Surinder Sud: What's plaguing agri-export zones?

FARM VIEW

Fifty-four of the sanctioned 60 AEZs have failed to take off in the past six years. Not even half of the targeted level of exports has been realised from these zones.

How badly has the scheme for promotion of agri-export zones (AEZs) flopped is evident from the fact that 54 of the sanctioned 60 AEZs have virtually failed to take off in past six years. On the whole, not even half of the targeted level of exports has been realised. And, not surprisingly, less than half of the anticipated investment has actually gone into these zones.

This, obviously, is indicative of some basic flaws in either the concept of AEZs, or the process stipulated by the government for setting them up, or the way the whole programme has been handled. In fact, the problems seem to plague all these areas. Prima facie, the philosophy behind AEZs appears sound as it involves the provision in the designated zones of all the facilities needed for exporting specific products from geographically contiguous areas. Since this essentially means putting in place the whole chain from production to post-harvest handling of export-oriented products, it was deemed to be a win-win situation for all "" growers, intermediary product handlers and exporters. And, more significantly, the benefits were slated to last for long.

But, unfortunately, it could not happen that way, barring in a few cases. This was partly because the onus of lining up the necessary facilities was entrusted to the state governments, albeit with the involvement of Central agencies concerned and the private sector, which have a rather dismal track record of carrying out such an obligation. The envisaged funding pattern, too, was unfavourable for delivering results. For, it required the state governments and the Centre to bear 25 per cent of the development cost each, leaving the balance 50 per cent to be shouldered by prospective anchor private investors. Indeed, considering the indifferent financial health of most state governments, it was largely wishful to expect them to chip in with 25 per cent of the needed investment without any prospects of early returns.

Since this was virtually a pre-requisite for the rest of the investment to flow in, the whole programme failed to get going. This apart, there have been problems even with the choice of products for these AEZs. Some products, such as litchis and fresh flowers, are highly perishable and needed technological interventions for shelf-life enhancement, as also for designing suitable product-specific packaging and transportation for long haulage. Though the AEZs had a provision for generation of such technology as part of their stipulated activities, the entrepreneurs are usually unwilling to risk their investments ahead of availability of vital technology.

Moreover, unlike in the special economic zones (SEZs) where several fiscal and other incentives are on offer, the sops promised to investors in the AEZs were too meagre to evoke much interest. Besides, the much needed convergence of even the existing agri-export promotion schemes could not take place in the AEZs largely for want of adequate interest taken by the state governments in these ventures. The net result of all this was that the bankability of the projects got considerably eroded.

Indeed, under the circumstances, it seems good that the Centre has now woken up to these realities and has decided to play a pro-active role in putting at least a few of the AEZs on track. To begin with, it is reported to have identified four zones located in West Bengal, Assam, Andhra Pradesh and Sikkim, for development with an estimated investment of Rs 48.85 crore. The target is to make them operational by end of the current year. The government is also in touch with private banks to lend support for these ventures.

Of course, if successful, these AEZs would serve as the role models for others, besides prompting investors to come forward in other AEZs as well. But for that to happen, it would be necessary to select the products carefully, keeping their export-worthiness in view. Also needed would be a thorough study of their price competitiveness in the retail stores in destination markets. What needs to be realised here is that some of the products, despite being produced at a very low domestic cost, may not be able to compete with their rivals in the target markets because of costly post-harvest treatment and transportation. Extreme caution on this front is necessary because if the Central intervention too fails to resurrect the AEZs, it might spell the end of show for them.

surinder.sud@bsmail.in