Organic farming beats recession
Kochi, Source : The Financial Express

Export of organic spices to Europe is seen withstanding the recessionary pressures and growing, while exports to US market have slowed a bit, traders said.

“Turning organic seems to have helped spice farmers resist the recessionary pressure in pepper, coffee and cashew, while cocoa has tanked a little due to lower demand for chocolates,” Shiny George of Indian Organic Farmers’ Producer Company Ltd ( IOFPCL) told FE.

Her organisation, which exports nearly 100 tonne of cocoa to Switzerland-based chocolate manufacturer Chocolate Stella SA , is under pressure to settle for a value that is nearly 5-8% lower than the contract entered in 2007-08. IOFPCL is farmers’ collective formed in 2004 to promote the cultivation and export of organic produce. Shiny foresees more pressure from buyers on price, while the volume could grow given the small size of the market. “The most interesting part is that if we can show an improvement in quality, the buyers are willing to pay more even in a recessionary market,” Shiny added. Coffee and cashew exports to Europe, particularly Germany, is growing and offer good scope for Indian farmers, she said.

Thomas Chacko of Peermade Development Society feels that the market for organic spices would continue to grow at 15% annually. “The per capita consumption of spices is very nominal to be affected by a slowdown. It will continue to grow and the prices will move according to the quality of the commodity,” he said. Cocoa is under pressure due to higher per capita consumption when compared to spices, he added. However, he concurs that the US market has been impacted by the recession and buyers are seen negotiating hard. Realisation from organic pepper is 40-50% above the spot market rate for ordinary pepper and combined with the nominal farming cost, farmers are better equipped to deal with the slowdown in demand, traders said.

“Organic farmers benefit from lower production cost and assured returns. Ordinary pepper goes through five-seven rounds of pesticide and fertiliser spraying,” PJ Chackochan, a member of ‘Organic Wayanad’, a farmer’s collective in the Wayanad district said. While the self-help groups and NGOs involved in promoting organic farming manage to market the small volume, things may turn difficult when volumes increase, experts report. Spices Board expects to export organic spices worth Rs 240-260 crore by the year 2012. “The process of consultations will go on till April 20, after which the suggestions will be compiled. Thereafter inter-ministerial consultations will begin. The commerce ministry wants to be ready with the recommendations when the new government is in place,” the official added.

Before the current policy was released, foreign trade procedures were spelt out through an “export-import policy”. This mechanism was prevalent from 1992 to 2004. The UPA government replaced this with the current five-year trade policy to bring stability and incorporate sector-specific export promotion measures. Exporters have been demanding a host of benefits in the new policy, including continuation of the Duty Entitlement Passbook Scheme, which was extended till further notice by the commerce ministry. This scheme, which is not compliant with world trade rules, reimburses indirect tax levied on inputs used by exporters.

Representatives of the Federation of Indian Chambers of Commerce and Industry (Ficci), who met DGFT officials today, demanded customised schemes to help exporters tide over the liquidity crisis, reduce transaction time and other costs related to foreign trade. Pointing out that reimbursement of Value Added Tax levied on exporters took about 12 to 15 months, Ficci demanded refund of the Fringe Benefit Tax and Service tax.