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Workshop on
Medium Term Outlook for India’s Food Sector
Under the Project “Incorporating International Best Practices in the Preparation of Agricultural Outlook and Situation Analysis Reports for India”
Supported by Food and Agriculture Organisation
Thursday, June 26, 2014
Amaltas Hall, India Habitat Centre, Lodi Road, New Delhi
Summary of Proceedings
Inaugural Session
Dr. Shekhar Shah welcomed Dr. J.S. Sandhu, Agriculture Commissioner, Ministry of
Agriculture, Mr. Peter Kenmore, FAO representative in India, Dr. Ashok Gulati, Chair
Professor for Agriculture at ICRIER and former Chairman of CACP, Government of India
and other invited participants. In his opening remarks Dr. Shah emphasised the need for
systematic and broad based reviews of the food sector in order to both develop policies for
the medium term and also make course corrections of the programs and in the short term,
especially given the context of sensitivity of the issue of high food prices and also the need
for achieving sustained improvements in agricultural productivity.
Dr. Peter Kenmore in his comments said it is very important to establish a credible
agricultural market information for food security. FAO has already initiated work on
Agricultural Market Information System (AMIS), an initiative of the G20 countries, to
provide member countries of FAO information on a range of variables relating to primary
food commodities and uncertainties associated with production and markets. Information
which member countries collect usually relate to production and related issues. There is a
need to provide a global perspective on these developments as the domestic markets are now
linked to each other through trade on a scale as never before. Further, he also pointed out that
to provide food security for the ever growing population we need to assess not only the
immediate needs but also for the future needs on food.
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Dr. Kenmore recognised the serious consideration of these issues by the Government of India
as it identified NCAER to provide comprehensive reviews of the agricultural situation in
India focusing on the major food commodities and produce quarterly and semi-annual reports
assessing the short term and medium term prospects of the sector. FAO, on its part, was keen
to participate in this process and was able to mobilse technical and financial resources to
support NCAER’s work in this area. FAO was able to bring to this work its own technical
expertise in assessing agricultural outlook across countries.
NCAER was very quick in producing the outlook reports. The quality, depth and analysis
presented in the India reports has been of a high standard and has been highly appreciated
within FAO. He felt that India, through these reports, has been able to get recognition, trust
and influence in International arena in its commitment to improving and sharing information
on the emerging food outlook scenarios globally. It has also given a direction to its agri-
policy making as the processes of the study allowed wide consultations and discussions
among the various stake holders through workshops and meetings.
Session I: Overview and Medium-term Outlook for Foodgrains
Dr. J.S. Sandhu, Agriculture Commissioner, Ministry of Agriculture Chaired the first session.
In his opening remarks Dr. Sandhu said we need to find ways to minimize variations in food
production, particularly of pulses and oilseeds where variation is large. Among coarse grains
variation is large in the case of production of rabi Jowar.
He said Government at its level has identified soil health and irrigation as priority areas.
Dr. Sandhu, then requested Prof. Ashok Gulati to proceed with his presentation on the
outlook for foodgrain sector.
Prof. Ashok Gulati pointed out that since 2000 there were four El Nino years of which three
were drought years. We need to be aware of the likely deficit in rainfall and be prepared with
steps so that variation in foodgrains production is minimized.
Some of the key points that emerged from Prof. Gulati’s presentation were:
Looking back, there is smooth rise in foodgrains production particularly wheat and
rice. Maize production has also achieved dramatic growth. In pulses also we can be
self sufficient, producing more than 20MT, if there is effective market support
mechanism.
India needs to constantly assess foodgrains production and demand given the scarcity
of water. Public irrigation is very expensive and needs serious review. We need to
avoid spikes in the foodgrains prices and our price incentive mechanism should be in
line with the global prices.
India’s productivity levels in rice, wheat and maize is still way below what current
technology can provide and it is a question of right incentives and investments.
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India will maintain adequate production of cereals to meet its consumption
requirements, except for some occasional dips caused by bad weather. But for edible
oils we will remain dependent on imports unless some major policy decisions are
taken to turn around oil palm cultivation.
There is a need to focus attention on horticulture, dairy and poultry production as
these are emerging areas where demand will expand significantly.
Prof. Gulati also expressed his expectation that the agricultural outlook reports should be
sought after reports by the stake-holders in the coming years.
Prof. Parmod Kumar (ISEC) in his comments said droughts of 2006 made us conscious about
the vulnerability to production fluctuations from a food security perspective. He said except
for 2009 all were reasonably good monsoon years and years of good harvest in the recent five
years. But still we were reeling under high food inflation. We have achieved record
production of milk and fisheries but are unable to meet our ever growing demand.
Two the other key points that were mentioned in the presentation by Prof. Kumar were:
In horticulture our quality is still poor and wastage high. As such a large part of
production is not reaching consumers.
In the Food Security Act emphasis is only on cereals.
He also presented his forecasts for the supply and demand for major food commodities in the
medium term using an econometric Model.
Dr. Shashanka Bhide (NCAER) made a presentation on an overview of the trends and
patterns in the development of India’s food sector. He said challenge lies in achieving output
growth in an environment where food commodity prices are expected to remain subdued over
the medium term in the international markets.
In the general discussion following points were made:
There is a need to incorporate the changing economic conditions in policy. For
example, there is a duty of 100% on chicken and zero duty on pulses, a situation that
cannot be sustained. In the case of Sugar, inconsistency between State Advised Price
for sugarcane, a globally competitive sugar sector must be resolved
On solutions to the extensive malnutrition problem in the country, relying on higher
consumption of wheat and rice alone cannot be the approach. We need to provide
better sanitation, safe drinking water and work towards improving female education.
The issue of extent of usage of output for seed, feed & amount of wastage at various
stages was raised. While there are no specific estimates, some indirect estimates were
obtained for modelling total utilization of output. Dr. Parmod Kumar’s approach
provided one such set of estimates.
While there is scope for improving the efficiency of fertilizer use by improving the
mix of fertilisers (N-P-K ratio) which will improve productivity of fertilisers, there
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was also a view that there are areas in the country and commodities where the overall
use of fertilisers was also low. There is, therefore, a need to address both sources of
productivity improvement.
Dr Sandhu commenting as chair said technological advances in hybrid seeds, mechanization,
raising seed replacement rate and varietal replacement rate can double our productivity which
needs further investment.
Session II. Medium-term Outlook for Horticultural Food Commodities
Mr. Sanjeev Chopra, Joint Secretary and Mission Director, National Horticulture Mission,
Ministry of Agriculture, chaired the session. In his opening remarks, he pointed out the policy
challenges in the sector characterized by high growth and also sharp fluctuations in market
prices.
Dr. N.K. Krishna Kumar, Deputy Director General (Horticulture) presented the issues in
the development of the vegetables sector, particularly potatoes and onions. He noted that
climatic disturbances like hailstorms, untimely rains etc have severely affected the crop
production and prices.
He noted some characteristics of the potato and onion production and markets.
This year potato prices have increased by 35% mainly because of late rain and storage
of previous year.
There has been significant growth in the production of potato and onion in the recent
years. Gujarat state has done well in Potato production.
About 80 per cent of seed potato is coming from northern hills of the country.
In Karnataka potato production takes place in kharif season also and this aspect has an
important role in stabilizing prices.
In the case of potato post-harvest loss is about 16 per cent of total produce. 7.5 per
cent of the produce is processed and 8.5 per cent is used as seed.
There are significant yield gaps across production conditions. Yield gap in case of
potato is 50 per cent. Through better irrigation systems and nutrient delivery systems
this gap could be bridged as has been done in Gujarat.
The impact of climate change will be positive in NW plains, slightly negative in NE
plains and severely negative in the plateau region. In order to meet the growing
consumption demand short duration hybrids are required with appropriate temperature
related sensitivity characteristics so that cultivation can expand across the country.
There is a need to adopt ecological niche modelling techniques to identify sites
suitable for seed production in non-traditional areas like Indo Gangetic plains.
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Two to four crops of onions are now taken in various parts of the country. Fresh onion
starts coming from July onwards in Andhra Pradesh, Karnataka and Tamil Nadu and
continues upto April-May. In Maharashtra fresh onion starts coming into market from
September to May whereas in Gujarat and Madhya Pradesh crop comes from
November and continues till May. This year hailstorm damaged the crop, as a result
seed prices of onion doubled in less than three months. In Nasik region rain in
September and October affects the onion production adversely.
Prof. P.G. Chengappa, ICAR National Professor, Institute of Social and Economic Change,
Bangalore in his presentation on competitiveness of Onion market in India said that the
behaviour of arrivals and prices differs for urban market such as Bangalore, and Lasalgaon
and Pimpalgaon markets in Maharashtra. In Bangalore market higher arrivals also coincide
with higher prices. Wholesale prices are more volatile than retail prices.
Indian onion export of onion has grown significantly; March-July is the peak period for
export of onions.
Referring to a study of producers and other market intermediaries he noted that onion trade is
unilaterally dictated by the traders and not by the farmers mainly because of low average
farm size leading to low bargaining power in price formation. Lack of strong farmers’
organization to compete with traders is another major reason for large price margins. Factors
which affect the decision for cultivation mainly include suitable weather, short duration crop
varieties and sufficient rainfall. Apart from this, availability of water and labour are crucial.
Higher marketing costs, lack of market infrastructure, hoarding of produce and significant
post-harvest losses contribute to inefficiency of onion markets. For promoting competition
and marketing efficiency, entry of new traders/ private firms should be encouraged.
Dr. Rajesh Chadha, Senior Fellow, NCAER in his presentation on ‘Issues in Onion
markets’ talked about causes and consequences of price volatility in the Indian Onion
Markets with specific focus on supply chain issues.
He said that the Indian Government generally responded to the price increases by banning
exports and introducing direct market interventions to control prices. The subsequent price
collapse as in February 2011 then impacted heavily on the farm sector.
While climate played a role in reducing onion supply and increasing consumer prices, these
effects were exacerbated by anti-competitive and inefficient supply chains and further short-
term interventions by government to control consumer prices.
The reform of supply chain regulation, which enables certain intermediaries to earn above
normal margins, would not only have lowered consumer prices and negated the need for the
export ban, but would have done so in a manner that avoided (i) high costs being imposed on
the farm sector in the form of the subsequent depressed onion prices and (ii) consequent
adverse impact on the longer term competitive advantage in the international market. The
combination of high wholesale margins and high marketing costs associated with APMC
markets, significantly increase consumer prices, which then escalate further in the face of
seasonally induced supply shortages.
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In the discussion, the issue of lack of momentum in industry taking up dehydrated onion
processing was raised. While the Indian consumer prefers fresh onions in home cooked food,
the use of dehydrated onions is growing as packaged food and in restaurants.
The importance of production shocks in inducing volatility of prices relative to the other
factors such as market inefficiencies was also discussed. It was recognized that while
production shocks lead to price volatility, such volatility was strengthened by market
inefficiencies. Prices in urban markets are influenced by arrivals of harvest. Even a 5 %
increase in an area affects the supply a lot.
The role of National Horticulture Mission in addressing the need for expansion of supply was
discussed. The NHM programs addressed mainly issues relating to seed, seedling and
fertilizer supplies or usage in the past. But now NHM is also focusing on post-harvest
management.
Some key points that were highlighted include,
Contract farming is also not gaining as much wide acceptance as expected. Because
of scattered onion production belts, cooperatives have not successful in achieving
benefits of scale to the producers. Introduction of E-auction which has been initiated
in Karnataka is a good initiative.
West Bengal farmers often face low price of potato. However, the number of days of
low prices is going down and high prices are increasing. Demand for onion is
exponentially increasing. Out of total demand 40% is fulfilled by kharif production,
20 % by late kharif and 40% by rabi, which is mainly going for storage. The quantity
in storage at the beginning of the new crop year was a major determinant of price of
potato during the year.
Onion demand is consistently rising and gradual erosion of MEP regime has ensured
greater stability in prices. The major challenge for horticulture is to sustain this
growth by ensuring better institutional support mechanism, infrastructure and
technology support for the entire value chain.
When NHM was initiated its main focus was on area expansion. But in this year 25-
30% of funds will go to post harvest management. Temporal and spatial spread of
potato and onion is required for solving many problems on the supply side. Fiscal
initiatives like enhanced support to cold chain projects, and investment in suitable
warehousing will help in strengthening the supply chain of vegetables.
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Session III: Medium Term Outlook for Oilseeds and Edible Oils, the Dairy
Sector, and the New Marketing Channels for the Farm Commodities
Dr. Mruthyunjaya, Former Director, NCAP chaired the session.
Mr. Vijay Sardana, Independent Director, ACE Commodities and Derivatives Exchange
Limited, an entrepreneur and an analyst, spoke on behalf of Solvent Extractors’ Association
(SEA).
He pointed out that the government policies, focused on wheat and rice, giving more
importance to carbohydrates. This will pose to huge challenges in the coming years.
BY 2025, Indian population will be 140 crore and average per capita income will be $3000.
Per- head calorie requirement is 2,700 per day. The requirement of oilseeds will be 80
million tonnes to produce 23.3 million tonnes of edible oil. How will this be supplied?
Land holding size will continue to shrink. Only 45% of the cultivated area will be irrigated.
At an average yield of 1.1 tonnes/ hectare, India will need 73 million hectares under oilseeds
to meet the average per capita edible oil requirement of 1kg pe month.
Irrigation will continue to be a limiting factor. There is limited scope to expand oilseed area.
India’s average oilseed yield of 1.1 tonnes/ ha is well below the average US oilseed yield of 2
tonnes per ha. Oilseed production by 2025 will be at the most 36 million tonnes against the
requirement of 80 million tonnes.
Therefore, India will continue to remain a net importer of vegetable oils with the vegetable
oil import bill likely to reach $40 billion by 2025.
The export subsidies provided by other countries will be beneficial to India which will
continue to remain a major net importer of agricultural commodities. The way forward is to
bring in High Yielding technology. There should be a seed strategy for India. India should
not be dependent on multinational seed companies, which will dictate terms, for its seed
requirement. There is also need to formulate a feed strategy for the country. The cost of
production of milk will continue to rise.
Mr. T.N. Datta, General Manager (SA&S Group) NDDB, Anand made a presentation on
Outlook of dairy sector. He said that with the rising level of income and urbanization demand
for milk and milk product is increasing at a faster rate. Milk now accounts for largest share of
food spend in urban India and next only to cereals in rural areas. He said that the Cabinet
Committee on Economic Affairs, Government of India, considered and approved the
National Dairy Plan I in February, 2012 for six year period (2012-13 to 2017-18). The main
objective of this plan is to meet the rising demand of milk by increasing productivity of milch
animals and linking rural milk producer to the organize milk producing centers.
He pointed to the critical nature of fodder supplies to milk production.
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Dr. Nilabja Ghosh, Associate Professor, Institute of Economic Growth, in her
presentation said that emergence of new marketing channels in agricultural commodities is
required to deliver higher prices and returns to the producers even while offering cheaper
commodities to consumers and other users. Markets have to become more efficient with the
inflow of modern methods, resources and motivated players.
Ms. Nidhi Nath Srinivas, Chief Marketing Officer, NCDEX, in her comments on the
oilseed and oils scenarios, focused on the policy flip- flops impacting the vegetable oil sector.
She wondered whether India should focus on becoming self- sufficient in vegetable oils or
making available vegetable oils at low prices to the consumers. Although there is talk on
encouraging oil palm cultivation, there are constraints such as high cost of production and
absence of market support. She questioned the logic of the imposing lower import duty on
edible oils and high duty on oilseeds. The policy flip flop has encouraged speculative activity
in the edible oil business.
The differential duty structure for crude vegetable oil and refined vegetable oils has
encouraged companies to set up refining facilities at all major port areas. The largest FDI in
food processing sector is in edible oil sector. All big multinational veg oil companies are
now operating in India. The high cost of moving vegetable oils from domestic production
centres to consumption areas has resulted in sickness in the domestic vegetable oil industry.
The oil meal is the saviour with increasing demand for oilseed meal both domestically and
for exports.
Giving an example of the increase in Bihar rabi maize production due to the involvement of
NCDEX, she said developing finance markets could trigger commodity markets.
Prof. K.V. Prabhu, Joint Director Research, Indian Agricultural Research Institute,
reflected on the various technological developments in the area of breeding of crop varieties
that can yield more and withstand some of the adverse natural conditions. He maintained that
taking the research findings to actual production has to become more efficient.
Dr. Mruthyunjaya, in closing referred to the need for greater coordination of efforts on the
supply side to make oilseeds and dairy sector more productive.
Session IV: Input and Sugar Sector Medium Term Outlook
Prof. Ashok Gulati, chaired the final session of the workshop.
The Input Scenarios in the Medium-term
Dr. Vaishali Chopra, Senior Manager, Robobank made a presentation on Outlook for
Input Sectors. Pointing to the encouragement of use of urea rather than combination of NPK
nutrients and use of micronutrients through subsidy policy, there is an imbalance in the use of
chemical fertilisers. Due to lack of appropriate policy, India is not in a position to be close to
self-sufficiency in fertilizer sector. For balanced use of fertilizers India needs to promote
micro nutrients and the use of P and K.
For plant protection she said there is immense scope and industry needs to capture the
opportunities that will become available when many formulations will move out of patent
protection in the coming years.
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She said farm machinery sector needs better technology /automation in sowing, breeding and
harvesting because of emergence of labour shortage in agriculture. For Horticulture Sector
also we need specialized machinery.
She raised the possibility of large potential for commercial hiring of machinery on time
sharing basis which can be a game changer for the small farms and also for the agricultural
machinery sector.
Dr. Mruthyunjaya, Former Director, NCAP in his comments on Outlook for Inputs said
we need to consider the role of non- conventional inputs also. He listed i) time as a resource
(has opportunity cost), ii) Technology is generally taken for granted, we need cost efficient
technology, iii) skill of the farmers and farm labour or other participants ion the farm sector
as invaluable input that can bring about greater efficiency, iv) Innovations which provide for
an impetus to growth, v) Scale of operation and vi) Governance as a important non-
conventional inputs. He argued that adequate attention to these inputs is necessary to improve
the efficiency of the conventional inputs.
Medium-term Outlook for the Sugarcane and Sugar Sector
Mr. Roshan Lal Tamak, Business Head, Sugar, Olam Agro Industries, Gurgaon, made a
presentation on the Outlook for Sugarcane and Sugar Sector. He said India is the Second
largest producer of Sugar in the World after Brazil. But its per capita consumption is as low
as 20kg per annum as compared to 50 kg in Brazil.
In India sugar production is divided between the cooperative and private sectors but private
sector is growing fast.
42% of the sugarcane area falls in Uttar Pradesh, where sugar productivity per hectare of cane
grown is low. Sugar production in India has stagnated at around 24 million tonnes during the
last decade primarily because of the adverse effects of high State Administered Prices (SAP)
for the sugarcane in UP on the one hand and unviable sugar prices in the market and due to
climatic conditions in Maharashtra. He said sugarcane yield is the highest in Tamil Nadu at
100 tonnes per hectare where as it is the lowest in UP at 55 tonnes per hectare largely because
of State and climatic factors.
Sugar consumption in India is increasing at the rate of 3% per annum and is expected to cross
30 million tonnes by 2020.
For the development of the sugar sector he said the government should implement
Rangarajan Committee recommendations which suggested sugar linked formula for
sugarcane. Government has recently raised ethanol blending norm from 5% to 10% which is
benefits utilization of cane in a more financially viable manner. The sugar industry should
also look at power generation from waste material for its improving its profitability.
Commenting on the sugarcane sector Ms. Nidhi Nath Srinivas, said Sugarcane producers in
UP have no choice but to sell their produce to only one sugar mill falling in the area. In States
like Karnataka, Tamil Nadu and Andhra Pradesh mills bid for the sugarcane, wherever it is
produced in the state. Because of this industry has no incentives for raising cane yields in UP.
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Commenting as Chair Prof. Gulati, said sugarcane crop of UP is a 9 months crop and cannot
be compared with yields in the other states where the crop is in the field for 13 months.
Further water usage and water cost are much higher in Maharashtra where farmers pump
ground water for irrigation from great depth.
He said India is spending Rs. 70,000 crore on urea subsidy and needs a policy correction.
The issue of Ethanol pricing was also raised indicating how ethanol demand is helping the
sugar industry.
Dr. Gulati said it will be better policy option for India if it adopts Fair and Remunerative
Price for sugarcane as suggested by CACP and Revenue Sharing as suggested by the
Rangarajan Panel.
Vote of Thanks
Dr. Shashanka Bhide, NCAER, offered the vote of thanks to the Ministry of Agriculture
and FAO for their sustained support for the project on Agricultural Outlook Reports
undertaken by NCAER. He also thanked the speakers, discussants, chairs and all the
participants who contributed to the discussion and made the workshop a valuable forum for a
broad-based discussion on the outlook for a number of food commodities. He also thanked all
the members of the project team at NCAER who supported the background work for the
workshop.
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