Forget the clichés and chestnuts that rather grossly undervalue peanuts. Before you arrive at a preconceived notion that this must be a product, which fetches, well, peanuts,here is the clincher – global propensity for Indian peanuts has provided a very fertile pasture for exports. In a nutshell, groundnuts have come to mean an export item worth hundreds of millions of dollars
Traversing the territory of Anantapur (in Andhra Pradesh), one cannot not help being overwhelmed by a strong sense of consternation, with many villages reflecting impecunious state of livelihood. It is anything but what you expect of a nerve-centre contributing to a significant share of India’s groundnuts exports. Queries about the lack of affluence revealed that while farmers sowed, brokers reaped! While navigating the terrain, one also gets the feeling of being frozen in space, time and movement, with the landscape presenting a monotonous view of dry, arid, hilly spreads bereft of even a blade of grass, except for some cultivated stretches here and there. It does make one wonder, how would anything ever grow on such tough, unyielding topography?
When the going gets tough, the tough get going. And Anantapur’s farmers have demonstrated their resilience in weathering the ills of climatic vagaries and soil incompatibility to transform and position this district as one of the top groundnut producing regions in the country. In Anantapur, groundnut is cultivated on an area of 7.5 lakh hectare – nearly 10% of India’s total area under groundnut cultivation – helping Andhra Pradesh become the third biggest groundnut producer, after Gujarat and Tamil Nadu. The pre-dominance of groundnut as an integral and crucial part of Anantapur’s economy and livelihood can be gauged from the fact that an exclusive Agriculture Research Station (ARS) has been established at Kadiri, located at a distance of about 95 km from Anantapur. The ARS has been instrumental in developing a plethora of customised drought and disease-resistant groundnut varieties, keeping in view production aspects and market demands.
The Kadiri series – the tag attributed to the location of its genesis – specifically K6, comprising juicy and big kernels, enjoys iconic status due to its immense popularity in both export and domestic markets. Its prominence is evident from a riveting bronze replica of it, positioned conspicuously at the ARS. “The Kadiri brands have become a preferred choice across the world, with several Indian states taking up its cultivation. Even China, which is one of the largest producers of groundnuts, have sourced them from India,”
Strangely, despite prolific production, pricing parameters and markets for groundnuts are barely structured. There are only few small time processing units in the district, which means hardly any direct exports takes place from here. Most of the milling and processing is done in Chelekere in Karnataka, from where groundnuts are channelled to export and domestic markets. “Traders here do not have the financial capacity to enter this business. So, traders, with deep pockets, from Tamil Nadu and Karnataka, procure the produce through local brokers,”
Not surprisingly, farmers in Anantapur resort to distress sales, notwithstanding the market demand. “Traders and brokers indulge in exploitative methods and deception like under-weighing and underpricing the produce,” Murugesan reveals. The pathetic plight of local farmers is symptomatic of a blight that has been plaguing the system with no remedies on offer from the establishment, except crocodile tears. But, anyway, the mindset of the bureaucracy and the ruling clique have always proved to be a very hard nut to crack. Questions Dr. Naik resentfully, “When manufacturers are allowed to fix a price on their products, why not farmers?”
The desperation of the farmers emanates from apprehensions and insecurities about the fate of their crop. While on one hand, the scarcity and unpredictability of monsoon spells doom and reduce the farmers to tears quite often, on the other hand, exporters laugh all the way to the bank. Such gross inequity is shocking, to put it euphemistically.
To substantiate this point, let us analyse the profit differential between farmers and exporters. The average per hectare groundnut output in Anantapur varies between 2 MT to 2.5 MT, depending on climatic and other factors. At the farm level, groundnuts are sold in standardised 42 kg bags, with the price tag on each bag hovering between Rs.1,500 and Rs.2,000, i.e. approximately Rs.35 to 48 per kg. But after processing and grading, the groundnuts are exported at FOB prices ranging between Rs.64 to Rs.80 per kg. Given that the per hectare investment on cropping, including all inputs, tractor hire and labour, is approximately Rs.25,000-30,000, means even at the higher yield of 2.5 MT per hectare and the higher price of Rs.47 per kg, a farmer earns about Rs.87,500 per hectare. On the other hand, an exporter, assuming he/she exports 2.5 MT, earns a profit of Rs.57,500 per hectare, after accounting for an average cost of Rs.10 involved in per kg processing of groundnut, by just being a facilitator! That a farmer’s expenses don’t include the cost of land, while an exporter also gets duty drawback of 1%, makes the scenario even more bizarre.
The irony of India’s groundnut trade is that the country has ended up becoming an exporter of low-margin raw materials and not high margin value-added products. This, not only because we don’t have proper processing facilities, but also because the produce is not enough to cater to both the segments. In fact, it won’t be an exaggeration to say that not having proper processing facilities is also a function of inadequate production. But why don’t we produce enough groundnuts, despite being the World No.1 in area under cultivation? Simple. India’s per acre yield is one of the lowest in the world!
Despite such impediments, there is no reason why India can’t produce enough to satiate both global, as well as local demand. This, particularly since, there is increased focus on developing high yielding varieties in recent years. For example, Gujarat – the biggest producer, with a share of 33.3% – has recently developed a new variety – GJG-31 – that can improve the yield by 20x! Apart from this, many other varieties, with increased protein and sugar soluble content and size values, like the Kadiri series, are already making inroads into the market.
Sea of irony
Most of the global demand for groundnuts is from the confectionery and food processing industries. And since Indian groundnuts are high in protein content and low in oil content, they are a favourite in the international market, particularly since not many countries consume groundnut oil. Inexplicably though, in India, there does not seem to be much focus on directly exporting value-added groundnut confectionery products, which offer much higher margins than kernels. Just how much more lucrative the processed groundnuts market is can be gauged from the fact that while both processed groundnuts (HS Code 200811) and raw groundnuts (HS Code 1202) are roughly $2.5 billion markets in terms of value, the former is less than a third of the latter in terms of volume. This means an exporter of just 1 kg of processed groundnuts earns more than an exporter of 3 kg of raw groundnuts. Reality check: In FY2014, while India exported 5.1 lakh MT of raw groundnuts, it exported just 0.8 lakh MT of processed groundnuts!
“There is a large demand for value-added groundnut based products in the global market. This market can be tapped only if Government of India promotes their exports and provides a level playing field with other competing countries such as China and Argentina, which provide large incentives to their industries.” Not that issues with the Indian groundnut industry end here. Quality concerns like presence of high levels of aflatoxins and infestations are also afflicting the Indian groundnut market dynamics. There have been several instances of Indian groundnuts being rejected in overseas markets – the most recent being the case of Vietnam suspending an Indian groundnut consignment that had Olivier bugs.
If this doesn’t indicate nonchalance and indifference by government agencies, nothing does.
"India has lost the more lucrative processed groundnuts market to China"
Spending a couple of days in Anantapur, one cannot but feel it’s high time the government woke up to ground realities and gave the Indian groundnut industry its due. Rational farm pricing policies to ensure security to the cultivators during times of distress and climatic vagaries could be the first step. This would facilitate and motivate them to use high quality seeds and inputs, which would then inevitably translate into high quality output. How often have you heard this? Maybe, never. But the government has. And many times over!