Dynamics and competitiveness of agricultural trade polices on coconut economy of Kerala
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Date
2019
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Department of Agricultural Economics, College of Horticulture, Vellanikkara
Abstract
Coconut is a crop of economic importance in many Asian and Pacific
countries. India is the largest producer of coconut in the world contributing
23798.23 million nuts from an area of 2.09 million ha (CDB, 2018). The
economic reforms of the 1990s and the subsequent trade liberalization policies
have brought challenges and prospects to Indian agriculture including the coconut
industry. In this context, the present study was undertaken with the objectives to
trace and assess the impact of trade policies in edible oil on coconut economy of
Kerala, to analyse the price transmission in the markets, to estimate the efficiency
of selected coconut markets and finally to suggest appropriate policy measures for
improving the performance of coconut trade.
Both primary and secondary data were used for examining the specific
objectives of the study. The primary data were collected using well-structured and
pretested schedules through a survey of 90 farmers, 45 market intermediaries and
15 exporters in the selected districts of Kerala. Secondary data was mainly
collected from authentic sources like CDB, EXIM data bank, DGCI&S, DGFT
and FAO statistics.
Though trade liberalization adversely affected the coconut farmers during
the initial phase of liberalization, it subsequently increased the opportunities of the
Indian coconut sector to compete in the world market. The export growth rate of
coconut products has increased during the study period (1980-81 to 2016-17)
while instability index, a measure of export stability was found to have decreased.
The high growth rates of coconut products together with low instability indices in
the export revealed the prospects for Indian coconut sector in the global
market. Hence stream lining the production through Good Agricultural Practices
to fulfill the export market requirements with regard to quality and safety would
boost the trade.
The comparative advantage in coconut trade analysed using the Revealed
Symmetric Comparative Advantage (RSCA) indicated that coconut oil and
desiccated coconut did not possess any comparative advantage in global trade,
while coconut (fresh and dried) and copra have comparative advantage. It was
obvious from the result that rather than focusing on the export of coconut oil and
desiccated coconut, India must give much effort to increase our export share of
coconut, copra and other value-added coconut products to augment the foreign
earnings.
The trade policies concerning edible oils at the national level were found to
have an impact on the coconut oil prices in Kerala too. Exponential growth rates
were computed to compare the growth of edible oil imports and coconut oil prices
in Kerala. The significant improvement in the growth rates of edible oil import
and decline in the growth rates of coconut oil price confirmed that trade
liberalisation and further Free Trade Agreements (FTAs) facilitated the huge
import of edible oil from other countries which unfavorably affected the domestic
coconut economy.
The result of the Policy Analysis Matrix (PAM) unveiled that coconut oil
production in Kerala was competitive at the given level of technologies, prices of
inputs and outputs and current policy stipulations. However, social profitability, a
measure of efficiency or comparative advantage was observed to be negative. The
result depicted that coconut oil production in Kerala lacks comparative advantage
in production and the state was not able to use the available resources efficiently.
The efficiency of selected coconut markets studied using Shepherd’s index
indicated that the presence of more number of marketing intermediaries and high
marketing cost and margin have reduced the producer’s share in consumer’s
rupee. Besides, high wage rates, shortage of skilled labour, lack of processing
technologies, adverse climatic conditions, etc., obstruct the farmers in performing
even the primary level processing and thereby it reduces the producer’s share in
consumer’s rupee.
The cointegration analysis using Johansen Cointegration method revealed
that the liberalisation policies and further free trade agreements have resulted in
the transmission of price signals between domestic and international edible oil
markets and it led to the integration of these markets during the post-liberalisation
period. The result of Vector Error Correction Model (VECM) also depicted that
changes in the international prices of edible oils would cause changes in price in
the domestic coconut oil market in the long-run.
High wage rate, labour shortage and incidence of pest and diseases were the
major production constraints faced by the farmers. Inclusion of agricultural
operations also under MGNREGA has been suggested by farmers as an option for
bringing down the cost of cultivation. Shortage of skilled labours can be lessened
through the adoption of programmes like Friends of Coconut Tree (FoCT). The
problems related to pest and disease attacks can be addressed by developing
resistant and hybrid varieties and better plant protection measures.
Price fluctuation, high transportation cost, inadequate storage and
processing facilities were the major marketing constraints faced by the farmers.
Long-term policies for the price stabilization of coconut and other coconut
products are inevitable to reduce the price fluctuation. The government should
continue the procurement operation through Krishi Bhavans as it is found to be
beneficial for the farmers. Shortage of raw nuts, lack of exclusive market for
coconut and high domestic price were the major constraints reported by the
domestic traders and upcountry traders. The recent surge in the domestic price
could be attributed mainly to the short supply coupled with high domestic and
industrial demand. Shortage of raw nut due to lower production, productivity and
pests and diseases needs to be addressed seriously.
In the era of trade liberalisation and FTAs, the interests of farmers also
need to be safeguarded while concentrating on trade opportunities. Given the
present trade scenario, the coconut sector in Kerala needs strong support from the
government to revive and retrieve its premier role performed in the past.
Description
PhD
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Citation
174737