SUGAR WOES

Recent announcement of Union Agriculture Minister to free sugar industry from controls have been welcomed by the Industry at large But given the complexities of Sugar dynamics that prevail in India it require more than political will to set this industry right In order to understand the real problems ,one need to first analyse various issues with this regard In India Sugar is under the perview of essential commodities act of 1955 which means that Government control sugar capacity additions through industrial licensing and determines the price of sugarcane and the quantity that can be sold in the open market As a result of which the sugar mills are expected to surrender 20% (currently) of their production to the Government at prices below the market level prices This sugar is known as Levy sugar to be used by the public distribution system In addition to this there is a second restriction on the mills in the form of Free sale quota After surrendering 20% the remaining 80% are to be sold by mills in a restricted marketing environment The Government releases what is called monthly free sale quota to mills to be sold within the stipulated time frame In addition to this there is a differential pricing systems by the centre and the State governments The centre announces MSP and the states have their own SAP (state adminstrative price) In the latter case most of the times the prices are determined by political expediency to humor the farmers without a clear analysis of the production lecel,international prices etc as a result of which the cane grower farmers are made to wait for months to get their payments Then there is this curious principle of growers have to sell to the miller within a 15km radius Apart from these policy problems the major problem of sugar industry all over the world is its cyclical nature Other countries have offseted this problem by diversifying into ethanol and power generation from Bagasse But in India we dont have any clear policy with this regard Some share of profits can be envisioned for the farmers by actively pushing for additional byproducts Similarlyin india the sugar yeild is one of the lowest in the world A perfect oppertunityis knocking our doors with European union opening up its sugar industry India exports primarily to Asian countries like indonesia,bangladesh,& Pakistan Though we have limited capacity of production of refined sugar which is the requirement of EU,but still our production process can be adjusted accordingly With every chances of having a bumper production( estimated to rise to 25million tonnes from existing 18 million tonnes) these plethora of issues assume added significance What we need today is the fine balance of protection of consumer interest and commercial viabilities of the millers The Government has much work to do with this regard

SUGAR WOES

Recent announcement of Union Agriculture Minister to free sugar industry from controls have bee

ARTIFICIAL BARRIERS- serious threat to International Agri trade

The major problems that have been encountered by the Indian Exporters is the arbitrary quality and technical restrictions setting by the western markets This is despite clear cut requirement of WTO standards regarding food security and technical barriers to trade The major problem with this regard is continuous shifting of quality standards and specifications to the ignorance of the exporters of the third world countries A lot of times Indian Exporters send consignements to countries only to discover that they have failed some specific quality or technical norm and consignements have to be returned The number of these TBT (technical barriers to trade) have increased sharply from just 365 in 1995 to 1030 in 2007 China alone has 560 TBT measures followed by USA and european union India has already asked the WTO to examine these multiplicity of international standards These non tariff measures (NTM) the efforts should be made by the member countries to list these NTMs Once WTO makes it mandatory to post all NTM data there would be some sense of uniformity which would obligate the countries not to change the standards frequently Moreever exporters would know the existing standards in the destination countries Sometimes WTO prescribed international certification is not considered by various groups The requirement of Aflatoxin in Groundnut is prescribed at 15 parts per billion by CODEX whereas EU has a standard of 4 PPB These multiplicity standards creates hurdle in the smooth flow of international agri business

QUALITY ISSUES IN INDIAN AGRI-EXPORTS

The importance of quality parameteres in Agri exports is increasingly becoming important in the world arena Since World Trade Organization emphasized the importance of Sanitary and Phytosanitary measures nations have increasingly become selective with this regard India is no exception to this Since last year when importers in European Union reported high levels of Aflatoxins,a Fungus and returned a number of consignments Indian Government has started implementing laws to set right the the Groundnut industry With this regard Agricultural and processed food products export development authority (APEDA),A BODY ENTRUSTED BY Union Government for development of Agri and allied products has come out with strict guidelines for exporting Groundnuts to the EU countries APEDA is now ensuring compulsory registration of the entire supply chain including processing and shelling units,godowns as well as storage facilities In addition to this APEDA is stressing to bring the processing units under HACCP (Hazard analysis critical control points) certification,which is a approved international certification As a result there has been a decline in Groundnut exports to the tune of 726.21 crores during Apr2009/January 2010 as compared to the corresponding period of the previous year But according to the analysts there might be some problems initially,but it would benefit exports later Also the quality of groundnut sold in India is poor as we accept aflatoxin level upto 30% compared to single digit level in EU Similarly in exports to non EU countries which is twenty times more than the EU there is no need for these type of stringent mointoiring of supply chain But with the international global standards becoming uniform in nature the Government would be ill advised to drop these precautionary measures in case of exports to non EU countries Rather it should use this oppertunity to make the whole industry quality controlled so that exports reach a critical mass in this important 1500 crore export dominated business

ITC E CHOUPAL- PIONEERING BREAKTHROUGH

One of the pioneering concept which has revolutionized Indian Agri system has been ITCs E-choupal If we look back at the circumstances which prompted ITC to go for an alternate supply chain model is purely innovational and inspirational based on the inadequacies of the Indian Agri system To go back into the history ITC had set up an International Business Division (IBDS) in 1990 for exporting agri commodities ITC was exporting Rice,Soyabean,acquproducts,peanuts,wheat,coffee,black pepper, sesamum seeds, processed and frozen fruits and vegetables It had over the years established tremondous capability But ITC believed that the profit margins were not high as they would ideally have been because it did not have sufficient control over the supply chain of Agri produce In Madhyapradesh Soya one of its important exportable item was facing huge problems as the farmers were located in remote villages Furthermore the company did not have any control over the quality of the products In addition to this the middlemen exerted influence on the farmers by concealing the prevailing market prices and other related informations They made huge profits by themselves by blocking access to such information So ITC conceived an alternate supply chain management model by using internet to provide realtime flow of information and market signals directly to the farmers Thus the primary task for ITC was to bring marketing information to the farmers The basic idea was to equip the village choupals with a PC and internet connectivity The Echoupal model was based on two important coordinates 1 Samchalak +PC and internet who uses Net to provide spot quotas and after examining product sample and if the price is right ,farmers take the produce to the ITC collection centre 2 Samyojak who coordinates a group of villages and performs documentation work He also supplies inputs from ITC and associate companies to Sanchalak The Sanchalaks were paid 0.5% of the procurement price for each tonne of soya procured by ITC from their Choupal The Sanchalaks paid operating cost like electricity and internet connection charges ( Rs 2900 to7600 per year) and ITC covered cost of PC maintenance and misalleneous travel(Rs 4800 per year per unit) Similarly Samyojak were paid 1% commission for each tonne of soyabean sold to ITC and they were also responsible for collecting the produce from the villages and bring it to the collection centres Thus by this innovative scheme ITC could prevent middlemen excessive price, could control quality and more importantly farmers got right price At present ITC has 6500 choupals and has projected to increase it to 20000 by 2012 covering 100000 villages in15 states covering almost 15 million farmers This homegrown strategy seemed to be a clear winner and more importantly has left important lesson for Agri companies and cooperatives for future times

ITC E CHOUPAL- PIONEERING BREAKTHROUGH

One of the pioneering concept which has revolutionized Indian Agri