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Price crash, ‘Rs 1200’ cr loss, big imports: Will Kashmir’s apple industry survive?

Ziraat Times Team Report

Representational AI generated image.

Srinagar, May 18: Many  apple growers in Kashmir are in distress today due to huge financial losses this year. As cheaper apple imports have soared, off-season prices have crashed 40 to 50%, cold storage and production costs have sky rocketed, the question being asked is this: Will this Rs 11,000 crore industry survive?

The bigger question is about market equilibrium which is not being achieved. Farmers have spent huge sums of money in developing new high density apple orchards with part government subsidy, and  have taken loans from banks.

There are multiple government schemes providing attractive  subsidies to promote growth in the sector. But today farmers are asking: is it even viable to get bank debts and not find the right prices for their produce?

The current situation: 

After a good production season in 2023, many growers had booked space in Controlled Atmosphere (CA) Storages anticipating good returns in lean supply months. But, today, many of them are regretting this decision owing to a sharp drop in prices.

In 2022 and 2023, farmers in Kashmir were selling their apples in the range of Rs 1100 – Rs 1300 per box during the harvest time. However, as produce started to swell markets, many farmers chose to store their produce for better returns during the lean supply months. However, what they didn’t anticipate is a huge surge in cheaper apple imports, making their apples less attractive in the market.

This week, Ziraat Times engaged with apple farmers, traders and Cold Storage administrators to understand the extent of farmer stress. The picture that emerges suggests a hard time for Kashmir’s apple industry.

An average crate, which is costing Rs 1500 to Rs 1600 to farmers after storage charges, is now fetching them about Rs 700 – Rs 900 in the current market scenario.

“This is a catastrophe for farmers, who are questioning themselves why to grow apples at all”, reflects Gulzar Wani, a young orchardist from Kulgam who has invested in a high-density apple farm.

“For farmers, the average cost of storing apples in a CA Store is around 20-30% of the total apple value, depending on the duration of storage. The cost also involves holding costs, interest costs, wastage costs as well as extra costs associated with refrigerated cold chains in summer time. But with this price fall, farmers are in shock”, Nisar Ahmed, a prominent apple trader from South Kashmir explains.

The CA Storage factor:

J&K is producing around 1.7 to 2.1 million tonnes of apples every year, but only 35 to 40% is exceptionally good quality, and which is stored in CA Stores.

Farmers choose cold storage based on the  assumption that, if not over-supplied, they would get better returns in lean supply season. However, now excessive holding back has meant excess supply in market for off season months, leading to no value addition to farmers.

The over-supply from cheaper destinations like Iran, Afghanistan, South Africa and the reduction in import duty for US apples prompted importers in the country to import more quantities in off season. Importers argue that this is necessary to make affordable apples available in the country’s markets. But, with this, Kashmir’s apple growers are running into losses as their production and transportation costs are relatively very high.

During 2023, an additional Controlled Atmosphere storage capacity of around 70,000 tonnes was added to the existing capacity of around 2,80,000 tonnes in Kashmir region. According to official information accessed by Ziraat Times, there are at least 150 pending land applications with the Government of J&K for the creation of more storage infrastructure in J&K. An additional 50,000 tonnes storage capacity is coming into operation in 2024. This additional storage is creating more space for storing apples for off-season.

Now, industry experts are worried how viable these additional CA Stores would be if farmers choose not to store this year for high storage costs and lesser incomes in off season.

The import competition factor:

In early 2024, markets across the country were flooded with apples imported from Iran & Turkey, leading to more availability of produce in the off season. And the prices of most of these imported apples are giving a tough competition to Kashmir apples.

“The average cost of production of our produce is much higher than foreign produce, so it is difficult for our fruit to compete with imported apples”, says Ghulam Nabi from Sopore.

And then there is the quality factor too which doesn’t allow farmers to store all of their produce in CA stores. “We can store only high quality produce to be able to bear the storage costs and to be able to compete with foreign produce. B and C grade apples cannot be stored in CA storage, which reduces our overall profitability”, says Nisar Ahmed, a farmer from Pulwama.

Another farmer Ghulam Nabi Dar from Shopian said that they were fetching around Rs 1200 per box during October but they chose to store their fruit in CA Stores at Lassipora Estate and now it is costing them around Rs 1650 per box but they are not fetching more than Rs 700 after waiting for more than 6 months.

Thousands of other farmers have similar stories to tell.

With such a drop in prices and high storage costs, industry experts are now estimating a cumulative loss of about Rs 1000-1200 crores to farmers who choose to store their produce this year.

Interestingly, while the storage capacity of fruits has increased 10 fold in Kashmir in the last one decade, the quality production which needs to be stored in order to be able to add value has not increased significantly.

Many farmers are under huge debts and are struggling to meet ends due to this crisis situation.

Is more CA storage a winning strategy in the long term?

Some trade analysts believe that excess CA storage capacity may ultimately create a market distortion.

“The basic purpose of encouraging CA Stores was to prevent flooding of apples to the country’s mandis at the top harvest season to help maintain good prices. The assumption was that once stored these apples could then be supplied to mandis in off season for better prices. But as off-season imported apples are thronging the markets like anything, the basic purpose of the CA Stores stands into question”, says Abdul Khaliq, an apple trader in Shopian.

There is barely any informed debate in J&K right now on how much storage infrastructure should actually come up to maintain the equilibrium of demand and supply so as to add value to farmers and how much imports should be allowed to let domestic farmers benefit from such storage?

CA Storage and selling in off season has another flip side to it: the selling capacity of off season fruits is much lower than the normal harvest season due to the fact that other fruits like mangoes, watermelons, musk melons & grapes, which are much cheaper than apples, are readily available in the months of March till June.

The worst affected in this price fluctuation are Shopian and Pulwama districts, where about 80% of the entire CA Storage capacity is located and where most big farmers choose to store their apples for lean supply season. These two districts produce about 4.5 Lakh tonnes, compared to total production of about 2.1 million tonnes, as per the data published by Horticultural Production Department.

The aim of such subsidies is to secure farmers income however the current scenario and the excess capacities have flooded Mandi’s with more fruit than they can handle leading to 40-60% losses to farmers income.

Farmers’ and CA Stores’ take:

While farmers believe that CA Storages are charging them excessively and putting unreasonable conditions for packing and withdrawal, CA Stores have their own arguments.

“See we have taken huge loans from banks, and then we have high operational costs from electricity, generators and staffing. We have to cover our costs and should be able to repay our debts. We have to consider all these factors”, said one CA Store manager.

However, farmers believe that the subsidies being provided by the government of J&K as top up on the subsidies provided by Central Government are meant to subsidize storage rates for farmers.

“The reason such huge subsidies are provided by the state to CA Stores is so as to benefit farmers. CA Stores cannot act as commercial enterprises of high profit. They have to keep farmers interests in view”, said Aamir Nair, a student of Agriculture Science, who himself belongs to a farmer family in Kulgam.

Industry observers are now sounding caution about the future direction of Kashmir’s apple industry and are citing the lessons learnt from states like Uttar Pradesh where cold storage facilities were developed for potatoes, but due to excess storage facilities, potato prices finally collapsed in off-season, leading to loss of farmer incomes and, eventually, shutting down of such facilities.

“What if such a situation arises in Kashmir? It would be an economic crisis”, argues Naseer Ahmad, another orchardist from Pattan.

“This year should be an eyeopener for all stakeholders in the industry, including government, farmers and CA Storage owners who need to introspect on the crisis situation and find durable solutions & policies to maintain the market equilibrium”, he adds.

Equilibrium is the only way to save Kashmir’s apple farmers and traders from such losses in future, he asserts.

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