EXPORT PERFORMANCE AND FACTORS AFFECTING COMPETITIVENESS OF PLANTATION COMMODITIES IN INDIA

Abstract

With the opening of Indian agriculture and high level of integration of domestic markets with the world markets there is high dependence of many plantation crops on export markets directly or indirectly. This along with the dynamic policy environment calls for an analysis towards the export performance, potential and competitiveness of plantation crops in India. The study examines the changing patterns of international trade in plantation commodities and analyses the factors contributing to or retarding the competitiveness of plantation commodities in India. Unlike the earlier studies, which have used protection coefficients as indicators of competitiveness, the study uses the ratio of unit export prices (f.o.b) to examine the performance of select plantation commodities in India. From the analysis of unit export price ratios of select four commodities, coffee, tea, cashew and pepper, we see that price performance in international markets has been good only for cashew. The poor price performance of coffee, tea or pepper is a reflection of lower value addition or poor quality against the competitors. Cashew nut which has good price performance is an exception among the commodities chosen for analysis, which can be attributed to higher attention paid by the policy makers for cashew processing in India through promotion of processing industries. However, the sector currently depends heavily on imports of raw cashew which calls for measures to boost the domestic production within the country. Though tariff barriers are very limited in the case of plantation commodities under study, non tariff barriers continue to retard competitiveness of plantation commodities in India. The need for certification emerges as a major non-tariff barrier for coffee and tea. In the case of coffee, the threat becomes intense to India when the competitors are increasing the share of sustainable coffee in the world markets. There are lessons to India from competitors in Central and Latin America who,in addition to leveraging on technology to increase the yield have made certification possible to a great extent without much cost with the existing local institutions and infrastructure. Finding a low cost model for individual farm certification calls for collaboration among a range of local and international actors which needs to be addressed through the right set of policies. One of the keys to the expansion of sustainable coffee in India is co-operatives which is currently absent in the coffee growing districts of India. Stringent rules of labeling in developed markets, quality standards, maximum residual limits, food safety, ethical practices are the major non-tariff barriers confronting exports of tea from India. Investors have also been slow to invest in India for tea processing due to high costs brought about by the hefty taxes levied on the activity. India also lost some of its international markets for tea due to lack of strategic government policies, especially, with Russia, Poland and Pakistan. Improved trade relation with Pakistan would open doors to one of the major markets of the world. False certification of re-exports of poor quality tea is a serious concern, which needs immediate policy attention. To make the Indian cashew more complaint to standards there is a need to attain ISO, GMP and HACCP certifications which is currently obtained by only a few cashew processors. Similarly for spices, the largest threat among the non-tariff barriers is with the multiplicity of rules governing the sanitary and phytosanitary requirements. Wide difference on the rules and procedures adopted by different organizations and countries while importing this commodity has created confusion in the Indian pepper exporters which needs to be negotiated for standardization of rules in the international forums.