This is in continuation of the debate on creative capitalism, an idea made popular by Bill Gates. For earlier inputs see tag: Capitalism.
Tim Harford writes:
My final worry about recognition is that we do not always recognize behaviour that will truly help the poor. A simple example: a friend
of mine recently bought shoes made in Italy rather than shoes made in Romania, specifically because she was worried (in a rather vague way) about encouraging sweatshop labour.
I am a bit worried about this 'concern' for the poor in other parts of the world expressed through the market place. It could backfire on the poor person in most cases.
Let me try to explain this through an example:
Sometime ago while I was working in Delhi, we used to get tea, coffee, etc, from the Indian Newspaper Society's building in Rafi Marg, a stone throw from Parliament House, served mostly by small children from Nepal. I asked the boy why he was serving in the canteen instead of going to school like all other kids do.
He said he would like to. But things were bad at home, and his father had no way but to send him to India where he could find some work. He said once things are better and he earns a little money to help his parents, he would go back and get into a school one day.
I knew child labor was a crime but what could I do? Report him to the police? I could only pray that things would get better for him, and perhaps now that his country is a republic he may be able to go back and enter a school.
I was trying to say, there are moral choices in this. Avoiding goods for fear of aiding sweatshops even inadvertently might harm a family somewhere, who are dependent on this little money for their survival. Those little ones in the sweatshops in those far-away dreary places too have their parents who had to make a moral choice too, and it is difficult for any parent to send the kids to these work places instead of schools. But they have no option in most cases.
I do not say the world should keep a blind eye to the extremely poor working conditions in the poorer parts of the world. By no means. It should always be concerned, it should agitate, put pressure on governments, and try every which way in which it could help them.
But paying a higher price for the goods of same quality from a developed country to avoid something suspected to be tainted by the sweat of a child from a poor country can't be the right answer to this moral question. Perhaps it boosts one's self esteem, but surely it would not help bring in a better world for any one of us.
Posted by: n p chekkutty | July 26, 2008
Stephen Landsburg writes:
Undermining the anti-sweatshop movement would be an excellent place to start.
This is an excellent proposition because one of the first things the West can do to help the poor in the developing world is to dispel the sentimental nonsense revolving around this concept about 'sweatshops' in those countries. The fear of sweatshops and the 'conscientious' objection to the products from these countries is a virus fast spreading all over the developed world and I am sure, it would hurt the poor of our world much harsher than any other steps the West can take, say the protectionist legislations or even the the refusal to help with aid.
A few days ago in response to a post by Tim Harford, I had made the following observation: "Avoiding goods for fear of aiding sweatshops even inadvertently might harm a family somewhere, who are dependent on this little money for their survival."
I feel that since Prof Landsburg has made a scathing criticism about the way the West is dealing with this issue, it is necessary to look at it from the standpoint of those countries and people who are likely to be hurt by such measures.
First let us accept that the working condition in most of the developing world is not as comfortable as the workers in the developed world enjoys. But the crucial aspect is that while there may be choices for the workers of the developed world, there is precious little choice for those living in these parts of the world. The less choice, the less bargaining power you have. Hence exploitation of the labor is at a much higher level in these parts, no doubt about it.
So what to do? Leave them to the care of God and disallow their products from the Western shops? And thereby deny them the daily meal, if at all they are able to afford a meal by all these exertions? I have seen hundreds of kids who work in road projects, small workshops, mills, canteens, etc, and then go to school to build their lives. By refusing to buy the products that may have their sweat on it, what we actually do is to deny them the only chance to hold on to a better life, stonewalling the only glimmer of hope they may have.
The best way here is to put pressure on the governments, the factory owners and the business community in these parts of the world to improve working conditions, to go for stricter law and enforce labor standards. Here the trade unions and political parties who are deeply involved with the poor people's lives could be of immense help. So what we need to do is to think of building strategic tie-ups with the political establishment, say the trade unions, political parties, etc, and enforce change. But the Gates Foundation memo never even speaks of such a strategic initiative as they do not think the political society in the third world can be a valuable ally in the effort to promote creative capitalism. I think this is a fundamental mistake on their part. They speak of Prahalad and the gains to be picked up at the bottom of the pyramid. Fine. But unless you have somebody alive at the bottom how can you pick up anything from there?
Posted by: n p chekkutty | August 04, 2008
A response to a query from Jessica Haussler, Frankfurt:
Jessica,
My objection to the campaign against 'sweatshops' now gaining ground in the rich countries not because I do not want the working conditions there to improve. I do certainly want the difficult conditions in which people work in many companies who are suppliers to the global chains to improve. Naturally, any consumer pressure that would force the corporate firms to take actions to get the situation improved would be welcome. But that can be done not by diverting production units, shifting locations, or cutting back orders. But through forcing their collaborators to go for better standards, by persauding the local governments to enact much stricter laws, and ensuring decent working conditions do exist in those countries also.
But the problem with a blanket campaign and boycotting of such products simply on the basis of a suspicion that it involves child labour can be disastrous to those people who depend on them. Possibly they work in abominable conditions, but refusing to buy their products would only mean denying them their daily meal. I suppose no conscientious consumer can ever think of doing it.
Posted by: n p chekkutty | August 06, 2008
Showing posts with label Trade. Show all posts
Showing posts with label Trade. Show all posts
Monday, August 11, 2008
Sunday, January 13, 2008
Will Nano Put Dear Old Rickshaws to Rest?
Ratan Tata’s dream project, the Rs.1-lakh Nano car, is likely to give a much needed rest to our dear old auto-rickshaws and cycle rickshaws that crowd Indian cities.
That would mean a revolution on Indian roads. Elsewhere in the word, the rickshaws are seen only in automobile museums but here even on Rajpath in Delhi and Kolkata’s and Hyderabad’s crowded streets they are a live presence. It was Buddhadev Bhattacharya, West Bengal’s chief minister, who recently decided that enough is enough and told the cycle rickshaws to keep off the roads.
It was a sad thing to see: A frail old man, his ribs jutting out, struggling to pull his rickshaw with a fat lady or a big family happily sitting behind. The auto-rickshaws are much more respectable, as drivers in front maneuver these three-wheelers often violating all possible traffic rules in busy streets giving jitters to the passerby and other vehicle owners.
Now that the Nano is coming to the Indian streets, it is most likely to be the favored vehicle for quick and short-distance travels, replacing the rickshaws. They are fuel efficient, can hold up to five persons and can move about even in small alleys as our rickshaws do.
And they are sure to compete with the auto-rickshaws in prices too. The Bajaj and Piaggio auto-rickshaws that ply in the Indian roads cost almost as much as a Nano. Thus with some prodding from the government and easy finance from the banks, it is likely that the rickshaw drivers may opt for Nano taxis that would bring them more money, more passengers and more prestige.
That means the fears expressed by western analysts like Andrew C Revkin of New York Times, who wrote in his blog, Dot Earth, that Nano would be India’s contribution to the vehicle explosion on world’s roads, are misplaced. Revkin says that by 2020, the world’s roads would be full with over a billion cars, most of them coming from the new economies like India, China, Mexico and other developing countries. That, as he says, would mean disaster for the environment.
He quotes his colleague Tom Friedman who wrote after his visit to Bangalore about the Indian way of development: No, No, No, Don’t Follow Us, he screams as India and others are revving up their engines.
No one claims that the new vehicles coming to the streets of developing countries would not pollute. They would, as any other vehicle using fossil fuels anywhere in the world. But what is the solution? Return to vanaprastha as suggested by ancient Indian rishis and heartily recommended by post-modern western analysts like Revkin and Friedman? But even the rishis advised to take up vanaprastha and sanyasa only after enjoying the life and the world in grihasthasrama, or the life of the person with a family.
That goes true with young economies too. Let the United States and other rich countries enter vanaprastha as they have had enough of the worldly goods. The developing south needs its own grihasthasrama now.
That apart, it is also wrong to say that these new cars would only add to global pollution. In fact, when they conquer the roads and displace the highly polluting, less fuel efficient
Ones like our auto-rickshaws, they would actually be helping to reduce pollution.
(Cartoon courtesy: Sudheernath, New Delhi.)
Friday, January 11, 2008
A Landmark: 2500-year-old Canoe Found in Makotai
The Iron Age canoe brings first proof of Kodungallur as the centre of global trade 2500 years ago.
By N P Chekkutty
Yaleglobal, the online magazine of the Yale University Centre for the Study of Globalization, describes globalization as an historical process that began with the first movement of people out of Africa into other parts of the world. Traveling short, then longer distances, migrants, merchants, and others have always taken their ideas, customs, and products into new lands. The melding, borrowing, and adaptation of outside influences can be found in many areas of human life.
The movement of technology, food and plants and ideas are three major areas where this process made its impact right from the early days of history. New historical and archaeological studies have proved how this process developed through centuries and how mankind was going through a process of integration ever since they came to know how to travel around.
In the past week, two major archaeological findings, from the two hemispheres of the planet, brought back into focus the ancient roots of this process. The first report came from Yucatan in Mexico, where scholars unearthed evidence of a 1500-year-old market in an ancient Mayan city. The market place was a thriving place dealing with food articles and other essential items as any other market in these days of post-modern globalization, reminding us how ancient are most of the modern trends that we speak of.(See report, Ancient Yucatan Soils Point to Maya Market, and Market Economy, New York Times, Jan.8.,2008, www.nytimes.com).
On the other side of the planet, in Kodungallur near Kochi, Kerala, archaeologists reported finding of the remains of an ancient ship. The Hindu on Wednesday, January 9, reported that the radiocarbon dating of the remains unearthed at Pattanam, seven kilometers south of the present town of Kodungallur, has proved that these remains date back to around 5th century BC.(See report, Study Points to 500 BC Kerala Maritime Activity, The Hindu, Jan.9,2008; www.thehindu.in).
These are exciting findings: The Iron Age remains unearthed in Kodungallur including part of a wooden canoe and bollards (stakes used to secure canoes and boats) give the first archaeological evidence that trade was indeed part of human activity even in those Iron Age days.
It was the Kerala Council for Historical Studies (KCHR) which conducted these studies at Kodungallur in February-April 2007 and the findings were tested for dating at the Institute of Physics, Bhubaneswar. The analysis was done making use of the method known as Accelerator Mass Spectrometry (AMS) Radiocarbon 14C, a well known process for dating historical artifacts.
The KCHR director, Dr. P J Cheriyan, describes the findings as evidence for the maritime activities in these parts as early as the fifth century BC. “The artifacts received from the excavation site suggest that Pattanam, a hinterland port and a multicultural settlement, may have had links with the Mediterranean, the Red Sea, the Arabian Sea and the South China Sea rims since the early historical period of South India,” he says.
Archeologists and historians are excited about the new findings. T Satyamurthy, eminent archaeologist, Chennai, has expressed the view that the new findings were very encouraging. It is necessary to conduct more excavations of a horizontal nature to find further validation for these initial findings, he says.
Dr. M G S Narayanan, eminent historian and former chairman of the Indian Council for Historical Research (ICHR), also feels these are very important findings. This is the first time archaeological evidence has come up that points to the existence of maritime trade in these areas as early as the fifth century BC, he said in an interview.
Dr. Narayanan said that the ancient Sangham literature referred to the booming city of Makotai, which was known as Muciri in Tamil and Muziris in Greek. There were a number of songs in the Sangham literature that spoke about the town. There were inscriptions and other epigraphic evidences that proved the importance of the town of Makotai which later became Mahodayapuram during the second Cera’s who ruled from the ninth to 12th centuries.
Dr Narayanan said the present day Pattanam was most likely the ancient Muciri Pattanam, described in the ancient Tamil literature. Many interesting findings had been made here, like the ancient Roman pottery and coins that date back to the first and second centuries AD. Large broken pieces of amphora, the long beaked Roman wine glass, were also among them.
But the present findings take the history of Makotai to even before the Roman age, much deep into the Iron Age. The KCHR plans to continue their digging in the area, including an under-water exploration, later this year in search of more detailed information about the ancient trade that linked this port to other parts of the world.
11.01.2008
By N P Chekkutty
Yaleglobal, the online magazine of the Yale University Centre for the Study of Globalization, describes globalization as an historical process that began with the first movement of people out of Africa into other parts of the world. Traveling short, then longer distances, migrants, merchants, and others have always taken their ideas, customs, and products into new lands. The melding, borrowing, and adaptation of outside influences can be found in many areas of human life.
The movement of technology, food and plants and ideas are three major areas where this process made its impact right from the early days of history. New historical and archaeological studies have proved how this process developed through centuries and how mankind was going through a process of integration ever since they came to know how to travel around.
In the past week, two major archaeological findings, from the two hemispheres of the planet, brought back into focus the ancient roots of this process. The first report came from Yucatan in Mexico, where scholars unearthed evidence of a 1500-year-old market in an ancient Mayan city. The market place was a thriving place dealing with food articles and other essential items as any other market in these days of post-modern globalization, reminding us how ancient are most of the modern trends that we speak of.(See report, Ancient Yucatan Soils Point to Maya Market, and Market Economy, New York Times, Jan.8.,2008, www.nytimes.com).
On the other side of the planet, in Kodungallur near Kochi, Kerala, archaeologists reported finding of the remains of an ancient ship. The Hindu on Wednesday, January 9, reported that the radiocarbon dating of the remains unearthed at Pattanam, seven kilometers south of the present town of Kodungallur, has proved that these remains date back to around 5th century BC.(See report, Study Points to 500 BC Kerala Maritime Activity, The Hindu, Jan.9,2008; www.thehindu.in).
These are exciting findings: The Iron Age remains unearthed in Kodungallur including part of a wooden canoe and bollards (stakes used to secure canoes and boats) give the first archaeological evidence that trade was indeed part of human activity even in those Iron Age days.
It was the Kerala Council for Historical Studies (KCHR) which conducted these studies at Kodungallur in February-April 2007 and the findings were tested for dating at the Institute of Physics, Bhubaneswar. The analysis was done making use of the method known as Accelerator Mass Spectrometry (AMS) Radiocarbon 14C, a well known process for dating historical artifacts.
The KCHR director, Dr. P J Cheriyan, describes the findings as evidence for the maritime activities in these parts as early as the fifth century BC. “The artifacts received from the excavation site suggest that Pattanam, a hinterland port and a multicultural settlement, may have had links with the Mediterranean, the Red Sea, the Arabian Sea and the South China Sea rims since the early historical period of South India,” he says.
Archeologists and historians are excited about the new findings. T Satyamurthy, eminent archaeologist, Chennai, has expressed the view that the new findings were very encouraging. It is necessary to conduct more excavations of a horizontal nature to find further validation for these initial findings, he says.
Dr. M G S Narayanan, eminent historian and former chairman of the Indian Council for Historical Research (ICHR), also feels these are very important findings. This is the first time archaeological evidence has come up that points to the existence of maritime trade in these areas as early as the fifth century BC, he said in an interview.
Dr. Narayanan said that the ancient Sangham literature referred to the booming city of Makotai, which was known as Muciri in Tamil and Muziris in Greek. There were a number of songs in the Sangham literature that spoke about the town. There were inscriptions and other epigraphic evidences that proved the importance of the town of Makotai which later became Mahodayapuram during the second Cera’s who ruled from the ninth to 12th centuries.
Dr Narayanan said the present day Pattanam was most likely the ancient Muciri Pattanam, described in the ancient Tamil literature. Many interesting findings had been made here, like the ancient Roman pottery and coins that date back to the first and second centuries AD. Large broken pieces of amphora, the long beaked Roman wine glass, were also among them.
But the present findings take the history of Makotai to even before the Roman age, much deep into the Iron Age. The KCHR plans to continue their digging in the area, including an under-water exploration, later this year in search of more detailed information about the ancient trade that linked this port to other parts of the world.
11.01.2008
Friday, December 7, 2007
Vanilla and the World Market
Vanilla: Spicy Beans Gone Sour
By N P Chekkutty
Vanilla is a spicy bean that brings back the memories of the foolish peasant who killed the goose that laid golden eggs: as the vanilla prices skyrocketed, peasants everywhere in South India took to it in a big way, even cutting off their rich traditional crops, only to be rudely shocked as they took a beating in the next season.
Vanilla is grown in the lush green tropical lands of South India, mainly in Kerala and the Nilgiri region of Tamil Nadu and Karnataka, and it was hailed as a magic plant that would bring instant riches as the price of the raw beans reached as high as Rs. 3850 a kg during the 2002-03 season. In the season before, it had fetched around Rs, 130 a kg, and owing to sudden increase in international demand, the prices soared many times. This spice, grown in Madagascar and Indonesia, is an essential ingredient for ice-creams,
cakes, biscuits and beverages, giving them the mouth-watering flavours. The vanilla
prices shot up when the crops in Madagascar failed almost completely late in 2001. As
supplies went short, the international buyers who have a monopoly over extraction of vanilla flavours from dry beans, sent their agents scurrying all over the South and South-East Asian countries, widely known for their variety of spices. It was then the peasants in Kerala and other South Indian States had a windfall of profits.
But the dream turned sour and shockwaves started coming in when the price of
vanilla beans slumped to as low as Rs. 50 a kg in the last season, driving many farmers to a debt trap. There were thousands of small and medium farmers who had completely shifted to vanilla as a monocrop, abandoning their traditional varieties of crops like rubber, coconut, cocoa, tea and coffee, hoping to reap a rich harvest.
This collective shift to the vanilla bandwagon was not confined only to growers. There were many banks, including a number of pubic sector banks, who abandoned all caution and pumped in huge amounts of money to the vanilla business, handing over massive loans as advance to the growers who needed cash to cut off their ripe plants of other varieties to make way for vanilla. In fact some banks sent their representatives to remote villages pursuading farmers to take loans and plant vanilla, resulting in a massive increase in their non-performing assets in some areas of Kerala.
“It was foolish to nure such unrealistic hopes about a single crop, which were bound to crash,” points out Abhay Jacob, a senior farm journalist in Kerala, who had warned against the en-masse shifting of cropping pattern, as prices had often showed such huge fluctuations in international markets. He said that thousands of hectares of ripe crops were pulled out to make way for vanilla in the 2002-03 season as farmers were hoping that the prices would go higher and higher. He said that there were rumours then that the use of synthetic vanilla, a substitute for the organic variety, would be banned on health grounds and as a result, the demand for vanilla beans from the international food industry would only go up.
But the market reacted differently. As the price of natural vanilla went absurdly high, the multinational food, beverages and ice-cream companies, who are its main consumers, turned to synthetic and semi-organic varieties for flavours. That saw the dmand for naturl vanilla showing a sharp decline in the next season.
“It was a case of wrong understanding of the global market trends,” says P S Sreekantan Thampy, senior officer at the Spices Board, Kochi, which is the national agency for the promotion of spices trade in India. He said that right from the beginning the Spices Board had warned the farmers against shifting en-masse to vanilla as it was a risky move. Vanilla is a plant that is best as an intercrop along with other crops, and it would give handsome returns in three years.
Thampy said the current market price of vanilla was not really bad as they ensured a decent profit to cultivators. What has been shattered is the unrealistic dreams of easy money. With a proper marketing system and fresh investments for developing new value added products from the spice, it could bring excellent profits to the growers and investors, he said.
Traditionally, the farmers were planting vanilla as an intercrop with rubber, coconut, and vegetables. With a low investment of around Rs. 30 a plant, it fetched a comfortable return of around Rs. 130-150. These leafy plants need good shade, plenty of water and natural manures, no need for much pesticides and fertilizers and the real effort on the part of the farmer is during the season of pollination, as the plants need artificial pollination. Each plant has to be individually pollinated early in the day and each healthy plant could give as much as two to three kg of ripe beans during a season in three years time.
As the farmers burnt their fingers with huge unsold stocks last season, there was a hue and cry about the farmers being let down by the authorities. The Central Government even urged the Spices Trading Corporation of India, a public sector undertaking, to absorb the stocks.
“But we can’t absorb all those unsold stocks as we cannot incur losses beyond a point,” said an official at the Corporation who said that they could step into the market only when the prices go dangerously below the normal level threatening the entire agricultural sector.
“But the case with vanilla was different,” points out Abhay Jacob. It was a deliberately engineered hysteria that misled the growers to disaster. It was also a case of drying the haysack while the sun shone: during those days there were firms who sold planting material --saplings of one metre-- for as high as Rs. 135 while it had cost only Rs. 2 to 8 in the previous years.
It was sheer madness in the heydays of vanilla craze. There were plantation-owners who kept a round-the-clock watch as thieves roamed about the villages to carry off with plants as even the saplings could fetch a fortune. “There were some people who even put up electric barbs around their farms simply to protect this green diamond in their backyard,” recalls Abhay Jacob who hails from a rich farming village near Kottayam.
But vanilla remains a good and profitable crop for growers and investors. With a long-term stratgey and proper investments, it could be a money-spinner as Vanilco, a producer-promoted company, has proved in the past one year.
The Vanilla India Producers Company Ltd, (Vanilco) was registered at Kochi in October last year with individual farmers and their primary societies as members. Vanilco is the first experiment in farm-level marketing and processing, under a new legislation introduced by the Union Government in 2002. Vanilco is involved in the procurement and processing of vanilla beans and is exploring new ways to develop value-added producuts for Indian markets.
“In the last season, when we had just entered the market, we procured around 50 tonnes of vanilla beans at Rs. 250 a kg,” said M C Saju, an official with Vanilco. Vanilco has started processing the beans at its factories in Kerala and Tamil Nadu, and has tied up with Indian Institute of Technology, Mumbai, to develop new methods for extraction of flavours. It has also found bulk buyers for the flavours with Amul and Milma who are using the natural vanilla for their ice-creams and other products.
Saju said the domestic market itself is growing. What was needed were new technologies for development of value added products in India, as Madagascar offers over a dozen different items for various segments of buyers, both commercial and household. For this, fresh investment has to be directed to this spice. In such a scenario, India will have to import vanilla beans as its produce will not be sufficient to meet the huge market demands, he pointed out.
The rising demand is reflected in the procurement charts at Vanilco. Compared to last year’s 50 tonnes, Vanilco has already procured 130 tonnes in the first two months of the season. This year they target to procure 200 tonnes.
The market intervention by Vanilco has proved that vanilla growers need not be at the mercy of international agents who used to control the markets. With a strategy of deferred payments, Vanilco was able to offer a price of Rs. 250 while the open market rates (cash down) offered by the global buyers were around Rs 150.With new researches on for developing more value-added products in India , vanilla could be the bean that will offer a spicy taste, both for consumers as well as growers.
By N P Chekkutty
Vanilla is a spicy bean that brings back the memories of the foolish peasant who killed the goose that laid golden eggs: as the vanilla prices skyrocketed, peasants everywhere in South India took to it in a big way, even cutting off their rich traditional crops, only to be rudely shocked as they took a beating in the next season.
Vanilla is grown in the lush green tropical lands of South India, mainly in Kerala and the Nilgiri region of Tamil Nadu and Karnataka, and it was hailed as a magic plant that would bring instant riches as the price of the raw beans reached as high as Rs. 3850 a kg during the 2002-03 season. In the season before, it had fetched around Rs, 130 a kg, and owing to sudden increase in international demand, the prices soared many times. This spice, grown in Madagascar and Indonesia, is an essential ingredient for ice-creams,
cakes, biscuits and beverages, giving them the mouth-watering flavours. The vanilla
prices shot up when the crops in Madagascar failed almost completely late in 2001. As
supplies went short, the international buyers who have a monopoly over extraction of vanilla flavours from dry beans, sent their agents scurrying all over the South and South-East Asian countries, widely known for their variety of spices. It was then the peasants in Kerala and other South Indian States had a windfall of profits.
But the dream turned sour and shockwaves started coming in when the price of
vanilla beans slumped to as low as Rs. 50 a kg in the last season, driving many farmers to a debt trap. There were thousands of small and medium farmers who had completely shifted to vanilla as a monocrop, abandoning their traditional varieties of crops like rubber, coconut, cocoa, tea and coffee, hoping to reap a rich harvest.
This collective shift to the vanilla bandwagon was not confined only to growers. There were many banks, including a number of pubic sector banks, who abandoned all caution and pumped in huge amounts of money to the vanilla business, handing over massive loans as advance to the growers who needed cash to cut off their ripe plants of other varieties to make way for vanilla. In fact some banks sent their representatives to remote villages pursuading farmers to take loans and plant vanilla, resulting in a massive increase in their non-performing assets in some areas of Kerala.
“It was foolish to nure such unrealistic hopes about a single crop, which were bound to crash,” points out Abhay Jacob, a senior farm journalist in Kerala, who had warned against the en-masse shifting of cropping pattern, as prices had often showed such huge fluctuations in international markets. He said that thousands of hectares of ripe crops were pulled out to make way for vanilla in the 2002-03 season as farmers were hoping that the prices would go higher and higher. He said that there were rumours then that the use of synthetic vanilla, a substitute for the organic variety, would be banned on health grounds and as a result, the demand for vanilla beans from the international food industry would only go up.
But the market reacted differently. As the price of natural vanilla went absurdly high, the multinational food, beverages and ice-cream companies, who are its main consumers, turned to synthetic and semi-organic varieties for flavours. That saw the dmand for naturl vanilla showing a sharp decline in the next season.
“It was a case of wrong understanding of the global market trends,” says P S Sreekantan Thampy, senior officer at the Spices Board, Kochi, which is the national agency for the promotion of spices trade in India. He said that right from the beginning the Spices Board had warned the farmers against shifting en-masse to vanilla as it was a risky move. Vanilla is a plant that is best as an intercrop along with other crops, and it would give handsome returns in three years.
Thampy said the current market price of vanilla was not really bad as they ensured a decent profit to cultivators. What has been shattered is the unrealistic dreams of easy money. With a proper marketing system and fresh investments for developing new value added products from the spice, it could bring excellent profits to the growers and investors, he said.
Traditionally, the farmers were planting vanilla as an intercrop with rubber, coconut, and vegetables. With a low investment of around Rs. 30 a plant, it fetched a comfortable return of around Rs. 130-150. These leafy plants need good shade, plenty of water and natural manures, no need for much pesticides and fertilizers and the real effort on the part of the farmer is during the season of pollination, as the plants need artificial pollination. Each plant has to be individually pollinated early in the day and each healthy plant could give as much as two to three kg of ripe beans during a season in three years time.
As the farmers burnt their fingers with huge unsold stocks last season, there was a hue and cry about the farmers being let down by the authorities. The Central Government even urged the Spices Trading Corporation of India, a public sector undertaking, to absorb the stocks.
“But we can’t absorb all those unsold stocks as we cannot incur losses beyond a point,” said an official at the Corporation who said that they could step into the market only when the prices go dangerously below the normal level threatening the entire agricultural sector.
“But the case with vanilla was different,” points out Abhay Jacob. It was a deliberately engineered hysteria that misled the growers to disaster. It was also a case of drying the haysack while the sun shone: during those days there were firms who sold planting material --saplings of one metre-- for as high as Rs. 135 while it had cost only Rs. 2 to 8 in the previous years.
It was sheer madness in the heydays of vanilla craze. There were plantation-owners who kept a round-the-clock watch as thieves roamed about the villages to carry off with plants as even the saplings could fetch a fortune. “There were some people who even put up electric barbs around their farms simply to protect this green diamond in their backyard,” recalls Abhay Jacob who hails from a rich farming village near Kottayam.
But vanilla remains a good and profitable crop for growers and investors. With a long-term stratgey and proper investments, it could be a money-spinner as Vanilco, a producer-promoted company, has proved in the past one year.
The Vanilla India Producers Company Ltd, (Vanilco) was registered at Kochi in October last year with individual farmers and their primary societies as members. Vanilco is the first experiment in farm-level marketing and processing, under a new legislation introduced by the Union Government in 2002. Vanilco is involved in the procurement and processing of vanilla beans and is exploring new ways to develop value-added producuts for Indian markets.
“In the last season, when we had just entered the market, we procured around 50 tonnes of vanilla beans at Rs. 250 a kg,” said M C Saju, an official with Vanilco. Vanilco has started processing the beans at its factories in Kerala and Tamil Nadu, and has tied up with Indian Institute of Technology, Mumbai, to develop new methods for extraction of flavours. It has also found bulk buyers for the flavours with Amul and Milma who are using the natural vanilla for their ice-creams and other products.
Saju said the domestic market itself is growing. What was needed were new technologies for development of value added products in India, as Madagascar offers over a dozen different items for various segments of buyers, both commercial and household. For this, fresh investment has to be directed to this spice. In such a scenario, India will have to import vanilla beans as its produce will not be sufficient to meet the huge market demands, he pointed out.
The rising demand is reflected in the procurement charts at Vanilco. Compared to last year’s 50 tonnes, Vanilco has already procured 130 tonnes in the first two months of the season. This year they target to procure 200 tonnes.
The market intervention by Vanilco has proved that vanilla growers need not be at the mercy of international agents who used to control the markets. With a strategy of deferred payments, Vanilco was able to offer a price of Rs. 250 while the open market rates (cash down) offered by the global buyers were around Rs 150.With new researches on for developing more value-added products in India , vanilla could be the bean that will offer a spicy taste, both for consumers as well as growers.
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