Interview by Editor Agribusiness & Food Processing Magazine

Interview by Editor, Agribusiness and Food Processing Magazine, Media Today Group on the occasion of Receiving Award

Appeared in Agribusiness and Food Processing Magazine, July'2012 Issue

      First of all, Media Today Group congratulates you for winning the Special Award from Mr Pranab Mukherjee for your contribution to the advancement of commodity markets in the country…... Our first question is about your illustrious, experience-rich, and two-decade long journey from CFTRI to now as Chief Operating Officer (COO) with large industrial house. How do you feel about such a rewarding career and way forward for agriculture space in India?

At the outset, let me convey my thanks and heartiest gratitude to my teachers, parents, family, friends and well-wishers for their constant support and guidance. They all provided me intellectual inputs, encouragement and moral support to pursue career in this non-glamorous sector of Indian economy. Whenever I undertook challenging assignments and tasks, they were instrumental in enhancing my knowledge, skills and capabilities. It was tough with many challenges but enriching and satisfying journey. This recognition gives confidence that the path was right and give encouragement to do more and because still long way to go.

Since 1984, I am associated with agribusiness universe in various capacities. Started by journey as student and performed my responsibility as Extension Worker, Production Executive, Sales Engineer, Head of Departments and Head of Organization. I worked with NGOs, Cooperative sector, Government Policy Making Bodies, Industry bodies, Consumer bodies, Farmer Groups, Private Sector Firms and International Development Agencies like UN Bodies, Large Multinational Organizations in India and aboard.

It was clear from the day one that business and market is a dynamic place, one must constantly upgrade knowledge base and skills to remain relevant with changing times. I was continuously acquiring qualifications in technology, law, various aspects of management like human resources management, finance management, economics and policy making from some of the best institutes in the country.

I also travelled to every state of India and extensively around the world to have first-hand experience of ground reality in every aspect of agribusinesses and food world.

After spending more than 25 years in agribusinesses in various capacities, it is clear that agriculture and agribusiness needs extra dedication and is very critical for political and social stability in India.

As a country with very high population density and poor agriculture productivity, it will always be challenging to ensure food security to masses and employment to unskilled workforce. Unless we develop an action plan at state level and district level to address these two biggest challenges of India, the political and social stability of India cannot be ensured for too long.

Unfortunately, agriculture and agribusinesses are not getting due attention in terms of technology intervention and financial and intellectual resources to create infrastructure and human resource suitable for agriculture and agribusinesses. This will create serious problem with growing population and shrinking nutrition availability.  We are running out of time because time lag between planning and execution will take three to five years and by then this will complicate the situation on ground.

I wish more and more media houses, private sector and policy execution bodies will devote more time and resources to address the economic, social, political and foreign policy aspects of agriculture, food security and agribusiness space because this sector will decide the peace and prosperity of India.

I must thank Zee Group for organizing this award for recognizing commodities and agribusiness space and brought this vital economic and social space in public domain. They have dedicated very informative and contemporary show called “Mandi Live” for agri-food-commodity space.

      As you know there have been a lot of debates about the intentions of the players involved in futures markets, as it is said that farmers are not getting any benefit from this trading. For instance, India produces 10 Kg of Soya, but the futures trading are done for 1000 kg or more. The profits are pocketed by investors, traders and middlemen. There is some lacuna in the system as farmers remain poor and needy despite many noble schemes and initiatives. Solvent Extractors Association of India (SEA) has also recently made a representation to the Government about the black marketing of mustard oil through futures markets, and sought total ban of this anti-farmer activity. As a commodity expert, what is your frank opinion about all this?

We are adding more than one million populations every month in this country. Land under agriculture for food production is shrinking. Per capita availability of food is going down on daily basis. Commodity prices are very closely related to demand – supply situation. We are importing 60% of edible oil and pulses requirement from international market. Dollar is becoming expensive it means imported edible oils; pulses and fuel will become expensive. This will have cascading effect. Local transportation and labour cost is going up. Interest cost on bank loans are going up. Under this situation what one should expect? Any sensible and logical thinker will say prices have to go up. This is what is also reflected in futures market due to price discovery mechanism. Unless we improve productivity and per capita food availability in the country it will not be possible to control food inflation. High inflation of food will lead to serious social and political problems.

Every farmer wants better price for his crop, every consumer want food at low cost. This is not possible without workable compromise. This compromise is adding to subsidy burden. The only way to address this issue is technology intervention in production and post-production activities.

Why future transactions are in multiple times of actual production and what is the way forward to check inflation?

Future trading is not always physical transaction, very often it is paper transaction. Quantum of transaction in future trading shows how many times people do trading on exchange and change their positions on futures exchanges. More the transactions, more is the insecurity about the future. Every one changes its position to minimize risks in the markets due to unpredictable behavior of the markets and policy environment. It means frequent transactions means people are covering their risks and not sure about the future of their positions and future of business environment. In stable and predictable environment such transactions will be less.

Now, if prices are going down against fundament demand – supply situation it only indicates there are external factors playing some role or something abnormal in Indian food market or there is either political or administrative interference in the market. These activities hide or distort correct market signals. This also indicates the potential risks in operation of the market and the will create apprehension in the minds of investors and will discourage investment in agri-food space by investors.

In order to control the extreme volatility in the market, Government of India can develop a safeguard mechanism in line with WTO Agreements and develop similar safeguard mechanisms under Essential Commodity Act. They must be transparent, predictable and fair. Arbitrary decision making based on political compulsions and consideration will destroy the fair market and will discourage investments in agri-food space.

In international forums, as country, we want world to become free and fair market for all. We have signed many international treaties in this regard like WTO, SAARC, ASEAN, etc. On the other hand, within India we are not able to integrate all states into one common market; every state has its own taxation policy and documentation requirements. We are not able to bring all states on common platform of one single market with common rules and regulations called Indian Common Market. Domestic regulatory and administrative issues are adding to transaction cost. Very often imported foods are becoming cheaper. These imported foods are adding to current account deficit and also hurting farmers’ interest.

Similarly, on investment front, on one hand government want private investment in areas like godowns and warehouses and on the other had they impose restrictions on quantities to be stored under Essential Commodity Act without any predictable and fair formula. How any investor will be able to recover investment made in such situation. That is why large players in private sector are not very excited about investing in warehouses and godowns. The cost of Wheat and paddy rotting on road sides is much more than revenue collected due to these policy tools. There must be mechanism to address such situations and encourage investments.

It is high time we should not only review the all regulations and their implication on transaction costs and inflation. Regulations governing Futures Market and Spot markets should be reviewed with one agenda to bring more players and competition into the systems. Bihar has abolished APMC Act and now registering maximum growth in agriculture space. Why other states are not keen?

Both types of market need modernization and participation of all players without any entry or exit barriers. This will lead to perfect competition and will discover true prices for the commodities. These markets will send correct signals to policy makers about demand-supply situation in India and its implication of inflation and import bills. This will also tell private investors where to invest for what activity. We have to think long term and avoid temptation of short term comfort and revenue generation.

 

    What can and should be done to better commodity markets, and any mechanism to better the condition of farmers?

Please by no means under estimate commercial sense of average farmer. They may not be operating at large scale but they know how to bargain better deals. With mobile technology and penetration of mass media options, farmers is well conversed with the price movements. In remote villages, now-a-day’s farmers do refer prices of commodity of their interest and also track price movements. Visit to any mandi and interaction with any farmer whose crop is traded on future market will give you an idea how much he knows about commodity markets, what should be the price for his crop and from where he gets the information.

The first thing he has learned is how to ask for better price. The information is available to him, but he may not be able to fully utilize the information for his advantage because of his poor bargaining power due to lack of support systems in mandies like storage facilities, transportation facilities, cleaning facilities. Cost of transaction in mandies is very high for average farmers because of small quantity they handle. In order to save his cost of transaction, he prefers to sell his goods on “as-it-is-where-it-is-basis”. In well equipment mandies farmers are in winning situation. Please visit Unjha mandi or Amlsad mandi in Gujarat; you will see what collective bargaining power of farmers can do. It should be a MUST visit for all agribusiness professionals and well-wishers of farmers.

Commodity markets are evolving with time. Better rules and regulations, better understanding of the systems, more market players including farmers, better working environment and proper enforcement of various regulatory provisions will make markets better and more reliable. 

How farmers can take benefit of futures market?

As far as farmers are concerned, one must appreciate that individual farmer like retail investors in capital market is not always fully equipped to take the benefit of market dynamics. In capital market, the concept of Mutual Fund is helping retail investors. There is a need to have something similar option for farmers’ collective strength in futures market. Under practical situation, we should encourage farmers’ cooperatives to play effective role on behalf of the farmers. Amul, IFFCO, KRIBCO, etc. are very good examples where farmers collective bargaining has made big difference and they are leading organization today.  Collective bargaining power of farmers will act as major force and benefits to farmers may multiply. They will be able to face the strong market forces and at the same time they will be able to utilize professional services which are currently not available to individual farmer.

 

    FSS Act has come to protect public health. But small and marginalized Food Business Operators (FBOs) like Mithaiwalas and chaatwalas are apprehensive about the rules that might not only stop them from using certain ingredients, resulting in taste loss and poor sales, but also may shut their shops. Licensing is another big issue. As a food technocrat, what is your opinion to protect the interests of such small players as well as maintaining health standards?

Please suggest, what is the alternate to safe food? Food Safety and Standards Act is instituted to protect public health from unsafe foods. It is the fundamental right of every citizen to have access to safe food. It is the duty of the government to ensure safe food.

As a country we have to decide what is more important, safe food to eat to protect public health or survival of unhygienic shop on road side and employment and earning of shop owners? One shop can make hundreds of people sick. If our Parliament has passed this law it means our policy makers and peoples’ representatives want safe food for masses.

Why every change is taken as negative development by various stakeholders? Why, as a society, we don’t want to change for better and safer future? Why affected parties feel their commercial interest is more important than public health? How much it cost to ensure clean water, clean utensils and clean and proper storage of ingredients used in mithai shops and namkeen shops? Consumer is willing to pay for clean and safe food.  Look around, you will find Hygienic shops do better business then dirty shops. It means to provide safe and hygienic food is always better business strategy. No one wants unsafe food at discount, because no one wants to be sick, not even those who oppose new safe food laws. Safe food never reduces business and shut shops. It is a mindset issue.

It is very well known fact that about 80% diseases are due to bad water and bad food. Most of the small scale food operators use traditional skills and knowledge in making food items which is typically traditional concepts of indigenous fast foods of India like mithais and namkeens.  If prepared hygienically, many of them are better in nutrition in comparison to their western counter parts.

Unfortunately, in traditional shops, hygiene is not important parameter. The major focus is cost i.e. profit or taste i.e. sales and not food safety. Many of these shopkeepers do use ingredients to keep cost low and taste good in mind like synthetic non-food grade colours, excessive artificial flavors and sweeteners, water from unhygienic source, utensils are washed with unclean water, leftover food is reprocessed or frying in polymerized and oxidized oils to save cost, workers’ personal hygiene is never considered. Location can be on drainage systems. These are just few of the examples.

Unhygienic foods are biggest concern for public health. Have you ever seen any statistics indicating food positing cases in India or sickness due to bad food in India? You will not get these figures because hospitals and doctors don’t maintain such records. FAO report says 30% population in developed world suffers due to bad food. Can you imagine what will be the situation in developing country like urban India and under-developed rural country like Bharat?

Licensing is required basically to ensure that there should be minimum food safety requirements with every food business operator. After all Government is accountable for public health and there must have check on who is supplying what, to consumers.

In America, there is Bioterrorism Prevention and Preparedness Act, because food can be misused and can be infected to create public health crisis of unpredictable level. Every country is changing their laws to save public from bad and contaminated food. If we are progressing in that direction, why so much opposition.

I agree and fully support that there must be a mechanism which is fast, fair and hassle free. There must be space and level playing field for Indian traditional food preparations. Any delay at any level only brings bad business practices into play. All the license fees collected should be used to improve the system, infrastructure like testing laboratories and to train the small players and if possible support them by training and provide facilitation services to ensure food safety and hygiene in their operations.

There is no alternative to safe food and food safety. Employment and economic considerations can be addressed within food safety parameters. Major Challenge is only Mindset and desire to change.  

What is the way forward for mithai and namkeen shops?

If there are any items or ingredient which mithai or namkeen shops association wants to add to food, if not permitted, they can make representation to FSSAI with the justification for use in food items. If required, under Right to information they can ask on what basis Food safety Authority has rejected their demand. FSSAI will provide the decision of the committee and with relevant facts. So I don’t think it is such a big issue. But yes, if anything which is used by FBO, which is unsafe, even if it is adding taste or look of the product it must be stopped and banned. Public health and safety is more important than taste and cost. No civilized society will ever support unsafe food and Courts will stop sale of such products, even if authority will permit such products. So, best option is focus of safe and good food.

Disclaimer:

Views are personal. Author has no mandate to represent any association or organization on these matters.