Apple, by far is the most important fruit of the state. It is grown over 1,10,679 hector and annual production in 2016 was 456 metric tonnes. The total apple trade of the state is estimated at around Rs4000 crores which is close to 4 % of the total GDP of the state. Apart from this, it has not only catapulted the people on road to prosperity from the dire straits; but also completely transformed the economy of seven districts and put them way ahead on the Human Development Index compared to others. Recently, an article was published in a local daily about China's proposal for zero import duty in the free-trade pact being negotiated with 16 countries under the Regional Comprehensive Economic Partnership (RCEP) which will adversely affect the apple economy of Himachal. The pact has missed the 2017 deadline due to various reasons and is likely to be finalized by November 2018. India’s main concern under the Regional Comprehensive Economic Partnership (RCEP) is that services should also be incorporated in the pact and this pact should boost its manufacturing sector, especially Make in India. Apple farmers have expressed their apprehensions against China’s proposal and few are demanding Government interventions. Before the whole issue becomes political, we must rationally analyze the various components related to the Apple trade.
Let’s examine the demand side first
Consumption of apples in India is small in terms of capital terms and demand is sluggish in spite of rising income among the masses. The demand for apple is responsive to the changes in price and income. The average Indian household spends about 55% of its income on food and is highly sensitive to prices while buying consumer goods. And as wholesale prices of other fruits are lesser than apple in all seasons which makes it difficult for Apple to enter their food basket in spite of their rising incomes. That is why consumption growth is slow despite the rising incomes of the masses. Growth in Apple production is also very slow compared to other fruits like mango, banana, etc. The main reasons for this can be a low priority given by Government to research and extension efforts as compared to staple foods like wheat and rice.
Supply-side
Domestic apple growers face the bulk of the price risk that hampers marketing improvements. The major marketing channels for growers is to pack their crop and ship it to local mandis/ Chandigarh/Delhi by unrefrigerated truck where the consignment is then handled and sold by a commission agent. Another option growers have nowadays is the sell it at CA stores at the price fixed by these stores taking into account various parameters. Growers also have the option of paying for storage in the hope of getting a higher price at a later time. The bulk of the price risk on growers. This risk likely reduce the incentives for growers to invest in improved production, harvest, and post-harvest practices
Apple import in India
In April 1999, India removed quantitative import restrictions on apples under Open General Licence (OGL) with an import tariff of 40% which was later increased to 50%. Today India Import apples from the following countries:-
Sr. No | Country | Total % of Import | Value of Import in USD |
1 | USA | 47.9% | $104 Million |
2 | China | 19.8% | $43 Million |
3 | Chile | 10.3% | $22 Million |
4 | New Zealand | 8.9% | $19 Million |
5 | Italy | 5.4% | $12 Million |
6 | Others | 7.6% | $17 Million |
Total Exports | $217millions |
Source: Ministry of Commerce and Industry
Apart from tariff barriers, India has imposed various non-tariff barriers on the import of apples. These include Apple waxing, Phytosanitary certificate, pesticide residue regulation although Indian regulation does not specify a maximum residual level and also uses Codex Standard. U.S.A. export primarily Washington Red Delicious, with relatively small amounts of Golden Delicious and other varieties to India. Apples from Australia and New Zealand are mostly Gala or Red Delicious varieties and out of their relatively limited export surplus. Chinese apples are primarily of the Fuji variety (that comes with netting). Apple import in India has fallowed a clear seasonal pattern, with a decline during peak domestic harvest increasing during the domestic lean season. It is pertinent to mention here that the imported apples do not compete with the domestic ones due to the following reasons.
i) Imported apples are not a substitute for consumers. The reason being its higher prices and better quality. This is the result of better post-harvest practices like packaging, CA storing, etc in these countries and this, in turn, leads to higher marketing costs and margins. ii) Indian consumers liking for the color red and sweet taste also plays a role.
Implications of apple Imports in India
Domestic producers of apples hitherto have failed to exploit the opportunity to increase their earnings by improving quality to compete with the imported apples. Studies across various sectors like Banks, Insurance, retails and telecom suggests that domestic players improve and innovate once they meet competition due to liberalization.
Domestic apple growers are fetching better prices for their produce as compared to the pre-import era. So self-inflicted market reforms made it possible.
Imported apples do not compete with domestic apples as a close substitute the reason being higher price and better quality of import apples.
This high import tariff (only Turkey has higher import duty on Apple) provided no protection to the domestic apple growers.
Amendments in APMC can wonder to the local market and pricing of the apples. The sooner it’s done the better it will be.
We are living in the age of liberalization. Which means we can’t turn a blind eye to what’s happening around the world. Rather than making hue and cry about the changes, we need to do a SWOT analysis and prepare ourselves to face them. Similarly, lowering the import tariff would not spell doomsday for the local apple farmers. Rather, it will provide an opportunity for the producers to enter into the new markets and push the government to strengthen the industry as a whole. The government of China did wonders in the early Nineties to its struggling apple industry by investing in the processing industry which made china the world leader in apple juice. It’s a prime example of the nexus between capital investment and labor-intensive agricultural exports. A combination of government, private, and foreign investment built a network of apple juice processing plants that turned apples into juice concentrate that could be exported, creating a new market opportunity for China’s vast supply of apples. Ironically, the United States is the largest buyer of this juice. So let’s take advantage of this good economics and make our demand heard by doing good politics.
