The scheme for AEZs doesn’t seem to have yielded the desired results. These zones hardly helped in creating new irrigation & supply chain infrastructure at right locations. So, small & marginal farmers are left in the lurch, even as the demand for processed foods surges in domestic and global markets, says Prabha Jagannathan
RECALL the parable of the village council meeting in which ryots thundered about having to build a new little wooden bridge over the rivulet every year, because the children played swinging from it and weakened it. The story goes on to say a small voice piped up from the back and said: “Why don’t we make the bridge so strong that it lasts for many years and children can swing from it?” The Union government would do well to hire this rational solution provider to formulate its long-term farm policy.
In 2001-02, the nodal agri-exports authority — APEDA — formulated the scheme of agricultural export zones (AEZs). It went into operation a year later. Almost half the MoUs under AEZs were signed in 2002-03, when it was obvious that a comprehensive programme was needed to boost stagnant food production. The multilateral trading regime under the WTO mandates the country to focus on SPS rule-friendliness, quality of the products and the strategy to counter technical barriers to trade. But by 2005, a peer review of the performance of AEZs proved that out of the 60 zones, 54 had not met the targeted levels of exports or attracted the envisioned investments. Actual investments made by then were Rs 820 crore (against a target of Rs 1,718 crore) and the actual exports were Rs 5,316 crore (against a target of Rs 11,821 crore over five years).
The government subsequently junked 34 more AEZ proposals. In 2006, the Centre began chanting the new mantra of mega food parks. In July this year, MoS for commerce Jairam Ramesh declared AEZs a “failure”. The entire process took barely five years in a sector which, during the 10th five-year plan, has refused to move up beyond 2.4% growth, thanks to ad hoc policies that undermined its growth.
Assocham, in a recent study, has suggested that PPP model be explored for reviving AEZ fortunes. APEDA still presides over core policies on agri-commodity exports. A recent parliamentary committee note to the ministry of commerce acknowledged that India continues to rank abysmally low (below 2.5%) in world agri-trade marketshare for want of strong supply chain infrastructure, critical to the growth of exports in agro commodities and to meet domestic food needs. This year, APEDA has come up with a Rs 2500-crore plan to develop 12 centres countrywide to process agri perishables!
So why didn’t AEZs, which would have helped farmers directly, get the requisite policy push? Lack of special benefits and the fact that there was no single entrepreneurial agency running AEZs, admits the government.
In half the time, the Centre pushed through crucial decisions that affect longterm production in the farm sector, including the entry of FDI in retail and the establishment of SEZs, both of which made the private sector prime players. The latter, which will access close to 5% of the country’s arable land from farmers, are supposed to be the advantage theme, but will come up in areas where port and road linkages and other key marketing infrastructure exist in good measure. The takeover of such arable land without any alternative long-term livelihood options for farmers is controversial.
“The government will never have the resources to tackle the production problems concerning food security and exports that hounds the sector alone. Private sector investment is imperative to any policy on this. Both the SEZ policy and the retail policy have laid out big incentives, paving the way for optimum tapping of potential,” points out a Delhi-based supply chain analyst who is consultant to a major agri produce export firm. A working group on agricultural marketing infrastructure and policy for the 11th plan pegged the total investment needed at Rs 64,312 crore, with private sector investment of Rs 30,625 crore.
But even more importantly, emphasises agri-trade analyst Madan Diwan, the AEZ concept didn’t take off because it never addressed the basic questions of production — whether in relation to exports or food security. This question of whether and how to hike output can’t be addressed without factoring in the fact that 60% of the country’s cultivated land is rain-fed. Developed together, greenfield agricultural zones, FDI in retail and SEZs could have catalysed creation of the link between the farmer and the consumer, with big advantages for both, and also the investors. There could have been many benefits — strengthening backward linkages and infrastructure including cold chain, boosting processing to minimise post-harvest wastage in fruit and vegetables (which is 40%), etc.
AEZs, however, were conceived as mere processing sheds meant to tap existing goods produced in regions. The government should have conceived agri-zones as dedicated zones backed by contract farming and designed to rope in the private sector as key drivers, buttressed with all the fiscal incentives that they are getting in SEZs and in retail and set export obligations.
But instead of tapping existing regions where agri-produce was already doing well (grapes in the Nasik region, for instance) and where infrastructural linkages existed, the zones should have come up on rain-fed lands and wastelands so that the private sector and farmers’ cooperatives that transform to corporates used the land price advantage to invest heavily in development of infrastructure. Only the enabling policy super structure and power and water supply concerns should have been that of the government.
AEZs in China are developed differently, involving contractual agreements with farmers over several hundred acres and include several villages and residential areas with big fiscal and in