Himachal Horticulture

Project Context

The Himachal Pradesh Horticulture Development Society serves as the implementing agency for the project, it intends to provide ICT based platforms for electronic delivery of department specific services of Horticulture Department, automating all the administrative activities of Horticulture department and HP HDP, implementation of MIS integrated with the workflow of Himachal Pradesh Nursery cum demonstration orchards development and management society (SPV) for the implementation of HPHDP.

The State produces about 1 per cent of the total fruit production of 889.77 lakh MT in India (2013-14). Apple dominates the fruit production in the State and contributes about 91.39% of the temperate fruit production and about 83.14 % of the total fruit production in the State. The State produces about 6.25 lakh MT apple (2014-15) that constitutes 28.55% of the total apple production in the country. However, the productivity level of the fruit crops in Himachal Pradesh still needs to be reviewed and augmented when compared with the international productivity figures. The State faces a number of sectorial, institutional and policy challenges which need to be addressed systematically if the potential is to be realized and translated into a sustainable development impact. Some of the challenges that need to be addressed include:

Declining apple productivity: Himachal Pradesh is the second largest producer of apple in the country after Jammu & Kashmir but in terms of quality, Himachal apples enjoy a consumer preference and are considered to be better for storage. Although apple growing is often thought of as a major success story in Himachal, the farmers here have been experiencing a steady decline in apple productivity over the last few years, both in terms of yield and quality of fruit. There has been a high level of variability in apple production ranging from 0.12 to 0.72 million tonnes with a median of around 0.5 million tonnes, over the last 05 years. Post-harvest handling infrastructure: Due to insufficient development of forward and backward linkages, efficient and competitive value chains (supported by optimal post-harvest infrastructure such as cold chains and trading facilities) in the state are far and few. The State has less than required pre-cooling facilities; similarly, integrated packaging and sorting facilities need to be improved upon.. Also, the cold storage capacity is limited and concentrated in a few districts (Shimla and Mandi), and many districts do not have such facility (Lahaul, Chamba, etc.). This not only inhibits the development of a commercially viable cold supply-chain but also limits the growth of processing industry within the State.

Limited development of agro processing in the state: Despite comparative production advantage in agricultural/horticultural commodities and emerging marketing opportunities, conversion of this advantage into competitive agro-processing industries has proved to be a challenging task in the state. The food processing industry in HP is at a nascent stage. A recent study conducted by the Industries Department, Government of Himachal Pradesh (GoHP) indicates that the total investment in assets, across food processing, for Small and Medium Enterprise (SME) is a meagre INR 83.75 million (US$ 1.40 million), with an abysmally low total processing capacity of about 1113 tonnes. Challenges for the growth of agri enterprises in the State: The major challenges faced are: Procurement of raw materials- Lack of surplus production (except in case of apples) poses huge challenge for the processing industry. In case of vegetables, given that majority of the produce is off-season (hereby fetching better prices for fresh produce), procurement of raw materials is challenging for processors especially if it has to be done in large volumes. Lack of optimally distributed post-harvest infrastructure: Absence of adequate post-harvest infrastructure (grading, sorting, CA & cold stores, etc) poses huge challenges in maintaining an even supply of raw materials for the processing industry. Also, lack of i) on farm primary processing facilities such as grading and sorting, ii) cold chain infrastructure and iii) forward linkages through refrigerated transportation hamper the quality of raw material and limit the growth of processing industry within the state. Packaging and other downstream ancillary industries: Packaging and other downstream ancillary industries are lacking in the state. For example, majority of the packaging material is currently being imported into the state from neighboring places like Delhi and Chandigarh. This increases the cost of packing material and builds up the cost of end product. Also the frequent changes made by Food Safety and Standards Authority of India (FSSAI) with respect to packaging requirements renders it unviable for small players who rely upon economies of scale by placing bulk orders. Transportation: Transportation within the state suffers from monopoly by unions ( such as Nalagarh Truck Operators Union) which operates about 8000 trucks and leases out to all the major Fast Moving Consumer Goods (FMCG) players in the industrial belt in Solan district. Given the hilly terrain and limited competition, there is hardly a level playing field in the transportation segment making the freight charges uncompetitive. Inadequate regulatory framework- i. Taxation Issues- The tax regime is inequitable and complex with different taxes levied on the same tax base, administered by different agencies leading to multiple annual payments and high compliance cost. There exist perverse incentives for enterprises to remain small and under-report turn-over. A piece-meal policy on tax exemptions and incentives has exacerbated the complexity in obtaining input-tax credit and led to double taxation. Moreover, the regulatory framework in Himachal Pradesh imposes a disproportionate burden on small enterprises – through regulations which primarily target large enterprises - making it too costly for firms to be an SME. As a result, despite the production base and presence of few anchor investment units, few ancillaries have developed.Marketing of fruits: The present marketing system as it functions today for fruits especially for apples has developed over many years. It is totally a private sector operation with some government involvement in arranging packing material, facilitating the transportation of the fruits, facilities in the terminal markets and limited grading and packing facilities in the production areas. Growing import of apple in spite of high tariff and high marketing margin: Apples top the list of fruits imported followed by oranges, grapes and pears. USA, China, Chile and New Zealand are the major exporters of apples to India. There has been an increasing trend in the import of apple from about 22,000 metric tonnes (MT) in 2002-03 valued at about US$ 10.50 million to 175,356 MT in 2013-14 valued at US$ 201 million, in spite of high import tariff (currently @ 52.015% i.e. basic import tariff of 50% plus surcharges); high marketing margins (accounting for about 50% of the consumer price); and devaluation of currency (from INR 48 in 2002-03 to INR 62 in 2013-14).