High cost of organic food products in India is the key reason behind its purchase being restricted to affluent class of consumers as the switch to organic food is likely to cost an additional INR 1,200–1,500 per month for a family, according to a recent ASSOCHAM-EY joint study.
“Specialized farmer training cost, processing and inventory holding cost (without chemical additives), and increased packaging, logistics, and distribution cost (due to low volumes), contribute to the high price of organic food products,” noted the study titled ‘The Indian Organic Market: A new paradigm in agriculture,’ conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) jointly with global consultancy firm Ernst & Young LLP (EY).
High certification costs together with high cost of organic manure, and inflationary pressure created by high demand and low supply are key reasons for organic products to have higher price mark-ups than conventional products, according to the ASSOCHAM-EY study.
The report further noted that poor awareness levels amid consumers about health benefits of organic food products, especially in the non-metro cities together with their limited availability in the market are posing grave challenge to growth of Indian organic food industry.
Lack of standardized organic agriculture inputs and subsidy on organic inputs, supply chain issues, global competitiveness, absence of proper branding and packaging are other challenges being faced by organic sector in the country.
It also highlighted that while the Centre has sanctioned several schemes to incentivize organic farming with many state governments even creating individual policies to promote the same and private sector too having expressed interest by increasing investments, there exist several challenges for all stakeholders involved at every stage of the value chain.
For instance, owing to gaps in the regulatory framework for organic products in India, producers of organic products are continually struggling to optimize the scale of their operations while maintaining profitability.
The ASSOCHAM-EY report also stated that although the government has been encouraging organic cultivation through various policies, there is a need to have state-level policies and cells to monitor organic production.
The government at the same time needs to step up its efforts to discourage use of fertilizers and pesticide by incentivizing and promoting use of bio-fertilizers and bio-pesticides to decrease the cost of cultivation.
In addition to the procedural challenges pertaining to certification and quality assurance, the increasing costs of inputs and the elongated conversion period from conventional to organic farming are a few of the key challenges faced by the producers, most of whom are small or marginal farmers.
The processors of organic food products on the other hand, face significant resistance in the form of lack of adequate post-harvest facilities for organic products. Thus several measures need to be taken in order to avoid contamination and cross-contamination of produce as infrastructural capabilities of the country often prove to be inadequate.
The ASSOCHAM-EY study also called for developing a public-private partnership model that aids the organic sector in reaching its full potential. “A greater emphasis should be placed on the capacity building of stakeholders, easing access to finance, monitoring and evaluation (M&E) of all assets and processes as well as research and development (R&D) to help keep abreast with global progress in the sector.”
Additionally, the report noted that there has emerged an urgent need for infrastructural development and business climate reforms, reinvention of branding and marketing strategies and entrepreneurship development.