Fruits and vegetables gives 4-10 times the return from other crop groups namely cereals, pulses and oilseeds. A study on sources of growth indicate that diversification towards horticultural crops is the most powerful factor in raising growth rate of GDP agriculture. A one per cent shift in area from non horticultural crops to horticultural crops adds 0.46 percentage points to growth rate of agriculture sector. Due to changes in taste, preferences and food habits, the consumption pattern in India has been shifting towards fruits and vegetables. Such changes are also happening globally. Studies on food demand indicate that 1 per cent increase in per capita expenditure results in 1.9% and 1.02% increase in demand for fruits and vegetables respectively. Thus, per capita intake of fruits and vegetables in the country will keep rising in coming years. Moreover, there is large deficiency of these items in Indian diet. India’s import of fruits is rising by 20 per cent per year. All these indicators suggest that demand side prospects for fruits and vegetables are very bright.
Technological developments in horticultural crops have facilitated some diversification. Varieties of horticultural crops have been developed for cultivation in off season, under diverse climatic conditions and with various attributes to attract consumers. Despite favorable demand and supply side factors area under fruits and vegetables in the country has remained below 10 per cent. Even with one tenth share in area, fruits and vegetables contribute more than one fourth of earnings from crop sector in the country.
Highly elastic demand for fruits and vegetables, preference of consumers for fresh farm produce and new e-commerce offer vast scope for increase in production of fruits and vegetables and farmers’ income in the country. The major constraint however is marketing. This is reflected in slowdown in diversification towards horticulture crops, very high growth in horticultural imports, large price spread between producers and end users, high level of post harvest losses, frequent and often violent price fluctuations, low level of processing, and very low post harvest value addition. The main constraint to expand production of fruits and vegetables is the system of marketing and inadequate processing facility.
Horticultural crops, particularly vegetables, are more popular with smaller size land holdings as they have advantage in terms of family labour required for labour intensive production. However, such farmers are severally constrained by scale factor in marketing of produce. In most cases a horticultural crop does not come to maturity at the same time and harvestable produce is distributed over a span of a few weeks. Being perishable, these crops cannot be stored at home to make a economical lot for taking to market. This further lowers the scale of marketable lot of farmers. The standard mode of disposal of marketable surplus is sale in nearby market yards (mandi) which is subject to APMC rules and regulations. This requires produce to pass through long market channel which involves payment of approved and unapproved taxes, market charges, and margins to a large number of intermediaries. Recently some states have brought perishable fruits and vegetables out of purview of APMC Act but it has made difference only to small quantity of produce. The practice of marketing, required by market regulation, has prevented application of e-commerce in fruits and vegetables and kept producers and consumers apart. Recently in many cities online sale of fruits and vegetables has been started by some innovative vendors but it has no back-end support. Market regulations constrain online purchases from the farmers/producers which can be of immense benefit to producers as well as consumers.
India’s experience of milk marketing, which ushered in the white revolution, offers interesting lessons for harnessing its horticulture potential. Milk and horticulture have lot of similarities. Both are high value, perishable, labour intensive, and income augmenting enterprises. Very stable and robust growth in milk production is attributable mainly to three market factors, namely, institution of milk cooperatives, complete freedom to milk producers and buyers for sale/purchase of milk throughout the country and deregulation of dairy sector. With similar market conditions India can achieve horticulture revolution in a much shorter period than White Revolution. We need two simple measures for this. One, take fruits and vegetables out of APMC Act and make their sale and purchase completely free. This will allow setting up vegetable/fruit collection centres by local entrepreneurs, like milk collection centres, where farmers can sell even a few kg of their produce. In some cases integrators will start pooling the produce for marketing, like informal milk vendors in the countryside. They can make economic lot and sell the produce in a market or they can have direct contact with vendors or other buyers in towns, cities and various consuming centres. This will also encourage private sector to go for contract farming and having assured supply of suitable material for processing. Many innovative vegetable and fruit sellers in urban areas will be attracted to develop back-end linkage to get direct supply from the producers. India has waited for development of modern value chain in horticulture for a long time but this has not been happening due to legal hurdles and restrictions on free and direct marketing. Two, horticulture producers companies or associations of various types, like dairy cooperatives, can also help farmers in marketing their produce without involvement of long chain of market intermediaries. Some progress has been made in this area in the last two years and there are some impressive success stories; such experiences need to be scaled up. Three, as delicensing of dairy in 1991 and the amendments in Milk and Milk Product Order in year 2002 attracted large investments in milk marketing and processing, free marketing of horticultural produce will attract lot of investments in horticultural processing and value chains.
Demand side factors and technology are highly favourable for horticulture revolution at small farms. What is needed is policy support for market liberalization, producers organizations and processing. These require action both by the states and the Central government. The onus for freeing market for horticultural produce rests with the states while support of Central government is crucial for promoting producers’ organizations and fruits and vegetable processing.
Views are personal.
Disclaimer: NITI blogs do not represent the views of either the Government of India or NITI Aayog. They are intended to stimulate healthy debate and deliberation.