Post on 30-Apr-2023
ARECANUT IN THE NATIONALECONOMY
Prepared by:Dr. T.N. Prakash Kammardi,
Professor & Head and Honorary Director,Scheme on Cost of Cultivation of principal Crops of Karnataka (GOI),
Assisted by:Ranganath, L. and Ranjith Kumar, P.S., Research Fellows,
Department of Agricultural economics,University of Agricultural Science, Bangalore 560065.
Ph: 080-23620025 (O), Mob: 9448772202, email: prakashtnk@yahoo.com
nspite of the significant contributions that arecanut makes to the
Nation’s Economy, precise estimates in this regard are very much
lacking. This information gap is a cause for concern for those who are
involved in making policies and programs to protect the interests of
arecanut farmers and to promote arecanut economy in India. This
section provides available information regarding the area, production,
marketing, processing, demand, trade and so on related to areca nut
in India.
I. Area and Production
India is the traditional areca-growing country in the world. At the time of
partition, during 1947, nearly half of the area under arecanut was lost to
Pakistan. As a result, the country faced the shortage in supply of arecanut during
the early fifties. The increasing internal demand was made good by import of
arecanut from Sri Lanka and Malaysia in the beginning. Hence, the Government
had encouraged the expansion of area under arecanut cultivation on a large scale
and provided liberal financial assistance, through co-operatives and scheduled
banks, for its cultivation. Consequently, the production of arecanut increased
steadily and the country achieved the self-sufficiency by early 60’s.
I
As per the Ministry of Agriculture, GOI, the area under arecanut is around 4
lakh hectares with a production of around 4.78 lakh metric tons in 2009-10 in
India. Main arecanut growing states in the country are Karnataka and Kerala
which together account for 70 per cent of both area and production in the country.
Assam, West Bengal and Meghalaya are other minor arecanut producing states in
India. Details are given in the table 1 and graph 1.
Graph 1: Area of Arecanut in Different States in India (2009-10)
Table1: State wise Area and Production of Arecanut in India (2009-2010)
Sl.No. StateArea
(hectare) PercentageProduction
Percentage(metric tons)1 Karnataka 1,84,520 46.12 2,24,000 46.862 Kerala 97,170 24.29 112,140 23.463 Assam 69,970 17.49 62,700 13.124 West Bengal 11,390 2.85 21,160 4.435 Meghalaya 12,360 3.09 17,100 3.586 Tamil Nadu 5,030 1.26 10,390 2.177 Tripura 4,430 1.11 8,360 1.758 Mizoram 6,580 1.64 8,210 1.729 Andaman & Nicobar 4,100 1.02 6,000 1.2610 Maharashtra 2,200 0.55 3,600 0.7511 Goa 1,850 0.46 2,780 0.5812 Nagaland 200 0.05 1,300 0.2713 Andhra Pradesh 250 0.06 190 0.0414 Pondicherry 60 0.01 80 0.02
India 4,00,110 100 4,78,010 100Source: National Horticulture Board , GOI, (2009-10)
The area and production of arecanut have been increasing continuously in
India since 1991-92. Area under arecanut has increased to 4.01 lakh hectares in
2009-2010 which is almost twice that of the area prevailing in 1991-92 (2.2 lakh
hectares). Production of Arecanut during 2009-2010 was 4.78 lakh Metric Ton
(MT) which was around two times produced during 1991-92 (2.5 lakh MT).The
same is depicted in graph 2.
Graph 2: All India area and production of Arecanut since 1991
1.1. Karnataka Scenario
In Karnataka, as per the State Horticulture Department source, around 4.55
lakh acres (1.84 lakh hectare) is under arecanut cultivation which forms around
46 percent of all India total. Its contribution to total production is around 2.24
lakh a ton that forms 47 percent of all India production in 2009-10.
It is important to note that arecanut cultivation is undertaken with varying
extent in almost 28 out of 30 districts in Karnataka. Among which, Chikmagalur
district stands first in both area (20 %) and production (17%), Shimoga stands
second followed by Davanagere district. The top 7 districts viz. Chikmagalur,
Shimoga, Davangere, Dakshina Kannada, Tumkur, Chitradurga and Uttar
Kannada occupy 89 per cent of the area under arecanut and contribute around 91
per cent of areca produced in the state. The remaining 21 districts occupy around
11 per cent of the total area, which together contribute around nine per cent of the
production. The details are given in Table 2 and illustrated in graph 4.
Graph 4: Area of Arecanut in Different Districts of Karnataka (2009-10)
Table 2: Area Production and Yield of Arecanut in Different Districts ofKarnataka in 2009-10.
Sl.No. District
Area
(acres)Percentage
Production
(Ton)Percentage
Yield
(Kg./acre)
1 Chikmagalur 1,07,110 19.91 56,572 17.38 528
2 Shimoga 94077 17.49 52781 16.21 560
3 Davanagere 73480 13.66 40159 12.33 548
4 DakshinaKannada 68938 12.81 49323 15.15 716
5 Tumkur 55145 10.25 37220 11.43 676
6 Chitradurga 42320 7.86 21523 6.61 508
7 Uttar Kannada 39503 7.34 37933 11.65 960
8 Other Districts 57282 10.59 30080 9.16 488
Karnataka 5,37,855 100 3,25,591 100 612
Source: - Department of Horticulture, Government of Karnataka (2009-10)
1.2. Rapid Area Expansion
Like any other prudent decision makers, arecanut farmers have been
responding positively to price stimulus by bringing additional area under
cultivation whenever there are good prices in Karnataka. This has been happening
since early 80’s as the prices started moving in upward trend in the state. A study
by Gajanana (1985) points out that the farmers in South Kanara (Dakshina
Kannada) district have added 30 per cent more area under cultivation for every 50
percent increase in the prices of arecanut.
This had further accelerated during the decade after the establishment of
the Central Areca nut and Cocoa Marketing and Processing Co-operative(CAMPCO) Ltd in 1973 as the farmers could get an assured marketing network
thru the CAMPCO ltd. The trend is being continued even today. As per a recent
study by Yadav (2007), the area response by the farmers for price stimulus is
positive and significant in both traditional as well as non traditional regions
growing arecanut in the State. The graph 3 shows area and production increase
in arecanut in Karnataka over the years. If the same trend continues, arecanut
production in Karnataka may increase enormously in the near future in
Karnataka.
At present, the arecanut has got its presence in almost 140 out of 175taluks in Karnataka. Among them, Kadur stands first in both area andproduction, followed by Channagiri and Bhadravati taluks overtaking thetraditional taluks that have been growing the arecanut from the beginning.
However, an accurate estimate of the expansion of area under arecanut at
the all India level is difficult to obtain. Unlike in the Southern states, arecanut
cultivation in Assam and North Eastern regions, is unsystematic and carried out
as a ‘forest crop’. This imposes a severe constraint in getting accurate estimates of
area and production of arecanut in the country. Even in Karnataka available
information confirms that area under arecanut is not only increasing in the
traditional cultivating regions (like Malanad and Costal areas) but also in the non-
traditional regions like Doddaballapura (Bangalore rural) as well as in the
command areas (like Tungabhadra regions) in the state. This is happening by
replacing either field crops such as paddy (in the traditional regions and command
areas) or ragi or pulses (in the non-traditional regions) in the state. Due to
differences in the land revenue which is higher for arecanut, this expansion, in
majority cases, is unaccounted and not included in the revenue records.
A reconnaissance survey indicates that the extent of unaccountedexpansion of arecanut varied from 34 percent in Sringeri and Sulya taluks,48 percent in Shimoga to almost 110 percent in Doddaballpura taluke(Prakash, 2002).
This unaccounted area expansion again acts as a bottleneck to obtain
accurate production estimates so as to formulate suitable policies and programs to
stabilize arecanut economy in India.
Graph 3: Area and Production of Arecanut in Karnataka (2009-2010)
1.3.World Scenario
Similar ‘information gap’ exists at the global level. As per the Food and
Agriculture Organization (FAO), the world production of arecanut was around
8.54 lakhs metric tons with a total area of around 7.03 lakh hectares in the year
2006. India’s share in production comes to 55 per cent and that of Indonesia 17
per cent, Bangladesh 10 per cent, China 8 per cent, Myanmar 4 per cent and
Thailand was around 2 per cent. The share of Sri Lanka, in total production of
arecanut in the world is hardly 1.6 per cent and that of Nepal, Malaysia, Maldives
and Kenya as per this source, is very negligible.
But, according to the Directorate General of Commerce, Intelligence and
Statistics (DGCI & S), Ministry of Commerce, GOI, India imported around 50
thousand metric tons, which formed almost 50 per cent of the total consumption
of arecanut during 1960. It was also stated in the Paulose Committee Report (1973
pp. 2) that the import was coming mainly from the two countries, Malaysia and Sri
Lanka. If this information was correct then it is difficult to believe how these two
countries have become insignificant producers in the recent years! Country wise
area, production and productivity of arecanut in 2006 is given in Table 3 and
Illustrated in graph 5.
Table 3: Country wise Area, Production and Productivity of Arecanut (2009)
CountryArea
(hectare)Production(metric ton)
Yield(Kg / ha)
India 400040 489000 1222
Indonesia 125000 52000 416
China 59000 162000 2745Bangladesh 79000 56000 709
Mynamar 36000 57000 1583
Thailand 16000 26000 1625
Malaysia 800 1300 1625
Maldives 40 330 8250
Nepal 2000 3600 2
Sri Lanka 12000 20000 1667
Kenya - 90 --World 729880 867320 1188
Sources: Directorate of Arecanut and Spices Development, (DASD) Calicut & Food and Agriculture
Organization (FAO), Rome
It should be noted that the average productivity of arecanut inChina is 225% higher than that of India and it is a whooping 700%higher in Maldives
Graph 5: Area of Arecanut in Different Counties 2009
II. Investment, Livelihood and Employment
Investment made by farmers on perennial plantation crops like arecanut is
very substantial. A precise estimation of such investment at the aggregate level is
not readily available. This eludes the attention of the policy makers to frame
policies and programs to protect the interests of the farmers. There are two ways
through which private investments from the farmers have been made on arecanut.
Arecanut requires around 8 years period to get established and to bear economic
yield. On an average an investment of around 2.75 to 3.00 lakh rupees (in
current prices) is required to raise one acere arecanut garden in Karnataka
(Prakash, 2004). This includes the cost of seedlings, input, labour to land revenue
and rental value of the land. Another form of investment is on the permanent
items such as fencing, machinery, equipments and processing yards, which put
together works out to around Rs. 50,000 in traditional arecanut cultivation
region (Rajashekarappa, 2001). As mentioned earlier, there is around five lakh
acere area recorded under areanut in Karnataka.
A rough estimation of the total investment made on arecanut gardensby the farmers comes to around fifteen thousand crore rupees (in currentprices) in Karnataka.
Similar information on the extent to which areanut provides income and
livelihood security is also crucial. With an average size of holding less than 2
acers, there are around three lakh farm families involved in arecanut cultivation
in Karnataka.
In addition, arecanut cultivation generates high employment both at
production as well as processing stages. On an average, each acere of areanut
employs around 250 human days for cultivation and another 200 human days for
processing annually in Karnataka (Mallikarjuniaha and Prakash, 1987). In this
way, arecanut provides employment to around 10 lakh laborers round the year at
the farm level itself in Karnataka. In addition, for grading, marketing and
preparation of value added products like scented supari, arecanut provides
employment in the urban as well as semi urban areas. There are 15 lakh petty pan
shops earning a good income by selling beeda and other value added arecanut
products in different parts of India.
In these ways, a very rough estimation points out that the arecanutprovides income and livelihood security to more than thirty million peoplein India!
It is very important to note that even during the days of collapse in the
prices of many plantation crops; arecanut has provided the income and livelihood
security to farmers and workers depending on it without many interventions by
the government in South India. This is mainly due to excellent marketing
arrangements where both co-operatives and private agents are playing very crucial
roles in Karnataka.
III. Internal Demand, Exports and Imports Surge
Though arecanut production is location specific, its consumption is wide
spread throughout the country. Prior to the 80s, the arecanut was consumed
mostly in the raw forms to prepare either traditional tambula or the beed.Production was not even sufficient to meet even internal demand up to 1965.
3.1. Consumption of Arecanut in India
Emergence of the value added arecanut products such as Scented Supari,and Ghutka had given real boost to the arecanut economy in India. When the era
of “value addition” through the large scale commercial processing of arecanut
began, the diversified products in attractive packets and labels started flooding
the retail markets though out India. Value added arecanut products promised a
lucrative enterprise in view of its increasing consumption by all groups, in nook
and corner of India. This enhanced the choice and convenience of the consumers,
as a result of which the consumption of arecanut especially in the northern
states such as Uttara Pradesh, Gujarth, Delhi and Maharastra increased by many
folds.
Demand for arecanut products has increased steadily in India. Arecanut
being a ‘habitual’ item, its consumption, is income elastic and price inelastic’; i.e.
for an increase in the income, its consumption increase more than proportionately
and for a given level of price raise, proportionately less reduction in consumption
takes place. Consumption of arecanut in India has increased from 2.50 lakh tons
during 1991-92 to around 5.2 lakh tons in 2009-10 with annual growth rate of
around five per cent. The projected demand of arecanut by 2020 is estimated to be
more than six lakh tones in India.
The compound annual growth rate of production is around 4.20percent which is less than that of consumption which is growing at the rateof around five percent annually in India. This is a happy sign for Arecanuteconomy, as a whole, in India.
However, foreign trade with in which import of arecanut is growing at a very
high rate of around 23 percent compared to the export whose annual growth rate
is just around 10 percent in recent years. This must give sufficient cause for
concern for farmers, co-operatives and policy makers in India. The Coefficient of
Variation (CV) which explains annual fluctuations also calculated for production
consumption and trade in India. As seen in the table below, the trade (import and
export) has been fluctuationing heavily (around 80% of the mean value) over the
years. Such a huge fluctuation especially in imports has very destabilizing impacts
not only on arecanut economy but also on income earning capacity of farmers
producing arecanut in India. Hence proper preventive measures are needed
immediately in this regard. The details of production, consumption and trade are
given in table 4 and the same is represented in graph 6.
Table 4: Production, Consumption and Trade of Arecanut in India(in Metric Tons)
(1991-1992 to 2009-2010)
Year Production Export Import Consumption1991-92 2,51,000 658 0 2,50,3421992-93 2,56,300 629 0 2,55,6711993-94 2,71,100 525 0 2,70,5751994-95 2,89,700 823 545 2,89,4221995-96 2,95,500 406 5,091 3,00,1851996-97 3,07,700 513 9,565 3,16,7521997-98 3,35,500 664 10,823 3,45,6591998-99 3,09,800 533 6,707 3,15,9741999-00 3,34,400 734 11,695 3,45,3612000-01 3,73,100 712 29,350 4,01,7382001-02 4,09,300 1,483 14,788 4,22,6052002-03 4,09,300 1,555 21,452 4,29,1972003-04 4,39,200 1,809 27,957 4,65,3482004-05 4,52,700 3,695 32,124 4,81,1292005-06 4,83,100 4,113 53,275 5,35,3312006-07 4,83,300 2,268 76,678 5,37,0672007-08 4,76,000 1,472 21,299 4,95,8272008-09 4,81,300 1,518 41,797 5,21,5792009-10 4,78,010 1,757 39,527 5,15,780CGAR(%) 4.19 10.04 22.47 4.75CV(%) 22.96 77.28 80.24 25.92
Source: National Horticulture Board and DGCI & S, KolkattaCGAR- Compound growth Rate and CV Co-efficient of Variation
Value addition helped farmers to get good prices. For instance, in a span of
just 15 years, from 1985 to 2000, the increase in the price for raw nuts was more
than 500 percent and the area under arecanut has almost doubled in Karnataka.
This enabled the small farmers with one acre area under arecanut to earn an
assured income sufficient enough to lead a decent standard of living. If
unaccounted area is taken in to account the annual arecanut production may
exceed five lakh tons in India. With a modest average price of rupees five thousand
per quintal, the income that the farmers cultivating arecanut receive, would easily
exceed rupees 2500 crores (at current price) annually in India. As a result of this
income generation, the consumer durables such as bike, TV, fritz and cars, which
are other wise confined only to the urban upper middle class, became common
household items in the regions growing arecanut in India.
Graph 6: (a) Production and Consumption of Arecanut in India.
(b) Export and Import of Arecanut in India.
A study by Preeti (1998), also highlights that there is a significant improvement
in the socio-economic status of arecanut farmers during the early 90’s. For
instance, farmers especially large farmers, have began to spend more on items like
LPG gas, electric appliances, phone connection, purchase of four wheelers, house
construction and even to purchase of agriculture land after the price boom.
At the retail levels, Ghutkas are sold at an average price of Rs. 800 per kg
where as the price of scented supari is around 400 per kg. When areca nut is used
for beedas it fetches a price of around 500 per kilogram. In this way, arecanut gets a
value addition ranging from 350 percent to 600 percent when consumed ultimately.
And hence, it is up to anybody’s imagination that the huge contribution that the
value added areca nut products could make to the country’s National Income.
A simple estimation indicates that arecanut contributes around 15,000crore rupees annually to the National Income of India.
3.2. Export of Arecanut
Not only our neighboring SAARC countries but also Middle East and other
Muslim countries have become an assured destination for the value- added arecanut
products. Demand for these products has been fast increasing globally, especially
among the people of Indian / Asian origin. Export of arecanut products from India
has almost tribbled in a span of 20 years since 1991. India’s export currently reaches
more than 40 countries in the world. During 2009-10 India exported nearly 1750
tons of arecanut in the forms of splits nuts (13%), whole nuts (37%) and value added
forms like scented Supari (50 %). Major destinations of these items are Malaysia,
Maldives, UAE, Nepal, UK, Sri Lanka, South Africa, Canada and Kenya.
Interestingly, the demand is increasing gradually in the developed world also
including USA, UK, Canada, Australia, Thailand, Singapore and France, that too for
the products such as Ghutka and Panmasala. The panmasala and scented supariare exported to countries like UAE, Afghanistan, Canada, Mexico, Saudi Arabia,
Singapore, UK etc. The UAE has been major market for Indian panmasala, accounts
for 50 per cent of export from India in recent years. The UK, Canada, Saudi Arabia
and USA stand next to UAE in import of Indian panmasala.
3.3. Import of Arecanut into India
Various promotional measures were introduced by the State as well as Central
governments to increase the production of arecanut during the 70’s. These helped in
the gradual expansion of area, increased production and ultimately resulted in self
sufficiency in the consumption of arecanut inIndia. From 1974-75 to 1993-94 there
was no import of arecanut into the country. But, the situation had changed there
after. As a result of liberalizing the economy during the early 90’s and signing of
GATT agreement, the import of arecanut in to India has started increasing at an
alarming rate. The annual rate of increase in import of arecanut has crossed 22 %
since 1995. The details are given in the table 4.
Arecanut imports in 2006-07 has touched an all time high of 76,760tons at a unit cost of less thani rupees 15 per kg ! . This is equal to around 15percent of Country’s production and almost 35 percent of arecanut producedin Karnataka.
Such an unregulated imports had a very deleterious effect on the stability of
the economy and well being of the farmers producing the arecanut in the country.
Nearly 40,000 quintals of arecanut valuing around 100 crore rupees have been
imported to India in the recent years (2009-10) from eight Asian countries and an
African country i.e. Tanzania. Nearly 43 % imports were in the whole nut form, 32 %
in the split form and remaining 25 % import was in other forms. Nearly half of the
imports came from Indonesia. Bangladesh (15 %), Nepal (13 %), Myanmar (6 %) and
Thailand (5 %) are the other major countries exporting arecanut to India in recent
years.
IV. Conclusions
The above analysis clearly demonstrates that the arecanut at the
macro level has been playing diverse roles and contributing in multiple
ways to the economic development of India. Ultimately, these must result
in welfare and well being of the farmers producing the arecanut.
However, the recent collapse in the prices and severe pests and disease
attack on palms in the traditional areas are threatening the very
sustenance of arecanut economy in India. The situation called for
“intervention” by the Government, in the form of Minimum SupportPrice (MSP) that provided, to some extent, much needed stability to
arecanut economy in the State. Nonetheless, the recurrent
pronouncements to ban some of the value added areca products like
Ghutka and Panmasala add salts to the injury and has put in jeopardy,
the very livelihood security of millions of farmers and workers depending
on arecanut cultivation and trade in the country. This calls for rigorous
policy interventions, thorough R & D efforts, coherent planning and
program initiatives to resurrect arecanut economy in India.
V. Reference
Faulose Committee Report 1973, The Price Structure of Arecanut and other AlliedMatters, The Government of Mysore.
Gajanana, T.M., 1985, An Analysis of Supply Response of Arecanut in Karnataka, M.ScThesis (Unpublished), submitted to University of Agricultural Sciences,Bangalore.
Mallikarjunaiah, K.G., and Prakash, T.N., 1988, Processing and Marketing of Arecanutin Shimoga District, Research Report submitted to Director of Research,University of Agricultural Sciences, Bangalore.
Prakash, T.N., 2002, Cost of Cultivation of Arecanut in Karnataka, Research report,Department of Agriculture Economics, University of Agricultural Sciences,Bangalore.
Prakash, T.N., 2004, Cost of Cultivation of Arecanut in Karnataka, Research report,Department of Agriculture Economics, University of Agricultural Sciences,Bangalore.
Preeti, N. S., 1998, Economic Analysis of Arecanut Cultivation and its Impact on nonFarm Economy in Shivmoga District of Karnataka, M.Sc. Thesis(Unpublished), submitted to University of Agricultural Sciences, Bangalore.
Rajashekarappa, M.T., 2001, Impact of Crop Losses due to pest and Diseases on CostStructure of Arecanut Cultivation, M.Sc. Thesis (Unpublished), submitted toUniversity of Agricultural Sciences, Bangalore.
Yadav, C.G., 2007, Area Expansion and Output Projection of Arecanut - An EconomicStudy in Karnataka State. M.Sc. thesis (Unpublished), submitted to Universityof Agricultural Sciences, Bangalore.