AGRI EXPORT ZONES IN INDIA

GENESIS

With the removal of almost all the quantitative restrictions on imports and with the decks cleared for integration of Indian economy with the global one, a need was felt to harness our competitive advantage in international trade.

Agriculture was perceived as one sector where such a potential existed. The provisions of Agreement on Agriculture, implemented in letter and spirit, could create such an opportunity. However, despite the potential, there was a lot to be done to get the supply chain going.

The objective, therefore, was to take a look at an agriculture produce in a comprehensive manner – right from farm to the palate – so as to be able to deliver an appropriately priced and attractively package quality product in the international market. Thus emerged the concept of Agri Export Zone, which found a place in the exim policy announced for the year 2001-2002 as a separate chapter.

CONCEPT

Promotion of agricultural exports is important for creating conditions for providing remunerative prices to farm products. Sporadic efforts have been made in the past for promoting exports of agricultural produce/products from the country. Thus on one hand Research and Development has taken place with little bearing on the development of a particular agricultural produce for the purpose of export, on the other hand financial and fiscal incentives are being provided for exporting a particular produce without actually addressing pre-harvesting and post-harvesting practices.

Though India ranks as the world's second largest producer of horticultural crops, the country fares less impressively on processing fronts. Lack of adequate storage facilities is one of the main problems faced by food processing industry leading to almost 30-40 percent wastage of the production. Simultaneously, most of the varieties grown in India are simply not suitable for processing. Therefore the concept of Agri Export Zones developed by APEDA aims to improve the levels of food processing to reduce waste , increase marketability and help farmers to enjoy higher value of realization. It takes a comprehensive look at a particular produce/product located in a contiguous area for the purpose of developing and sourcing the raw materials, their processing/packaging, leading to final exports. Thus, the entire effort is centered on the cluster approach of identifying the potential products, the geographical region in which these products are grown and adopting an end-to-end approach of integrating the entire process right from the stage of production till it reaches the market.

However, the entire effort begins with market analyses to assess the market potential for that produce. Subsequently, steps are taken to ascertain the quality parameters that are required for making this produce/product acceptable in the international market.

The attempt then is to see what sorts of interventions are required at each stage of the value chain to come up with such a produce/product.

These interventions commence right from availability of inputs like seeds, fertilizers, pesticides, credit etc. This would then entail research into the pre-harvest protocols, if they do not already exist and application and extension of these protocols and practices in the fields of identified farmers.

Development of harvesting protocol, its implementation and the post-harvest management are all critical links in the value chain. These would include activities like storage (both intermediate and final), grading, sorting, processing, packaging and transportation. Each of these activities would involve a specialised intervention, which could be technological (hence would involve research) or financial.

It will also identify/enlist difficulties/ problems encountered at each stage. These difficulties could be procedural in nature or may relate to a particular quality standard. A package needs to be developed to suggest solutions to these problems. Corrective time bound measures will then be delegated to specific government agencies. The APEDA will ensure that the measures are completed on schedule. Export quality products will have specific niche markets identified and will be promoted extensively. Under the programme, international Agricultural experts may also be invited to demonstrate modern harvesting technologies.

Finally, it is the marketing, which is the key to the success. The capability to position the product in an appropriate market and getting an appropriate price would ultimately determine whether the AEZ could get going.

EVOLUTION                                                                                                                       

What is being sought to be done through Agri Export Zones is nothing new. However, the novelty lies in the fact that this concept does not conform to the traditional understanding of the concept of a ‘zone’ where there is a physical demarcation of boundaries, which are built by brick and mortar. There is also no export obligation on the basis of mere fact of this being an export zone. The obligations, if any, emanate from the licenses which the exporter choose to take. The concept, therefore, is much more flexible. It hinges primarily on ‘convergence’, ‘partnership’ and ‘focus’.

‘Convergence’ relates to putting together of all the ongoing schemes of Central and State Governments to take care of the financial interventions required at various stages of value chain. Thus, whereas the extension and inputs related assistance can flow from Ministry of Agriculture schemes, funds for reefer vans and marketing assistance could come from APEDA. The cold storage could be assisted by NHB and processing plant by Ministry of Food Processing. The idea is to converge and utilize such assistance for an identified produce rather than assisting different products in different places sporadically, without addressing issues relating to the entire value chain.

The ‘partnership’ envisaged between Central Government, State Government, farmer, processor and the exporter lies at the heart of the concept of AEZ. All the players have to come together otherwise AEZs will not work. Each relationship is as important as the other. Thus, consistent supply of produce by the farmer to the processor is a critical link in the value chain. Similarly, the commitments of the Central and State Government and their capacity to deliver and deliver quickly is crucial. All the these players have to work together. Fortunately, perhaps on account of recognition of mutual interest, in most of the AEZs sanctioned so far this partnership is evolving on the right lines, though there is still a long way to go with issues like ‘contract’ farming, which will provide a lasting solution to problems relating to supply chain management, yet to be resolved. However, the heartening feature is the willingness of each player to find such a solution and some models are already emerging.

The ‘focus’ that AEZ provides to agri-export related issues enables a quicker resolution of these issues. There have been a number of such issues at the State, national and international level, that have been sorted out as they were prominently highlighted, consequent to the declaration of AEZs. Reduction of import duty on flowers by EU and reduction in the interest rate on credit to farmers are some such examples.

A variety of interventions, as mentioned earlier, by various agencies mark the development of AEZ. The ‘financial intervention’, in form of various assistance schemes run by a number of Central and State Government organization, enables access to subsidies. Organisations like APEDA, NHB, MOA, DFPI, NCDC and SFAC have provisions for such schemes. Financial assistance gets extended to activities like productivity enhancement, micro irrigation, improvement of quality, R&D, pre and post-harvest training and extension services, maintenance of cool chain, packaging, apart from market development and freight support for selected products.

The ‘fiscal interventions’ come directly from Central and State Governments with the primary objective of enabling duty free access to inputs for the purpose of exports. Thus, the advance licenses become available for sourcing duty free inputs. Facility for concessional duty import of capital goods gets extended not only to direct exporters but also to service providers. The State Governments contribute by way of exemption of all duties, cess and taxes on inputs that go into production for exports.

The ‘monetary intervention’ has come by way of availability of concessional credit (at packaging credit rates) to the farmers. This has been facilitated through a circular issued by RBI.

The ‘administrative intervention’ entails identification of an institution by the State Government for carrying out research for various activities, earmarking of extension teams for the AEZ, clearly specifying and defining the roles of various State agencies, which includes identification of nodal agency to coordinate the work at the state level for executing the project.

The ‘legislative interventions’ become necessary if some laws and regulation have to be amended to facilitate procurement, processing or transportation for exports. The initiative taken by the Government of Uttar Pradesh in enabling direct procurement of agriculture produce by the processors obviating the ‘mandi’ procedure, has gone a long way in promoting smooth procurement. Some State Governments are actively contemplating to bring about a legislation to facilitate contract farming as well. Tamilnadu has already taken the lead.

The Agri Export Zone begins with the preparation of a feasibility report by the State Government. This report is submitted to APEDA, the designated nodal agency for AEZ. After a preliminary evaluation by the Coordination Committee, chaired by Chairman, APEDA, it is put up for consideration to an interdepartmental Steering committee, headed by the Commerce Secretary. Once the project is approved, an MOU is signed between APEDA, representing the Central Government and the State Government. This MOU provides for upfront commitments of the Central and State Governments. A detailed action plan is then worked out for each set of activities. An advertisement is issued by the State Government to solicit private sector investment in the wake of various upfront commitments by respective Governments. Once the private sector entrepreneurs are selected, it becomes a private sector driven zone with the Government and their agencies providing the committed support and interventions. An elaborate web based monitoring system has been evolved to closely follow up each activity on the basis of a PERT chart.

The policy pronouncement was not expected to set the Yamuna on fire. However, the underlying objective was to get the States involved in the process of exports, a task which was hitherto considered difficult if not impossible. All the previous efforts to involve the State governments in promoting exports had not had the desired impact. The attraction in the AEZ was the benefit that was likely to accrue to the farmer. Thus, AEZ became politically acceptable. This also explains the enthusiasm with which the States have taken up the task of setting up these zones. Not many schemes of the Central Government have got going in the first year of the implementation. As many as twenty Agri Export Zones were approved in the first year itself. In fact, surpassing all expectations, exports have already started taking place from some of the zones. The Agri Export Zones have got going, though there is still a long way to go. The concept itself is still evolving and the last word has still to be written.

 Measures envisaged to promote exports from such Zone 

1. Financial Assistance :

Both Central as well as State Government and their agencies are providing a variety of financial assistance to various agri export related activities. These extend from providing financial assistance for Training and Extension, R&D, Quality Upgradation, Infrastructure and Marketing etc. Thus, whereas Central government Agencies like APEDA, NHB, Deptt. of Food Processing Industries, Ministry of Agriculture provide assistance, a number of State Governments have also extended similar facilities. All these facilities would have to be devoted and extended to promote agri exports from the proposed Zones in a coordinated manner. Some additional features like providing grants from Market Access Initiative fund could also be considered by the state governments.

• 2.      Fiscal Incentives :

The benefits under Export Promotion Capital Goods Scheme, which were hitherto available only to direct exporters, have now been extended to service exporters in the Agri Export zones. Thus, even service provided to ultimate exporters will be eligible for import of capital goods at a concessional duty for setting up of common facilities. They shall fulfill their export obligation through receipt of foreign exchange from ultimate exporters who shall make the payments from their EEFC account.

Exporters of value added agri products will be eligible for sourcing duty free fuel for generation of power, provided the cost component of power in the ultimate product is 10% or more and the input-output norms are fixed by the advance licensing committee of the DGFT. In view of the power intensive nature of most of the value addition, almost all the exporters of value added agriculture produce will become eligible for such facility. Similarly, input-output norms can also be fixed for sourcing other inputs, like fertilizer, pesticides etc. duty free for cultivation purpose.

 3.      MONETARY ASSISTANCE

Monetary intervention. Availability of concessional credit (at packaging credit rates) to the farmers.

NABARD has issued Circular to provide refinance to commercial banks for financing of farmers for cultivation / production of identified crops / commodities in AEZs under contract farming. The banks financing farmers will charge interest not exceeding 10.5% p.a. on their loans under the scheme.

• 4.      ADMINISTRATIVE INTERVENTIONS

These interventions are made primarily by the State Governments for the following :
Deputation of scientists for research Identification of farmers Preparation of extension literature Identification of extension teams Extension work. (These tasks can also be undertaken by Pvt. Sector)

 5.      LEGISLATIVE INTERVENTIONS

Bring about changes in the existing legislation /rules/regulations/to facilitate exports
The initiative taken by the Government of Uttar Pradesh in enabling direct procurement of agriculture produce by the processors obviating the ‘mandi’ procedure, has gone a long way in promoting smooth procurement.
Some State Governments are actively contemplating to bring about a legislation to facilitate contract farming as well. Tamilnadu has already taken the lead.

• 6.      DIPLOMATIC INTERVENTIONS

Negotiate with the international trading partners for providing market access :Reduction in tariffs and subsidies Removal of non tariffs barriers

Benefits of Agri Export Zones : 

 The anticipated benefits to accrue as a consequence of setting up of such zones are as follows:

i. Strengthening of backward linkages with a market oriented approach.

ii. Product acceptability and its competitiveness abroad as well as in the domestic market.

iii. Value addition to basic agricultural produce.

iv. Bring down cost of production through economy of scale.

v. Better price for agricultural produce.

vi. Improvement in product quality and packaging.

vii. Promote trade related research and development.

viii. Increase employment opportunities.

Novelty of Agri Export Zones

No physical demarcation of boundaries, which are built by brick and mortar.
No export obligation on the basis of mere fact of this being an export zone (The obligations, if any, emanate from the licences which the exporter choose to take)
Hinges primarily on ‘convergence’, ‘partnership’ and ‘focus’.

Convergence of all the ongoing schemes of Central and State Governments
The extension and inputs related assistance from Ministry of Agriculture schemes,         funds for reefer vans and marketing assistance from APEDA. The cold storage by NHB and processing plant by Ministry of Food Processing.

Focus: Quicker resolution of agri-export related issues

Examples - Reduction of import duty on flowers by EU reduction in the interest rate on credit to farmers

Operation of the Concept

 The entire approach of promoting the Agri Export Zone would have to be taken on a project mode. This would mean that the State Governments would need to identify potential export products which could be selected for development with a cluster approach. State Governments will have to evolve Projects which are feasible and are possible to be implemented immediately. They have also to conform to the indicative guidelines given below. The States will forward such project proposals to APEDA which will conduct the initial scrutiny of the proposals .If found feasible, APEDA may provide necessary guidance in preparing the detailed project report. This report, after preliminary scrutiny, will be placed before the Steering Committee which has been constituted under the chairmanship of Commerce Secretary with the following members:

1. Director General of Foreign Trade, Member
2. Joint Secretary (EP Agri Division, DOC) Member
3. Joint Secretary (Deptt. of F.P.I.,MOA) Member
4. Joint Secretary [Infrastructure Division, DOC] Member
5. Executive Director, NHB Member
6. Representative of DG, ICAR Member
7. Director (Finance, Deptt. of Commerce) Member
8. Chairman, APEDA Convenor

 Once the project proposal of a State has been approved by the Committee, an MOU would be signed between APEDA (on behalf of the Central Government) and the State Government for providing possible assistance at each stage of the project.. The responsibilities of the State government would also be defined in the MOU, a draft of which is under preparation.

Guidelines for State Governments

 The proposal of the State Government for developing an Agri Export Zone would need to take into account all activities necessary to set up projects in such a Zone. Some basic guidelines for developing such projects are detailed below:

•    Identification of a agricultural produce (cash crop) which would be developed for export through a cluster approach. This would, obviously, be based on concentration of production of a given product or a set of products in a particular area which could be promoted as an Agri Export Zone.
• The Zone could be a block/group of blocks or a district/group of districts.
• An Agricultural University would need to be identified which will assist in the R&D work relating to development of the project. Such University should preferably be in the vicinity of the Zone.
• In case of horticulture based projects, an exporter should be identified who would source produce from 100-200 orchards in a contiguous area. In case there are more exporters/ farmers interested in exports, then a single pack house operator or a processing unit to serve the exporters/farmers may be identified.
• Efforts should be made to ensure enough production crops to enable the unit to run round the year.
• The proposal should indicate the entire range of activities involved in the process, list out interventions being provided by the State Governments at different levels and also suggest the facilitations that can be provided by the Central Government. Interventions from the Centre could be, inter-alia in areas of feasibility studies, setting up backward linkages, training and extension, pre and post harvest activity, packaging, transportation, market promotion, etc.

 Responsibilities of the State Government

 To enable the Agri Export Zone achieve the objectives of the concept and to make the projects viable, it is necessary that the Central and State Governments work closely with each other. This would imply certain pro-active steps to be taken by the States with regard to the following :

• Identification of a State Government institutions/agency, which will be responsible for implementation, and coordination of the entire activity.
• Single window problem solving desks should be created in the offices promoting zonal approach to agriculture exports.
• Adequate availability of infrastructure, inputs, electricity, etc.
• Redeployment of extension officers in the Export Zones who would interact regularly with APEDA and organise training/activity on a regular basis with a definite action programme.

SCHEMES OF APEDA AT A GLANCE :

 Schemes for Market Development :

Schemes For Development of Infrastructure:

Schemes for Quality Development :

Schemes for Research and Development:

Schemes of National Medicinal Plants Board - Department of Indian Systems of Medicine and Homeopathy Ministry of Health and Family Welfare Government of India

Promotional and Commercial Schemes of National Medicinal Plants Board

Designated Areas for Financial Support

Project proposals could be submitted in the following designated areas of Promotional / Commercial schemes for overall development of medicinal plants in general and with special reference to 32 species, prioritised and identified by the Board viz:

Proposals could also be taken up for any other medicinal plant for which there is assured market.

Project Proposals can be submitted in the following areas:

I- Promotional Schemes

1. Survey and inventorization of medicinal plants

2. In-situ conservation and ex-situ cultivation of medicinal plants.

    To encourage in-situ conservation and ex-situ cultivation of selected medicinal plants, particularly endangered species which have appeared in Indian Red Data Book (IRDB) and negative list of CITES.

    To create region-wise and species wise medicinal plants demonstration centres (herbal gardens).

3. Production of quality planting material

To producer germ plasms of quality planting materials in bulk by developing improved agro-techniques and other appropriate technology.

4. Extension centres - Information, education and communication.

Awareness through audio-visual aids, talks, seminars, training, workshops, etc.,

Training & visit of growers and collectors to demonstrations plots, research centres and other related organisations in the country.

Activities encouraging cultivation for growing medicinal plants 

Extension material on medicinal plants.

5. Study demand supply position and marketing of medicinal plants for domestic and global market.

Study in respect of state-of-art creating and developing infrastructure for the purpose of value addition, shelf life, storage of drugs conforming to international standards

6. Research and development in medicinal plants sector.

7. Strengthening capabilities of NMPB:- The Scheme, related to man-power for NMPB including pay and allowances to staff, office infrastructure, computerisation, etc.,

Other Areas:

8. Promote co-operative efforts among growers and collectors of medicinal plants.

9. Value addition and semi processing of products of medicinal plants.

10. Undertake / assist or encourage scientific technological and economic research on medicinal plants.

Eligibility:

Applicable to government organisations for grant in the specified areas above.

Non-government Organisations (NGOs) are eligible for certain areas except R&D activities.

 II Commercial Schemes

1. Production and ensure supply of quality planting material.

2. Area expansion for selected species and cultivation in more than 2 ha. land area.

3. Value addition - for developing proper harvesting techniques, semi-processing of produces viz. collection, grading, drying, storage, packing, etc.,

4. Develop innovative marketing mechanism.

Eligibility:

Government Organisations

Registered growers, association/federations of growers, traders, manufacturers, societies, pharmaceutical companies, NGOs and recognised private research institutes or any group of people who have past 3 years experience in medicinal plants sector.

Financial Assistance to farmers:

In case of farmers financial assistance would be as under:

Small and marginal 50% (operational land area below 2 hectare.)

Medium 40% (operational land areas 2-10 hectares)

Large 30% (operational land area 10 hectares and above)

For the above activities in the case of NGOs, Societies / cooperatives financial assistance would be provided to the extent of 30% of total expenditure, as explained above.