New
players pose a serious challenge in the international arena and
policy-makers will have to do some fancy footwork to keep up, says
Charles J. Kithu
Spices
are often the currency of the developing countries. The primary
producers of spices include India (by far the largest producer and
exporter), Egypt, China, Indonesia, Malaysia, Mexico, Turkey and
Brazil. Since spices are always in demand in the industrialised
world, export of these basic agricultural commodities by developing
countries can be relied upon to earn valuable foreign exchange.
The major importers are the US, Europe, Japan, East Asian and Middle
Eastern countries. An added challenge is that exporting countries
with low technology infrastructure have not only to satisfy highly
demanding customers, but also to comply with the stringent food
laws of the importing country.
World
Scenario
The current estimate of world imports is 5,25,000 tonnes valued
at US $ 1,500 million, with an annual growth rate of 4 per cent.
This is against a world production of 8.5 million tonnes valued
at US $ 25 billion. The difference between world production and
import is the domestic consumption of producing countries. As far
as the product mix is concerned, the bulk of spices is exported
in ‘whole’ or ‘unground’ form, while only 15-20 per cent of spices
are sold in ground form, as mixtures of ground spices and as essential
oils and oleoresins.
The
substantive shift towards natural products in the West has stimulated
the demand for spices in recent times. Added to this is the new
demand wave for organic spices in Europe, USA and Japan. Though
the size of this market is small (around 1 per cent of the total
market), the annual growth rate is to the tune of 25-30 per cent.
Under
the WTO-regime, countries hitherto inactive in the spice trade have
started emerging as producers, posing a substantial threat to traditional
exporters like India. These new entrants have practically no domestic
market, which compels them to push their produce at cost price or
even below it.
India’s
Position
India is the biggest producer, consumer and exporter of spices,
with a 45 per cent share by volume and 23 per cent share by value,
in the world market. The Indian spice export basket consists of
around 50 spices in whole form and more than 80 products in value
added form. However, a few spices and value added forms constitute
a major segment of the country’s total export earnings. Spices,
contributing more than 80 per cent in quantity and 90 per cent by
value, based on a three-year (1997-98 to 1999-2000) average of exports,
are classified as the major contributors.
However,
the fortunes of individual items vary from year to year because
of the changing global supply and demand position and other external
factors.
India
has also made forays into the value added sector. Currently 33 per
cent of total exports by value are of value added forms. The major
value added forms are spice oils and oleoresins; curry powder and
mixes, speciality extracts and blends. However, higher end value
addition has not yet been attempted. Similarly the export basket
for spices has a lot of potential for widening. Recent additions
are vanilla, garcinia and herbal spices.
Comparative
Advantages
India has certain natural comparative advantages with respect
to the spice trade. They are–diverse agro-climatic zones, availability
of innumerable varieties and cultivars of each spice suitable for
different climatic conditions, comparatively cheap labour, a large
domestic market for better buoyancy in trade, a tradition of using
spices and spice products in food, medicine and cosmetics.
The
Indian spice trade also has acquired comparative advantages. They
are capabilities acquired by the spice industry over the last decade
in quality management, improved packaging and technological innovations
in production and processing.
The
third and most important comparative advantage is the induced advantage
to maintain which, policy interventions would be important. Significant
structural changes in the world trade mechanism and new issues like
environment and human rights are likely to affect patterns of trade.
Against this background, strategic policy interventions are a must.
Policy interventions need to be targeted at specific spices or geographical
areas, to remove impediments adversely affecting the country’s exports.
The major hurdles are: inadequate surpluses for exports and insufficient
quantities of quality spices. We will examine and propose possible
solutions for the problem of insufficient surpluses and deal with
the problems of quality here.
Inadequate
Surpluses
Of the 31.50 lakh tonnes of spices produced annually, (excluding
mustard, which alone has a production of approx. 25.00 lakh tonnes),
India could hardly export 7.5–8 per cent. There have been severe
shortages of exportable varieties of spices in certain years. The
major reason is burgeoning domestic demand. Demand for spices from
the upwardly mobile middle-class is on the increase. Changing eating
habits and the population explosion are also factors. This huge
domestic demand leaves behind little surplus for export and so exports
are happening by accident rather than design. Among the reasons
are:
Low
productivity of Indian spices
For
instance, the productivity of pepper is 1,500 to 2,000 kgs/ha in
Malaysia, Indonesia and Vietnam, whereas Indian productivity in
an intercrop situation (where the number of standards will be 500-600
against 1,100-1,200 in pure cultivation) is 280–300 kgs/ha. For
some spices, the domestic demand ensures a remunerative price, as
with cardamom. But this situation doesn’t in anyway help to improve
exports, since our prices are not competitive in the international
market. The only option is to raise productivity to international
levels so that prices will be competitive without affecting the
income of our farmers. The major input, which can offer a higher
productivity, is high yielding varieties. The Indian spice industry
is blessed with strong research support and a number of high yielding
varieties are available, suited to different agro-climatic factors.
These varieties have not been fully exploited. The missing link
here is adequate initiatives to produce and supply improved varieties.
Poor
availability of inputs
This is another restrictive factor especially planting material.
Except for cardamom and vanilla, development of all other spices
is the responsibility of the state agriculture/horticulture departments.
But the desired state run programmes for production of quality planting
material are not forthcoming in many states. Therefore a restructuring
of the present system of implementation of the programme is essential.
It is also relevant to mention here that the rapid disappearance
of some indigenous varieties of spices due to mixing of planting
material results in loss of genetic purity. Examples are varieties
contributing to the production of Cochin ginger (viz. Kuruppampady,
Ellackal), Alleppey finger turmeric (viz. Elanji), and Byadagi chilli,
etc. Through the required policy initiatives, these varieties must
be protected so that export demand can be met, since there do exist
niche markets for these varieties overseas.
Non-availability
of – suitable fertilizers and plant protection chemicals, suitable
irrigation, facilities for on-farm processing and storage, and adequate
credit. These are factors reducing the acquired comparative advantage.
Considering the huge, small grower base, this issue gains greater
significance in the areas of production and sustenance. This is
one of the major reasons for the erratic production of individual
spices, earning the country the label of ‘inconsistent supplier
of spices’.
Lack
of real time knowledge of area sown, especially with annual crops.
This is pushing the illiterate farmer to go in for such crops, as
may be extensively cultivated in other areas. The seed companies
and agents of big purchasing companies play havoc in such situations.
The advancement of information technology should make it easier
to know and disseminate real time information so as to avoid over
production and the consequent steep fall in prices, which lead to
farmers’ distress. Proper usage of the remote sensing network established
by the National Informatics Centre at district level will provide
for rapid transfer of information. But the real challenge lies in
collection and feeding of this type of information to a national
network. Real time knowledge of the possible size of the crop could
even help exporters to take an advance position in the international
market.
Inadequate price for producers This is a recurring complaint of
the Indian spice farmer. The price situation is directly linked
to the supply position of each year. There are crops like chilli,
where huge stocks are maintained in cold storages. The price which
prevailed the previous year often influences farmers to go in for
large scale cultivation, irrespective of stocks available and neglecting
the possibility of alternate crops (in the place of chilli, in Andhra
Pradesh it is cotton). This results in severe price crash. This
situation repeats itself and the vicious cycle continues. Added
to this is the pressure of imports. India, on an average (1998-99
to 2000-2001) imports 59,000 tonnes, valued at Rs 280 crore per
annum. Though imported stocks are mainly for value addition and
export, a part is meant for stock and sale in the domestic market.
Imports do, to a certain extent, suppress the domestic price, affecting
the prospects of Indian spice farmers. The alternative is to improve
production of the items that are imported and make them available
at international prices. This is possible with production support
programmes.
Agricultural
extension in many states is market-oriented
Extension is not focused on the needs of the market, especially
the export market. This service is limited to a few areas and to
a few sections and often fails to recognise indigenous methods and
factors to get a competitive edge in export of spices. The recently
announced policy framework for agricultural extension by the Central
ministry of agriculture, has taken care of many longstanding issues
in extension work, but still lacks an independent system of evaluation.
Near
monopoly of agricultural research by ICAR institutes
Non-participation of the trade in investment fors research, non-recognition
of private agricultural research by ICAR/SAUs, undue delays in transfer
of technology from lab to land, a non-focused approach in identifying
research problems and alienating research from market driven issues,
are some of the key areas in spices research to be addressed through
policy intervention.
Insufficient
mechanisation of spice production and processing
This is the other limiting factor. Appropriate technologies need
to be developed to improve productivity of workers engaged in spice
production and processing. It will not only help in ensuring hygienic
post harvest handling but also in cost effective production. Ginger
peeling, solar drying of spices, boiling, drying and polishing of
turmeric, on-farm processing of seed spices, are some of the areas
which need immediate attention.
Crop
Insurance is urgently needed in the spice sector
Unprecedented natural calamities often push the small and marginal
grower into a crisis situation. In order to prevent this and to
build up his confidence in sticking to cultivation of spices, it
is necessary to extend crop insurance, with suitable packages to
contain all possible risks in the areas of production, processing,
storage and transport.
Suggestions
for Policy Interventions Capacity Building
The need for efficient use of soil, water, bio-resources, fertilisers
and pesticides, popularisation of location specific and economically
viable varieties of crops, improved input management, protection
of plant varieties and endogenous technological transformation is
possible only with building up of relevant capacities in respective
areas. It is suggested that the best vehicle for a sustained change
in the field of spice production is the setting up of self-help
groups (SHGs) and export-oriented villages. Educated youngsters
with an inclination towards agriculture may be properly trained
so that they will act as agents for change. Common facilities need
to be established with initiative of the SHGs so that major inputs,
agricultural equipments and processing facilities can be set up
under their auspices. These can be named agro-clinics or common
facility centres. Non-governmental organisations can also play a
great role in organising self help groups, arranging micro credit
to the participating farmers, centralised collection and processing,
marketing and even exports.
Contract
Farming
In the context of the present thrust towards agri-business in the
wake of economic liberalisation and globalisation, the small growers
find it difficult to participate actively in the market economy.
In many developing countries such farmers could become marginalised
because economies of scale do not operate. These poor farmers therefore
give up their traditional occupation of agriculture. One of the
options identified to arrest this migration from rural to urban
areas is to establish market linkages. An organised contract farming
system would provide such linkages, which could enable small producers
reap the maximum benefits and make production and processing competitive
since this ensures improved inputs, better technologies and an assured
market. As a policy initiative the necessary legal frame-work needs
to be developed in individual states.
Wider
Applications of Biotechnology
Protocols for the rapid multiplication of spices like cardamom,
ginger, vanilla, curry leaf, turmeric and cloves have been developed
by the Board using the tissue culture route. Some spice crops like
vanilla or saffron require large-scale multiplication using this
technology to cater to the ever-increasing demand for planting material.
Advance technologies like somatic embryogenesis and synthetic seeds
are being developed for cardamom and ginger. Protoplast culture
for vanilla and anther culture for cardamom are also under testing.
These techniques can, in due course, be employed to other spices
also. This would ensure genetic purity, and the selection of the
appropriate time for planting, as demanded by the market.
Organic
Farming
Organic spices have a market in most countries. The Spices Board
has prepared a package of practices for organic production of major
spices and standards for organic spices. Driven by a series of government
initiatives including the setting up of a regulatory frame work
for proper certification and export promotion, the notification
of the National Programme for Organic Production (NPOP) designated
Spices Board as one of the accreditation agencies for certification.
The Board, through the implementation of projects under UNDP and
the World Bank, has assisted in the certification of nine projects,
each comprising of 50-100 growers.
Now
one major policy initiative left undone is to achieve reciprocal
recognition of organic standards with other nations and trading
blocks and award a logo for Indian organic products.
IPM/IDM
Farmers of spices like cardamom, chilli and ginger are heavily dependent
on chemicals for pest and disease control and fertilisers. Indiscriminate
use of chemicals results in pesticide residues beyond tolerable
limits, leading to rejection of many consignments of spices from
India. The Spices Board has conducted demonstrations on IPM/IDM
in two villages on chillies, during the last year. The results were
encouraging. Apart from fetching a higher price, the productivity
and durability of the product have immensely improved. Extension
of the IPM/IDM technologies in spices like chilli, ginger, cardamom,
seed spices, etc., is suggested, to improve our competitive position
against other suppliers.
Widening
the Spices-Exported Basket
The agro-climatic conditions available in the country are suitable
for the introduction of exotic spices with a high market potential.
Vanilla, paprika and herbal spices (rosemary, thyme, parsley, oregano,
basil) are the spices identified for this purpose. Extension of
high value spices like saffron will also help to achieve better
exports. The Board is currently implementing a programme for increased
cultivation of these spices. However, resources like planting material
and capital are limiting factors. The current prices of the above
commodities are highly remunerative to farmers. For instance, vanilla
fetches around Rs 6,500 per kg.
Extension
of Spice Cultivation in Non-Traditional Areas
India, boasts of almost 30 per cent of global production, but she
could not even export a single consignment of aflatoxin free labelled
chilli from the country.
Non-traditional
areas for spices like the north eastern region, special and hilly
areas of other states, especially the newly formed ones, offer good
potential for spice production for export. The climatic and other
factors in these areas are congenial to spice cultivation. NGOs,
CBOs and SHGs can be engaged in the introduction and maintenance
of spice crops in these areas. The activities identified are:
A comprehensive base line survey on the adaptability of various
spices to non-traditional areas.
Exploratory studies on the availability of indigenous varieties
of spices in these areas.
Support
to the growers on input supply especially planting materials, transfer
of technology (both pre and post-harvest), storage and marketing.
Establishment
of export linkages.
Empowerment
of rural communities, especially of women, in areas of production,
on-farm quality management and marketing.
Inadequate
Quantities of Quality Spices for Export
The
food safety standards of major importing countries mostly fall into
the following categories:
- Macro
cleanliness
- Microbial
load
- Mycotoxin
- Trace
metal contamination
- Pesticide
residues
Major
importing countries like the US, EU, Japan, Australia and New Zealand
have their own standards.
The
major causes of inferior quality in spices are:
- Lack
of awareness among farmers of the latest technologies in production
and post-harvest operations.
- Facilities
at the grading and packing centres are also rudimentary and the
merchants in this sector do not possess modem equipment for cleaning
and grading or for storage of spices.
- Proper
drying of spices within 8-12 per cent of moisture is not done
after harvesting, resulting in microbial contamination.
- Drying
of spices on non-hygienic surfaces creating further contamination
from microbes such as fungi, germs and bacteria including harmful
ones like Salmonella, Staphylococcus aureus, Bacillus cereus and
Clostridium perfringens, yeast and mould, E-coli, Coliform.
Quality
management followed in the spice sector must be through:
- Educating
growers, traders, manufacturers and exporters on changing quality
standards and quality upkeep.
- Empowering
the processor and manufacturer to achieve Good Manufacturing Practices
(GMP) through Spice House Certificates and Indian Spices Logo
of the Spices Board.
- Acquisition
of ISO 9000/14000 & HACCP certification by processors/ manufacturers.
- Development
of infrastructure for quality evaluation in areas of physical,
chemical and microbiological testing/analysis.
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