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Exim Policy shock hits Kerala hard

D Jose in Thiruvananthapuram

When the Bharatiya Janata Party-led coalition assumed power at New Delhi last month, not many in Kerala shared the optimism that the state, under a Left Front government, will get a better deal from the Centre. But few expected a blow so soon.

The shock has come in the form of the new Export-Import Policy announced by Commerce Minister Ramakrishna Hegde. The policy envisages liberalising the import of several agricultural and marine products, the strength of Kerala's economy.

The new Exim Policy includes paper, fruits, and vegetables in the list of open general licence (which means their imports will be liberalised). The fear is that this will break the backbone of Kerala's agricultural sector, already reeling under the impact of the unprecedented fall in the prices of natural rubber, cardamom, and coconut.

Pepper growers, who earned a good price this year due to fall in global production, fear the removal of import restrictions will push prices down, adversely affecting them in the long run like it did rubber growers. Indian rubber lost its glamour after imported rubber and tyres invaded the market. In fact, the rubber tree growers who have suffered a loss of about Rs 20 billion due to the price crash, expected some relief from the new government.

Chief Minister E K Nayanar was obviously caught unaware by the policy change since he had met Prime Minister A B Vajpayee only a couple of days before the announcement. The latter had promised to look into the problems plaguing Kerala's cash crops. The new policy has probably left the chief minister wondering whether the prime minister exercises any control over his Cabinet members.

The state had only recently begun efforts to diversify into horticulture and food processing. "We had identified these as growth areas after discussions with the World Bank and the International Monetary Fund," says state Planing Board vice-chairman I S Gulati. He fears the new policy will hurt Kerala's efforts to industrialise the agricultural sector and ensure value addition to several commodities now being exported from the state.

Moreover, in the absence of an effective mechanism to prevent dumping, the policy will affect cultivation of fruits and vegetables meant for the export market, he added. Gulati warned that Kerala would lose its competitive advantage once major players in the sectors concerned expand their activities.

The planning board vice-chief pointed out that the state seafood sector faces a similar problem: once marine products imports come in, the state will lose its competitive edge. Incidentally, the seafood processing sector has welcomed the decision to include several items of marine products in the open general licence list, though the opinion of some economic experts is that it will harm the domestic sector in the long run.

Kerala's share in Indian seafood exports has declined from 36.58 per cent in 1990-91 to 24.40 per cent in 1996-97. Earnings mirrored the fall. Traditional fishermen, already badly hit by the deep sea trawlers owned by foreigners and the aquaculture farms springing up in the country, will suffer a further blow. They fear that large-scale import of prawns, crabs, and cattlefish would lead to a drop in domestic prices and push fishermen into penury.

"These varieties, often exported, account for more than 50 per cent of the traditional fishermen's earnings," said S Santiago, executive secretary of the World Forum of Fish Harvesters and Fish Workers, the traditional fishermen's federation. "Largescale import of these varieties, as allowed by the new policy, will aggravate the traditional fishermen's poverty, who number about 600,000 in Kerala alone." Santiago warned that the traditional fishermen, who are already agitating against globalisation, will be forced to step up their campaign.

Marine Products Export Development Authority chairman K B Pillai felt the new Exim regime would provide relief to the processing sector if the policy permits import of fish without value addition. He also added that imported value-added marine products may not find a domestic market.

However, the seafood processing sector is pleased with the new Exim policy. This sector feels that imports will help the domestic processing sector to augment its capacity utilisation. India at present only utilises 14 per cent of its total processing capacity of 7,500 tonnes. The country has 404 processing units at present. Sources in the Seafood Exporters Association said that augmenting the processing units capacity utilisation will help revive hundreds of peeling sheds now lying idle. Kerala has as many as 200 peeling sheds employing about 20,000 workers. Many of these were closed due to dwindling catch and the restrictions on aquaculture.

But a section of marine experts feel that liberalised imports is not the answer to the problems facing the seafood since India is one of the very few countries in the world with rich fish resources. India's strategic location in the Indian Ocean allows it to harvest the resources of the Arabian sea in the west and the Bay of Bengal in the East. The sea around Lakshadweep Islands in the Arabian Sea and the Andaman and Nicobar Islands in the Bay of Bengal harbour fish resources such as tuna and other fishes.

Also, India's resource potential in the exclusive economic zone (up to 200 kilometres from the coastline) is estimated at more than four million tonnes, whereas India only exploit about 2 million tonnes now. The varying climatic conditions from the Himalayas to Kanya Kumari provide different environments in which temperate and tropical fishes can be bred.

Thus, marine experts feel the government should intervene to realise the country's potential instead of importing marine products. It is worth noting that certain European countries have imposed strict non-tariff restrictions on export of shrimp and other products from the country on the grounds of hygiene. Several processing units that could not meet the European Union standards have been lying idle.

All political parties in the state, including the Bharatiya Janata Party, have objected to the new Exim policy on the grounds that it is harmful to the state's interests. The state assembly is scheduled to discuss the impact of the policy on the Kerala economy by suspending routine business on Wednesday, April 22, and unanimously pass a resolution flaying the new policy.

Various political leaders have urged the central government to reconsider the policy. State Congress president Vayalar Ravi said the policy will lead to closure of several small scale units in the state. Saying the policy will hurt Kerala farmers, he blasted the BJP that spoke of swadeshi but had cheated the people,

Opposition leader A K Antony of the Congress wanted the central government to re-examine the policy as it would affect fishermen and the marine products industry. He urged the Centre to review the policy in consultation with the state government.

Communist Party of India-Marxist state secretary Chandran Govindan has alleged that the new policy was directed by the World Bank and the International Monetary Fund. "This is to protect the interests of some big industrialists both within and outside the country's," he charged.

State BJP chief Padmanabhan asked the state government to convene an all-party meet to discuss the issue. He said that mere submission of a representation to the Centre will be of little avail. "The Kerala government should be prepared to co-operate with the Centre to protect the interests of the state," he added.