispensed with and the money saved could be shared between
the producer and the consumer.
There are many organized
retail business models like supermarkets, hypermarkets, chain stores for
specialty products like drugs and cosmetics but the retail business model that
readily comes to mind of an average Indian is one of a super market
wherein the retailer directly buys it
from the producer and sells it directly to the consumer. This is the model which the organized Indian
business wishes to follow especially for farm produce as it sees big profit
opportunities in it.
CRISIL
in a study carried out in 2006 found that over 70 per cent of the retailing was
from the unorganized sector. At an estimated Rs.10 trillion in 2006, India's retail
industry is almost one-third the country's GDP. With food and grocery (F &
G) items accounting for more than 70 per cent of all retail sales. However, the
penetration of the organized retail in the F&G segment is negligible and
stands at around 1 per cent.
The
CRISIL report further pointed out that the farm incomes in India could
double if the organized retail enhances the farmer realizations on food items from
the current 30-35 per cent of retail price to the international norm of over 50
per cent of retail price.
Those
who are attacking the farm produce retail stores are basically the commission
agents operating in various mandis and
the small farm produce retailers. The
organized retail is directly sourcing the supplies from the farmers and since
the farmers do not have to come to the mandis
to sell their produce they save on transport, commission and other
incidental expenditure which adds to their earnings.
True,
the middleman/commission agent sees it as an attempt to cut his
livelihood. This is manifested either in
the violent attacks on the retail outlets or by using the provisions of the Agriculture
Marketing Act to prohibit the sourcing of farm produce directly from the farmers. They also fear that they would be totally
marginalized once the organized retail puts in place the cold storages and the seamless
supply chain.
Clearly,
the organized sector has to come to terms with this and find out ways to take
along these people and protect their livelihood. Going by the experience of the South-East
Asian countries the organized and the unorganized retail in the farm produce sector
can co-exist.
Interestingly,
the farm produce retail chains like Reliance Fresh, Godrej-owned Farm Fresh or
Spinach in Bombay
are selling the farm produce at much cheaper rates than the prices charged by
the street vendors. Thus, because of the
large price differentials the consumer has also developed a vested interest in buying
farm produce from the organized retail chain.
As
far as the retailing of the manufactured products is concerned, the organized
sector has already made inroads in the unorganized sector. Vishal Megamart, Big
Bazaar are some of the well-known chains. In the field of retailing of medicines too the
scene is changing; the sector once dominated by individual owners is giving way
to company owned chains of stores which are selling medicines at a
discount.
Importantly,
the unorganized sector for the retail of manufactured products so far does not
perceive any threat to its livelihood from the organized retail. One factor
which differentiates the retail of farm produce from the retail of manufactured
products is that while the farm produce does not carry any MRP (maximum retail
price) tag, the manufactured products do carry such a tag so the product bought
from the unorganized sector or the organized sector would cost the same.
Incidentally,
it may be mentioned that the MRP has become an anarchism for most of the
manufactured products as it is not serving any useful purpose except for
keeping the prices artificially high. In a competitive regime the prices of
manufactured products would remain stable without the MRP tag.
Coming
to hyper-markets. Hyper-markets source and stock a number of manufactured
products and sell them to retailers and bulk buyers like institutions, offices,
hotels, hospitals etc. just like the stockists.
The only difference is that while a stockist stocks only one product,
the hyper-market will sell all the products in bulk under one roof, saving time
and energy for the retailers and bulk buyers.
Needless
to say, it is too early to judge the reaction to hyper-markets. There is one
hyper-market, Metro, which is functioning at the moment. There may be some
protests from the stockists/distributors of manufactured products when the
Bharti-Wal Mart joint venture starts functioning from the next year. Reliance is also thinking of going into hyper-markets.
But
one thing is certain that there is no stopping the organized sector getting
into the retail business. The real shape will emerge only through a dialogue
among the vested interests. And the
change is likely to benefit the producers, the traders as well as the
consumers. ---- INFA
(Copyright India News and Feature Alliance)
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Nourish Indian Brands:MNCS CROWD OUT DOMESTIC PLAYERS,Dr. Vinod Mehta,23 August 2007 |
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Economic Highlights
New Delhi, 23 August 2007
Nourish Indian Brands
MNCS CROWD OUT DOMESTIC
PLAYERS
By Dr. Vinod Mehta
Brands have an important role to play in a buyers'
market. Once the brand value is
established it is relatively easier to sell the goods. In this regard the foreign brand names have
an edge over the Indian brands. As the
foreign brands enter the Indian market in a big way there is a danger that
Indian brands may be crowded out unless
the Indian companies are willing to give a fight to the foreign brands.
The economic reforms of the past one-and-a-half
decade have given confidence to the Indian industry to establish their brand
names not only in the domestic market but also in the international
market. However, the time is ripe for
the Indian companies to start thinking in terms of establishing brand names for
their products.
It is not an easy task but Indian companies will have
to learn to build up their brand name if they have to survive in the
competitive market, both domestic and foreign.
There is nothing to be afraid of, as past experience shows that all the
foreign brand names which entered India have not done so well.
A few years back a report in a financial weekly
stated that foreign brand names were crowding out the Indian brand names in the
domestic market. According to the report
the multi-national corporations (MNCs) had purchased 31 Indian brand names
since their entry into the Indian market. The two most important examples were
in the soft drinks and ice-cream sector.
In all the 31 cases, the Indian companies had sold
their brands for various reasons. Ranging from wanting to make a fast buck while
the going was good as in the case of the soft drinks and ice-cream industry to
the inability of the Indian partners to match foreign resources for the
continuation of their partnership.
At one level, one wishes these brands had survived
and the Indian entrepreneurs had fought the MNCs. But at the other, there is
nothing to mourn about the demise of some of these brand names. If one looks at India’s corporate history, one finds
that even in the protected market environment, a number of top Indian brands
just disappeared from the market making way for other Indian brands. They adhered to the natural process of the
survival of the fittest.
For instance, a number of top TV manufacturers in the
early sixties like Televista, Weston and Standard just vanished after a while.
Questionably, as there was no external competition at that time, who were
responsible for the TV makers’ death?
In the field of radio, the Murphy brand was on the
top for a while but it too disappeared from the market. Two German companies
--- Telefunken and Grundig --- tried unsuccessfully to enter the market through
a joint venture with an Indian company but both sank without a trace.
In the soft drinks field, the Janata Government booted
out Coca Cola and replaced it with a new indigenous drink called Double Seven
which was marketed and distributed by the Government-owned Modern Industries. This era also saw the emergence of Thumbs Up
and Campa Cola, soft drinks manufactured by the private sector. Both these captured
a large chunk of the Indian soft drink market and crowded out Double Seven from
the market.
The moot question is: No tears are shed when new
Indian brands crowd out other Indian brands from the domestic market, why should
tears be shed when international brands crowd out some of the Indian brands?
Commonsense avers that the crowding out of an Indian
brand by other Indian brand names is due to the company’s inefficiency which has
been steam-rollered by more efficient companies. The same logic also applies vis-à-vis MNCs crowding
out inefficient and mismanaged Indian brands and companies.
However, there have been exceptions wherein strong
brand names were sold by their owners for monetary reasons. For instance in the
soft drink sector, the Thumbs Up owner sold the brand to his competitor Coca
Cola rather than fight back. Ditto the
case with the Indian ice-cream leader Kwality which was bought by Hindustan
Lever (now Hindustan Unilever).
On the other hand, Lakme cosmetics and Tomco of Tata,
which were perennially making losses, were faced with two options: close down or
sell out. The Tata’s exercised the second option and sold out both. Lakme to Hindustan Lever. Similarly, Vijay Mallaya’s UB Group sold
its preserved food division to a MNC.
When the MNC Camay Group entered the Indian market,
Indian soap maker Godrej out of fear that it would be unable to survive joined
hands with Camay. Only to separate and
compete later. It is another matter that Camay flopped. Similarly, in the
detergent sector it was the Indian brand Nirma which gave Hindustan Lever a run
for its money a few years ago. Today, there are other Indian detergent brands,
apart from Nirma, which are fighting the international detergent brands like
Tide, Ariel and Henko.
Pertinently, one needs to remember that when an MNC
takes over an established Indian brand, there are other established Indian
brands which are determined to fight the MNC in the domestic market. Again, in the ice-cream sector both
home-grown Amul and Mother Dairy have taken head-on Hindustan Lever's Walls ice-cream.
If this is happening within the organized sector there is a vast unorganized ice-cream
sector in which no MNC even Amul would be able to compete.
Clearly, these developments of the past ten years
should give the Indian industry confidence to enter the international market. There
is no need to weep over the fact that they sold their brands to foreign
competitors but to look forward and fight the MNCs. Admittedly, it is a very
difficult task to establish oneself in the foreign market but once Indian
companies are determined to do so they are sure to emerge successful in the
coming years. Towards that end they need
to take risks and make quality products.
In sum, the economic reforms have exploded the myth
that foreign brands will always crowd out domestic brands. The Indian brands have the capacity to fight
the foreign brands provided they maintain consistent quality of their product.
---- INFA
(Copyright India News And
Feature Alliance)
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Agricultural Production:NEED TO INTENSIFY & DIVERSIFY,Dr. Vinod Mehta,14 August 2007 |
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ECONOMIC HIGHLIGHTS
New Delhi, 14 August 2007
Agricultural Production
NEED TO INTENSIFY & DIVERSIFY
By Dr. Vinod Mehta
The year 2003-04 witnessed a record agricultural
production, almost a 19 per cent increase in the foodgrain production and a
record oilseeds crop. This has not been sustained in the subsequent years,
which partly explains the current spurt in the prices of essential commodities
like wheat, rice, edible oil and pulses. The continuous fall in their production for
the last three years is indicative of the crises and inflationary prices.
Thanks to a good monsoon this year, the production of
grain and other agricultural products is likely to be all right and the
Government may import half of the wheat it had planned to import earlier to
beef up its grain stocks. The situation by and large remains stable.
However, it is important to ponder over the question of
agricultural production as we have almost reached self-sufficiency in grain
production. We are no more dependent on
any large-scale food imports to feed our population (China still imports some grains to
bridge the gap between its domestic production of foodgrain and the demand for it).
Once we are able to produce enough to meet the domestic requirement, we should
be able to think ahead and plan for the export of agricultural products say in
the next five to ten years.
This calls for action at two levels. First, we must reduce the gap in the
productivity of similar agricultural products among different States and second,
diversify our agricultural production.
Take productivity in Punjab
and Tamil Nadu. Areawise, Tamil Nadu is
three times the size of Punjab. However, Punjab harvests 21518.7 thousand tonnes of foodgrain on
an average (cereals plus pulses) while Tamil Nadu harvests around 8,567.5
thousand tonnes of foodgrain. Again, Punjab is
basically a wheat-eating area while Tamil Nadu is pre-dominantly a rice-eating State. Also, Punjab
produces both rice and wheat while Tamil Nadu produces only rice and little
wheat.
Similarly, Andhra Pradesh, Madhya Pradesh, West
Bengal and Orissa are two to nine times bigger than Punjab.
However, the production of rice and wheat in these States is lower than in Punjab. A few years back, the rice and wheat production
in these states were as follows: Andhra Pradesh 9487 thousand tonnes and 6.7
thousand tones; Madhya Pradesh 5822 thousand tonnes and 6160 thousand tonnes; West Bengal 11444 thousand tonnes and 632 thousand
tonnes; and Orissa 6616 thousand tonnes and five thousand tones respectively.
In other words, there is a vast hidden
potential of grain production waiting to be tapped which can feed not
only the country’s population but also, say, the population of EEC.
The need of the hour is a clear-cut agricultural
policy both at the Central and state levels which can help the farmers to fully
exploit their hidden potentials. The proposed agricultural policy would cover
provision for assured irrigation water and supply of other critical inputs like
appropriate high-yielding varieties of seeds, fertilizer, organic manure,
credit, guidance in the use of new technology, market support in the form of
cold and other storage, processing, packaging and transport.
Roughly, if Tamil Nadu is three times the size of
Punjab, then Tamil Nadu should aim to produce two to three times the rice and
wheat produced by Punjab. If such indicators are worked out for each
state in relation to the highest producing state, it would indicate the hidden
potential of each state. These could then be tapped with appropriate
agricultural policies of each state.
Moreover, as there is a ready international market
for foodgrain, there is no reason why Indian farmers should not be allowed to
tap it. An example: Japan alone
imported US $ 31.57 million worth of foodstuffs in 1990. In countries like Austria,
Belgium, Denmark, France,
Germany, Portugal, Spain
etc., the import of agricultural products constitutes more than five per cent
of their total imports.
The signing of the WTO has also opened up the immense
possibilities for the diversification of crops and other agricultural
products. Diversification in
agriculture, as in industry, is said to be an insurance against risk. It also helps supplement the incomes of
farmers. Now-a-days farmers are advised
to go in for more than one crop per season so that loss on account of bad
weather or any other natural calamity may be compensated by the gains in the
other crop.
Similarly, farmers with byproducts of crops such as
straw or hay are suggested to go in for small dairy units. Apart from the
cereals, there is a vast international market for milk and milk products, fruit
and vegetables (both fresh and canned), cut flowers, meat and meat products.
India is the largest producer of
milk in the world today. But milk in India
predominantly comes from buffaloes as against the milk from cows in European
and other countries. The texture and
taste of the buffalo milk is different from that of the cow milk and hence the
products made out of buffalo's milk like cheese and butter also taste
different.
For instance, researches in cheese production have
revealed that cheese produced from buffalo's milk enjoys a premium in the European
market. True, exporting cheese to European countries would be like carrying
coals to Newcastle, yet it stands to reason that
India could develop a niche
market in Europe for its cheese made out of
buffalo's milk.
But this too requires serious research in the
development of different varieties of cheese made from buffalo's milk which
would be acceptable to foreign taste buds. India
has no tradition of making cheese except paneer (cottage cheese) which
is not a cheese as the term cheese denotes in Europe.
Thus, there is a lucrative international market for Indian cheese but one needs
to make efforts to establish it.
Similarly, the demand for milk products like
condensed milk, evaporated milk, milk powder etc., is quite high in the
international market. But as there is tough
competition from other countries in this sphere, we need to create a niche for products
made from buffalo milk.
Additionally, there are hardly any competitors for the
production and marketing of milk-based Indian sweets in the international
market. Again through serious research one can prolong the shelf-life of these milk-based
sweets for marketing in other countries.
Cut-flowers is another item which is in great demand in
Europe especially in winter when the
availability of flowers decreases. India is
already tapping this market in a big way but there is still a vast scope for
increasing our share of flower exports. With most parts of the country getting sunshine
almost the year round, no major effort is required. Only the flowers and their
quality in demand in these countries need to be identified and assured of quick
transportation to their respective destinations. These include gladioli,
different varieties and colours of roses and tulips.
The other area of diversification is to take up fruit
and vegetables cultivation for the export market. Presently, Latin American countries dominate
the international banana market, Australia and New Zealand the apple, pear and
kiwi fruit market, the South-East Asian countries the papaya, pineapple, water
melon and rambutan (a variety of litchi fruit) market. Though India is exporting fruit to a
number of countries, it has not been able to establish its identity in the
international market.
Each banana from Guatemala
carries the sticker "produce of Guatemala",
every piece of the New Zealand
apple and kiwi fruit carries the sticker "produce of New Zealand” and even kinnos (a citrus
fruit belonging to the orange family) of Pakistan
carry the sticker "produce of Pakistan". This diversification would be helpful to
establish the identity of our products in the international market. Ditto the
case for vegetables.
Clearly, diversification in the agricultural sector
can help raise the earnings of our farmers.
This is not a Herculean task but requires sustained efforts backed by an
appropriate agricultural policy to intensify and diversify agricultural
production. This would realize three objectives: feeding the domestic
population, increasing hard currency earnings and increasing the incomes of
farmers. ----- INFA
(Copyright India News and
Feature Alliance)
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