MARKETING OPPORTUNITIES FOR INDIAN FRESH FRUITS AND VEGETABLES IN GULF COOPERATIVE COUNCIL (GCC) COUNTRIES

SUMMERY
Indian is one among top producers of agricultural commodities in the world. The number of commodities and varieties produced has increased during the past 25 years. The existing capacity is self reliant and capable of exporting surplus produce to South Asian and Middle East countries. Due to initiatives taken by government of India to meet the food needs of growing population, it is expected that the production will increase manifolds and consumption would be lower than the production in next two decades. India will be having advantage of excess agroproduction and that is nullified by spoilage and poor harvest and processing system. Hence Indian farmers need an orientation on pesticides use, Post-harvest management, packaging systems and latest logistics technology for meeting the quality as per the standards of USDA and HACCP. The total market potential of agriculture imports of GCC countries is USD 28,975 millions, in which Indias share is about 8 percent amounting to USD 2700 million(WTO,2009). Indias exports to gulf dominated by fruits and vegetables in raw form as well as processed. European Union, USA, and Gulf China are the major sourcing countries for agricultural and nonagricultural products for countries. These 3 countries alone contribute more than 40 percent of their imports. There is an enormous opportunity to export Indian fresh produce to Middle East countries provided there is a compulsion for integration of suppliers to synchronize the logistic movement with market demand. This paper will analyze the Indian production capacity, export opportunities in gulf countries and also offer solutions to various problems in agricultural supply chain management.

Authors:
1. Mr. Sudhakar Madhavedi, Research Scholar, School of Management Studies, University

of Hyderabad, Gachobowli, Hyderabad. He can be reached at: reachfirst@gmail.com

2. Dr. Acharyulu GVRK, Seniour Lecturer, School of Management Studies, University of

Hyderabad, Gachobowli, Hyderabad. He can be reached at: acharyulu_gvrk@yahoo.com

1.0 INTRODUCTION
Agriculture is an important sector in India. It is indispensible for the sustenance and growth of the Indian economy. On an average, about 70% of the households and 10% of the urban population is dependent on agriculture as their source of livelihood. Agriculture and allied activities constitute the single largest contributor to the Gross Domestic Product (GDP) i.e. about 33% percent. Due to various initiatives taken by the government of India, there is an increase in agriculture production. The initiatives include bringing additional area under cultivation, extension of irrigation facilities, the use of improved high yield varieties of seeds, adoption of new farming techniques and modern control system. There is an improvement in Indias agriculture productivity in terms of self sufficiency and export of variety of food grains. In spite of the several efforts, it comprises only one to two per cent of the world agriculture exports. India was the worlds second largest producer of fresh produce in the year 2006. It produced 43 million tons of fruits and 88 million tons of vegetables. The National Horticulture Mission forecasts annual production growth is at 8.8 percent for fruits and 10.9 percent for vegetables by the year 2015. The total consumption of 90 million tons of fresh produce is supplied through 7300 wholesale assembly markets and 27294 rural weekly markets. The consumption of fresh produce is expected to reach 140 million tons by 2015. It indicates there is an enormous growth opportunities to fresh produce sector. India can become a world market leader in horticultural produce through the vertical and horizontal integration of different components of the supply chain.

2.0 FRUITS AND VEGETABLES SUPPLY PATTERN

The Indian economy is moving from supply-driven economy to a demand-driven economy thus there is a change in consumption pattern of the population. Total domestic demand for fruits is expected to increase to 17.43 million tons by 2010 and 25.47 million tons by 2020. For vegetables, the demand is expected to be 103.16 million tons by 2010 and 137.25 million tons by 2020. Demand for both fruits and vegetables are expected to rise at the rate of 4-5 per cent per annum in the next 15 years. The per capita demand is also expected to rise at the same rate.
Total Demand Fruits Base Year 2000 2010 2015 2020 12.37 17.43 21.06 25.47 (Million tons) Vegetables 79.15 103.16 119.12 137.25 Per Capita Demand (Kg) Fruits 12.04 14.78 16.67 18.93 Vegetables 77.07 87.51 94.28 102.00

Year

Table 1: Projected domestic demand of fruits and vegetables in India Note: Scenario of economy growing at 8 percent annum Source: Kumar & Kumar (2007)

The increase in the demand of fruits and vegetables for domestic consumption is a challenge to the country. It is difficult to allocate large areas of land for horticulture. Diversifying land away from cereals to horticulture remains a constraint in spite of it being more profitable for farmers to produce horticulture products than cereals. The National Horticulture Mission (NHM) aims to double the production of fruits and vegetables by 2010. Tables 2 and 3 project the future production and supply of fruits and vegetables in India for 2015-16. It is estimated that the production of fruits and vegetables would increase to 66.9 million tons and 131 million tons respectively by 2010 and doubled by 2015. By reducing Post-harvest losses, the surplus margin of 20-25 percent of fruits and vegetables are moved from domestic market to export markets. Thus it is required that efforts should be diverted to minimize and remove the supply constrains and make the supply chain efficient in order to improve the horticultural growth rates.

Year Vegetables 1999-00 2010-11 2015-16 Fruits 1999-00 2010-11

Area (Million ha) 5.82 6.49 6.49 3.74 4.43

Yield (tonnes/ha) 14.4 20.2 23.5 11.8 15.1

Production tonnes) 83.8 131.1 152.5 44.3 66.9 74.9

(Million

2015-16 4.43 16.9 Table 2: Production forecast of vegetables and fruits Source: Kumar and Kumar (2003)

In spite of Indias wide range of soil and climatic conditions the horticulture sector is facing several constraints. These constraints result in a cultivable waste of about 19-40 percent. Another issue in the supply chain is the inefficient post-harvest management. The proper integration of post-harvest technology into marketing supply-chain is crucial. The extent of losses of fruits and vegetables in India is estimated at about USD. 238 million to USD 266million per annum (Surabhi Mittal), and the loss of quantity ranges between 10 per cent and 80 per cent in the most perishable fruits and vegetables. The other challenges before the fresh produce industry are rapid progress in production technology, changing consumer preferences, entry of multi-national companies and finally, the survival of interest of illiterate farmer who is unaware of consumer safety and quality standards. There is no coordinated effort made to bring uniform food safety and quality regulations by the different ministries of government of India

Year Vegetables 1999-00 2010-11 2015-16 Fruits 1999-00 2010-11 2015-16

Production (Million tons)

Post-harvest losses (Percent of Production

Supply (Million tons)

83.8 131.1 152.1 44.3 66.9 74.9

19 19 19 25 25 25

67.9 106.2 123.5 33.2 50.2 56.2

Table 3: Supply of vegetables and fruits in India Source: Kumar and Kumar (2003)

3.0 INDIAN EXPORTS SCENERIO

The total agri-export from India to the world is largely dominated by the cereals like Basmathi and NonBasmathi rice, wheat, Milled products and other cereals. These products are accounted for USD 3535 million and having a share of 46 percent of total agricultural exports. The next position in Indian agriexports is occupied by processed foods like Groundnut, Cocoa, cereal preparations, Alcoholic and beverage preparations and confectionery with worth of USD 1553 million and 20 percent share. It is remarkable to note that the contribution of processed fruits and vegetables export to the world wide is USD 583millions confined at 8 percent and it is similar in case of raw fruit and vegetable exports. Majority of Fresh products are exported to GCC countries. The floricultural exports are very negligible and accounted for USD 114 millions
Item Value in Million USD Total for Floriculture & Seeds Total for Fruits and Vegetables Total for Processed Fruits & Vegetables Total for Animal Products Total for Other Processed Foods Total for Cereals GRAND TOTAL Table4: Agricultural products export statistics Source: APEDA, 2007-08 Qty. 46398 1724573 774849 1932856 3220200 9752245 17451123 2007-08 Value (Million USD) 114.82 580.26 583.67 1221.25 1553.13 3535.08 7588.23 % of total value (Rounded off) 2 8 8 16 20 46

The total imports of GCC countries are at USD 293351millions in which Agricultural products share is around 10 percent. The largest importers of agri-products in GCC region are UAE and Saudi Arabia having a worth of total trade of USD 23048 millions. The total exports to UAE and Saudi Arabia alone contributing 80 percent of the total Agricultural products trade. The total Indian exports to GCC countries are valued at USD 2700 million and which is 9.5% of the total Agri-imports. It is observed that the total exports from Indian to GCC countries Bahrain, Oman and Qatar is very negligible and the exports are 4.98, 3.27 and 5.27 percent of their total Agri-imports respectively.

Crops/ Groups
Fruits Apple Banana Lemon Other Citrus Fruits/Mosambi Oranges Grapes Mango and Guava Papaya Pineapple Vegetables Brinjal Cabbages Cauliflower Onion Peas Tomato Potato Sweet Potato Beans

Potential Competitors
China, South Africa Oman, Singapore, Philippines South Africa, Jordan, Iran Spain, France, South Africa, Thailand, Netherlands Bhutan Australia, USA, South Africa, Syria, Chile Mexico, Brazil, Peru, Pakistan Malaysia Thailand, South Africa, Philippines, Malaysia, Kenya

Netherlands, Spain, France, Kenya Spain, Netherlands Mexico, Australia, China, Singapore, UAE Thailand, Netherlands, China, Pakistan, Indonesia Syria, Egypt, Greece, Kenya China Pakistan Thailand, Indonesia, Vietnam Jordan, Kenya, Oman, Zambia, Iran, Egypt

Table 5: Major competitors for fresh fruits and vegetable Source: Surabhi Mittal, 2007

4.0 INDIAN TRADE WITH GCC COUNTRIES:

India and gulf continue to enjoy traditional friendly relations. Geographical proximity, historical trade links, cultural affinities and presence of a large number of Indian expatriates in gulf have all continued to sustain and nurture the longstanding relationship over the years. India was a natural trading partner and a destination for higher learning. The presence of a huge Indian workforce in gulf has ensured close cultural interaction and bond between the Gulf Co-operation Council (GCC) countries and India. This friendship

found a new impetus with the discovery of oil in gulf with this gulf is exporting oil and other petrochemical products to India while numerous commodities are imported from India to gulf. Indias trade with GCC countries is highly cooperative and existing from many centuries. Trading with gulf is dominated by the crude oil and agri-products. India is regular importer of crude oil and exporting varieties of agri-commodities like fresh fruits, vegetables, Animal Products and cereals. The balance of trade recorded a negative balance in Indias account. The total trade balance is showing a negative balance of USD 102,079 millions. Indian trade account with Oman is having a very negative balance of USD 79026 millions. Hence there is need to nullify the negative trade with Oman and rest of the GCC member countries. The GCC countries need more agricultural products as their countries Agricultural production is very poor compare to the rest of the countries in the world.
Saudi Arab Export Import Total Trade Trade Balance 3,708 19,411 23,119 -15,702 Qatar 538 2,457 2,996 -1,919 Oman 377,358 456,384 833,743 -79,026 Kuwait 682 7,694 8,376 -7,012 Bahrain 252 830 1,082 -578 UAE 15,635 13,477 29,112 2,157 TOTAL 398,173.24 500,252.97 898,426.19 -102,079.73

Values in Millions US$ ,

Table 7: Balance of trade between India and GCC countries Note: Crude oil is excluded from the list of import items since 2000-01 Source: Ministry of commerce, published in 2009 and data relating to year 2007-2008.

As per trade statistics (2007-2008) published by the Ministry of commerce, Government of India, the country has achieved a total trade of USD 13857 millions of exports in agricultural products across the world. The total exports to GCC region is at USD 2700 million contributing 19 percent of total agriexports from India.
Indian Agri-Products GCC country UAE Bahrain Kuwait Oman Qatar Saudi TOTAL Total Imports 132494 11488 21122 16025 22005 90217 293351 Imports Percentage 8.6 5.6 12.0 10.3 5.5 13.8 Worth of Agriculture imports 10599 643 2534 1650 1100 12449 28975 Exports worth 1285 32 293 54 58 978 2700 Percent of total 12.12 4.98 11.56 3.27 5.27 7.86 9.32

Table 6: Statistics showing the Agricultural products imported to GCC countries in 2007-08

Source: World Trade Organization (WTO) in April, 2009

5.0 CONSTRAINTS TO EXPORT OF FRUITS AND VEGETABLES:

India has relatively well developed markets and well established marketing systems for fruits and vegetables. Even the export marketing systems are generally well developed and free from government restrictions and regulations. To increase the income of producers and to augment the exports of fresh and processed fruits and vegetables, India must attempt to reduce post-harvest losses through efficient processing and packaging, develop infrastructure facilities for quick handling and treatment of export consignments, and undertake research and development to produce large quantities of high quality products. Processed fruits and vegetables: Despite being the second largest producer of fruits and vegetables in the world, India has not, in general, done well in the export as well as in domestic marketing of processed fruits and vegetables. One important reason for this is that commercial processing of these commodities is highly limited and costly. This leads to considerable wastage of these commodities. The absence of exportable varieties of many of the potential products is another reason. Most of the processing units are concentrated in the home, cottage and small scale sectors. Very few processing units fall under the category of large scale units. The location of processing units at long distances from the producing centres is an important factor contributing to the high cost of the finished products. Even in terms of export markets, the country has concentrated on a few neighboring countries and the Middle East at the expense of European and other western markets which can yield better unit values. Institutional Problems: Poor infrastructure (in terms of storage, transport, cargo space, facilities at air/sea ports, vapour heat treatment, etc.), insufficient institutional support (credit arrangement, promotion of Indian fruits & vegetables overseas) and low research and development efforts (in terms of quality and productivity comparable to those in other producing and exporting countries) are the major constraints to the export of fresh fruits and vegetables. The institutional arrangements for (i) widening the production base for exports, (ii) efficient post-harvest processing/handling and product promotion technology, (iii) supply of raw materials at reasonable costs, (iv) provision of adequate and timely credit, (v) creation of strong infrastructure, including uninterrupted power and water supplies, and efficient transportation system, and the provision of technical support and conducive labour legislation are prerequisites for high export performance and marketing.

Sanitary and Phytosanitary measures:

Increasingly stringent food safety and agricultural health standards in industrialized countries cause major challenges for continued developing country success in international markets for high-value food products, such as fruit, vegetables, fish, meat, nuts, and spices. The literature casts sanitary and Phytosanitary (SPS) standards as a barrier to trade because some appear to be thinly disguised protectionist measures or discriminate against certain suppliers, or because of the high cost of compliance. Yet, in many cases, such standards have played a positive role, providing the catalyst and incentives for the modernization of export supply and regulatory systems and the adoption of safer and more sustainable production practices. Much of the policy discussion pertaining to SPS standards and developing country trade centers on finding ways to increase the participation of developing countries in international standard-setting bodies, or otherwise influencing the level and nature of the standards themselves. 6.0 POLICY IMPLICATIONS There is an urgent need for planned development of horticulture in the country. Land use and credit policies should be oriented to encourage the growth of fruit and vegetable commodities by inducing large scale cultivation and processing operations as well. 1. To augment the supply of vegetables, there is a need to promote the cultivation of offseason vegetables. Suitable areas need to be identified and both research and extension efforts should be intensified for this purpose. 2. Co-operatives should strive hard to enhance the bargaining power of producers and they can be a viable and potential alternative to private trade in both the domestic and export sectors. Cooperatives must encourage producers to become members through flexible policies which should allow procuring of produce without prior indent. Cooperatives need to locate more purchasing centres at the main wholesale markets and give wide publicity to their programmes. 3. The cost of transportation of raw materials (fruits and vegetables) to the processing units has been found to be high. There are also considerable losses during transit. Location of processing centres in the producing areas will help to reduce transportation costs and transit losses, consequently making the processed products cheaper and more competitive in domestic and export markets. 4. The product characteristics demanded for the export markets are quite different from those demanded for the domestic markets. Also the export markets demand high quality products. Hence there is a need to undertake research and development not only to increase productivity levels but also to develop varieties with product characteristics which are suitable for export marketing and processing. 5. Packaging is one area which requires considerable attention. Proper packaging will reduce transit losses and help to maintain the quality of the product that reaches the consumer. This will also help to cut down costs.

6. Buying habits in the markets of the developed countries are different from those in India. Branded products are preferred as brand names are associated with particular quality characteristics. Thus, proper branding of products, including fresh fruits and vegetables, especially for the export markets, needs to be encouraged. 7. Post harvest losses in fruits and vegetables are very high because of the perishable nature and short shelf life of these products. However, with the help of certain pre and post-harvest operations, which can be easily undertaken at the farm, the magnitude of these losses can be minimized. 8. Grading and sorting should be done at the production site. Quite often, proper packing and sorting of the produce is not done at the production site, which necessitates regarding and repacking during transit or at the terminal market. This results in repeated handling and in the process it causes damage to the commodity. These operations ultimately imply higher prices for the consumer and delay both in transit and dispatch.

7.0 CONCLUSION
Geographically, Indias export markets are rather limited. Major importers of Indian fresh fruits and vegetables are the Middle East countries, with only small quantities of these commodities being imported by the UK, Bangladesh and the former USSR. Similarly, the market for processed fruits is largely confined to the former USSR and to some extent to Gulf countries. Barring a few exceptions, most of the European and ASEAN markets do not figure in the list of importing markets of Indias horticultural products. A larger number of export markets could provide sustained growth for Indias exports besides yielding higher unit values. Hence efforts must be made to tap a large number of international markets in the bid to expand and diversify Indias export markets. Since there is currently limited scope for increasing the area under cultivation, it is essential to promote improved cultural and management practices to increase productivity levels. Many existing orchards are in a state of neglect and need to be rejuvenated through scientific methods and management. India has a narrow product mix for the export market as the bulk of Indian exports consist of mango, onions and mango pulp. Concerted efforts must be made to promote export of other commodities and products and to expand the export product mix. Exporting a large number of diversified products rather than relying on a few commodities will enhance export potential and hold on to the world market throughout the year. Direct contact between producers and processing factories should be encouraged. Such direct contacts between producers and processors can ensure better prices for producers.

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