According to press reports, ‘an ambitious plan has been drawn up by the Confederation of Indian Industries (CII) to export Indian-grown bananas globally to China, East Asia, the Middle East and Europe.’ Central to the plan is the development of a distinct brand for marketing purposes: ‘Tamil Nadu Bananas’ would seek to replicate the success of Florida Oranges and California Apples. According to CII representatives, ‘if the post-harvest losses alone can be avoided, then exporting 28 million tonnes of bananas would not be a problem.’
However, farmers in Tamil Nadu have expressed scepticism about the plan and its chances of success, particularly given the economic recession in Europe and global market price volatility. The farmers have called for far greater involvement of farmers’ associations in hammering out cold chain infrastructure concerns within any national action plan.
In 2011, Maersk Line carried out and published a review of the scope for ‘unlocking the potential of the Indian banana trade’. The review found that while increased Indian banana exports could potentially ‘bring economic, social and environmental advantages to India’ as bananas became a key export, this would require major investments along the supply chain under the current system of contract farming, and critical upgrades to India’s cold chain infrastructure. The review also noted a number of recent achievements under contract farming arrangements:
- average yields were two-thirds higher, with further scope for improvement;
- the quality of bananas had been improved, securing higher prices;
- there had been less wastage.
The key to these improvements was the grouping of smallholder farmers in export production clusters.
The recently announced ‘ambitious’ plans for the Indian banana sector has to be seen against the background of the pending conclusion of the EU–India FTA negotiations. The Indian Ambassador to the EU claimed in an interview in January that the negotiations may be approaching the final stage. However, agricultural market access has proved one of the most sensitive areas in the negotiations. This is echoed by the special safeguards that were included in the EU’s agreement with Andean Pact and Central American countries, at the insistence of the European Parliament in December 2012.
As India is the world’s largest producer of bananas, with 28% of global production, there would appear to be considerable scope for export growth to the EU, if supply chain management issues can be addressed. An EC-financed assessment of the potential impact of an EU–India FTA published in May 2009 noted that, between 1991 and 2005, ‘in the case of bananas there was a forty-fold increase in quantity and a 200-fold increase in nominal value’ of Indian exports. However, in 2010, less than 0.1% of Indian banana production was exported. The potential challenge to ACP banana suppliers of any EU–India deal involving improved access for Indian banana exporters is thus enormous.
Assessing the likelihood and extent of such a new threat to the ACP’s share of the EU banana market will require a detailed assessment of:
- the relative attractiveness of EU and alternative non-EU markets to Indian banana exporters;
- ongoing and planned Indian initiatives to overcome constraints on banana exports to the EU;
- a detailed review of the tariff and non-tariff measures on bananas to be included in the final EU–India FTA deal. The special safeguards included in the EU agreements with Andean Pact and Central American countries are likely to provide a model for any banana-related arrangement in an EU–India FTA.
Only by such research and analysis can concerned ACP governments properly assess the competitive threat posed by the world’s largest banana producing nation.