Trade policy and farmers’ concerns

Meri News, India, May 10, 2008

By Sanjeev Chopra

The impact of National Foreign Trade Policy on the livelihoods and incomes of the primary producers and its relevance to the grassroots was discussed in a seminar organised by the Kolkata Centre of CUTS, an international NGO, on May 7.

The National Foreign Trade Policy (NFTP) helps the exporters find global markets and assists state governments to develop infrastructure for exports. The ideas expounded in this column have emerged from a seminar organised on May 7, by the Kolkata Centre of Consumer Utility and Trust Society (CUTS) International, a Jaipur based International Non-Governmental Organisation working in the area of consumer awareness and protection, trade and globalisation issues and the impact of World Trade Organisation on the primary producers of internationally traded goods and commodities with special focus on agricultural products and handloom workers.

The subject under discussion was the impact of NFTP on the livelihoods and incomes of the primary producers and was under the GRANITE (grassroots network on the impact of international trade on livelihoods and employment).

My distinguished co-panelist was Sanjeev Nandwani, the joint director general of foreign trade responsible for trade promotion activities and the implementation of Assistance to States for Infrastructure Development for Exports (ASIDE) in the Eastern region. He highlighted the macro aspects of trade policy in general and also in the context of agricultural products.

The fact is that gems, jewellers and software are the main stars in the Indian export firmament and it is only recently that some attention has been given to agricultural exports. Because we are a nation which is among the top five producers as well as consumer of several agricultural commodities, our position on agricultural exports is often ambivalent. Thus, when the farmers want to export wheat and rice, the government wants to ensure that the consumers do not have to pay too heavy a price. There are also times, when farmers clamour for the imposition of countervailing duties on a wide range of commodities – ranging from apple juice concentrate to tomato pulp/puree, but the foreign trade policy is not very clear about how and when this should happen. To that extent, the farmers have always pointed out that the NFTP does not really take their concerns into account.

In the course of discussions, this columnist’s attention was drawn to the recently introduced scheme of special incentives to export of agricultural commodities and products made by rural artisans. Under this scheme, the exporter will get a reimbursement of 7.5 per cent of the value of the exportable commodity. This incentive will however be given only when the export has been made. This columnist suggested that at least 50 per cent of this amount should go back to the primary producer. After all, if the primary producer has no stake in the transactions after he has sold the produce, the NFTP means nothing to him.

There will of course be some initial difficulties in implementing the scheme. The first of these relates to tracking the producer, and determining his share. As the processing units become more organised and IT savvy, it is possible to track each and every receipt. In any case, for several product categories, this is being maintained for reasons of quality and to meet the norms of the importing countries. The second relates to monitoring of the scheme and a guarantee that the incentive will actually be transferred to the farmer.

This columnist feels that this is best left to voluntary compliance, coupled with extensive information about the scheme and some random checks with exemplary punishment in case of default. The first advantage is that the farmer will begin to get involved with the export units and will prefer to improve his product quality so that the produce becomes an export consignment.

Secondly, this will actually lead to a transfer of resource to the rural areas and strengthen the capitalisation of primary producers. Thirdly, and not insignificantly, there will be an actual documentation of the primary producers who are engaged in the production of exportable commodities and it would be easier to focus extension activities among them. They will also be the more progressive farmers and National Bank for Agriculture and Rural Development (NABARD) sponsored Farmers Clubs would also be anchored with the group that is involved in export because farmers growing exportable commodities would be more amenable to institutional interventions than their (bucolic) colleagues.

The other point made by this columnist was that this process of consultation has to become much wider. A few weeks ago AgriMatters had drawn the reader’s attention to the problems faced by the sesame farmers when all oilseed export (including palm oil and sesame) was banned by the union government without any reference to or consultation with the state governments. True, concessions were given subsequently when the state governments wrote the protest letters – but the point is, why not involve stakeholders before the problem, rather than reacting to the problem once it has crossed a certain level. If consultations with state governments are difficult and time consuming, at least the commodity boards, export councils and the farmers groups engaged in production should be asked to give their views. Else the NFTP is a policy of, by and for the exporters only.

It is true that an exporter adds value in a way that is quite different from a normal consolidator or middleman. But the question is – should the value thus created be shared equitably or cornered by the exporter alone. If we take a long term view, then the aspect of cooperation will rise to the fore, because where such trust is lacking, export orders may flounder if there are changes in market prices because of extraneous factors. Agro-processing and export units will find it easier to build local alliances, create confidence within and among the communities in which they function and leverage all the incentive schemes of the central and state government for export promotion.

As the CUTS study in Agri-Export Zones (AEZ) for Lychee, Pineapple and Mango in West Bengal had shown, the primary grower is not really concerned or bothered about the outcome of the ASIDE scheme – for he asks – what is in it for me? Even as the percentage of India’s share in global exports goes up from 0.7 per cent to 1.5 per cent (no mean achievement), the farmer asks – how does it affect my income? How does it add to the sustainability of my operation? How does it make a difference for me if my consignment is exported or sold in the domestic market? The farmers are now hoping that as the policy is coming up for review in the next few months, it is time that the Ministry of Commerce addresses these concerns. Only then will the policy have some meaning for the grassroots.

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