Green isn't white: Production of milk, vegetables affected by seasonality

Operation Greens is quite among the crown jewels of the Budget 2018, vigorously touted by those who prepared it as farmer-friendly or rural-focussed. It seeks to do for horticulture — specifically fresh tomatoes, onions, and potatoes — what Operation Flood did for dairying. Grower co-operatives and appropriate processing are expected to reduce seasonal vegetable price volatility just as they did for milk. As a result, animal husbandry received an enormous boost.  Its value of output is now higher than that of paddy and wheat put together. India, with over 160 million tonnes, is now the world’s largest milk producer.

The new Budget thrust may be lauded for its catholicity in attempting to transfer the experience of the white commodity to green ones, but little else. To begin with, despite all the shouting from the rooftops, it merits an allocation of Rs 5 billion.  That needs to be seen in the context of the three commodities together accounting for 90 million tonnes of output annually or a third of the fruit and vegetable production, which cost at least Rs 500 billion to produce. This is of a piece with former finance minister Pranab Mukherjee’s practice of token round-figure allocations to myriad schemes and duly followed by the present finance minister in the last three Budgets.

Meagre commitment of resources is the least of the problems with Operation Greens. Its very concept betrays a lack of understanding what worked for dairying.  The government, it seems, has bought a bill of goods sold by a well-known economist, for long a part of the government support system.

Both milk and vegetables face a steady demand, but their production is affected by seasonality. The consequent spikes in their prices hurt both the producer and the consumer. For dairying, processing provided the means to overcome this problem.  The flush season surplus production is processed into milk powder and milk fat (butter). They are stored and recombined to form liquid milk to augment lean season supplies. Producers and consumers thus enjoy stable prices the year round.  That win-win situation acts as a powerful incentive for the producer. Operation Flood adopted multi-tier co-operatives as strategic organisations. Private enterprise has done the same in India and elsewhere in the world. Nestlé dominates the milk scene in Punjab as does Fonterra in New Zealand.  

The lynchpin of growth in dairying is processing, not the organisation. Processed milk constituents can be reconstituted into liquid milk, but the dehydrated onion flakes cannot become fresh onions, nor tomato puree ever become fresh tomatoes.  The Indian consumer demand is mainly for fresh produce, not its processed product. So the milk commodity experience of evening out prices cannot be replicated for vegetables, a fundamental point that has escaped the learned economist-champion of the scheme, and now, alas, even the Government of India.

The Budget has once again sung praises of food processing and allocated it Rs 14 billion. The fact remains, though, that ever since the government began to recognise the role of the industry and formed a ministry for it as far back as 1987, its performance in either boosting farm incomes or consumer satisfaction has been marginal at best. Two reasons explain this. First, the domestic demand for processed horticulture products — juices, vegetable preparations, etc — is minuscule even after urban Indian rapidly changed in the last three decades.  Second, and more importantly, organised processing becomes a non-starter by the “feast-or-famine” syndrome affecting its raw material supplies. Contract farming has been ineffective, as producers renege on their commitments to supply at fixed prices if they are lower than what the fresh produce market offers. No industry can function on an on-again-off-again basis. So we continue to process a tiny proportion, under 2 per cent of the total output, at best.

Improved marketing infrastructure has also limitations of cost. A senior retail chain executive estimated the cost of maintaining a cold chain from farm to fork at nine times the cost of the fresh produce, pushing retail prices to unaffordable levels.  The presence of organised retail in horticulture is negligible even today, not exceeding a million tonnes, out of a total volume of about 300 million tonnes a year.

The fact that fruit and vegetable production has made spectacular gains in the last decade despite these problems indicates its real profitability for the growers.  In a good year, vegetable producers can earn Rs 100,000 or more per hectare in a 10 to 12 week season. And two or more crops a year are a distinct possibility. Like sugarcane growers, market gardeners have learnt to live with market risks.

That does not mean that all is fine with vegetable growing. Market intelligence, better infrastructure, and superior varieties would all help. But this cannot be done by simply transferring experiences of an unrelated commodity system. National Dairy Development Board, the agency that designed and implemented Operation Flood found to its chagrin that the same strategy did not quite work with oilseeds. Operation Greens represents not just colour blindness, but also an exercise in mindlessness, yielding merely a nice acronym, TOP, much appreciated by the powers-that-be. But even that is not an undiluted pleasure, as the convenor of the Congress social media cell quickly demonstrated by using its anagram, POT!

The writer is the founder-director of Institute of Rural Management, Anand and was an advisor to National Dairy Development Board