RSD/11th Plan/04-05-07 1

WTO AND AGRICULTURAL POLICY IN KARNATAKA

11th Plan Imperatives

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Why Get in to International Trade? Trends in Net Income from Agriculture

Stagnated Domestic Markets are Exploitative and

Market Margins are High Large number of Small and Marginal

Farmers Agricultural Trade Scenario in Karnataka

is Encouraging Agreement on Agriculture: Minuses and

Pluses Implications of Agreement on Agriculture

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High and Low Points

Low Points Large share of drought –prone area

and meager supportive irrigation. Lack of capital formation. Large share

of Small and Marginal Farmers Domestic Market imperfections both

in the factor as well as product market. High density of low value crops with

high risk. Information Asymmetry

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High Points

Emergence of high-tech and High Value agriculture.

Highly diversified sectoral Trade. Possibility of organising groups of small

producers. Availability of Ports Enterprising and Innovative Farmers Proactive Polity and Bureaucracy

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Support of the Crop Economy

Emergence of Floriculture and Horticultural crops in the State.

Strengthening of traditional trade oriented crops: Coffee, Spices, Cashew, Groundnut, Grapes, Fruits,

Rise of New trade oriented crops like: Rose Onion, Gherkin, Nigerseeds, Vanila

Picking up of Agricultural Trade through KAPPEC

The stagnation during the last decade: 1997 to 2006

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Table 1: Growth Rates in the Crop Economy:

1990-2000 Crops Area Production Productivity

Rice 2.55 2.09 -0.45

Ragi -3.22 -4.32 -1.14

Jowar -1.28 -4.54 -3.30

Bajra -1.40 -9.18 -7.89

Maize 7.75 6.86 -0.83

Wheat 3.98 4.78 0.77

Minor millets -6.68 -5.43 1.35Total cereals 0.14 -0.03 -0.17

Tur 1.50 -1.26 -2.72Total pulses 3.92 -1.11 -4.84

Total foodgrains 1.02 -0.12 -1.12

Groundnut -2.03 -10.4 -8.54

Total oil-seeds -3.81 -9.56 -5.98

Sugarcane -0.70 1.49 2.21

Cotton -3.01 -3.42 -0.42

Tobacco 5.74 4.75 -0.93

(Per cent per annum)

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Agricultural Trade Scenario in of Karnataka

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Karnataka’s Trade Performance

Note: 2005-06 dat pertain to April 2005-December 2005 Source: Karnataka Agricultural Produce Processing and Export Corporation (KAPPEC)

(Value in Rs. Crores)

Commodity 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 05-06* Coffee Pro 1183.93 957.53 881.42 730.65 757.57 705.65 749.98 Silk Prod 521.24 772.39 672.24 746.09 967.99 898.8 730.28 Cashew & Ker 251.55 187.98 163.54 279.83 265.72 518.35 302.76 Agri Proce Food Prod 195.33 237.91 349.51 366.99 361.25 362.41 213.58 Spices 61 73.74 69.12 91.65 99.58 109.54 154.76 Tobacco/pro 16.25 3.23 2.7 3.72 -- -- -- Rose Onion -- 38.62 48.35 39.38 51.5 52.57 19.51 Gherkins -- -- 120 139 140.7 141.3 213.96 Flowers 40.66 40 40 42 44 50 50 Total 2269.96 2311.4 2346.88 2439.31 2688.31 2838.56 2434.83 Total Exports 12854.25 16027.46 20145.58 29897.99 41670.24 62638.56 65455.18

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Agricultural Exports from Karnataka

0

200

400

600

800

1000

1200

1400

Coffee Products Silk Products Cashew & Cashew Kernels Agricultural & ProcessedFood Products

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06*

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Agricultural Exports from Karnataka

0

50

100

150

200

250

Spices Tobacco/ Beedi Bangalore RoseOnion

Gherkins Flowers

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06*

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Total Value of Agricultural Exports from Karnataka

Total Agri Exports

0

500

1000

1500

2000

2500

3000

1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06*

Cro

*April 2005-December 2005

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Agreement on Agriculture (AoA)

Market Access, Domestic Support and Exports Competition, Trade Related Investment Measures and Trade Related Intellectual Property Rights

Make clear distinction between types of subsidies. Tariff reduction obligation on Developed

countries-( by an average of 36 per cent over a period of 6 years) and developing countries –( by 24 per cent over a period of 10 years)

Agreement on Sanitary and Phyto-Sanitary (SPS) Measures provides ensuring the regulations given under the agreed rules

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Implications of AoA on the Karnataka Agriculture Sector

Non Existence Level Playing Field – Small holdings and Weak farmers

Spurt in cheap imports of agri commodities and its consequences on food security, disincentive to the producers and price fluctuations.

Emergence and strengthening of foreign producers and traders

Infrastructural bottlenecks as deterrents. Lack of Information and presence of touts

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Meeting the Challenges

Creating Strong groups (Chain) out of Weak(!) Links

Infrastructure as the Key Development intervention

Competing in the Market with Collective Strength Information Dissemination Formulation of short, medium and long

strategies to enhance the Export performance. More Number of Commodity based trade hubs

established and managed by Farmers

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Favorable agro-climatic zones for varieties of crops.

Comparative advantage in the yields of Rice, Jowar, Bajra, Sugarcane and cotton.

Huge potential in exporting the commodities like coffee, cashew, cotton, sugar, tobacco, processed food products (fruits & vegetables), animal products, floriculture and coarse cereals

Innovative and enterprising farmers

Initiatives During 11th Plan: A SWOT Analysis:

Strengths-

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Weakness-

Non-availability of infrastructure like water, quality power supply and roads

High land fragmentation and low productivity per unit area

Existence of weak marketing information system.

High Interest rates for Agriculture investment & export finance.

Vast gaps in yield and technology transfers

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Opportunities-

Comparative advantage in primary agricultural, horticultural products and processed foods, floriculture, and other primary forest products

A three-point strategy of creating an incentive structure, providing infrastructure, facilitating a transparent system of export administration and reducing pre-export and post-harvest costs

Ease of handling commodities through the International Airport and Mangalore and Karwar Sea Ports.

Establishment of Farmers’ Export Consortiums bring together the farmers with small quantity of exportable surpluses to reap the advantages.

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Threats- Import surges of agricultural products that in turn

likely to create welfare loss and disincentives for domestic producers.

MNCs are more likely to take advantages due to access to information about the world market.

Emerging new forms of QRs in the garb of Sanitary and Phyto-sanitary measures

On the negotiating platform of WTO, the partners from groups of countries (EU, Cairns Group) operate in unity among themselves whereas the opinion is divided among developing countries that makes the negotiations unsuccessful.

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Action Points for 11th Plan

Participation of the State in Policy Discussion at the Centre with Min of Commerce

Identification of Priority commodities for trade needing particular attention. Coffee, Cashew, Silk and Other Produce.

Identification of Special Products and Special Safe Guard Measures

Establishment and strengthening of Commodity Boards with farmers’ Initiative

Understanding of the Special safeguard measures and Phyto sanitary measures

Revitalization of the WTO Cell and Dissemination of

Information and Establishment of Nodes of KAPPEC

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