Aquaculture Development In India: An Economic Overview With Special Reference To Coastal Aquaculture

COUNTRY REVIEW

Aquaculture development in India: an economic overview with special reference to coastal aquaculture M. KRISHNAN* & PRATAP S. BIRTHAL† * Central Institute of Brackishwater Aquaculture, Chennai, India † National Centre for Agricultural Economics and Policy Research, New Delhi, India

Abstract Coastal aquaculture emerged as a sunrise sector in India during the 1990s. It was identified as a sector full of promise for expanding exports and for adding to foreign exchange. The sector has more than fulfilled its promise and has more in store. This paper gives an overview of the role and development of fisheries in general and aquaculture in particular in India. Growth, sources of growth, contribution to national gross domestic product, impact on rural economy, socio-economic impacts, generation of backward linkages, and export growth of coastal aquaculture in terms of composition, direction and penetration are reviewed. The paper concludes on an optimistic note for development of coastal aquaculture in the country with the streamlining of policy measures for production and marketing. Keywords: Aquaculture development, coastal aquaculture, socio-economics, environmental issues, India. Overview Agriculture in India occupies a prime position in terms of its contribution to gross domestic product and factor incomes. It accounts for 27 percent of India’s gross domestic product, 65 percent of the employment of the total workforce and 21 percent of the total exports of the country (Venkitaramanan, 2001). The sectoral shift has been less rapid and less pronounced than anticipated in more than 50 years of independence. Its population and poverty weigh down the Indian economy. India’s population at the last count was over 1 billion and the percentage of people below the poverty line around 36 percent1. While the green revolution stopped the imports of foodgrains, problems of distribution of food and low purchasing power of the people persist.

Correspondence Dr M. Krishnan, Senior Economist, Central Institute of Brackishwater Aquaculture, 75, Santhome High Road, R.A. Puram, Chennai – 600 028, India. Tel: +91-44-461-0311. Fax: +9144-433-1414. Email: [email protected].

1

Families (consisting of 4 members) below the poverty line earn on an average less than US $ 1 or 25 cents per capita per day in India. This is about enough money only for food and insufficient for other basic needs. The Government of India estimates, using a different yardstick of calories intake, that 330 million people are in poverty (www.members.tripod.com/tveducation). Aquaculture Economics and Management 6(1/2) 2002

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Fisheries have always been a traditional avocation. Craft and gear have remained more or less traditional despite rapid improvements in fishing technology in India. Traditional outlooks, cultural values and insufficient penetration of institutional finance have been responsible for low productivity of the fishers. Inland fisheries and aquaculture has made rapid progress of late and are contributing around 50 percent of the total fish production in the country (Krishnan et. al., 2001). The introduction of the New Economic Policy of the Government of India in 1991 has opened up India’s economy and has enabled rapid expansion of export market for Indian seafood. Fisheries sector: contribution and growth India’s contribution to global fish production increased from 3.26 percent in 1985 to 4.41 percent in 1997 (Table 1). Compared to growth in world fish production, fish production in India has increased at a faster rate mainly due to increasing volume of inland fish production. In 1997, India accounted for 4.9 percent of the world inland fish production and 4.07 percent of its marine fish production. Table 1 World vis-à-vis India in fish production (million tons) 1985 World Marine Inland Total India Marine Inland Total India’s share (%) Marine Inland Total

1990

1995

1997

75.80 (87.60) 10.73 (12.40) 86.53

83.25 (83.25) 12.40 (15.03) 97.97

91.90 (81.39) 14.72 (18.61) 112.91

72.49 (59.35) 49.64 (40.65) 122.13

1.73 (61.35) 1.09 (38.65) 2.82

2.22 (58.58) 1.57 (41.42) 3.79

2.70 (54.99) 2.20 (44.81) 4.90

2.95 (54.83) 2.43 (45.17) 5.38

2.28 0.16 3.26

2.67 10.57 3.87

2.94 10.67 4.34

4.07 4.90 4.41

Figures in parenthesis are percentages of the totals. Source: www.fao.org.

On average its fisheries sector contributes about 0.8 percent of India’s gross domestic product (Table 2). This has remained almost constant since 1970-71. However its contribution to agricultural domestic product has been rising continuously (Krishnan et. al., 2000). It increased from 1.98 percent during the decade of the 1970s to 2.74 percent during the 1990s. This could be due to a declining share of the agricultural sector to gross domestic product and faster growth in fisheries sector compared to the agricultural sector (Table 2). Annual growth in gross domestic product from fisheries sector accelerated to 7.12 in the 1990s from 2.86 percent in the 1970s. In contrast, the rate of growth of agricultural gross domestic product during these decades grew by 3.09 and 1.79 percent respectively.

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Table 2 Comparative contribution to GDP and growth of fisheries sector in India Period 1970-71 to 1979-80 1980-81 to 1989-90 1990-91 to 1996-97 1970-71 to 1996-97

Percent contribution to GDP Ag. GDP Fisheries GDP 0.81 1.98 2.86 (6.408) 0.74 2.37 5.11 (9.540) 0.79 2.74 7.12 (10.550) 4.38 (20.863)

Percent annual growth Ag. GDP GDP 1.79 (2.764) 3.39 (9.288) 2.89 (5.928) 5.27 (23.266) 3.09 (7.760) 5.85 (10.044) 2.74 (22.954) 4.62 (39.981)

Figures in parenthesis are t-values. Source: National Accounts Statistics, various issues, Central Statistical Organization, New Delhi.

The rate of growth in contribution of fisheries to India’s gross domestic product has started to approach the rate of growth in its gross domestic product. This could be attributed mainly to greater allocation of funds to fisheries sector. The fisheries sector outlay as percent of outlay for agricultural sector over the five-year plans has been increasing continuously (Table 3). It increased from 1.74 percent in the First Five-Year Plan to 5.49 percent in the Eighth Five-Year Plan. Its share in total outlay during different plans has, however, varied from 0.26 percent to 0.52 percent. Table 3 Outlay for fisheries sector during five-year plans (million rupees) Plan

Period

Total outlay

First Plan Second Plan Third Plan Fourth Plan Fifth Plan Sixth Plan Seventh Plan Eighth Plan

1951-56 1956-57 1961-66 1969-74 1974-79 1980-85 1985-90 1992-97

19600 46000 75000 159020 393320 975000 1800000 4341000

Outlay for agricultural sector

Outlay for fisheries sector

2940 5290 10680 27280 4302 66090 105240 224670

51.3 122.6 282.7 826.8 151.24 3711.4 5465.4 12328.2

Share of Fisheries sector (%) Total Agricultural outlay outlay 0.26 1.74 0.27 2.32 0.38 2.65 0.52 3.03 0.38 3.52 0.38 5.62 0.30 5.19 0.28 5.49

Source: www.nic.in/ninthplan.

Fish production: structure and trends Fish production in India increased steadily from 0.752 million tons in 1950-51 to 5.26 million tons in 1998-99 (Table 4). Marine fish production remained the major contributor till 198081. Its contribution to total fish production by 1960-61 was over 70 percent, but it declined drastically to 61.85 percent in 1970-71. Since then, it remained almost constant till 1990-91. In the 1990s, fish production structure underwent substantial changes. The share of inland fisheries increased drastically reaching to 48.76 percent in 1998-99. These changes arose from a deceleration in growth of marine fish production and a new policy perspective in favor of inland fisheries, particularly aquaculture.

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Table 4 Changes in structure of fish production in India Year 1950-51 1960-61 1970-71 1980-81 1990-91 1998-99

Total fish production (m. tons) 0.752 1.160 1.756 2.442 3.836 5.262

Share of marine fisheries (%) 71.01 75.86 61.85 63.68 59.96 51.24

Share of inland fisheries (%) 28.99 24.14 38.15 36.32 40.04 48.76

Source: Department of Agriculture and Cooperation: Statistics at a Glance, 2000.

Since 1980-81 fish production has been increasing at a rate of 5.21 percent a year (Table 5). The inland sector contributed increasingly to the observed growth. Inland fish production grew at an annual rate of 6.20 percent. A disaggregated view of the pattern of growth shows acceleration in growth of inland fish production during the 1990s. On the other hand, growth in marine fish production decelerated to 2.50 percent during 1990-99 from 3.73 percent during 1980-90. Table 5 Growth trend in fish production in India (percent) Source Marine Inland Total

1980-81 to 1989-90 3.73 (4.302) 5.14 (13.301) 4.30 (7.826)

Period 1990-91 to 1998-99 2.50 (4.200) 6.34 (17.558) 4.19 (9.767)

1980-81 to 1998-99 4.48 (13.992) 6.20 (37.763) 5.21 (24.15)

Figures in parentheses are percentages of totals. Source: Department of Agriculture and Cooperation: Statistics at a Glance, 2000.

Culture fisheries comprising freshwater and brackishwater fish culture is the main source of the growth in inland sector. The share of culture fisheries in inland sector has increased tremendously during recent years (Table 6). It increased from 43.33 percent in 1984-85 to 71.72 percent in 1989-90 and then to 84.07 percent in 1994-95. Within the culture fisheries, the major contribution to enhanced production was from freshwater aquaculture, which increased from about 30 percent in 1984-85 to about 65 percent in 1994-95. Table 6 Structure of inland fish production in India (‘000 tons) Type of culture Capture fisheries Culture fisheries Freshwater Brackishwater Total inland fisheries

1984-85 591.7 (53.67) 511.5 (43.33) 308.3 (27.95) 203.2 (18.42) 1103.2 (100)

1989-90 396.5 (28.28) 1005.5 (71.72) 779.4 (55.59) 226.1 (16.13) 1402.0 (100)

1994-95 334.0 (15.93) 1762.7 (84.07) 1392.3 (66.40) 370.4 (17.67) 2096.7 (100)

Figures in parentheses are percentages of total inland production. Source: Report of the working group for Ninth Five Year Plan for Fisheries.

Potential for development of fisheries India has abundant resources for fish production. Table 7 gives details of fishery resources in India. In the case of marine fisheries, India has 506 thousand square kilometers of continental shelf area and 8041 kilometers long coastline. The inland fisheries resources include 171334 kilometers length of rivers and canals, 2.05 million hectares of reservoir area, 28.55 lakh2

2

A lakh equals 100,000 units.

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hectares of ponds and tank area, and 0.788 million hectares of beels, oxbow and derelict water. The brackishwater area for fish production is estimated to be 1.422 million hectares. Table 7 Fishery resources of India Resource Marine Continental Shelf Landing centers Coast line Inland Rivers and canals Reservoirs Tanks and ponds Beels, oxbow and derelict waters Brackishwater

Unit

Quantity

‘000 sq. km. No. Km. Km. Million ha. Million ha. Million ha. Million ha.

506 2333 8041 171334 2.050 2.855 0.788 1.422

Source: Handbook of Fisheries Statistics (1996).

India’s inland resources have not been tapped to their potential. Only about 16 percent of its freshwater area and 10 percent of the brackishwater area has been utilized for fish culture. The productivity however is low while average productivity of freshwater aquaculture in 1998-99 was about 2.2.tons/ ha, there is a potential to raise yield to 10 tons/ha. The realized average productivity of brackishwater aquaculture in 1998-99 was 472 kg/ha as against the potential of about 10 tons/ha. Brackishwater aquaculture Brackishwater shrimp farming has been a growth area since the initiation of the process of economic liberalization in 1991. Tiger shrimp is the main cultured species in brackishwater. This is a high value commodity and has ample export potential. However, as indicated earlier, the production potential of brackishwater aquaculture has remained grossly underutilized in terms of both area and yield. Spatial distribution of area and production It is estimated that about 1.2 million hectares of brackishwater area is available for aquaculture. About two thirds of this lies in the states of West Bengal, Andhra Pradesh, Maharashtra, Kerala, Karnataka, Tamil Nadu, Gujarat, Orissa, Pondicherry and Goa (Table 8). Of the available area in these states, 47.51 percent is concentrated in West Bengal followed by Andhra Pradesh (17.60 percent), Maharashtra (9.38 percent), Kerala (7.62), Tamil Nadu (6.57) and Gujarat (4.41 percent). Only 17 percent of the available area in these states has on average been developed for aquaculture (Table 8). Though the extent of utilization varies substantially across the states, Andhra Pradesh has the maximum percentage of its potential available area under shrimp culture (> 50 percent). Kerala ranks second with about one fifth of the available potential area utilized for shrimp production. West Bengal ranks third in terms of the available brackishwater area under aquaculture. West Bengal accounts for the maximum share of available brackishwater in these states. Thus, due to variation in utilization of available area, the percentage distribution of utilized area varies substantially across the states. Brackishwater is principally used for shrimp production.

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Table 8 Potential brackishwater area, area covered, production and yield of shrimp production in different states, 2000-2001. State Potential Area covered Percent area Production Yield area (ha) (ha) utilized (tons) (kg./ha) Andhra Pradesh 150000 74220 (50.87) 49.48 53100 (54.69) 715.44 Goa 18500 930 (0.64) 5.03 970 (0.99) 1043.01 Gujarat 376000 440 (0.30) 420 (0.43) 954.54 Karnataka 8000 2980 (2.04) 0.12 2730 (2.81) 916.10 Kerala 65000 14740 (10.10) 22.68 7320 (7.53) 496.61 Maharashtra 80000 420 (0.29) 0.53 320 (0.33) 761.90 Orissa 31600 7420 (5.09) 0.02 7360 (7.58) 991.91 Pondicherry 800 Not available Not available Tamil Nadu 56000 2540 (1.74) 4.54 3790 (3.90) 1492.1 West Bengal 405000 42210 (28.93) 10.42 21080 (21.71) 499.40 Total 1190900 145900 (100) 17.11 97090 (100) 679.33 Figures in parentheses are percentages of totals. Source: MPEDA, 2001.

The states of Andhra Pradesh and West Bengal contribute 77 percent of the total brackishwater shrimp production in the country (Table 8). In fact, more than half of the shrimp production comes from Andhra Pradesh alone. West Bengal contributes 22 percent and is followed by Kerala (7.53 percent) and Orissa (7.58 percent). The altered uneven pattern of distribution of production compared to aquaculture area is due to differences in yields (Table 8). Per hectare yield is the highest in Tamil Nadu (1492 kg/ha) and the lowest in Kerala (496 kg/ha). The national yield is estimated to average 679 kg/ha. Except for Kerala and West Bengal, the yield in other states is higher than the national average. Shrimp culture is location specific and the interstate variation in yield maybe due to differences in agroclimatic, soil and water characteristics, technology, socio-economic factors, development of markets, infrastructure and institutions and so on. Sources of growth in brackishwater aquaculture Brackishwater aquaculture has been a part time activity in the coastal areas of the country since time immemorial. The states of Kerala, parts of Karnataka and West Bengal practiced traditional culture, which were quite unorganized and hence low yielding. Commercial aquaculture started in earnest in the country with the announcement of the New Economic Policy of the Government of India in 1991. With the aim of exploiting opportunities in this sunrise sector, a large area was converted to aquaculture in coastal areas. Increasing returns to scale in the initial stages led to increasing demands on land which in turn led to intensification of culture practices and subsequently to the outbreak of the shrimp white spot disease. This setback generated some introspection and changes in cultural practices that finally led to the culture system settling down to an improved extensive form of culture with a stocking density of not more than 5-8 per square meter and sustainable output levels of 1 ton per hectare. Table 9 traces the effect of area and productivity on shrimp aquaculture since 1990-91 across states in India. At the all India level, 59 percent of total production can be attributed to yield increases and 38 percent to area effect in 1990-91. While in 2000-01, yield effect on production has fallen to 12.69 percent and area effect has risen to 71 percent indicating that growth in production in earlier stages can be attributed to growth in yield and in the latter stages by growth in area at the all India level. While the state of West Bengal has had

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Table 9 Contribution of area, productivity and their interaction towards increasing production of shrimp across states 1990-1991 to 2000-2001 (1990-91=100) a (Percent) State West Bengal Orissa Andhra Pradesh Tamil Nadu Kerala Karnataka Goa Maharashtra Gujarat Total

Yield 96.75 158.40 -7.01 -34.17 81.78 81.83 100 73.58 -73.35 59.26

1990-91 Area Interaction Yield 2.95 0.29 94.57 -66.06 7.65 1815 109.47 -2.45 -20.68 165.60 -31.43 -55.32 17.31 0.91 -1256.62 16.8 1.37 44.22 0 0 65.32 23.59 2.82 -1767.23 235.56 -62.20 -11.35 37.89 2.84 8.87

1994-95 Area Interaction 2.90 2.36 -182.24 -1533.07 272.36 -151.68 737.10 -581.68 1516.79 -160.17 38.10 17.69 19.13 15.55 802.96 1064.26 180.29 -68.93 83.78 7.35

Yield 37.22 63.48 -9.49 -2.29 170.20 52.48 67.11 -237.38 -18.12 5.15

1997-98 Area Interaction 53.69 9.08 28.21 8.30 212.30 -102.81 109.97 -7.68 -92.53 22.32 25.18 22.34 16.91 15.98 156.18 181.20 145.80 -27.68 88.78 6.07

Yield 50.56 80.50 -6.68 -2.30 153.84 74.58 41.74 -119.05 -1.93 12.69

2000-21 Area Interaction 36.88 12.55 6.13 4.36 182.67 -75.98 123.41 -21.11 -74.43 20.59 11.10 14.32 26.07 32.20 127.78 91.27 106.78 -4.85 71.54 15.76

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To measure the contribution of area and productivity towards increasing production of shrimp across the states in India, the following methodology was used (Sharma, 1977, Mahajan et al., 1986, Krishnan et. al., 1991). P = Ao (Yn-Yo)+Yo (An+Ao)+ ∆A* ∆Y Where: P = Change in production Ao = Area in the base year An = Area in the current year Yo = Yield in the current year Yn = Yield in the current year ∆A = Change in Area (An – Ao) ∆Y = Change in yield (Yn – Yo) Ao * ∆Y Yo* ∆A ∆A* ∆Y ------------ + ----------- + -----------P P P Productivity Area Interaction contribution contrib. contribution

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continuous contribution to production from yield increases, giving way to area contribution only in the recent years, Andhra Pradesh, Tamil Nadu and Gujarat seems to have increased their production basically from increase in area under culture. Andhra Pradesh has more than 50 percent of its potential area under culture and also contributes more than 50 percent of the total farmed shrimp production in the country. The states of Orissa, Karnataka, Goa has contributed consistently to production by yield increases. But the absolute contributions from these states are quite low. Again, these states including West Bengal have weathered the losses better than others during 1994-95, when the whole of the sector suffered from the white spot disease. The intensity of culture seems to have a definite inverse relationship to the stability of shrimp production (Table 10). While Kerala, West Bengal and Orissa where some form of traditional aquaculture was already in vogue, seem to be relatively stable in terms of area, production and yield, the states in which aquaculture has made in-roads in the last one decade like Tamil Nadu Andhra Pradesh and Gujarat seem to exhibit more instability (Ravisankar et. al. 2001). Attempts at increasing production by improving yields by greater intensity of cultivation seem to have disastrous consequences. The sector itself seems to be reaching a natural equilibrium with the adoption of improved extensive methods of culture. Table 10 Trends in stability in coastal aquaculture (1991-2000) Parameter Production (CV %)

Area (CV %)

Yield (CV %)

Relatively unstable Gujarat (60.18) Tamil Nadu (58.76) Andhra Pradesh (49.54) Tamil Nadu (72.18) Andhra Pradesh (69.32) Gujarat (61.38) Andhra Pradesh (41.59) Maharashtra (40.83) Gujarat (34.31)

Relatively stable Kerala (17.62) West Bengal (22.39) Orissa (22.96) Kerala (4.70) West Bengal (10.78) Orissa (19.04) Kerala (18.27) Orissa (18.41) West Bengal (24.95)

Coastal aquaculture and impacts on rural economy The state of Andhra Pradesh has the largest area under coastal aquaculture in the country. Among the districts of Andhra Pradesh, Nellore has the maximum area under shrimp and its contribution to shrimp production of the state has been 5987 tons in 1998-99. This district utilizes many forms of culture systems, including seawater intake system, groundwater based culture system and creek water system. Nellore led the way for semi-intensive shrimp farming system in the country and also has been in the forefront in the propagation of scampi farming in the country. Patil and Krishnan (1998a) conducted a pioneering study for evaluating the impact of shrimp farming on rural development in Nellore district of Andhra Pradesh. Of the 518 shrimp farmers belonging to the Kandaleru Aqua-farmers Association (KAA) and located in Nellore, 79 percent produce on land holdings of less than 5 hectares. There are 253 small and marginal farmers operating on land holdings of less than 2 hectares in area (Table 11). These constitute 49 percent of all Kandaleru shrimp farmers. In contrast, 108 farmers or 21 percent of all Kandaleru farmers produce on land holdings of greater than five hectares. Of these 108 farmers, 43 or 8 percent of all KAA farmers operate on 10 or more hectares of land. Two hundred and eighty-five farmers or 55 percent reported that they own their farms, 81 or 61 percent reported that they lease their farm land and 152 or 29 percent reported that they received their land through a government land transfer scheme for the purpose of shrimp farming.

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Table 11 hectares

Kandaleru shrimp farms located in Nellore district by site by size of land holdings in

No. of shrimp farms Share (%)

<1 202 39

1-2 51 10

Land holdings size (ha) 2-5 5-10 156 65 30 13

>10 43 8

Total 518 100

Source: Patil and Krishnan (1998a).

The data reveal that farm ownership status varies with farm size (Table 12). Ninety-six percent of KAA farms operating on five or more hectares and 82 percent of those operating on an area between one and two hectares are owned by the operators. In the case of the larger farms, the owners are the individual farmers. In the case of the larger farms, wealthy shrimp farmers own 71 percent and 29 percent are either corporate entities with publicly owned shares or private limited companies. Table 12 Ownership status of shrimp farms by size of land holdings in hectares in Nellore district

No. of shrimp farms Share % Farm land owned Share % Farm land leased Share % Farm land transfer Share %

<1 202 39 50 25 0 0 152 75

Land holdings size (ha) 1-2 2-3 51 156 10 30 42 87 82 56 9 69 18 44 0 0 0 0

5-10 65 13 59 94 6 6 0 0

>10 43 8 42 98 1 2 0 0

Source: KAA database, 1997.

The majority of shrimp farmers who leased land operate on land holdings between two and five hectares and are mostly non-natives of the Nellore district. Their motivation for coming to this region and entry into the industry was in most cases entirely profit-driven. In most cases, these farmers came to the Kandaleru region in 1993 with the announcement of incentives given for export-oriented enterprises under the New Economic Policy of the Government of India. All the 152 farmers reporting that they received land via a government transfer scheme were entitled to this benefit due to their classification as members of one of India’s scheduled castes or scheduled tribes (SC/ST). Each one of them operates on a total area of less than one hectare of land. Patil and Krishnan (1998a) also found that shrimp farms operating on the smallest land holdings are owned and operated by local resident villagers (Table 13). Table 13 Share of Kandaleru shrimp farms by size of land holdings Shares 1993 share (%) 1997 share (%) % change in share

<1 30 39 +9

Land holdings size (ha) 1-2 2-5 9 31 10 30 +1 -1

5-10 18 13 -5

>10 12 8 -4

Source: KAA database, 1997.

In fact of the 202 of farms less than one hectare in size, 150 of them or 29 percent of all KAA shrimp farms are operated by members of the Scheduled Cast/Scheduled Tribe

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community who are considered the poorest and most deprived among those inhabiting the Kandaleru region (BFDA, 1997). Again, the dramatic rise in the number of small farm holdings between 1993 and 1997 suggests that shrimp farming has low barriers to entry for small farmers. This is believed to be because small farm production has low capital intensity and local availability of key inputs, such as feed and seed, keep variable costs relatively low. In addition to direct on-farm employment, ancillary industries have provided employment opportunities for both skilled and unskilled workers. It is estimated that the 33 seed hatcheries employ approximately 1650 workers; the 14 feed mills employ approximately 840 workers; the 8 processing plants employ approximately 1200 workers and the 16 new ice plants employ approximately 400 workers in total (Table 14). It is clear that there are strong direct and indirect employment opportunities associated with the development of ancillary industries to aquaculture. Table 14 Extent of ancillary industries in Nellore district and productive capacity Ancillary industries

Number of production/units Total capacity 1990-91 1992-93 1994-95 1996-97

Seed hatcheries

0

4

30

33

Feed mills Processing plants Ice Plants

0 0 8

13 3 14

14 6 22

14 8 24

2380 million pieces 7800 Mt 24000 mt 285 mt

Number of units 1997-98 (Andhra Pradesh) 142 28 36 -

Source: BFDA, Nellore.

Shrimp farming, environmental issues and social impacts Upsurge in coastal aquaculture activity induced by high profitability is reported to have caused adverse impacts on coastal ecosystems and social environments (Parthasarathy and Nirmala, 2000). Alagarswami (1995) identified adverse impacts of brackishwater aquaculture on social and physical environments and emphasizes the need to adopt eco-friendly technologies. A study, conducted by CIFE and CIBA (1998), concluded that shrimp farming does more good than harm and it is not eco-unfriendly. The study found that most shrimp farms (85 percent) were constructed in the saline shore zone and agricultural land accounted for only 15 percent of the total. The study also found that mangrove regions were unsuitable for establishment of shrimp farms since they were on acid sulphate soils. The salinisation of adjacent lands to shrimp farms has been attributed to the proximity of the lands to the coastal area and not because of the establishment of shrimp farms. Selvam and Ramaswamy (2000) covered 120 farmers including 30 agricultural farmers who sold their lands to shrimp farmers in Karaikal region of Union Territory of Pondicherry and studied factor shares, decomposition of output changes, impacts of shrimp farming on asset distribution, income generation and employment. In the case of shrimp production, the share of the operator (surplus) was higher than the share of any other factor. Operator’s share accounted for 68 percent of the gross returns in case of brackishwater-fed farms. The details of factor shares are given in Table 15. But despite being a high payoff activity, intensive shrimp farming in some of the areas is alleged to have caused problems of soil and water salinity, destruction of mangrove forests, disease outbreak, environmental pollution and social problems such as landlessness, restricted access of small fishermen to seacoast and conflicts between shrimp farmers and village community. Selvam and Ramaswamy (2000) also discuss the conversion of paddy lands to shrimp farming in the Cauvery delta of the state of Tamil Nadu. Intensive shrimp farming is considered to be socially inefficient because of its low labor absorption capacity, compared to paddy farming. But whether expansion of shrimp farming would lead to fall in farm

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employment or create additional employment opportunities would, however, depend on whether the land to be brought under shrimp farming is paddy land or waste/ saline land. Patil and Krishnan (1998b) used social impact index to study the severity of the social impacts of shrimp farming in Nellore district and concluded that there was enough scope and opportunities for solving these problems. The sustainability of brackishwater aquaculture in the country rests on adoption of location specific suitable farming systems, appropriate species, stocking density, cultural practices and policy support. Table 15 Factor shares (percent ) in rice and shrimp production in Karaikal region in Pondicherry, India Details

Rice

Gross value of output 100.00 Current inputs 20.83 Capital 11.89 Labor 28.40 Residual 38.88 Land 13.56 Surplus 25.32 Source: Selvam and Ramaswamy (2000).

Shrimp production Brackishwater-fed Seawater-fed 100.00 100.00 25.36 28.72 3.87 4.80 1.13 0.88 69.64 65.60 01.48 00.79 68.16 64.81

The shift to scampi The white spot disease and slow decline in price of tiger shrimp have caused coastal aquaculture to make a shift to scampi farming. It is estimated that more than 10,000 hectares of water-spread area has been brought under scampi culture in the Nellore district of Andhra Pradesh. Other districts in the same state such as Krishna, Parkas, East Guava and West Guava are also taking up scampi culture on a large scale. Andhra Pradesh alone accounts for 67 percent of the total area and over 85 percent of the production of the giant freshwater prawn. West Bengal, Orissa, Gujarat and Kerala are close behind in adopting scampi culture. Investment pattern in aquaculture In order to fulfill the objectives and the targets envisaged by the Planning Commission of India, many issues require careful consideration at levels of farm, industry, in research planning and implementation, in extension and by credit agencies which influence flow of institutional finance (Upare, 2000). The distribution of investment has however, been uneven across the states (Table 16). The industry invested in maximum in the states with higher yield potential. In 1994, Andhra Pradesh accounted for 45.57 percent of the total investment. In West Bengal 14.42 percent and Tamil Nadu 10.52 percent. Flow of institutional finance to aquaculture also increased substantially. The data presented however pertains to both coastal and freshwater aquaculture. This momentum, however, did not last long. Bad publicity saw coastal aquaculture bear the brunt of allegations of adverse impacts on ecology and society, besides encroachment in the coastal regulation zone, where aquaculture practices are prohibited under the Environment Protection Act 1986. In response to a public interest petition, the Supreme Court of India in 1996 directed the concerned authorities to abolish aqua-farms in the coastal regulation zone and to constitute an “Authority” to regulate aquaculture. Licensing was made mandatory for establishing the aquaculture farms. This caused a furore in the sector and many corporate firms withdrew from the arena. These developments have caused institutional financial agencies to have a rethink of strategy and financial support for coastal aquaculture.

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Table 16 Total investment in aquaculture industry in crore rupees State Andhra Pradesh Gujarat Karnataka Kerala Maharashtra Orissa Tamil Nadu West Bengal Other States Multi-states Total

1992 36.00 (44.38) 20.06 (24.73) 25.06 (30.89) 81.12 (100)

a

1994 468.00 (45.57) 80.00 (7.79) 52.00 (5.06) 15.00 (1.46) 34.00 (3.31) 6.00 (0.58) 108.00 (10.52) 146.00 (14.22) 93.00 (9.06) 25.00 (2.43) 1027.00 (100)

a

A crore equals 10 million. Figures in parenthesis are percentages of totals. Source: CMIE(1994).

Seafood exports Contribution to total exports Seafood is one of the sources of foreign exchange earnings in India. During 1997-98, seafood items worth Rs. 44868 million lakhs were exported that accounted for 3.45 percent of the total value of exports (Cf. Table 17). The share of seafood in total exports has almost remained constant since 1991-92 except that in 1994-95 when it attained its highest share of 4.28 percent. Incidentally, the shrimp production was also at its peak during this year. In fact, the growth in shrimp production is export driven. About two-thirds of the cultured shrimp production is targeted for exports. Contribution of seafood exports to agricultural exports has been varying between 14 and 21 percent (Table 11). In 1993-94, it contributed 18.11 percent to the total value of agricultural exports and increased steadily to 20.50 percent in 1996-97. This was because of liberalized export policies. Thereafter, the share of seafood declined mainly due to decline in production and imposition of stringent quality control measures by the importing countries. Table 17 Contribution of seafood to India’s exports Year

Value of seafood exports (Rs. million)

1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00

25519 35366 33811 40076 44868 43686 50000+

Share of exports (%) Total exports 3.66 4.28 3.18 3.37 3.45 3.13 3.14

Agricultural exports 18.11 16.05 19.22 20.50 18.93 18.17 14.62

Source: CMIE (2000), Foreign Trade.

Composition of seafood exports Seafood exports contributes about 3.14 percent of the value of total exports. Shrimp is the major item of seafood exports in terms of both quantity and value. In 1998-99, shrimp accounted for 26.11 percent of the quantity and 66.72 percent of the value of seafood exported (Table 18). The share of shrimp in quantity has declined steeply from 58.41 percent in 1985-86 to 26.11 percent in 1997-98. In value terms also, there has been a decline in the share of shrimp. But since 1990-91, it has been arrested. The share of frozen/fresh fish has

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increased consistently over the years in volume and value. In fact, quantitatively it has replaced the shrimp. Table 18 Changes in composition of seafood exports (percent) Item Frozen Shrimp Fresh Frozen fish Frozen squids Frozen cuttle fish Frozen lobsters Dried Items Live Items Others

Quantity Value 1985-86 1990-91 1995-96 1998-99 1985-86 1990-91 1995-96 1998-99 58.41 35.66 35.31 26.11 82.12 66.78 69.96 66.72 13.56 36.13 31.49 48.74 4.24 12.15 10.12 15.47 14.56 16.96 9.10 7.59 9.28 5.77 5.83 9.10 11.82 9.66 2.99 5.73 7.34 6.88 1.35 0.77 0.33 2.81 2.45 1.02 7.17 2.03 1.47 1.55 1.02 0.72 0.23 0.44 3.20 0.62 13.98 1.47 4.39 4.16 6.30 1.08 3.18 2.80

Trend in exports Decadal growth rates for the period 1950-51 are presented in Table 19. Since 1951, India’s seafood export has registered an annual growth of 6.57 percent in quantity and 18.17 percent in value, despite substantial variation in growth rates over different decades. During the 1950s, growth in quantity of seafood exported was 0.29 percent, while the value of exports increased at a rate of 5.72 percent. During the 1960s and 1970s, the quantity as well again as value witnessed substantial growth. But it decelerated in the 1980s and accelerated in recent years. Table 19 Trends in export of seafood by India, 1951-2001 (compound growth rates) Period 1950-60 1961-70 1971-80 1981-90 1991-2001 1950-2001

Quantity exported 0.29 9.88 10.65 5.81 7.58 6.57

Value of exports 5.72 31.62 22.91 11.67 14.11 18.17

Product-wise growth rates in India’s seafood exports in recent years are given in Table 20. Maximum growth occurred in case of fresh/ frozen fish (21.22 percent increase in quantity and 28.39 percent in value). Export of frozen cuttle fish/ fillets also registered substantial growth. It may be recalled that in recent years, the share of fresh/frozen fish and frozen cuttle/fillets has been rising continuously, while that of shrimp has been on a downward trend. This is a matter of concern because shrimp is a high value product and has been a priority export item. The reason perhaps could be because of heavy inventories in destination countries and competition from other shrimp exporting countries. Table 20 Growth trend in India’s seafood exports, 1990-91 to 1997-98 (percent/yr.) Item Frozen shrimp Fresh / Frozen fish Frozen cuttle fish/ fillets Frozen squids

Quantity 7.02 (5.742) 21.22 (9.133) 17.85 (8.984) 10.50 (3.469)

Value 21.87 (8.571) 28.39 (9.833) 26.68 (8.848) 23.72 (4.648)

Figures in parenthesis are t-values. Source: MPEDA, 1999.

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Direction of exports Japan constitutes the major market for India seafood. It accounts for about 45 percent of total seafood exports of India (Table 21). The USA with a share of about 10-15 percent was the second largest market for Indian seafood till recently. Now the United Arab Emirates is emerging as a new and growing market for Indian seafood. Its off-take has ranged from 5-10 percent in the recent years. Table 21 Share in total seafood exports of India by destination (percent)

World Japan USA UAE

1993-94 100 44.85 12.28 6.13

1994-95 100 43.99 12.86 8.27

1995-96 100 41.20 9.74 9.99

1996-97 100 42.32 9.68 8.57

1997-98 100 46.31 11.49 11.69

1998-99 100 47.02 14.31 8.09

1999-2000 100 41.37 15.63 5.59

Source: CMIE(2000), Foreign Trade.

Share of Indian seafood in imports of Japan and USA Competition from other seafood and shrimp exporting countries has been consistent over time. While India had a market share of more than 15 percent of the shrimp import market of Japan, it had only 5-10 percent of the market of USA, over the last twenty years. Thailand and Ecuador appear to have the major market share of shrimp imports into USA in recent years and Indonesia for the Japanese market (MPEDA statistics). The macroeconomic outlook It is estimated that lack of infrastructure causes a loss of $8 billion of food grains in India. Nearly $4.5 billion is wasted in transit. An estimated amount of $22.72 billion of new investments is required in farm infrastructure of which $5.6 billion is needed to build an effective transportation system for maximum utilization of food grains produced (Roy, 2000). Similarly, the contribution of marine products exports to India’s total exports and agricultural exports could be much more than the current 3.14 percent and 18 percent respectively if infrastructure and logistics could be improved. A careful analysis of the sectoral allocation of funds among fisheries, livestock and agricultural enterprises revealed that the returns to investment in fisheries was twice as remunerative as compared to investments in these other sectors (Singh and Lal, 1990, Krishnan and Birthal, 2002). Strengthening of handling and storage facilities at harbors and landing centers, one time weighing of the produce to avoid contamination, streamlining production, processing and packaging procedures in line with HACCP guidelines will improve acceptance of Indian seafood in the international markets (Krishnan, et. al., 1999a). Out of the $1.43 billion seafood exports achieved in the last fiscal year, the contribution of shrimp alone stood at 60 percent of the value. Backward linkages generated by aquaculture in rural areas have not only generated more income and employment in such areas but also have contributed substantially to the overall socio-economic improvement of the remote coastal areas (Krishnan and Sharma, 1994). There is fledgling of a domestic market for seafood. Its turnover is just over Rs.200 million. This market can help buffer the export market against any unprecedented fall in earnings (Krishnan, et. al, 1999b). The awareness of the scope and magnitude of the contribution that can be realized from seafood sector is growing in India. The creation of the Aquaculture Authority (of India) to govern aquaculture production strategies is hoped to offer directions in terms of technical inputs such as location of the farm, intensity of production and integration of production and marketing. The Marine Products Exports Development Authority (of India) under the

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Ministry of Commerce governs seafood trade. Production assistance and start up subsidies, market research and development are its forte. The move to set up an independent corporation to govern the maintenance of sanitation, hygiene, and upgrading of facilities at the harbors with representation of all the stakeholders will go a long way in improving the acceptability of Indian seafood in the international markets. India attracted $ 4.50 billion in foreign direct investments (FDI) in year 2000 (Srinivasan, 2001). Aquaculture offers enormous scope for foreign direct investments. The World Investment Report (2001) (quoted in Srinivasan, 2001) asserts “simply opening an economy is no longer enough”. There is a need to develop attractive configurations of location advantages” by capitalizing on the synergy of endowments of factors of production. Coastal aquaculture therefore offers great scope for enhancing income and employment in India. Given the right policy prescriptions and environment, this sector can make a much larger contribution to India’s GDP and its export earnings. Acknowledgements A significant part of this paper is based on the Indian Council of Agricultural Research Agricultural Produce (ICAR-AP) Cess Fund Sponsored project, “An economic evaluation of brackishwater aquaculture systems in India, (1998-2001) of the CIBA, Chennai and NCAP, New Delhi. The authors are thankful to the ICAR for funding and to Dr K. Gopakumar, Deputy Director General (Fisheries), ICAR, New Delhi for encouragement during the course of this work. References Alagarswami, K. (1995) Current status of aquaculture in India, the present phase of development and future growth potential. In: Regional Study Workshop on environmental assessment and management of aquaculture development, pp 141-186. FAO, Rome. CIFE and CIBA (1997), Assessment of ground realities regarding the impact of shrimp farming activities on environment in coastal areas of Andhra Pradesh and Tamil Nadu, Final Report, Central Institute of Fisheries Education, Mumbai – 400 061 and Central Institute of Brackishwater Aquaculture, Chennai – 600 028, India, p 30. Krishnan, M., Vasisht, A.K. & Sharma, B.M. (1991) Growth and Instability in Kerala Agriculture, Agricultural Situation in India, XLVI (1), 21-25. Krishnan, M. & Sharma, B.M. (1994) Development prospects of fisheries sector in India with special emphasis on marine products exports, Madras Development Series, 24 (7), 259264 Krishnan, M., Birthal, P.S., Ponnusamy, K., Kumaran, M. & Singh H. (1999a) HACCP guidelines and the economics of seafood processing: an impact analysis, Indian Journal of Agricultural Marketing, 13 (2), 122-128. Krishnan, M., Birthal, P.S. & Venugopalan, R. (1999b) Consumer willingness to pay for seafood and domestic market development – the contingent valuation approach, Indian Journal of Agricultural Economics, 54 (4), 566-572. Krishnan, M., Birthal, P.S., Ponnusamy, K., Kumaran, M. & Singh, H. (2000) Aquaculture in India: retrospect and prospects. In: Aquaculture Development in India (eds M. Krishnan & P.S. Birthal), pp 11-31, Workshop Proceedings 7, National Center for Agricultural Economics and Policy Research, New Delhi – 110 012. Krishnan, M., Birthal, P.S., Ponnusamy, K., Kumaran, M. & Singh, H. (2001) An economic evaluation of brackishwater aquacultural systems in India, ICAR-AP. Cess Fund Project

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