Barriers to India Agri & Processed Food Exports Include Food Quality
India was the ninth-largest exporter of agricultural products among World Trade Organization (WTO) member countries in the year 2015, a decline from the seventh position in the year 2014. While all of the major exporters of agricultural products experienced a decline in exports in the year 2015, India recorded the most significant fall (of around 19 per cent from the previous year) and China had the smallest decline (-2%).
A careful analysis of the nations' agriculture exports shows that the country has been facing both tariff and non-tariff barriers to agriculture product exports. Among the non-tariff barriers, food quality, safety and health-related issues have been a key barrier to the nations' agriculture exports in key markets such as the United States (US) and the European Union (EU). The data from the United States Food and Drug Administration (USFDA) shows that it rejected more imports from India than from any other country in the first five months of the year 2015. Some of the commodities that were rejected include fried and baked snacks, fresh vegetables (such as okra), fishery products (such as shrimp and prawns), instant noodles (exported by Nestle India Ltd), Basmati rice and Indian spices1.
A number of Indian snacks of reputed companies such as Haldiram's Food International Ltd were also stopped at the entry in 2015 due to the presence of pesticides that were banned in the US but not in India.2 Discussion with global multinationals show that they cannot source products like fresh green beans from India, which is a key ingredient for instant noodles, as it faces rejection in the US. They are now importing the beans from the US, processing the noodles in India and exporting.
Focussing on the EU, there were 172 notifications against Indian peanut and peanut products in the EU’s Rapid Alert System for Food and Feed (RASFF) portal between March 8, 2004, and April 30, 2016. In May 2014, the EU banned exports of fresh mangoes from India due to the presence of fruit flies after it had raised the issue for several years and no visible action was taken since the year 2010. When India took the corrective action, the EU lifted the ban in March 2015. The EU continues to ban a number of Indian vegetables including eggplant. The result of such bans and rejections has been a huge loss of revenue to exporters and farmers. This is more of a concern as India is losing its market share in key markets such as the US and the EU to exporters from other developing countries such as Kenya, Brazil and Uganda.
Fertilisers & pesticides
One of the reasons for the rejections in developed country markets is the excessive use of chemical fertilisers and pesticides at the farm level and lack of Good Agriculture Practices (GAP). Specifically, at present 67 pesticides that have been banned in the US, the EU and other nations are still in use in India.3
Examples of such pesticides are carbosulfan, chlorpyriphos, endosulfan, and quinalphos. If the farmers use these pesticides, their produce in fresh or processed form will have traces of such chemicals and will face rejection in countries such as the US, the EU and Japan.
Second, the products may get contaminated during storage, processing or while packaging. For example, in the case of peanuts there is a likelihood of aflatoxin contamination in the supply chain for which peanut-based products like kaju barfi and chikki are getting rejected. High aflatoxin content can lead to cancer.
Third, the Indian nodal agency for food safety, Food Safety and Standards Authority of India (FSSAI), can regulate domestic market and imports but cannot regulate exports and does not have any jurisdiction over farmers. Thus, FSSAI in India has no role in ensuring traceability from the farm to the final consumer.
Unlike India, in most developed countries the food safety authority has complete control over farmers, exports, imports and domestic market and they follow a uniform food safety standard for exports and domestic market. In India, there is a dual standard - exports have to adhere to the importing country standards, and these standards may vary depending on the importing country while imports and the domestic market have to adhere to the standards specified by the FSSAI. The FSSAI is trying to peg its standards with the Codex Alimentarius unlike the US and the EU which have a more rigid standard than the Codex Alimentarius. The lack of any role of FSSAI in exports and farm level contamination has been one of the key reasons for repeated rejections.
Focussing on the key differences in food safety standard implementation in India and developed countries, the food safety authority and agriculture departments in most developed countries have laid down clear guidelines for various categories of products (such as organic products). The FSSAI is yet to have guidelines for some product categories such as organic products.
Fourth, the export related regulations and inspection in India are highly complicated. The Export Inspection Council (EIC) of India under the department of commerce is a key regulatory body for pre-export inspection and certification of certain products such as fish and fishery products, animal casings, feed additives and premixture, Basmati rice, crushed bones Gelatin ossein, peanut and peanut products. A health certificate is needed from the EIC to export products such as Basmati rice and peanuts and peanut products to the EU.
In spite of the health certificates, the products are facing issues in the importing destination, which raises question on the inspection process itself. Further, Agricultural and Processed Food Products Export Development Authority (APEDA), which was set up to promote agriculture exports under the department of commerce, has recently taken up the role to set up a traceability system known as the TraceNet for various products such as grapes, mangoes and peanuts. It is also the nodal agency for setting up the standard for organic food exports.
Further, Spices Board of India looks after the promotion, quality control and regulation of Indian spice exports. Its approval is needed for export of certain spices such as turmeric (haldi). The directorate of plant protection, quarantine and storage ensures that the product is free from any pest or insect. Thus, there are multiple agencies looking after food quality and safety for the purpose of exports, while there is no nodal agency monitoring the entire food export supply chain. This makes it difficult to make one agency accountable for the contamination and lower quality products. Ideally, there is no need for EIC and FSSAI to have been given the responsibility of inspecting exports.
Fifth, India needs to improve its domestic standards to exports. The Indian domestic market for food products is large and growing. India has food inflation unlike countries such as the United Kingdom, which has food deflation. If product of inferior quality standards can be sold in the domestic market at high prices, there is less incentive for processors and farmers to invest in quality.
Sixth, ensuring higher standards and safe food does not always mean higher cost. In fact, organic inputs are cheaper than chemical inputs. But the shift away from chemical inputs requires right policies.
To conclude, the government should take some corrective actions immediately. The pesticides and chemicals that are banned in developed countries should be phased out and not subsidised. State agriculture department should work with agriculture institutes and universities to train farmers to adopt GAP. The Central government should have a comprehensive policy for safe agriculture and promote organic farming with clearly laying out their vision plan. The government should provide subsidies on green inputs and organic farming practices, and especially, the cost of third-party certification should be subsidised. There is need for training of exporters, small and medium processors and other supply chain agents through programmes such as the India-EU Capacity-building Initiative for Trade and Development (CITD) project to upgrade their knowledge about the requirements of the importing countries.
It is important for the government to investigate how other developing countries such as Kenya, Brazil, Uganda and South Africa are able to meet the requirements of developed countries. They have opened their markets to the retailers from developed countries and these retail chains are working closely with the farmers and are sourcing directly from the farmers. In the case of India, hardly any global retail chain is sourcing food products directly from India. Countries such as Kenya and Brazil have some large farms in which traceability back to these farms can be easily established unlike India. Large farms also ensure uniform product quality. While it may be difficult to have large farm sizes in India, farmers are already working in clusters in many projects, including organic projects.
At the processing level, countries such as Malaysia emphasise on bringing the food standard at par with global standard through their food parks. In the halal food parks of Malaysia, international standards are monitored by Halal Industry Development Corporation (HDC) which laid down the guidelines for the HALMAS status - an accreditation given to Halal Park operators as a mark of excellence indicating that the products are of the highest quality. Companies that are eligible under the Halal Malaysia (HALMAS) guidelines receive various incentives such as full tax exemptions of statutory income for 10 years. Thus, by linking incentives to adherence of global standards, Malaysia has been able to implement the standards. India needs to link its export incentives with quality and food safety standards. If not, our exports will continue to face rejection.