By Nantoo Banerjee
This winter has been most severe on the country’s teeming poor millions not because of any rapid fall in temperature, but because of an unprecedented food price inflation. This is despite the fact that India’s food and farm production are steadily going up. For the first time, the country’s annual food production is systematically outstripping the population growth. Yet, food shortage continues. Official data put India as one of the world’s top farm producers. Naturally, the question is: who is eating away the poor man’s food? What is contributing to food shortage leading to massive spurt in food and vegetable prices in the retail market?
Paradoxically, it is the country’s fast growing rich and middle-class that are increasingly emerging as the poor man’s food snatcher. Instead of farm-to-mouth, more and more agri-products are being diverted to farm-to-factory consumption. The latter is entering the market as processed products – right from underground water to grains, cereals, vegetables such as potatoes, onions, green peas, cauliflower, gourds, cabbage, brinjal, etc. Leading the pack of food processors are global brands like Coke, Pepsi, Lay, Pringle, Bourn Vita, Horlicks, Maggie, Nutrela, Complan, McCain wedges and French fries, McVities and Oreo, to name a few.
In fact, all leading MNC food processors are present in India’s $14.5 billion processed food market. The domestic market has shown an exponential 9 per cent annual growth. This is over 50 per cent more than growth of farm products in the last five years during which prices of some of the packaged foods have gone up by 100 to 500 per cent. In the ready-to-fry-and-serve segment, even packaged frozen chapattis, paranthas, dal and veggie kababs are available in the market. These companies are also known to waste huge amounts of food in processing. For instance, beverage producers waste more water in washing bottles than what they use in filling them. Similar instances can be cited for other products such as chips, ketchups, biscuits and heath and energy drinks. The companies either don’t bother about food wastage or keep cost records of what goes as wastage and what is genuinely consumed. Lots of foods are wasted due to poor infrastructure, transport and storage facility, including cold chain. There is no reliable cost benefit analysis to factor in the ultimate pricing of either processed foods or farm products in the retail market.
Name a leading foreign (FDI) investor which is absent in the processed foods sector. There is practically none, especially from the western hemisphere. The latest list has them all, including Kraft, Mars, Del Monte, Kelloggs, Kargill, Hershey, Coca Cola and PepsiCo, all from the United States, Nestle (Switzerland), McCain (Canada), Danone (France), Ferrero and Perfetti (Italy) and Unilever (Anglo-Dutch). Even the Japanese giant, Kagome could not resist the temptation of the Indian market. Britannia and Parle lead the local pack, mostly MSMEs. Some like Coca Cola and PepsiCo convert free ground water into big bucks from packaged drinking water and beverages. A litre of packaged drinking water costs Rs.18 and 500ml Rs.10. A small packet of 400g biscuit could be priced in excess of Rs.100. Obviously, these products are not meant for some 400 million urban or rural poor under the former Planning Commission’s definition or agricultural wage earners. The increasing diversion of food output from ‘farm-to-mouth’ to ‘farm-to-factory’ to feed the 300-million rich and middle class is putting pressure on their stomach. Plus a $10-billion worth annual farm products export is further fuelling the prices of food products in the retail market. The FDI and export have taken precedence over the common man’s hungry stomach.
It is unfashionable to the rich and upper class to talk about high retail food prices in public, except before state or Lok Sabha elections. Aam Admi Party’s Arvind Kejriwal successfully made it a big issue before Delhi election to draw support of the city’s million of poor voters who are more interested in the prices of potato, tomato, onion, chillies and green peas than the FDI inflow data. The common man has no clue about where do those tones of cauliflower, potato, onion, peas, tomato, gourd of all varieties, ginger, garlic, brinjal, banana, turmeric, cumin, etc. raised from farms disappear. While official statistics have been glorifying India’s startling achievements in the agriculture and food sectors, little is spoken about why food articles are becoming increasingly out of the common man’s reach. As a matter of record, India is the world’s largest producer of bananas, mangoes, papayas, chickpea, ginger, okra, buffalo and goat milk and buffalo meat. The country is the world’s second highest producer of rice, wheat, sugarcane, potatoes, garlic, groundnut (with shells), dry onion, green pea, pumpkin, gourds, cauliflower, tea, tomatoes, lentils, wheat and cow milk.
India’s gross cropped area is close to 200 Million hectares, with a cropping intensity of 140 per cent. The net irrigated area is 89.9 Million hectares. There are a total of 127 agro-climatic zones identified in India. It is true that proximity to petro-rich desert countries in West Asia and strategic geographic location connecting several of these countries through sea routes provide a special advantage to Indian traders over others like China to export both farm products and processed foods to the region. Incidentally, neighbouring China is the world’s largest grower of farm products, which are also among the cheapest.
Over 42 mega food parks are being set up in public-private partnership at an investment of Rs. 98 Billion. These parks have around 1200 developed plots with basic infrastructure enabled that entrepreneurs can lease for the setting up of food processing and ancillary units. The cost of skilled manpower is relatively low as compared to other countries. Attractive fiscal incentives are given by central and state governments by way of capital subsidies, tax rebates, depreciation benefits, as well as reduced custom and excise duties for processed food and machinery. Over 120 cold chain projects are coming up to develop and strengthen supply chain infrastructure. The impact of these measures will further dry up retail farm supplies and push up the prices of fresh and unpacked food articles consumed by the poor and the common man. The coming years may witness continuing food price inflation unless the government regulates the industry and trade, make proper cost analysis, prevent food wastage to ensure that there is enough affordable farm products in the retail market as China and India’s south-east Asian neighbours do. (IPA Service)