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Agri export sector bats for freight support.
May 31, 2022

Amid soaring international and domestic transport costs owing to the Russia-Ukraine war, exporters of agricultural commodities have asked the central government to reinstate the Transport and Marketing Assistance (TMA) scheme which had an allocation for Rs.200 crore.

The scheme was beneficial for low-value agri products, especially vegetables. Exporters said that often, air freight rates are higher than the cost of vegetables, and a 200-600% jump in freight rates in the last two years has worsened the situation.

Federation of Indian Export Organizations (FIEO) has said that withdrawal of TMA scheme has come as a 'setback' for agri exporters and that small businesses have had to bear the brunt of the same.

Seeking a quick roll-out of the revised TMA scheme which had an allocation of nearly Rs.150-200 crore, FIEO asked the cover to be given from 1 April 2021 as many exporters had factored in the freight benefits while finalizing the contracts.

However, a government official said the scheme has been stuck due to shortage of funds.

'The scheme was stopped because of a shortage of funds. Until fresh allocation is made, the scheme cannot be rolled out and no fresh allocation has been made as yet,' the official said on condition of anonymity.

Amid the surge in demand for agricultural commodities, India’s agri exports crossed $50 billion in FY22, the highest ever. However, exporters said high freight rates are affecting profitability.

'Neither the buyers nor the consumers are absorbing the entire increase in freight and therefore, the exporter is at a loss,' FIEO DG Ajay Sahai said.

Sahai added that in order to double farmers income, India’s agriculture exports should move to $100 billion. He said the remodeled TMA scheme should be launched by the government with higher allocation to the scheme and made effective 1 April 2021.

'Logistics contributes nearly 13% to the entire cost of exports. It is much higher compared to several developed countries. Government assistance to bring down logistics cost is not only a step in the right direction but is also WTO-compliant since there is no discipline on services at WTO,' Prof. Arpita Mukherjee of ICRIER said.

The value chain approach has worked for several countries such as Vietnam. 'For instance, South Korea is not a large producer of Zinc but is a top exporter of the commodity by reducing its logistics costs across the value chain,' she added.

Having risen over the years, India’s agriculture exports accounted for 11.4% of total exports in FY21 compared to 8.2% in FY10. Notable growth has taken place in case of marine products and rice over the years.

From 1.3% in FY10, the share of rice exports rose to 3% in the last financial year. During the last few years, India had to invoke the peace clause at the WTO for exceeding the 10% ceiling on the support it offered to its rice farmers.

Sahai also reiterated that there was no challenge from the WTO as far as the TMA scheme is concerned.

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