As the country debates on whether or not the government's promise to double farmers’ income by 2022 is realistically achievable, given fall in farm-gate realisations during the past few years, experts say boosting exports of processed farm commodities could be one way of achieving this end.
However, poor on-farm quality of Indian produce, along with frequent and sudden changes in regulations limits the scope of getting reasonable returns from exports, they caution.
Big food processing in India is constrained by a fragmented market and the absence of economies of scale, but even basic processing such grading, sorting and packaging isn’t done on farm products. This leads to lowering of their value and difficulties in clearing the strict phytosanitary norms imposed by European and other countries.
The extent of processing of agriculture products differs with different methodologies used.
According to an official report on Doubling Farmers Income (DFI), the extent of food processing is highest among foodgrains at almost 70 per cent, while in fisheries it is only 26 per cent and 35 per cent in milk.
“Expanding one acre of land under high-value crops such as horticulture at the expense of staple crops (cereals and pulses) yields an additional gross returns up to Rs 101,608 per hectare,” the report on Doubling Incomes said.
At the all-India level, the proportion of production that farmers are not able to sell in the market and thus do not get a monetary return for is 34 per cent, 44.6 per cent, and 40 per cent for fruits, vegetables, and fruits and vegetables combined respectively, the report said.
Clearly, this a huge quantum, given that India produced about 305 million tonnes of fruits and vegetables in 2017-18.
Assuming that 3-4 per cent of the production is retained by the farmer for self-consumption and seeds, the unsold fruit and vegetable output would be as much as 36 per cent.
In value terms this could mean millions of rupees lost due to sheer inability to process.
“Proper value addition of agriculture produce could lower the demand for a hike in minimum support price,” Ashish Mittal of All India Kisan Mazdoor Sangh told Business Standard.
Prof Sukhpal Singh from the Centre For Management in Agriculture at the Indian Institute of Management–Ahmedabad (IIM-A), said that value addition in Indian agriculture is challenging as domestic consumption is huge, while at the same time, Indian products don't meet global standards, especially phytosanitary norms.
Ha said the markets in India do not permit value-addition of food as it is highly costly for consumers.
“So there is dual challenge of not getting the right buyers in domestic markets who are willing to purchase high-priced products, while international markets have stringent quality standards that farm goods often aren't able to meet,” Singh told Business Standard.
"All this makes me feel that instead of focusing on processd food we should concentrate more on selling fresh farm items and develop basic processing facilities on the farms itself, like grading, packaging and sorting,” Singh said.
This itself would solve a big problem and help farmers get better prices for good produce, which is also a value addition.
“In India post-harvest losses are not as precisely quantified as in other countries. It is more of value loss like someone buying poor quality products. Therefore, the focus should be on retaining that value instead of building big processing units,” he added.