(Reproducing
my presentation on “Value Chain, Networking and Marketing” at a seminar on regional
development, jointly organised by the Ministry of Finance, RIS and FICCI in
Guwahati on May 14)
Thank
you for inviting me to this important seminar on Regional Development.
I
am a business journalist with infrastructure and connectivity being my focus
area. It is those subjects which primarily bring me to the North Eastern States
time and again. So my presentation will have a mix of both these aspects.
Various
speakers since morning pointed out that restoration of pre-1947 connectivity
options through Bangladesh, Myanmar and China are definite measures for
development of North-eastern India. I,
however, feel the regional development of the northeast can be optimised by
first ensuring efficient intra-regional connectivity with a clear focus on
creating local value chain.
We
all know, at 13-14 percent of GDP, logistics cost in India is higher than the
global average of 8-9 percent. There is no official statistics on the logistics
cost in Northeast, but one can safely assume that its higher than the national
average. Highways in large parts of the hilly states like Mizoram, Meghalaya,
Tripura, Nagaland, Arunachal Pradesh are unsuitable for plying of multi-axel
large capacity trucks. This surely increases transportation cost to these
states, which is a detriment to the creation of local value chain.
Transportation
cost is just one factor. There is more to logistics. Here in Guwahati, two
young investment bankers have set up a processed food start-up called Arohan
Foods. They have so far enlisted 2000 pig farmers in two districts of Assam and
parts of Meghalaya. Notably, Northeast records highest per capita consumption
of pork in India and, pig farming is a part of the social practice here. Arohan
wanted to ride on that to market branded processed food. While their brand,
“Choice Pork Natural” is already available with many retailers outside North
East; the company is growing slower than expected for lack of both physical and
social logistics.
To
optimise value addition; such ventures require uniform farming practices at the
back end and availability of physical infra like the cold chain to market the
processed food in more attractive and high value yielding markets outside North
East. North East lacks both these infrastructures. Naturally, Arohan is forced
to ensure availability of animal feed, identifying model animal shelter to
investing in cold chain logistics.
Their
job could have been easier if the State shouldered the responsibility of
creating enabling environment. Arohan could have spread its activities way
beyond a couple of districts to the entire north-eastern region, converting it
into a high value processed meat export destination.
In
the past, at the direction of the Centre, the State-owned companies had set up
heavy industries in North East to create employment opportunities. This was a
command economy planning and most of the times they were inefficient planning.
Assam,
for example, has petroleum refining capacity way beyond either its crude
production potential or demand for petroleum products. So imported crude is
pumped into Assam all the way from Odisha coast and products are pumped back to
the mainland India. Even a child can tell, it would have been easier to refine
crude in Odisha and send products to North East.
We
all know the geography of North East may not suitable for large industries.
Considering India’s long coastline there is no reason for auto-companies to set
up base here. There is also no reason to believe that the huge Indo-ASEAN trade
will be routed through North East sacrificing cheap sea freight opportunities.
On
the contrary, it is well known that North East didn’t do justice to its huge
agri-horticultural potential. It is a pity that barring the sole exception of
lower Assam; rest of the North East including the vast plains of upper Assam
are still single-crop, due to lack of irrigation facilities. If this is the
situation of primary agri-commodities, the scene is even worse in the
horticultural segment. North East surely produces one of the world’s best
quality gingers, turmeric, pineapple and so on. But, they cannot extract the
best value due to lack of uniform and certified practices; which are key to
play in the high-value food sector.
The
point I am trying to make is, North East is playing in the lowest equilibrium
in the agri-horticulture sector, where it has maximum promises. Connectivity is
no magic pill to remove this gap. On the contrary, my fear is, opening up
connectivity with the outside world without putting the house in order; can
make North East into a third-country transit trade destination like Myanmar. It
will be swamped by imports, which will not only limit its own growth potential
but also create a headache for the rest of India.
It
is hard to believe that the region which failed to grab the market
opportunities at its doorstep will be prosperous once Trilateral Highway
establishes connectivity to ASEAN! It is a pity that States like West Bengal,
Bihar or Andhra Pradesh meet the demand for rice or potato in Tripura; not the
next door neighbour Assam.
If
outward connectivity gets smoother, rice may come from China or Thailand. I
have no clue how it is helping local value creation and employment generation.
On the contrary, I have fears that the inefficient farm practices in Assam or
Tripura will stand no chance before such competition and, we might end up
creating a new set of problems.
The
story is similar to the marketing potential of North East’s rich cultural
heritage of handloom and handicrafts. North East failed to create a high
earning potential from such activities. The benefit is reaped by traders or
retailers outside North East. Tourism potential is untapped beyond Kaziranga
and Shillong due to the absence of social and physical infrastructure.
Meanwhile,
a time bomb is ticking in the organised tea sector in Assam – offering the
livelihood to at least 10 percent of the regional population. The spread of
small tea growers created a structural imbalance in the plantation sector as
organised tea sector is witnessing rising costs and narrowing earning potential
vis-a-vis increasing weather risks.
The
need of the hour is, allowing the organised sector to utilise the land for
producing more remunerative agri-horticultural products and source tea, through
contract farming, from the small growers. This could have been a win-win for
all. But its barred by law.
***
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