Blasé Capital ROTTEN APPLES?

Despite the official claims, and consistent denials, farmers and fruit growers in the country are getting worried due to the spate of bilateral and regional free trade agreements (FTAs). The latest contentions arise from the FTA inked between India and New Zealand. The chief minister of Himachal Pradesh, one of the largest growers and exporters of apples, has expressed concerns, and said that he will write a letter to the prime minister. The FTA allows for a reduction of import duty on New Zealand apples by half, or 25 per cent, which may lead to higher influx, and cause local prices to fall. Despite the huge local production, apples are imported from 44 nations, with the largest being Turkey, Iran, and Afghanistan. Of the 5,00,000 imported apples, New Zealand, despite the higher 50 per cent tariff, accounts for six per cent, and the share is likely to zoom due to the halving of the duties under the FTA.

Foreign apples are generally sold at lower prices, or command better sales in urban areas despite the higher prices, which impact the incomes and profits of the local farmers. There are charges that apart from the imports, Indian farmers struggle with rising costs of production, packaging, and transportation. Logistics is the key due to the perishable nature of the fruit, which tends to degrade within days, and causes huge losses to the growers. Harish Chauhan of the Joint Kisan Manch says, “The (New Zealand) FTA comes as a death warrant for the apple growers of Himachal Pradesh. There is a serious need for the central government to rethink the move to safeguard the interest of the farmers in the hill states where the economy depends mostly on apple farming.” In the recent past, the state was confronted with the lack of snowfall, and the owners of the orchards had to transport fresh snow from higher parts.

Deepak Singha, a trade unionist, and a grower, adds, “The farmers are worried as New Zealand is the first country to get a discount, and even in other FTA with other countries there is a fear that this concession will continue, which will definitely crash the prices. This is a serious concern as if such discounts are extended to countries like Iran, which sells its apples at a very low rate that will mean doom for the apple economy in the state.” The largest importing nations benefit currently from SAFTA (South Asian Free Trade Area), which allows apples to enter India with minimal duties. Local growers, especially in Himachal Pradesh, find it difficult to compete with the cheaper imports. Earlier, the foreign apples were sold as premium products at higher prices to rich urban households. This is no longer true, and the price dynamics have changed.

An analysis made by KS Chalapati Rao, a renowned expert on foreign trade, exposes other issues in the FTA with New Zealand. There is a commitment of inflows of $20 billion over a decade. However, Rao argues that foreign inflows from New Zealand are low, and the nation’s manufacturing base is not extensive, and contributes minimally to the GDP. Hence, even if investments come, they will be in areas such as services, and agriculture, which are the strong points. Agriculture, therefore, may witness both investments, and higher imports in some form or the other. This is despite the Indian officials’ claim that the FTA with New Zealand is unlikely to have an impact on the farm and dairy sector. The commerce ministry clarified that market access was “carefully calibrated to shield farmers and domestic industry.” Hence, the FTA excludes dairy, coffee, milk, cream, cheese, onions, sugar, and edible oils.

New Zealand Prime Minister Christopher Luxon said that the FTA was a win-win, as it will allow Indian exports to go up by nearly 20 per cent over the coming two decades, and give Kiwi businesses access to 1.6 billion Indian people. However, the pact includes dedicated agri-technology plans on kiwifruit, apples, and honey, which will focus on productivity enhancement, research partnerships, quality improvement, and value-chain development. This will enhance the incomes of the farmers. Thus, the FTA is beneficial to the local farmers, rather than hurt their interests. Even if the apple growers suffer, which they will not, it will be for a short period, before they benefit from technology interventions, and boost their productivity, incomes, and profits. Prime Minister Narendra Modi claimed that the FTA would double the bilateral trade in the coming five years, and boost investment inflows across sectors.

What is interesting is that there is criticism against the FTA in New Zealand. The country’s foreign affairs minister, Winston Peters, said that the deal was “neither free nor fair,” and gave in too much from New Zealand’s end. It is a bad deal for the country, as “it gives too much away, especially on immigration, and does not get enough in return for New Zealanders, including on dairy.” Thus, the concern on that side is that India managed to protect the dairy segment, which is a strong point for New Zealand. In addition, Indian techies are likely to enter the country in larger numbers, which raises worries about immigration policies. The movement of labour may be one-sided given the IT strengths of the Indian workforce.