Implications of Trade Liberalisation on Indian Fisheries

POLICY RESEARCH: IMPLICATIONS OF LIBERALISATION OF FISHTRADE FOR DEVELOPING COUNTRIES

A CASE STUDY FOR INDIA

BY

VENKATESH SALAGRAMA

Project PR 26109

June 2004

Food and Agriculture Organization (FAO), Rome June 2004

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Support unit forInternationalFisheries &AquaticResearch -SIFAR

IMPLICATIONS OF LIBERALISATION OF FISH TRADE FOR DEVELOPING COUNTRIES - A CASE STUDY OF INDIA

Integrated Coastal Management, India1

Contents

Acknowledgements..................................................................................................................... 2Abbreviations used in the Text ................................................................................................... 3

EXECUTIVE SUMMARY..................................................................................................................... 6INTRODUCTION .............................................................................................................................. 10

Rationale for the Study ............................................................................................................. 10Focus of the Study .................................................................................................................... 11Methodology ............................................................................................................................. 11Structure of the Report .............................................................................................................. 13

CHAPTER 1: BACKGROUND ............................................................................................................ 14General Context of India........................................................................................................... 14Fisheries Sector in India............................................................................................................ 16Main Stakeholders in Export Supply Chain in India ................................................................ 21The Poor within the Export Commodity Chain ........................................................................ 26

CHAPTER 2: ORIGINS AND DEVELOPMENT OF SHRIMP EXPORT SUPPLY CHAIN IN INDIA ............. 31Subsidies in the Pre-Independence Period................................................................................ 31Shrimp Export Chains and Modernisation................................................................................ 32Growth of Export Trade during 1961-2000 .............................................................................. 39Export Channels for the Important Varieties of Seafood in India ............................................ 43Benefits of Shrimp Production and Trade ................................................................................ 48Negative Impacts of Subsidy-Linked Technological Development ......................................... 49

CHAPTER 3: IMPACTS OF TRADE LIBERALISATION ON FISHERIES SUBSIDIES AND SEAFOODLEGISLATION IN INDIA ................................................................................................................... 56

Trade Liberalisation in India..................................................................................................... 56Impacts of Trade Liberalisation ................................................................................................ 57Subsidies and Seafood Legislation: the View from the Bottom ............................................... 71Changes in Subsidies and Impact on the Shrimp Export Industry in India .............................. 72Changes in Seafood Legislation and Impact on the Shrimp Export Industry in India ............. 81The Future Scenario .................................................................................................................. 84

CHAPTER 4: CONCLUSIONS AND RECOMMENDATIONS .................................................................. 91Conclusions............................................................................................................................... 91Recommendations..................................................................................................................... 93

REFERENCES .................................................................................................................................. 96APPENDICES................................................................................................................................. 102

A. Annexures .......................................................................................................................... 102B. Tables ................................................................................................................................. 107C. Figures................................................................................................................................ 113



ACKNOWLEDGEMENTS

A number of institutions and individuals helped this study in various ways. Our grateful thanksare due to: Mr V Vivekanandan and his team at SIFFS, Trivandrum; Prof (Dr) Mohan JosephModayil, Director, CMFRI, Kochi; Dr R Narayana Kumar, CMFRI-Kakinada; Mr Nero Shahin,MPEDA and Dr S S Gupta, CIFT, both at Visakhapatnam; many serving and past officers of theDepartments of Fisheries in Kerala, Andhra Pradesh and Orissa; and Mr B K Mishra at theFishcopfed (NCDC) at New Delhi.

The field interactions have been made possible with the kind assistance provided by MrMangaraj Panda and his colleagues at the United Artists’ Association, Ganjam; Mr Samson andhis colleagues at PENCODE, Puri; Mr M Srirama Murthy at FIRM; and Mr KHemasundareswara Rao at the United Fishermen’s Association; thanks are due to each one ofthem. Three studies done by ICM in recent times – one each for SIFAR/FAO, Oxfam (GB) andNRI – came particularly handy in preparing this document and we are grateful to Mr TimBostock, Ms Shaheen Nilofer and Dr Peter Greenhalgh who had commissioned the originalstudies.

A special word of thanks to Dr John Kurien at the Centre for Development Studies, Trivandrum.And a big thanks to Sebastian, Chandrika, Ramya and especially Venugopalan at the ICSF,Chennai, but for whose timely help and support with advice and reference material, this studywould have been much poorer.

Obviously, none of them is responsible for the abiding shortcomings and deficiencies, which aresolely mine.

Venkatesh Salagrama27 April 2004



ABBREVIATIONS USED IN THE TEXT

AAI Aquaculture Authority of IndiaAP Andhra PradeshAPEC Asia-Pacific Economic CooperationAPFC Andhra Pradesh Fisheries CorporationASCM (also SCM) (WTO) Agreement on Subsidies and Countervailing MeasuresBCV Palem Boddu Chinna Venkataya PalemBFDA Brackishwater Fisheries Development AgencyBIS Bureau of Indian StandardsBLC Beach landing craftBOBP Bay of Bengal ProgrammeDAHD Department of Animal Husbandry and Dairying (GOI)DFID Department for International Development (of the Government of United Kingdom)DOF Department of FisheriesDRDA District Rural Development AgencyEEZ Exclusive Economic ZoneEIA Export Inspection AgencyEIC Export Inspection CouncilEU European UnionFAO Food and Agriculture Organization of the United NationsFRP Fibre-reinforced plasticGDP Gross Domestic ProductGOAP Government of Andhra PradeshGOI Government of IndiaGOK Government of KeralaGOO Government of Orissaha HectareHACCP Hazard Analysis and Critical Control PointHDI Human Development IndexHPLC High Performance Liquid ChromatographyHSD High Speed DieselIBE Inboard engineICAR Indian Council for Agricultural ResearchICM Integrated Coastal ManagementICSF International Collective in Support of FishworkersIDP Inter-Departmental PanelIIM Indian Institute of ManagementIQF Individually quick frozenkm KilometreLPG Liquefied Petroleum GasMFB Madras Fisheries BureauMPEDA Marine Products Export Development AuthorityMT Metric TonneNABARD National Bank for Agriculture and Rural DevelopmentNCDC National Cooperatives Development CorporationNIPFP National Institute of Public Finance and PolicyNIRD National Institute of Rural DevelopmentOAL Overall LengthOBM Outboard motorOECD Organisation for Economic Cooperation and DevelopmentOGL Open General LicencePD Peeled and deveinedPDS Public Distribution Schemeppb Parts per billionppm Parts per millionPRA Participatory Rural AppraisalPUD Peeled and un-deveinedQR Quantitative RestrictionsRRA Rapid Rural Appraisal



SAT Supervisory Audit TeamSCICI Shipping Credit Investment Corporation of IndiaSEAI Seafood Exporters Association of IndiaSHG Self Help GroupsSIFAR Support Unit for Fisheries and Aquatic ResearchSIFFS South Indian Federation of Fishermen SocietiesSKO Kerosene OilSLA Sustainable Livelihoods ApproachSPS Sanitary and PhytosanitaryTCM Technical Cooperation MissionTED Turtle-excluder deviceUNDP United Nations Development ProgrammeUNEP United Nations Environment ProgrammeUSA (also US) United States of AmericaUSFDA United States Food and Drug AdministrationWTO World Trade Organisation

Conversion rates (Source: The Hindu, 27 April 2004; rounded off):1 US$ Indian Rupees (Rs.) 441 UK£ Rs. 781 € Rs. 52Denominations:1 Lakh 100 0001 Crore 10 000 000



MAP SHOWING THE THREESTATES COVERED BY THE STUDY

Kerala

Andhra Pradesh

Orissa



EXECUTIVE SUMMARY

Seafood export sector

1. The modernisation of Indian seafood industry began in 1950s and is inextricably linked to thegrowth of shrimp export trade. In turn, shrimp export trade is closely related to tradeliberalisation from the beginning. Shrimp continues to dominate the fisheries sector ingeneral and the seafood export sector in particular.

2. Subsidies and other assistance played a crucial catalytic role in the development of the exportsector, although the quantum of assistance declined subsequently as private sector took overthe activities. Promoting the sea as an open access resource has been an important subsidy inthe modernisation period and other direct subsidies encouraged entry of outsiders and privatecapital into the sector in a big way.

3. The key state-supported initiatives for increasing production have been the promotion ofmechanised trawling, aquaculture, deep-sea fishing and motorisation. Most of these systemshave come to depend on shrimp as the mainstay of their operations, increasingly so from1990s as the reduction in fish catches has been offset by the increase in value of shrimp.

4. Marine fish production in the country has grown significantly since 1950s. Shrimpproduction and exports from capture and culture sources grew rapidly through the period.

5. Exports have come to account for a quarter of the contribution of fisheries to the GDP.Culture shrimp contributes four-fifths of the total shrimp exports, which is mainly because ofthe decline in marine catches than from increased production from culture sources.

6. Japan, the EU and the US import a major proportion of India’s exports, and the main exportspecies is shrimp. This focus on a few developed countries on the one hand and on shrimp onthe other has implications on the profitability and sustainability of the export trade. There is agrowing trade in finfish exports to developing countries, characterised by large quantities andsmall margins.

7. The emphasis on production is not supplemented by developing adequate infrastructurefacilities to support them; the availability and quality of infrastructure remains insufficient.

8. The growth of shrimp trade brought a number of new intermediaries into the market chainalong with a complex range of trade relationships. It also necessitated entry of private capitaland informal credit into the fisheries sector in a big way and led to overcapitalisation offishing activities in due course.

9. There is little information on the role of different stakeholders – particularly the poor in theancillary category – in the export sector. Consequently, the impact of any changes on the lifeand livelihoods of the poor is often overlooked at the policy and implementation levels.

10. Since 1990s, three issues dominated Indian export scene: decline in overall catches,particularly shrimp; fluctuations in international markets depressing prices and profitability;and overcapitalisation of the production and marketing activities increasing risk.

Impacts of seafood export market chain

11. The benefits of the shrimp trade include increase in fish production and export earnings;fisheries – particularly shrimp trade – gaining social acceptance; increased affluence in thefishing villages (but skewed in terms of distribution), better housing, improved quality of life,



rising literacy and improved contacts with the wider world. The largely informal nature ofthe export chain allowed a large number of poor people to find work in support activities.

12. The negative impacts of shrimp exports include: increased social and economic inequality,environmental and resource degradation and unsustainable livelihoods. The gender balancein shrimp export industry is tilted in favour of men and many activities are not accessible tothe poor because of the need for high investment.

Trade liberalisation in India

13. India embarked upon a massive programme of liberalisation since 1990s and this has a far-reaching impact upon the economy and on the quality of life in general.

14. In spite of the strong emphasis on information and knowledge as fundamental features of thereform process, major knowledge gaps exist at the grassroots level on the process and thepotential impacts of trade liberalisation.

15. Liberalisation of Indian economy coincided with the establishment of the WTO, and thestructural adjustment policies had to contend with domestic fiscal reform and also make surethat the processes are in line with the global trade agreements.

16. The policy responses thus have been two-fold: at the domestic level, the focus is on fiscaldiscipline while at the international level, it is on arguing for exemptions for specialconditions that prevail in developing countries like India.

Subsidies in Indian fisheries

17. At the global level, the debates on subsidies in fisheries focus mainly on their impacts upontrade and environment, and largely bypass other dimensions like equity issues, livelihoodsand welfare. The debates take place at such a high level and in such abstruse language thatthe contribution of primary stakeholders to the evolving agreements has been extremely low.

18. Indian subsidies in fisheries, particularly those that are contingent upon exports, appear to beminiscule and are not likely to be affected in the context of a stricter disciplining of fisheriessubsidies. In fact, by focusing the discussion on subsidies to their trade related impacts alone,the international community might actually tempt countries like India to spend more onsubsidies of the ‘effort-and capacity-enhancing’ category.

19. In the general macro-economic context of India, subsidies are increasingly frowned upon atthe policy level and there is a proposal to cut the existing subsidies across different sectorsfrom the existing 10.7 percent of the GDP to 3 percent in five years. However, in practice,there is evidence that the total subsidies have actually grown in the late 1990s.

20. In terms of direct subsidies in fisheries, there does not appear to have been any cuts in thereform period, due perhaps to the fact that the total outlay of fisheries in the national plansworks out to a quarter of one percent and imposing fiscal discipline on such a minisculesector does not help the economy significantly. Subsidies in fisheries are also miniscule whencompared to other sectors like agriculture, prompting many people in the government itself todemand for more subsidies for fisheries, not less. Even if there is a cut in the direct subsidiesin the fisheries sector, the impact on many stakeholders may not be significant, except in caseof those providing some kind of social security.

21. The lifting of tariffs and quantitative restrictions in the fisheries sector during the 1990s isnot followed by any perceptible benefits or ill effects, but apprehensions about their possible



negative effect are widespread and generally justified. The possibility of fish importsswamping Indian markets and foreign deep sea fishing vessels allowed to operate in theIndian EEZ are two potential areas of concern for the producers.

22. In terms of exports, the new trade policies have not contributed much because of (i) declinein availability of shrimp and (ii) uncertainties in international markets. In fact, the Indianexport trade has stagnated since late 1990s and in many cases declined.

23. Although the negative environmental and livelihood implications of the modernisationprogramme are quite evident, there is continuing support at the policy level for moretechnological interventions in the capture sector. This aspect needs consideration and ablanket ban on the ‘effort-and capacity-enhancing’ subsidies – irrespective of their professedbenevolence – might be necessary.

24. Indirect subsidies in general category (i.e., not specific to fisheries) – such as petroleumproducts (HSD oil, Kerosene, LPG), electricity (affecting processing and ice making) andwelfare (health and food) – have been reduced with serious impacts on the stakeholders.

25. Changes to direct and indirect subsidies cover a range of areas and the primary stakeholdershave been finding it difficult to cope with the changes, not least because of unpreparednessand lack of alternatives. These changes have an impact upon the livelihood assets andstrategies of the poor, although in a context where change is occurring at different levels anddimensions simultaneously, the tangled skein of cause and effect is difficult to unravel.

26. The overwhelming impression among many informants is that the changes so far are only thetip of the iceberg, and that the real changes will become more significant in the coming years.

Seafood legislation issues

27. Many food exports from India – most notably, shrimp – have been affected adversely byselective application of sanitary and phytosanitary measures in the last decade. Shrimp facedrough weather over the issues of poor quality control, muddy smell and traces of antibioticsin farmed shrimp. The losses to the processing industry are quite high and affected theprofitability of operations significantly.

28. Intense and pro-active efforts by the government and the seafood industry have helped thelatter to survive the threats and actually emerge stronger after the ordeal, because the qualitystandards of the EU approved Indian plants are considered to be world class.

29. However the upgradation came with a big price tag: while some of the companies thatupgraded ended up with no working capital to organise operations, many companies simplyfolded up, unable to find the capital. This has meant a loss of livelihoods for a large numberof poor people, particularly women from single-headed households.

30. Besides high cost of adaptation, issues like irrelevance of foreign standards to localconditions, lack of timely and adequate information and consequent transaction costs,difficulties in understanding requirements as well as testing and monitoring them, perceivedlack of scientific data for specific threshold or limiting values and the uncertainty that arisesfrom rapidly changing requirements in overseas markets still persist and affect the industry.

31. The general feeling is that the Government of India’s quality inspection and monitoringsystem is very sensitive to the international food safety standards and is constantly evolvingto meet the SPS requirements. The government involves the industry in determining the bestcourse of action to meet the international demands and assisting it in various ways to cope



with the changes. In fact, it is felt that the government accommodates whatever demands theimporting countries might make, rather than take the issue up as an SPS measure.

32. At the international level, developing countries like India are constrained in theirparticipation and contribution to standard setting in the SPS process, and there is awidespread feeling that developed countries manage not only set the agenda but also changeit as they deem fit from time to time, adversely affecting the developing countries.

33. The exporting countries are also constrained because of poor domestic laws and qualitycontrol systems, lack or unaffordability of technology and infrastructure, poverty andunorganised nature of operations. These are exacerbated by the diversity in standards andverifying mechanisms prescribed by importing countries and the frequent changes tostandards and lack of clarity at various levels.

34. Within the country, the debate on standard setting is confined to a few organisations andindividuals, with the result that the country is not adequately prepared to offer effectivealternatives. Constituting multi-disciplinary taskforces at various levels and for differentsectors is an urgent necessity for a more comprehensive and forceful contribution to thestandard setting process and to meet the other requirements of the SPS Agreement.

35. Strict implementation of international seafood legislation (i.e., SPS measures) related to theissues of harmonisation, equivalence and transparency could lead to marginalisation of thesmall-scale operators from the export sector. Helping the small-scale producers to reachinternational markets through active state support might be considered an actionable, if notprohibited, subsidy although this may not happen immediately.

36. Stricter quality control would mean that, in the short term, there will be more serious lossesand many of the producers and exporters might not recover. In the medium term, this willlead to a reorganisation of the export sector, concentrating the ownership in fewer hands andmarginalising a number of poor stakeholders. In the long term, the international seafoodlegislation will begin to have an impact upon the domestic market chains as well and thequality requirements for domestic trade will begin to mount.

Future trends

37. Further changes in subsidies and seafood legislation are considered to have a positive impactupon the environment by reducing effort and making the users bear the cost of externalities.

38. In terms of trade, there is a likelihood of shrimp being replaced as prima donna of Indianexports by the entry of a number of other species and the international markets shifting fromdeveloped countries to developing countries and from export to domestic trade. From allaccounts, this is a healthy, sustainable, environment-friendly and equitable trend.

39. These positive impacts on the environment as well as trade will however be accompanied bydeclining access to the poor to the natural assets (fish) and the physical assets (productionand processing systems) on the one hand, and to the markets on the other. The reduction inaccess to livelihood assets is compounded by the state’s increasing withdrawal from itswelfare agenda and reduction in social subsidies, which means that for the poor in the exportsector, the worst may be yet to come, unless of course suitable safety nets are put in place.

40. Any new opportunities that liberalisation might offer are contingent upon certain basicrequirements at the individual level – assured access to resources, ability, skills andknowledge – and also at the macro level – a radical transformation in terms of infrastructureand other basic facilities – which necessarily constrain the poor from taking advantage.



POLICY RESEARCH: IMPLICATIONS OF LIBERALISATION OF FISHTRADE FOR DEVELOPING COUNTRIES – A CASE STUDY OF INDIA

INTRODUCTION

This case study is an output of the FAO-commissioned (SIFAR-coordinated) project“Implications of Fish Trade Liberalisation for Developing Countries” co-funded by DFID andGTZ. The main objectives of the India case study are to:

Review the key issues related to fish trade liberalisation in India focusing on, (a) changes insubsidies to the sector particularly during the period 1990 to 2004, and (b) internationalseafood legislation.

Analyse, from a macro-level perspective, the implications of trade liberalisation measures forlivelihoods issues based on secondary literature and primary data collected in field surveys inat least three locations of the country.

RATIONALE FOR THE STUDY

This is a particularly apt juncture to discuss the role of subsidies and international seafoodlegislation in the fisheries sector for three reasons.

Firstly, as the fisheries modernisation programme in the country completes a half-century, thereis a need to revisit some of the basic premises that underpinned the development of the sector –emphasis on exports, on increasing production, on subsidies and other incentives, on technicalimprovements – and assess their contribution to the process. It is essential to evaluate thecontinued validity of this framework. This becomes particularly important because the reformsprocess in the national economy, beginning from the 1990s, requires a further reinforcement ofsome of the fundamental features of modernisation, while demanding radical changes to others.

Secondly, the impact of some of the changes brought about by trade liberalisation is felt almostimmediately, but there are several others where a complete systemic overhaul is taking placebeneath the surface and their impacts are not visible yet. It is necessary to understand thechanges and their actual and potential impacts for designing and implementing more equitableand sustainable approaches and alternatives.

Thirdly, both fisheries subsidies and the sanitary and phytosanitary (SPS) measures are issues ofglobal importance. The issue of fisheries subsidies will be discussed at the next round of WTOnegotiations in 2005. It is necessary to develop a clear stand on the issue at the national level byreviewing the existing subsidies and developing appropriate policy responses to change and,where appropriate and necessary, to argue for the retention of subsidies. Similarly, India hasrepeatedly faced problems with sanitary and phytosanitary measures (SPS) in recent times, andmeasures are also needed to address this problem at the global and at the national level.



FOCUS OF THE STUDY

The issue of subsidies and seafood legislation are complex and are constantly evolving.Considering the importance and the sensitive nature of the issues at the national and internationallevels, they need a much broader, more informed and comprehensive treatment than is possiblewithin the time and resources (particularly of the cerebral kind) available to this study. In India,the issues have only recently begun to be discussed in any depth, which means that even theterms and contours of the discussion are not clear yet. Under the circumstances, the objectives ofthe study are necessarily modest, but (hopefully) significant in providing a new dimension to thedebate. Besides providing a brief overview of the dimensions of the liberalisation process, itfocuses on the issue from the perspective of primary stakeholders and their livelihoods.Secondary literature will be used extensively to provide a broad picture of the changes and theirimpacts, which is necessitated by the diversity that characterises Indian fisheries sector.

For convenience, the study focuses largely – but not exclusively – on shrimp export marketingchain. The choice of shrimp is apt for two reasons: firstly, it is the development of shrimp exportchain that has set the process of modernisation in Indian fisheries sector in motion and dictatedthe pattern of development of other market chains in the country. Secondly, shrimp has alsocome to dominate many fishing operations and changes in its production or prices have thewidest – and the most acute – repercussions on the sector. It is the shrimp export chains that havebeen the most affected by the changes in international seafood standards from mid-1990s.

The study is located in three coastal states of India – Andhra Pradesh and Orissa on the east coastand Kerala on the west coast – and the data collection was done during March-April 2004.Logistical limitations and prior existence of good secondary data on Kerala meant that the studyconcentrated Andhra Pradesh and Orissa for the fieldwork, where 3 major mechanised landingcentres (Paradeep, Vizag and Kakinada); two large motorised landing centres (Puri and Uppada);three medium-sized landing centres (BCV Palem, Chinaganjam and Arjipalli); and three majoraquaculture centres (Nellore, Narsapuram in West Godavari and Tallarevu in East Godvari) havebeen covered (see Map).

METHODOLOGY

The field studies had two main objectives: one, to determine the different stakeholders in theexport processing chain and to assess their relative poverty; and two, to assess the impact ofchanges in subsidies and seafood legislation on different categories of stakeholders.

Participatory poverty assessment

Using a two-fold process of assessing poverty, food insecurity and vulnerability among thecoastal fishing communities developed by ICM for FAO/SIFAR during 2002-3 (ICM 2003),participatory poverty appraisals were undertaken in selected locations. In the first stage, a tieredprocess of interactions, beginning at the village level, followed by the export stakeholder level,which led to the household level, provided a number of features at the general, exportstakeholder and household levels. At the household level, a checklist of 16 indicators was used todevelop an aggregate score. The indicators are based upon the three critical dimensions of well-



being, as defined by the Human Development Report (UNDP 2001:3): (i) longevity — theability to live long and healthy life; (ii) education — the ability to read, write and acquireknowledge; and (iii) command over resources — the ability to enjoy a decent standard of livingand have a socially meaningful life. The score thus obtained was used to assign the households ina particular stakeholder category – and, by common agreement, the export stakeholder group towhich they belonged in the village – with a rank from 1 (destitute) to 8 (affluent). The simplearithmetic mean of the ranks received by a particular stakeholder group in different villages isconsolidated and the different stakeholders are classified into four categories: well off, moderate,poor, very poor and the characteristics of poverty/wellbeing in each category are summarised andrevalidated in selected locations.

Obviously, this categorisation must come with a number of caveats, which is inevitableconsidering the complexity that characterises poverty in different locations, among differentstakeholder groups within and between areas. Differences in terms of caste, religion, gender,occupation, and age will play a role in deciding whether a family is sustainably employed or not.Many of the categories are not specific to export chain, not only because the producers targetother varieties of fish as well, but also because the livelihood profile of a fishing household is notexclusively confined to fisheries. However, as an indicative measure of poverty among thedifferent export stakeholder groups, this has been found to be a useful and workable proposition.

Changes in subsidies and seafood legislation and impact on different stakeholders

It is evident that many of the changes related to subsidies and seafood legislation are stillunfolding and are only beginning to make an impact upon the industry in general and on thelivelihoods of the different stakeholders in particular. Thus, it has been found necessary, whendiscussing impacts with the stakeholders, not to confine the interactions to what the actualchanges and impacts have been, but also to explore (i) what is likely to happen if the existingsubsidies are further reduced or withdrawn or the seafood legislation made more stringent, usingthe conclusions of the global and national debates on the two issues as the basis to formulate thefuture scenarios and (ii) the capacity of the individuals and institutions in the country to adapt tothe challenges posed by these changes. The methodology used at the group/village level wasinformal discussions using checklists, while at the household level a number of informal tools –developed by ICM based upon the sustainable livelihoods (SL) framework and used extensivelyduring the study mentioned above – were applied.

The changes from the community’s perspective were brought out through:

Trend analyses, where the key trends affecting the life and livelihoods of the keystakeholder groups were identified. The factors contributing to these changes were exploredat the household level or at the village-level or in discussion with institutional stakeholders.

Open-ended discussions on the potential impact of changes in direct subsidies in fisherieson different stakeholders yielded the relevance of the existing subsidies on their livelihoodsand their impressions of the impact in case of withdrawal of the subsidies.

Key strands of the debate on subsidies at the international and national levels – for instance,the different ‘modalities’ of subsidies as discussed by the APEC study (APEC, 2000) – werediscussed in terms of their implications to the export stakeholder groups.



STRUCTURE OF THE REPORT

This report has four sections. The first section briefly describes the general context of India,followed by a general description of the fisheries sector. The section also provides theinstitutional context and the key stakeholders involved in the export supply chains in the country.The section concludes with a description of the poor stakeholders in the export supply chains.The second section describes the origins and development of the shrimp export supply chain inthe country, the role played by subsidies in its development, followed by an overview of thecurrent status of seafood export industry in the country. The third section discusses the impact oftrade liberalisation in terms of changes in subsidies and seafood legislation at two levels – themacro level, including the global and national context; and the grassroots level, providing theperceptions of the primary stakeholder groups. The last section summarises the key changes andimpacts from a livelihoods perspective using the SL framework, and suggests a fewrecommendations.

LIMITATIONS

This is one of the few studies where there was an information surplus on some of the macro-levelissues, which was almost as big a problem as not having sufficient data (which normally is thecase when doing a study of this kind). The literature is growing almost daily on the issues ofsubsidies and SPS issues (not to speak of trade liberalisation), and having access to the internethas not made things any easier. This surfeit of information threw up three concerns: one, theproblem of sifting through vast documentation to take out bits and pieces that are relevant to thestudy (and even more difficult, to reject large chunks of it); two, ensuring that the study resultsboth fit into, and fill a gap, in the existing literature; and three, that the information does notoverwhelm the study process to an extent that the researchers are no longer in the ‘driving seat’.Conscious attempts were made to keep the study in line with the overall frameworks of debate,while retaining some sort of independence over the field research.

Secondly, establishing the links between the macro-level changes and their impacts at thegrassroots level is not a straightforward process at all. Change is taking place on a number ofplanes simultaneously, and ascribing the changing livelihoods or living conditions of astakeholder group to particular changes is fraught with difficulties. As the study will show, mostchanges taking place in the sector are indirect, and have their sources outside the fisheries sector,and it will require more time, effort and expertise to explore the changes in a more integratedmanner.



CHAPTER 1: BACKGROUND

GENERAL CONTEXT OF INDIA

With a land area of 3.3 million km², India is the seventh largest country in the world and isreferred to as a sub-continent in its own right. Stretching from the snowy Himalayas in the northto the tropical rain forests of the south, from the desert plains of Rajasthan on the west to thewooded hill ranges of the east, the country encompasses a wide range of ecosystems and is hometo a large variety of flora and fauna.

India has the distinction of being the second most populous country (after China) with a totalpopulation of 1,027 million (16.7 percent of the world population), which works out to apopulation density of 324 per sq km (GOI, 2003: 6-7). Some 742 million people or 72.25 percentof the population reside in rural areas (NIRD 2003: 4). 360 million people live in coastal areas(Hosch & Flewweling, 2004). The sex ratio (number of females per one thousand males) showeda consistently declining trend from 972 in 1901 to 927 in 1991, and has showed a slightimprovement to 933 in 2001 (GOI 2003: 11).

Agriculture is the lifeblood of Indian economy, contributing 25 percent of Gross DomesticProduct. About 70 percent of the population is dependent on agriculture for a livelihood (GOI,2003: 395). However, the land-ownership pattern continues to be skewed; in 1991, nine percentof the households owned half the farm land in the country (NIRD, 2000: 35). Right from 1951,when the First Five-Year Plan was launched, successive plans have given prominence to thesector both to ensure food sufficiency as well as to support livelihoods, particularly in the ruralareas. The survival of agriculture is dependent upon a number of subsidies – direct (for inputsand working capital) and indirect (income tax exemptions, minimum support price support) –and any changes to the subsidies in agriculture could prove catastrophic for the national economyas a whole. The structure of the economy has changed over the last 20 years, with the agriculturecontribution to GDP (including fisheries) falling from over one third in 1982 to only one quarterin 2002, and the service sector growing from 37.2% in 1982, to 49.2% in 2002 (Hosche &Flewweling, 2004).

Poverty & quality of life indicators

In terms of Human Development Index (HDI), India stands 115th among the world community(http://www.undp.org/hdr2001/indicator/cty_f_IND.html). The incidence of poverty in thecountry has declined by nearly half from 54.88 percent in 1973-74 to 26.10 in 1999-2000, which– when expressed in numbers – still means over 260 million people being poor in the country,down by only 60 million from the 1973-73 estimate (NIRD 2003: 85). In case of urban poverty,the percentage decline from 49 to 23.6 during the period is actually accompanied by an increasein the total number of poor by 7 million people! Incidence of hunger in rural areas in 1999-2000is as follows (Source: NIRD 2003: 98)

Members of households (percentage) getting two square meals a dayThroughout the year Only some months of the year Not even some

monthsNot reported

All India 96.2 2.60 0.70 0.50



This indicates that over twenty-six million people in the rural areas have access to two squaremeals a day only during some months of the year, while another seven million do not have twosquare meals even in some months! Average monthly expenditure on food per person in thecountry amounts to nearly 60 percent (NIRD, 2003: 81). Seasonal and long-term migration – intourban areas and non-traditional occupations – has been rising steadily and is a cause for concern.

Deprivation also stems from, or is exacerbated by, social inequality arising from systemicprocesses like caste, religion, gender and geographic origin, which determine the access to, andavailability of, resources to a household.

In 1991, access to the three basic facilities - safe drinking water, electricity and toilets – wasconfined to less than 4 percent of the rural households in the country. The following tableindicates the reach of other services in the rural areas of India (NIRD 2003: 333-4):

Availability of different facilities by percentage in villages of India (1995-96)Bus stand Bank Post office Fair price shop Vet centre PHC Primary school31.40 9.15 28.89 46.60 12.03 21.45 81.00Adult EducationCentre

All weather roads Police station Weekly market Supply depot(agricultural)

Coop society

48.25 65.25 4.54 14.40 10.87 22.10

Within the country, wide variations exist between states in terms of their human developmentachievements. Table 1 gives the HDI for selected coastal states of India, which shows Keralatopping the list with the highest HDI (0.638), while Orissa (at 0.404) comes last. Kerala ranksfirst in quality of life indicators like literacy, life expectancy and health. It has a sex ratio infavour of females and lowest infant mortality rate and birth rate when compared to Indianaverage (SIFFS, 2001). On the other hand, as an analysis done by Sundaram & Tendulkar(2003:1385-1393) shows, Orissa is one of the three states where the poverty situation (in termsof depth and severity) worsened over the period from 1993-94 to 1999-2000. Such differencesbetween states make it difficult to generalise the conclusions any study – including the presentone – across the country.

Social support programmes relevant to coastal fishing communities in India

The annual outlay for centrally sponsored anti-poverty programmes constitutes between 5 and 8percent of the total Government of India (GOI) expenditure, and about 1 percent of the GDP(NIRD, 2000: 102). Right from the launching of the First 5-Year Plan, the governments havegiven priority to livelihood generation and provision of basic services like housing, drinkingwater, sanitation, roads, cyclone shelters, health and education. Food security is sought to beachieved through the Public Distribution Systems (PDS) schemes, which provide subsidised foodto the people below the poverty line. For the weaker sections of the society – characterised byoccupation, caste, gender, age or physical ability – positive discrimination policies have beenenacted and reservations made at various levels. Some packages of insurance – for old people,widows and for helping the poor to tide over lean seasons – have been put in place. Althoughmuch criticism is levelled against the focus, content, scope and implementation of theseprogrammes, they undoubtedly address some basic needs of the poor. National drinking watermissions, public healthcare, rural sanitation, universal literacy campaigns, housing and public



distribution system are some of the public services relevant to the fishing communities of India(NIRD, 1999; ICM 2003).

FISHERIES SECTOR IN INDIA

People involved in fisheries sector

The coastal fishing communities in the country are among the poorest sections of the society (seeICM, 2003; Kurien, 1995; Tietze 1986; Vivekanandan et al, 1996). Traditionally marginalisedfrom the mainstream by the nature of their occupation, the fishers’ access to basic services is lowand a number of changes related to their livelihoods have made their condition more precarious.

According to livestock census of 1992 (cited in GOI, 2000), the total number of fishers in thecountry is 6.7 million, of whom men numbered 2.4 million, women 2 million and children 2.3million. Lacking disaggregated data from the 2001 Census, it has not been possible to ascertainthe current figures. Just over one third of full-time fishermen are located on India’s east coast,and 70% of the marine fish production originates from the west coast (Vivekanandan, 2002). Animportant feature of the fisheries sector is the gender-based division of labour and the active roleplayed by the women in the production and market-related activities in several states, particularlyon the east coast. Shrimp aquaculture provides livelihood to one million people, about a third ofthem employed directly in culture operations and the rest in ancillary activities (Mathew 2003).

Fisheries resources

India has a coastline of 8 041 kilometres spread along nine coastal states and four unionterritories. The exclusive economic zone (EEZ) stretches over 2.02 million km2, and thecontinental shelf covers 0.5 million km2. Table 2 provides the state wise details of coastline andcontinental shelf. The potential resources available from the Indian waters are 3.9 million tonnes,(2.2 million t in the inshore and the rest in the offshore waters) (GOI, 1996). India also hasinland water sources covering over 190 000 km and open water bodies with a water-spread areaof over 66 lakh hectares (GOI 2000: 122). Brackishwater area available for aquaculture purposesin the country is 1.2 million ha, of which 165 thousand ha is developed.

Fishing fleet

The methods of exploitation of marine fisheries resources vary from simple traps to largetrawlers and from simple hand-lines to sophisticated purseseiners (Vivekanandan, 2002). Thefishing crafts can be classified into two types: artisanal crafts with or without engine and themechanised boats. There are a total of 181 284 artisanal (i.e., non-motorised), 44 578 motorisedand 53 684 mechanised fishing crafts in the country making a total of 280 491 boats in all (GOI,2000: 128). The main fishing gears used can be classified as (i) encircling, (ii) drifting, (iii)dragging, (iv) seining and (v) lining types. Stationary gears include (i) set nets and (ii) fixed nets.The mechanised sector is largely dependent upon trawling, although gill-netting, purse-seiningand long-lining are also prevalent, particularly along the west coast of India. The design, size,construction, operations and economics of the fishing crafts – particularly the artisanal ones – arelocation-specific. Details of different artisanal fishing boats and the important nets used in



Andhra Pradesh, Orissa and Kerala are provided in Table 3 (a, b, c). New boat designs, FRP andplywood boat building, motorisation, synthetic nets are recent developments in artisanal sector.

Current level of exploitation

In 1950-51, the total fish production in the country was 0.75 million MT, of which marine fish(0.5 million MT) accounted for 71 percent. By 1999-2000, the total production has grown to 5.6million MT, but contribution of marine catches came down to 50 percent at 2.8 million MT, thedecline being due to increased production in inland and culture sectors. Marine production hasalso remained static since 1993-94 (GOI, 2000) (Figure 1). The catches from inshore waters arereported to have reached their full potential (Vivekanandan, 2002) and there is potential forincreasing the catches of only the cheaper varieties (small pelagics), supporting the contentionthat fishing effort in recent years has concentrated on specific high-value varieties (Salagrama,2004). The production from offshore can add 1.2 million tonnes to overall landings.

The annual average landings by the trawlers increased from 300 thousand t in 1980-1981 to 1.3million t in 1999-2000, increasing their share in marine production from 29.4% to 48.8%(Vivekanandan, 2002). The annual per capita production of active fishermen in the artisanalsector declined from 2 590 kg in 1980 to 420 kg in 1996-97, while it increased from 5 260 to8 130 kg in the mechanised sector (Sathiadhas, 1998: 466).

The composition of the Penaied shrimp in the total marine fish catches ranged between 5 and 8percent during 1991-98 (GOI, 1996 & 2000) (Figure 2), but there has been a decline in theoverall landings of marine shrimp since 1994. The culture production of shrimp rose from 28thousand MT in 1988-89 to 86 thousand MT in 1999-2000 making up for the shortfall in marinesupplies (MPEDA, 2001). East coast, particularly Andhra Pradesh, West Bengal and TamilNadu, dominates culture shrimp production, with Andhra Pradesh producing more than half thetotal production in the country (GOI 2000: 128). The average production per hectare, which grewto 820 kg per ha during 1994-95, fell back to 550 kg by 1999-2000. Andhra Pradesh, whichreached the one tonne per ha mark in 1994-95 slid down to 665 kg by 1998-99 (MPEDA 2001).Besides penaeids, scampi (Macrobrachium rosenbergii) is being cultivated in over 12 thousandhectares in the country with an estimated production of 7 140 MT during 1999-2000.

Contribution of fisheries to national economy

The gross investment on fishing component is estimated as Rs 8 000 crores (Vivekanandan,2002), much of it is in the private sector. Fisheries contributes Rs. 19 555 crore to the GrossDomestic Product (GDP), which works out to 1.3 percent of the total GDP or 4.6 percent of theGDP from agriculture sector. The contribution of fisheries to the GDP has shown a consistentincrease from 1970-71 when it was 0.62 percent of the total GDP and 1.46 percent of the GDPfrom Agriculture (GOI, 2000: 130). India’s contribution to world fish production has gone upmarginally from 3.7 percent in 1950 to 4.18 in 1997, but the contribution of marine sectordeclined from 2.97 to 2.86 percent during the period. Figure 3 provides the wholesale price indexfor different sources of protein in India indicating that the increase in real value of fish is muchfaster than that of the other food items (GOI, 1996: 117; GOI, 1997:121).



Institutional context of fisheries

Under the Constitution of India, fisheries is a state subject, i.e., individual states within theIndian Union can frame and implement fisheries policies of their own. The maritime states ofIndia have control of the seas up to a distance of 22 kilometres from the shore, while the CentralGovernment has control over the EEZ (Exclusive Economic Zone) beyond 22 km, stretching upto 200 km limit. In general, as Anjani Kumar et al (2003:15) have noted, the national policies inIndia have been export oriented, supporting relatively large-scale fisheries for shrimp, while formany states the primary concern was the welfare of local small-scale fishermen. A wide range offisheries development programmes have been administered by a large number of central andstate government agencies in the country. The nature, quantum, focus and impact of theprogrammes have been subject to changes from time to time and from state to state. Thefollowing section will provide an overview of the institutions working in the sector along withthe nature of support they extend to the seafood export industry.

Central Government organisations

At the central level, fisheries is under the purview of the Department of Animal Husbandry &Dairying (DAHD) which is part of the Ministry of Agriculture, Government of India. TheFisheries Development Commissioner in the DAHD heads the fisheries wing. The divisionimplements and monitors the central sector schemes and centrally sponsored schemes1

implemented through the state governments. It also undertakes pilot projects and acts as aconduit for externally funded development projects in several states (GOI, 2000). The followingis a summary of different fisheries development programmes funded by DAHD.

Subsidy for motorisation of traditional craft and for purchase of fishing gear Reimbursement of Excise Duty on HSD oil (currently Rs. 0.35 per litre) to mechanised

fishing vessels below 20 Metres. It does not cover motorised boats2. Fishing harbour facilities at major and minor ports. Subsidy ranging from 100% (for

fishing harbours at major ports) to 50% (for minor harbours and fish landing centres); inthe Ninth Plan, assistance for improving hygienic conditions to meet internationalstandards was made available.

Integrated coastal aquaculture through Brackishwater Fisheries Development Agency:

Subsidy for renovation/construction of fish farm including cost of inputs for the first year. Subsidy for establishment of shrimp seed hatchery of 2-5 million capacity

Welfare programmes

Development of Fishing Villages (DFV) programme provides basic civic amenities suchas housing, drinking water and community halls.

Savings-cum-relief (SCR) provides assistance to the fishermen during the lean period. Accident insurance. Premium subsidised to cover fishermen of age 18-65 years.

1 The latter have a component of contribution by the state governments2 In Kerala, motorized boats receive subsidized kerosene, but this is not available in other states



The Ministry of Food Processing Industries extends support for:

Setting up of infrastructure facilities for preservation and processing of fish Assistance (through MPEDA) for deep sea fishing and processing venture Assistance for diversified fishing Interest subsidy on loans for acquisition of deep sea fishing vessels Communication facilities for Coast Guard Grant-in-aid for setting up research & development and quality improvement in fish

processing technology

Other central ministries, such as the Ministry of Commerce (through MPEDA and EIA),Ministry of Environment and Forests (conservation and management), the Ministry of Shipping(fishing ports), the Ministry of Rural Development, Ministry of Ocean Development, and theMinistry of Defence (Coast Guard) play a determining role in the fisheries sector. The NationalCooperative Development Corporation (NCDC) provides assistance to fishermen cooperativeson liberal terms, implements the following schemes to enable the fisheries cooperatives to takeup activities related to production, processing, storage and marketing:

Purchase of operational inputs such as fishing boats, nets and engines Creation of infrastructure facilities for marketing (transport, cold-storages, retail outlets) Establishment of processing units including ice plants and cold storages

The Marine Products Export Development Authority (MPEDA) functions under the Ministryof Commerce, Government of India and acts as a coordinating agency with different Central andState Government establishments engaged in fisheries sector. The role envisaged for theMPEDA is comprehensive – covering fisheries of all kinds, increasing exports, specifyingstandards, processing, marketing, extension and training in various aspects of the industry. TheMPEDA has the mandate to develop the local seafood industry by providing technical assistance(through extension services and contact programmes), financial assistance (in the form ofsubsidies and loans) and promoting its products abroad. The MPEDA’s subsidy assistanceschemes cover marine capture fisheries, culture fisheries, processing industries and exportpromotion and, in terms of seafood export, the most significant and substantial support receivedby different stakeholders.

The Export Inspection Council (EIC) was set up in 1963 under the control of the Ministry ofCommerce in order to ensure sound development of export trade of India through quality controland inspection. The EIC is the apex authority under the Government of India, which isresponsible for monitoring of quality standards and issuing of licences. The EIC works throughthe regional Export Inspection Agencies, which are the implementing arms of the council andissue certification of quality to exporters of fish and fish products.

State government organisations

The State Department of Fisheries (DOF) is the nodal agency responsible for formulation ofpolicy, development and management programmes and their implementation. The DOF providesdirect support for increasing supply from both capture and culture fisheries. It monitors and



promotes improved management of the resources, and actively promotes the involvement ofsmall-scale and poorer participants in the sector. Its main activities include construction offishing harbours and setting up marketing and processing infrastructure, technical support,training and extension, subsidies and credit assistance to fishermen for acquiring fishingequipment, support to fishermen cooperatives, compiling fisheries statistics, and implementingvarious welfare measures and activities for the fishers (DOF-AP, 1998).

Many states like Kerala have programmes for social insurance, fishermen’s relief funds,rehabilitation programmes, special transport services, schools and scholarships, assistance forrepair of houses, and even for diversification of occupation (GOI, 1983: 14-19). Village accessroads, transport facilities and provision of infrastructure for drying were some of the programmesthat most state governments have taken up. Since 1990, budgetary constraints have forced thestates to confine themselves to implementing the central programmes. Many state departments offisheries have set up apex cooperative bodies to source funds from the NCDC. Some statedepartments started corporations to undertake input and output marketing with poor results.

The Department of Rural Development (through the District Rural Development Agency –DRDA), Department of Forests, Shore Area Development Authority (SADA), Department ofPorts and various bodies set up for development of weaker sections, such as the BackwardClasses (BC), Scheduled Castes (SC) and women and child welfare, have a role to play at thestate level in the fisheries sector. The main activities of DRDA are to promote enterprisedevelopment and employment generation among the rural youth and women, extending trainingand financial support, setting up infrastructure facilities like fish drying platforms, net-mendingand fish storage rooms, community halls, etc.

Research organisations

Fisheries research is undertaken by both the central government and the individual stategovernments. The central government research institutions generally fall under the control of theIndian Council of Agricultural Research (ICAR). Fisheries research in the states is done byagricultural universities and their colleges of fisheries. The following are the fisheries relatedinstitutions under the control of the ICAR.

Central Inland Capture Fisheries Research Institute (CICFRI), Barrackpore, W Bengal,conducts research on open inland water systems and undertakes extension and training.

Central Institute of Brackish water Aquaculture (CIBA), Chennai, Tamil Nadu conductsresearch for development of finfish and shellfish culture in brackish water.

Central Institute of Freshwater Aquaculture (CIFA), Bhubaneswar, Orissa conductsresearch on production and productivity issues in freshwater aquaculture.

Central Institute of Fisheries Education, Mumbai (CIFE), Mumbai, Maharashtra is theonly fisheries university in India undertaking education and research in fisheries.

Central Marine Fisheries Research Institute (CMFRI), Kochi, Kerala carries out work onmarine fisheries resources and their exploitation; and training and extension programmes.

Central Institute of Fisheries Technology (CIFT), Kochi, Kerala undertakes research infishing technology, craft and gear, processing and preservation; it also helps in qualitycontrol certification for export of seafood.



Two other fisheries research organisations – National Research Centre on Coldwater Fisheries(NRCCWF), Bhimtal and National Bureau of Fish Genetic Resources (NBFGR), Lucknow arealso affiliated to ICAR.

Financial institutions

The National Bank for Agriculture and Rural Development (NABARD) has a specialcomponent for preferential lending to the fisheries sector at subsidised rates of interest.NABARD’s support to fishing sector included refinancing mechanised and other boats andaquaculture (Upare, 2004:66). In the X-5 Year Plan period, NABARD plans to refinance loansworth over 6 thousand crores (GOI, 2001a: 41). Mechanised trawling was financed by thecommercial banks until 1980s (see next chapter), and the brackishwater boom in the early 1990salso encouraged financial institutions like Industrial Finance Corporation of India (IFCI),Industrial Development Bank of India (IDBI), Shipping Credit and Investment Company of India(SCICI), State Finance Corporations (SFC) and NCDC to lend credit, but much of this supportdried up by mid-1990s for a number of reasons (Anjani Kumar et al 2003: 13-14).

Trade associations

The Seafood Exporters Association of India (SEAI) is the representative body of seafoodexporters. It takes an active part, in conjunction with the MPEDA, in conducting theInternational Seafood Fairs in India, besides participating in the various international fairs andexhibitions. It brings out the Seafood Exporters Journal.

MAIN STAKEHOLDERS IN EXPORT SUPPLY CHAIN IN INDIA3

The seafood export industry comprises of four distinct entities. They are: (i) producers (ii)intermediaries (iii) processing/export industry and (iv) ancillary workers. The last groupconstitutes numerically the largest grouping in the sector and includes a wide range of poorpeople involved in miscellaneous wage earning activities. Frequently, the people in this grouphave no direct stake in the economics of operation and any changes in the sector affect themsecondarily, although no less drastically.

1. Producers

Capture operations are largely carried out by people from traditional fishing castes, while manyoutsiders are also involved in aquaculture. Processing and export industries are owned by non-fishing entrepreneurs.

Mechanised trawling fleet

In 1997, the mechanised fishing fleet in the country numbered over 47 000 boats and employed200 000 people (Sathiadhas, 1998:466), of whom 150 000 were employed in trawling. However,considering that at least a quarter of the boats are idling at any given time, the actual numbers of

3 Drawn from ICM (2002) and SIFFS (2002) and revised and updated.



people employed may be less. The organisation of mechanised trawling is different fromartisanal fishing in at least three respects: (i) the crew are generally from the fishing castes andemployed on wage basis, although they do receive a small share in the catches of the bycatch; (ii)the owners are seldom active fishers themselves and (iii) their operations are focused on shrimp.

Artisanal fishing fleet

According to GOI (2000:128), there are over 225 000 motorised and non-motorised boats in thecountry, so approximately 900 000 people are possibly employed in sea and estuarine fishing.Sharing systems vary across the regions, but it is commonly understood that the crews earn ashare in the catches and not a regular wage. Sizeable quantities of shrimp are caught usingtrammel nets and small gillnets in the artisanal/motorised sector. Many fishing operations arefocused on shrimp through the 1990s because its high value helped the fishers to overcome thereduction in overall catches, but the current study shows that the fishers are shifting back tofinfish again. In Andhra Pradesh and Orissa, a motorised, open-sea based fishing boat targetsshrimp for about 3 months spread over two peak fishing periods in a year. The income fromshrimp might account for 60 percent of the annual income of a fisherman, and in some years, thiscould be much higher, although it has come down to 40 -50 percent in the last couple of years. Innon-motorised estuarine fishing, shrimp contributes up to 90% of income.

Among the crew, the fishers working in non-motorised boats are the poorest and those workingon mechanised trawlers are relatively better off, although recent trends indicate that working onmechanised boats is not considered a profitable proposition anymore. Mechanised boat ownersform the most prosperous category in the capture sector and have strong associations, whichlobby for their interests at various levels. The other stakeholders are not so well organised. Insocial and economic terms, the motorised boat owners fall in between the non-motorised and themechanised boat owners. The levels of indebtedness amongst the mechanised and motorised boatowners are the highest among all categories of fishworkers. The non-motorised sector is stressednot so much in economic terms as in terms of reduced access to fishing grounds (SIFFS, 1991).

Culture sector

The participants in export commodity chains from the culture sector are: (i) small-scaleaquaculturists, who own farms of about 1 – 2 ha size and for whom aquaculture is a largelysubsistence activity; and (ii) large-scale aquaculturists, who could be individual/family operatorsor the corporate operators. At present, there are only a few large corporate farms continuing withshrimp farming. The individual/family operations are as lucrative as they are risky. Onecharacteristic feature of this category is generally the ownership lies in the hands of people withnon-fishing backgrounds. Small-scale farmers, who constitute over 90 percent of the farmers inall states, generally obtained their landholdings under development programmes or by sharingthe village commons among themselves. A majority of the coastal farmers are from the fishingcommunities, many of them active fishers themselves, and even now, they frequently shuttlebetween the two occupations depending on whichever looked less risky or more lucrative. Ineconomic terms, the status of the small farmers is little different from that of the marine fishersand, in economic terms, more risky.



2. The intermediaries

Commission agents and independent traders

The commission agent and the middlemen-trader are relatively new phenomena, who arrived onthe scene only after the shrimp export markets began to grow in the 1980s and 1990s. There isvery little information available on the various categories of the trade intermediaries in fisheries.Considering the debate that the ‘exploitative practices’ of ‘middlemen’ have generated, it israther surprising that they have not received more scholarly attention. In rural areas, theygenerally come from the fishing community or a neighbouring agrarian community, frequentlyfrom the elite or affluent sections while outsiders are also observed in this trade in urban areas.They play an important social and economic function and – in the absence of institutional safetynets – bear most of the risk that a highly risky trade like shrimp export carries.

The numbers of commission agents and traders varies from place to place and from time to time.Each commission agent has an arrangement with a particular company, which provides a softloan in cash or kind to him in return for procuring shrimp from individual fishers/farmers on itsbehalf. The commission agent in turn lends the money to the fishers and the farmers in return forthe right to sell their products on commission basis. The independent traders do not borrow fromprocessing/exporting firms and use their own funds in business, hence they obtain a better priceby selling to whichever company or peeling shed is willing to pay them well. The owners ofpeelings sheds form an important category of independent traders in Kerala.

Investments in trade by the individual traders could range between Rs. 25 000 to Rs. 1 500 000or more. Both independent traders and the commission agents obtain shrimp from the boats towhich they have advanced money and also from others. They frequently form cartels to controlthe prices and resort to various malpractices in rural areas. The larger traders increasingly act ascollection points for shrimp brought by a number of smaller traders, and the interrelationshipsbetween the various categories of traders are amazingly complex, and a simple cost-benefitanalysis to assess the profitability of this trade is almost impossible.

Company agents

Company agents are employed by processing plants to purchase raw material conforming to theprice and quality specifications given to them by the company. They receive monthly wages (inAndhra Pradesh) or commission on a per kg basis (in Kerala). They ensure that the raw materialprocured is iced adequately and hygienically at the harbour and transferred to the company byinsulated vans. Their influence is on the rise as processing plants are taking a greater control onthe supply chain as a response to the EU legislation (SIFFS 2002).

3. Processors & Exporters

The pre-processing and processing activities are the only areas in shrimp export chain wherewomen take a lead role, albeit as wage labourers.



Pre-processing and peeling centres

These pre-processing centres are individually owned. The owners have arrangements with theprocessing plants for supplying shrimp. Until recently, pre-processing activities generallyinvolved beheading and peeling, but increasingly peeling is being done at the processing plantitself. The number of people employed in a pre-processing centre varies depending on the placeand season, as workers are employed on a daily wage basis depending on availability of shrimp.Decreasing work (due to declining supplies and the insistence of the factories on buying wholeshrimp) and increasing competition have caused many women to move out of this activity.

The peeling shed industry is an important source of employment in Kerala. There are regular(registered) and seasonal peeling sheds, employing between 25 and 100 women each – generallyfrom the local fishing community – and pays a fixed rate based on the quantity peeled. Manywomen also collect raw material from the large peeling sheds for peeling at home, and are paid afixed, but lesser, rate than those who peel in the shed.

Processing industry

Processing for the export sector is different from the other activities in the fishing industry in thatit is in the organised sector (even though the product it processes comes from the informalsector). A large share of the processing and export markets is held by a relatively few companiesin Andhra Pradesh and Kerala. SIFFS 2002 notes that 87 percent of the seafood processed inKochi belt in Kerala during 1999-2000 was done by eight processors out of a total 69 processingplants in the area. Nearly 70-80 percent of the seafood in Andhra Pradesh is reportedly processedby four or five large companies. Some of the large processors also own factory vessels to have abetter control over the quality of the catches and the operations. There are different categories ofprocessors/ exporters in the country. Not all the players are involved in both activities.

Processors who also export

Most major exporters own their own processing plant(s). They secure orders from clients abroad,procure raw material, process and pack it at their processing plant and export it. Some of the bigexporters have their own brands and sell their products in semi cooked or ready-to-eat form tosuper market chains in foreign countries.

Processors who do not export directly

This category mostly comprises of people who invested heavily in plant and machinery in theaftermath of the EU ban and currently have no working capital or are facing supply problems.They lease their idle plants on a fixed (per kg) commission basis to other processors/ exporters orto exporters who do not have processing plants of their own.

Exporters who do not have a processing facility

Not having one’s own production facility places definite limitations on the degree of control anexporter can have on the quality of the final output. However, a few people who have the export



license and the required working capital continue to take processing infrastructure on lease. Thiscategory is likely to vanish as seafood legislation becomes more stringent.

Workers in shrimp processing activities

The seafood processing plants employ women for pre-processing, grading, sorting and packing.MPEDA (2002) notes that nearly 80 percent of the workers in seafood processing plants arewomen from economically weaker coastal communities. The number of women employed in aprocessing plant ranges between 100 and 250, and considering there are about 400 registeredprocessing plants in the country, the total number of women employed in these plants couldrange between 40 000 and 100 000. The income from processing activities is significant for thefamilies of these women.

The fact that a large percentage of the processing workers are generally poor migrant girls fromKerala leading cloistered lives inside the factory premises under poor living and sanitaryconditions makes them vulnerable to exploitation (Beena, 1992). Processing workers receive lowwages (Rs. 1 200 to Rs. 1 500, going up to Rs. 2 000 per month) and work long and irregularhours (12 hours or more at a stretch). The hard and tedious work leads to frequent ill health andmany girls suffer from anaemia due to malnutrition. The plight of the migrant workers isworsened by competition from the local women, which reduces their bargaining powerconsiderably. Many processing plants keep the girls in the ‘temporary labourer’ category,effectively blocking their chances for a fair deal through legal mechanisms. The Factory Act andthe Inter-State Migrant Workers (Regulation of Employment and Conditions of Service) Act of1979 are largely bypassed. The EU regulations impose certain basic standards on the status ofemployment as well as the quality of life of the processing workers, which reportedly have apositive impact on the conditions of the processing women.

4. Other participants

Hatchery owners, operators and workers

There are 260 shrimp hatcheries in the country, with more than half of them – 133 – located inAndhra Pradesh and another 72 in Tamil Nadu (AAI, 2001: 15). Little information is availableon the working conditions inside hatcheries, but it is believed that, being a sophisticatedtechnological activity run along professional industrial lines, the working conditions here aremuch superior to the rest of the fisheries sector.

Feed mill owners, operators and workers

There are 33 feed mills in the country, with Andhra Pradesh and Tamil Nadu accounting for 27of them (AAI, 2001:15). The feed mills are generally set up with active foreign collaboration, orare the Indian subsidiaries of international companies and often form part of an integrated systemof supply and procurement, which makes it difficult to assess their performance individually. Asin the case of hatcheries, the working conditions are reportedly better in the feed mills.



Shrimp seed collectors

In sharp contrast to the ultra-modern, capital intensive, aqua-hatcheries are the natural shrimpseed collectors who, until 1994, are the only source of seed for culture operations in the country.Like many other shrimp stakeholder groups, the shrimp seed collectors too had seen a high intheir profession, which has been followed by a drastic low. However, the downward journey ofthe shrimp seed collectors took them far lower than any of the others. From being the lifeline ofthe aquaculture industry in early 1990s, natural shrimp seed collection became a banned activityby mid-1990s. Still, a large number of poor people continue to collect seed because they simplydo not have an alternative livelihood option. These are among the poorest in the export sector.

5. Ancillary participants

Aquaculture involves hatchery owners, operators and workers as well as daily wage labourers forpreparation and management of pond operations and regular watch and ward staff. Processingand export activity depends on a large number of ancillary workers, technicians, transporters,carriers and very little quantitative or qualitative data exists on their existence and functioning.The ancillary participants in the seafood export chain would include: carriers and transporters,pre-processors and processors, packers and handlers, ice makers and sellers, technicians, crateand basket makers, insulated systems manufacturers and service agents. Interactions with themreveal that their understanding of the rapidly unfolding processes of liberalisation and its impacton their own livelihoods is not very detailed.

THE POOR WITHIN THE EXPORT COMMODITY CHAIN

The composite wealth ranking of different stakeholder groups in the export chain are as follows:

Stakeholder group Rank (1 – 8)4

Fishing crew – non motorised 3Fishing crew – motorised (including BLCs) 4Fishing crew – mechanised 5Boat owners – non motorised 3Boat owners – motorised (including BLCs) 5Boat owners – mechanised 7Shore-seine owners 5Shore-seine labourers 3Aquaculturists – large-scale 8Aquaculturists – small-scale 4Aquaculture labourers 2Shrimp seed collectors 1Peeling shed owners 7Commission agents 7Company agents 6Large scale trader/financiers 7Shrimp peelers (village/household based) 3

4 1 = Extremely poor 8 = Well off



Shrimp peelers (harbour based) 3Shrimp peelers (factory-based) 4Processing factory owners 8Processing factor workers (women) 3Exporters 8Auctioneers 5Procurement and packaging assistants 2Suppliers of ice 5Hatchery owners and operators 8Feed mill owners and operators 8Hatchery workers 5Feed mill workers 5Transport owners 7Transport workers 4Engine mechanics 5Basket weavers 3

Consolidation of different livelihood groups in Andhra Pradesh and Orissa into differentwealth categories:

Well off (7-8) Moderate (5-6)Aquaculturists – large-scaleBoat owners – mechanisedCommission agentsLarge scale trader/financiersProcessing factory ownersPeeling shed ownersExportersTransport ownersHatchery owners and operatorsFeed mill owners and operators

Shore-seine ownersBoat owners – motorisedFishing crew – mechanisedAuctioneersSuppliers of iceEngine mechanicsCompany agentsHatchery workersFeed mill workers

Poor (3-4) Very Poor (1-2)Fishing crew – non-motorisedFishing crew – motorisedBoat owners – non-motorisedAquaculturists – small-scaleShrimp peelers – harbour basedShrimp peelers – factory basedShrimp peelers (village/household based)Transport workersProcessing plant workers – womenShore-seine labourers

Aquaculture labourersShrimp seed collectorsProcurement and packaging assistantsBasket weavers

Features of poverty and causes of vulnerability in the seafood export sector

Features of poverty

An appraisal of the seafood export industry suggests three things: (i) the gender balance isheavily tilted in favour of men; although women play a crucial role in processing, the control ofoperations remains firmly in the hands of men; (ii) the production, processing and export



activities depend on the capacity to invest sizeable sums5; and (iii) in terms of state support, thebenefits have all gone to the direct stakeholders – mainly the producers and the processors/exporters. The remaining stakeholders – who are numerically in a majority and constitute thelargest block of poor people in the sector – have been excluded from the support programmes toan extent that it is as though they do not exist. The following table provides a general summaryof the key characteristics of the different wealth categories directly involved in the export sector,as developed during the field research. The idea is not to suggest that all characteristics of aparticular category are applicable to the stakeholder groups in that category; but that the mostnumber of characteristics of the category are.

Well off Moderate Poor Very poor1 Status of

employmentOwn productionassets

Monthly wageearners or ownproduction assets

No production assetsor simple productionassets; regularemployment

No productionassets; irregularemployment

2 Participationin productionactivity

Supervision; nodirect participation;employ workers forwages

Direct participation;Employ workers onsharing basis for ownproduction assets;share includes thatfor boat and net

Direct participation;receive share fromfish catches formanual contribution

Directparticipation;Daily wages/share

3 Importance ofshrimp toincome

Very high (80-90percent)

High to very highseasonally (50-60percent)

High to very highseasonally (50-60percent)

Less important(15-25 percent)

4 Livelihoodprofile

Involvement/investment in otheractivities

No involvement inother activities

No involvement inother activities;family members havea diversified profile

Involvement in awide range ofactivities

5 Impact of leanseason

None Partial dependenceon credit to meetsubsistence needs

Regular dependenceon credit to meetsubsistence needs

Hand loans,migration andgoing hungry

6 Housing6 Own permanenthouse with RCCroof, many rooms

Own tiled house orrented tiled/RCChouse, two or threerooms

Own thatched houseor rented tiled/RCChouse, one or tworooms

Own thatchedhouse or rentedthatched house,one room

7 Arrangementsfor cooking

Separate roomwithin the house,LPG stove

Separate room withinthe house,LPG/Kerosene stove

Cooking in the openusing firewood

Firewood stove orcollecting foodfrom others

8 Dependence onPDS

None Moderate High High (ifaccessible)

9 Cost of food intotal income

5-20 percent 20-30 percent 30-50 percent 50 percent andabove

10 Individualbank account

Exists andfrequently used

Exists and rarelyused

No account No account

11 Savings House, productionassets; cash in bank;jewellery

Production assets;house

Thatched house;brass vessels

No savings

5 Non-motorised fishing may not involve much investment, but then the non-motorised owners and crew fall into the‘poor’ category6 Not applicable where government housing scheme is in operation



12 Membership Member of the tradeassociation

Member ofcooperative society

Membership ininformal associations

No membership

13 Drinking water Own tap/borewell Tap/borewell sharedwith neighbours

Communaltap/borewell

Communaltap/borewell

14 Healthcare Private doctors intowns

Private doctors in thevillage/governmenthealthcare

Governmenthealthcare/localquacks

Governmenthealthcare/selfmedication

15 Consumergoods

TV, two wheeler TV Radio None

16 Educationalstandards

School goingchildren

Younger childrengoing to school,dropping out midway

Children not studyingor drop out

Children involvedin work and notstudying

Causes of vulnerability

An important point to note is that virtually everyone in the sector – from the poorest shrimppeeler to the most affluent processor/exporter – is affected by the changes one way or the otherand, more than poverty, it is insecurity that characterises most occupations in the export sector.The main cause of vulnerability is the dependence on shrimp. Shrimp production from bothcapture and culture sources has been quite uncertain in the last decade and the downward trendof production has an impact on everyone in the sector (see Elias Sait, 2001). A small shift inproduction is reported to pull the economic status of a household down from ‘well off’ to‘moderate’ or even lower category.

Many fishers in Andhra Pradesh shifted their creek-based fishing operations to open-sea fishing in the 1990s insearch of shrimp and found themselves competing with the mechanised trawlers. When aquaculture developed in thearea, many shifted from fishing to shrimp farming. When that too failed, some of them returned to fishing, whileothers gave up fishing altogether and moved into fish trade – buying bycatch from trawlers for sale in domesticmarkets.

The traders also face serious risks when they invest heavily in shrimp from capture and culturesources and in every village there are at least a few traders who lost heavily in shrimp trade. Thelack of shrimp means that the processing industry operates at 15 percent of its capacity in allstates, and its impact is felt on the profitability of operations and employment potential. Peelingoperations in places like Kakinada have been folding up since much before the EU regulationscame along, and this is directly attributed to decline in catches.

The second source of vulnerability is the international fluctuations in seafood markets. Thesingle minded emphasis on shrimp and on two or three major developed markets – Japan, the EUand the US – for selling it to, have meant that even a slight fluctuation in the shrimp market hascatastrophic consequences for everyone down the line. It is not facetious to suggest that theimpact of such events as 9/11 was felt as badly by the fishers in remote fishing villages ofAndhra Pradesh and Orissa as by those nearer to the action – the sudden slump in prices ofshrimp during September-October 2001 led many traders in Orissa, who had invested to the tuneof up to Rs. 60 000 in each motorised boat coming from Andhra Pradesh, to go very nearbankruptcy. Similarly, the mechanised boats found themselves sitting idle at Paradeep and Vizagfishing harbours, because the slump in shrimp prices to under Rs. 200 a kg meant that even good



catches were not going to pay the fuel costs. It also coincided with the harvesting season inaquaculture, and led to serious losses among the farmers.

A third source of vulnerability comes from the cost of operations, which keep going upconstantly for many reasons and the demand for higher investment is almost always in inverseproportion to the profitability of operations, with the result that many fishers, processing plantowners and other stakeholders, have begun to opt out rather than invest more and risk theirfuture. As shall be discussed, an important reason for the increasing cost of operations is thereduction in general subsidies like diesel, but even otherwise, the cost of operations isunreasonably high. An important reason for the overcapitalisation is, once again, shrimp!Because the returns on shrimp were extremely favourable, many producers and processorsinvested in excess capacity, leading to high investments and higher recurring costs, and whenshrimp declined in catches, the cost of operations became suddenly very expensive.

All these changes also mean that several poor stakeholders – who had found a niche forthemselves in the export chain – are no longer able to depend on the shrimp. There is a strongtrend of consolidation of the production and marketing chain, which is veering towards a ‘lean-and-mean’ system that does not have a place for many traditional players. While some categories– peelers at the landing centres, for instance – are more or less outdated, the employmentpotential of the remaining categories is coming down significantly. It is possible that the changeswill help the sector to become more viable in due course, but the impact of such a change isbeing borne by the poor stakeholders.

The next section will discuss the role of shrimp in the development of modern fisheries sector inmore detail.



CHAPTER 2: ORIGINS AND DEVELOPMENT OF SHRIMP EXPORTSUPPLY CHAIN IN INDIA

This chapter reviews the development of shrimp supply chain and the role of subsidies (in thebroad sense of the term) in its development.

SUBSIDIES IN THE PRE-INDEPENDENCE PERIOD

A number of studies (Thomson 1989; Kurien 1980; Tietze 1986; Bavinck 2001; Salagrama2003a; Salagrama 2003b; Schombucher 1986; Alexander 1995) have suggested that the socialand economic organisation of traditional fishing communities was closely bound with the naturalecosystem in which they operate. The nature and organisation of these production systems wassubsistence-based, largely egalitarian and their technology simple. These features weredetermined by the communities’ need to assert and maintain their collective claim upon an openaccess natural resource like fish. This was further reinforced by the need to keep the means of itsextraction – i.e., boats and nets – communally employed (Thomson, 1989). It is for these reasonsthat capital formation and its reinvestment were actively discouraged in many communities. Themarkets were local and rurally oriented, not fully monetised or formalised, and their tradingcapacity was limited. In other words, there was no incentive in the system to increase theproductivity beyond a particular limit and even if the production and economic systems weremore efficient, the social systems actively worked against capital accumulation7.

Subsidies in Indian fisheries date back at least up to late-19th Century, when the first state-sponsored development programme in the fisheries sector was introduced: establishment of‘salting enclosures’ for the purpose of supply of salt at a little above the cost price for ‘bona fidecuring purposes’ (GOI 1961: 58). Salt was made an excisable commodity by the colonialadministration (which would lead to the famous Salt Satyagraha by Mahatma Gandhi), and therewere complaints that salt tax had destroyed the flourishing trade in cured fish in various parts ofthe country. The government’s effort was aimed at providing the public with wholesome saltedfish as an article of diet and to increase the processors’ income8. The earliest of these enclosureswere opened in 1874 and from 1882,

‘…a gradually increasing number of yards, or bonded enclosures were opened, at which salt is issued notonly free of duty but often at rates much below the local cost of the salt … the only conditions are that thefish shall be brought into the yard, salted and dried within its limits, and kept there till presumed fit forissue…’ (MFB, 1915: 209-211).

In 1909, there were 143 such yards scattered along the coast in which something over 50,000tons of wet dressed fish were annually cured. However, “the result of this concession to theindustry”, lamented the then Director of Madras Fisheries Bureau at the Lahore IndustrialConference, 1909:

7Extravagance and poor savings – the two common causes of complaint against the fishers – can be related to this.8 And to save the government the trouble, expense and risk of designing and administering measures against theillegal use of salt earth, i.e., salt made from seawater (GOI, 1961: 59).



“… has not been all that was expected…for the cure has not developed in quality, or even in quantity,proportionately to the cheapness of salt; the East Coast cure remains precisely what it was in [c. 1870] …the reasons being that the market seems to prefer or at least to be reconciled to a highly flavoured productwhich the curers can produce in their ancient way and with the minimum of care and charge, while themere cheapness of salt cannot counteract the results as to taint of longstanding primitive and defectivecustoms in catching and marketing…’ (MFB, 1915: 209-211)

After 1947, when duty on salt was abolished, there was a decline in the number of processorsusing the fish curing yards because they could now procure salt in the open market at the samerates as in the Government yards. In a typical reversal of priorities, the newly independentGovernment of India began subsidising the cost of salt to the extent of 50 percent in order tokeep the rates lower than those prevailing in the local markets and make the fish curing yardspopular (GOI, 1961: 59), but the extent of subsidy still did not prove sufficiently attractive to thefishers. Considering that an explanation fitting all facts to account for their curious indifferenceis still not found9, blaming the failure on ‘longstanding primitive and defective customs’ may bejust as valid (and easy) today as it was in 1915! In the Andhra Pradesh Department of Fisheries,the position of ‘Petty Yard Officer’ was intact at least until 2002, although it had been decadessince the government supplied any salt for curing purposes.

SHRIMP EXPORT CHAINS AND MODERNISATION

The foundations of the modern fisheries sector in India, as we know it today, were laid within thefirst two decades of the country’s independence in 1947. Rejecting the existing systems offishing as ‘of a primitive character, carried on by ignorant, unorganised and ill-equippedfishermen,’ (Kurien, 1980), the fisheries policymakers embarked upon an ambitious programmeof modernisation. The sector’s capacity to earn sizeable foreign exchange for the country is animportant reason for its appeal at the national level; hence modernisation went hand in hand withexport promotion.

As Johnson (2001) puts it, “The development path advocated by modernisation relies on avariable mix of market incentives and state intervention, the latter specifically to stimulategrowth in capacity through investment until such a time as the country or region builds sufficientmomentum to maintain growth on its own”. Growth in capacity would come from developingnew systems of fish production in place of the existing systems which are ‘by and largeprimitive, and consequently, according to modern standards, the return per unit of effort isrelatively small’ (ICAR, 1997: 769). This is achieved by introduction of ‘a modern, capital-intensive, specialised technology’ (Kurien, 1991) and led the way to production that drew onindustrial principles of organisation to feed international markets (Johnson 2001).

Status of shrimp in pre-modernisation period

Prior to 1960s, shrimp was not exactly a prized item in the fisheries economy of India. Accountsof Indian marine fisheries from the pre-Independence period (MFB, 1916, among others)indicate that although sizeable quantities of shrimp were caught using traditional nets, moreattention was paid to the finfish used for curing, like sardines and mackerels. In Kerala, Kurien

9 In 2003, a full 130 years after the ‘Salting Enclosures’ experiment began, at least one major research project wasinvestigating ways and means to reduce losses in traditionally cured fish on the east coast of India (Esser et al 2003).



(1985) notes that in the 1940s, shrimp was an inexpensive item, mainly dried and exported to S-E Asian countries and, when glut landings occurred, used as manure in coconut orchards. InAndhra Pradesh, tiger shrimp was boiled and dried or smoked to make a local delicacy, and itrarely travelled very far from the place of its landing. The DOF officers give instances whenlarge quantities of shrimp caught by the mechanised trawlers in the early days – i.e., early 1970s– being dumped into the sea for lack of demand (AP Srirama Murthy, pers.com.). A comparisonof the wholesale prices of prawns with those of other important finfish in 1961 shows that shrimpreceived prices that were no higher – and frequently lower – than the latter (GOI 1961).

India’s main exports until early 1960s consisted largely of dried products and the main buyerswere from neighbouring countries like Sri Lanka, Myanmar and Singapore (GOI, 1961;MPEDA, 2001). Shrimp in any form was not even listed among the seafood exports from Indiauntil 1957 (GOI 1961:175) (see Tables 4a & b).

Development of Indian shrimp export industry

A number of factors came together during the 1950s and 1960s, which made shrimp a valuablespecies. The 5-Year Plans launched in 1951 emphasised the need for rapid agriculturaldevelopment as a means to achieve self-sufficiency in terms of food production in the shortestpossible time (Datt & Sundharam, 1998). During the first two plan periods, self-sufficiencywould mean providing an inexpensive protein source to the Indian poor and reducingdependence on large-scale imports of food, which were creating a large balance-of-paymentscrisis; by the Third and Fourth Plans, this would shift to increasing exports to raise foreignexchange earnings (Johnson, 2001; Bavinck, 2001:56). Agriculture was not given an exportorientation because it was felt that it should primarily meet the domestic demand and alsobecause the country chose to selectively liberalise its economy; and fisheries, along with a fewcash crops, was primed for exports (Anjani Kumar et al, 2003:9).

Latest technologies were imported from the West at very low prices (GFC, 1994) underinternational technical cooperation agreements. Self-sufficiency was an important strand ofmodernisation programmes, and led to an active focus on developing indigenous substitutes fordifferent technologies imported. This was done through influential initiatives like the Indo-Norwegian Project (INP) in Kerala and FAO-supported programmes elsewhere in the country(Kurien, 1985; Vivekanandan, 2002; Srivastava et al, 1990:33; DOF-Karnataka 1978: 8; DOF-Andhra Pradesh, 1978 4). Mechanisation experiments with FAO assistance began in 1954 inAndhra Pradesh (DOF-AP 1978: 4-5) and in 1957-58 in Orissa (GOO, 1996: 302). Some of theinternational fisheries experts of the period have since become icons in the history of Indianfisheries (Bavinck, 2001; GFC, 1994). Exploration by INP and CMFRI on the west coast(Kurien, 1985) and by the GOI survey vessels on the north-east coast of India (Somvanshi,2001:2) in late 1960s and mid-1970s opened up the Indian seas for shrimp fishing.

On the preservation and storage front, the GOI began setting up a chain of ice-cum-cold storageplants (procured under TCM fisheries programme) at important coastal centres (GOI, 1961),which were instrumental in the initiatives by some private entrepreneurs to export shrimp to theUS on experimental basis in late-1950s. These experiments met with spectacular results (Kurien



1985) and the rest, as the saying goes, was history, although accepted history credits the Indo-Norwegian Project with ‘inventing’ shrimp exports10.

None of these events might have taken place without a strong demand pull which came initiallyfrom the US and later from Japan. The US was looking to other sources for its requirement ofshrimp when the 1948 revolution in China abruptly cut off its main source of supply. Beginningin 1962, the Japanese, who lost their access rights to Mexican waters, also began importing fromIndia (Kurien, 1985). The devaluation of Indian Rupee in 1966 boosted the Indian exports,particularly of the frozen and canned varieties (MPEDA, 2001). The growing market demand forfrozen shrimp meant that the markets for Indian seafood shifted from traditional buyers – SriLanka, Myanmar etc, which bought the dried fish – to more affluent economies like the USA,Europe, Australia and Japan (MPEDA, 2001).

Thus, modernisation of fisheries was based upon an open trade regime right from the beginning(Anjani Kumar et al 2003:9). The keywords defining ‘modernisation’ were the same as wouldapply to the current day liberalisation: market and price mechanisms as efficient purveyors ofresources and benefits; private investment and technological efficiency as growth motors;opening of markets to international trade; and state’s role confined to being facilitator ofeconomic growth and to ‘smoothening the road to liberalisation’ (Krishna Reddy, 2001). Thedevelopment of mechanised trawling in the 1960s was accompanied by a series of developments– balance of payments crisis, booming international demand for Indian seafood, active Stateemphasis on growth and exports which was reflected in a number of active support measures,devaluation of Indian rupee, import of international technologies and experts, to name a few.Exactly the same set of conditions accompanied the growth of the other most importantintervention in the coastal fisheries sector – brackishwater aquaculture – in the post-liberalisationperiod of 1990s.

Shrimp exports – the policy shift

At the policy level, fisheries development became synonymous with addressing the foreignexchange needs of the country, and this was to be achieved through ‘increased trawler subsidiesand improved port facilities’ (Johnson, 2001) to target shrimp, which emerged from relativeobscurity to become the Prima Donna of Indian fisheries by late 1960s, a position it occupies tothis day. Bavinck (2001:58) notes that the central and state governments (except in Gujarat)“chose to break radically with the past. They vested their hopes in mechanised boat fishing.”And, “from the beginning, financial incentives were an important component of the FisheriesDepartment’s programme to promote mechanised boat fishing” (ibid, 63). Significantly, thecoastal waters were treated as an open access regime (GOI, 2001a; Hosche & Flewweling,2003), which encouraged people to move into the sector and exploit a common resource freely.

The role of subsidies in developing the shrimp trawling

An important thing about mechanised trawling is that it was practically a new system and hadlittle relation to the traditional systems in existence then. The target species, the technology used

10Thus the development of shrimp export chain has come to be looked upon as an entirely State-led developmentactivity.



to harvest them, investments and terms of trade, preservation systems, markets where they weresold, were all new. Similarly, ‘modern’ aquaculture was a new system in terms of feed, seed,farming technology and methods, and had practically no relation to the traditional systems.

Naturally, there was resistance from the fishermen to adapt to the new systems, which were alienand, after their profitability was established, unaffordable. Although promotion of mechanisedfishing was an important activity from the First Plan, it was only from the Third Plan (1961-66)that effective steps began to be taken to create the necessary institutions for an early and easydiffusion of technology (Thomson 1989:125). This was done at three levels11.

i. Fostering cooperatives

Apart from salting enclosures, the other noteworthy programme of the colonial government hadbeen the setting up of fisheries cooperatives. The traditional systems, as mentioned, actuallydiscouraged capital accumulation and did not have the necessary ‘corporate’ orientation toundertake more capitalistic modes of production and distribution. To overcome this, thegovernment fostered new institutional structures with an explicit economic focus (MFB,1915:223-225) and sought to enhance the capital base of their members through credit assistance,bringing institutional credit for the first time into the fishing villages (MFB, 1918:50-51;).However, the performance of the societies had remained lacklustre and many had been in variousstages of dysfunction by 1930 (MFB, 1933:49-56). The reorganisation of producer groups alongeconomic lines without linking them to more efficient markets (which were the other constraintagainst innovation) meant little to the fishers in practical terms (MFB 1929:41). But thecontinued existence of cooperatives in the villages for decades achieved the objective of havingan economically-oriented counterpoint to the more socially-minded (hence fragile) traditionalvillage panchayats.

Modernisation addressed the problem of markets sufficiently, but found itself confronted withthe other enduring trait of the traditional systems: lack of surplus to invest in the new boats. Thisled to the revival of old cooperatives or forming new ones, in order to make the new boatsaccessible to their members12 (Bavinck, 2001). In practice, the boats went through benami(bogus) cooperatives and ended up with non-fishing capitalists. In 1978, only 240 out of a total1440 mechanised boats in Kerala were in the hands of the fishermen (GOK, 1978: 7). Thetraditionally evolved systems and practices were clearly given a short shrift in the process.

ii. Infrastructure development

Emphasis was placed on developing infrastructure like boat building and berthing facilities,processing and preserving systems, transport and marketing facilities (DOF-Karnataka, 1978: 10-11; Kurien, 1985:77; Bavinck, 2001: 60-62; DOF-AP 1978; GOO, 1994 and 1996). The sleek

11 Detailed interactions with the members of the United Fishermen’s Association (Andhra Pradesh) and Samudram(Orissa) forms the basis for the ideas contained in this section.12 This channelling of support has ever since remained the most important – if not the only – function of the fisheriescooperatives in many states. With the leaders of the traditional panchayats having made a swift changeover to thesocieties, the cooperative became a major force to reckon with in the fishing villages in 1970s and 1980s. Beingdriven entirely by economic considerations, it is no surprise that the cooperatives collapsed as soon as governmentfunding to them stopped (see Salagrama 2003c).



new infrastructure transported fishing and trading activity from the rural fish landing centres toultra-modern premises, and gave it a ‘status’ it never had; the fishers aspired to the new status,while the entrepreneurs from upper classes found it sufficiently ‘respectable’ to make their own.Thus, the infrastructure may have acted as much to attract the attention and the interest of thefishers and the private entrepreneurs as serving the purpose for which it was set up.

iii. Subsidies for technology promotion

Subsidies had long been considered an effective antidote to the ‘extremely conservative’ natureof fishermen (ICAR, 1997: 769). Even in 1905, the Director of Madras Fisheries Bureau wassuggesting that “it is open to Government… to advance funds, or even… to give grants-in-aideither to individuals or to small syndicates of fishermen for the purchase of larger boats, thesecurity being the boats themselves…” (MFB, 1915: 14). In 1948, the first All India FisheriesConference was held in New Delhi and the idea of subsidizing some part of the capitalexpenditure, especially on mechanization, originated at this conference (GFC, 1994)13.

Different kinds of subsidies – often linked with subsidised credit – were available for obtainingtrawlers in different states until 1980 (Kurien & Achari, 1994; Bavinck, 2001: 64-65). A TrawlerDevelopment Fund was set up in the Fifth 5-Year Plan to finance a large number of fishing boats(John & Hamid, 1995:28). Providing training to fishermen (DOF-Karnataka, 1978: 10) (DOF-AP1978) (Bavinck, 2001: 64) and feasibility reports to entrepreneurs to avail loan from the StateFinancial Corporations and banks (GOO 1996: 302) played an important role in the promotion.Banks provided subsidised credit to fisheries as part of their agriculture portfolio and this gainedmomentum after the nationalisation of banks in the early 1970s. The National Bank forAgriculture and Rural Development (NABARD) refinanced loans for mechanised and deep-seafishing boats and aquaculture, and also for infrastructure development (Srivastava et al1990:249; Upare, 2001:64-66) on favourable terms. Insurance coverage was provided tomechanised boats.

The role that subsidies were expected to play is clear: (i) to act as an incentive to attract thefishers – and later, the entrepreneurs – into trawling and (ii) to facilitate the introduction of ahigh cost technology into an economy having a low level of surplus and capital accumulation.Seeing the bumper harvests that the introduction of an efficient technology into virgin fishinggrounds could yield, the investment support was considered to be insignificant. In any case, oncethe production and market systems were effectively linked, the need for capital infusion wasexpected to gradually come down and finally cease (Thomson, 1989:126). And by the time thetrawler promotion programmes came to an end by late-1970s, the trawling industry was wellestablished and operated on its own.

Trawler subsidies in the 1990s

A series of interrelated developments through the 1970s and 1980s necessitated a revival ofsubsidies to support trawling in 1990s, albeit in a much reduced form. Firstly, the earnings fromthe shrimp boom attracted large amounts of private capital into the harvesting sector. As the

13 It was also at this conference that it was decided that the country should apply for foreign assistance to create thenecessary infrastructure for modern fisheries development.



demand for shrimp looked almost insatiable, its continued extraction from the sea was sufficientto keep in profits, and this was facilitated by the common property nature of the resource. Thegovernment’s inability to control further expansion, or implement effective managementmeasures, came in the way of reducing effort. As investments mounted, so did the need for quickprofits, and it was a classic ‘Tragedy of Commons’ scenario, which came true in Kerala as earlyas 1970s (Kurien, 1985), and in other states by 1980s. Continued extraction of natural resourceswithout respite led to a sharp decline in catches.

By then, the continued dependence on shrimp – for foreign exchange earnings, for thelivelihoods of a large number of people and for the survival of the industry itself – had reachedserious proportions. One measure to address the problem has been the revival of subsidies on aregular basis to reduce the operational cost for small mechanised fishing vessels (most of themechanised boats in India fall into ‘small’ category). This involved exempting or reimbursingthe Central Excise Duty on HSD oil supplied to the mechanised boats. Although the total outlayunder this head was more than double than that paid for motorisation programme in the 9th Plan,when distributed to around 20 000 vessels, it spreads too thin and is reported to work out to aninsignificant proportion of the costs incurred by a boat owner. Other measures to address thecrisis in inshore shrimp fisheries included (i) promotion of aquaculture as an alternative tocapture fisheries; (ii) efforts to develop deep sea fishing; (iii) motorisation of the traditional boatsto augment supplies and (iv) framing regulation measures to control effort.

Development of brackishwater aquaculture

Although brackishwater (shrimp) aquaculture was developed and promoted by the governmentsince mid-1970s, its rapid growth was essentially a post-liberalisation phenomenon. A look at thestatistics proves this. In 1990-91, brackishwater cultivation in India covered 65 100 ha, of which46 815 ha or 72% was in W Bengal and Kerala – the two states where traditional aqua-farminghad existed for a long time – and the total production was 35 500 MT, with an averageproductivity of 550 kg per ha (GFC, 1994:59). By 1999-2000, the extent of area underbrackishwater culture grew by 2 ½ times to over 150 000 ha, with the traditional aqua-farmingstates, W Bengal and Kerala, accounting for only 36 percent of the total, while the share of thestates with modern aquaculture systems grew sizeably, Andhra Pradesh alone accounting forover 50 percent of the total area. Modern aquaculture gives much higher yields than thetraditional (‘Pokkali’) systems of Kerala. Table 5a & 5b (from SIFFS 2002) gives a comparisonof productivity for Andhra Pradesh, Orissa and Kerala, which shows that the per hectareproductivity in Andhra Pradesh is nearly three times higher than in Kerala.

With the liberalisation of Indian economy in 1991, it became possible to import efficient farmingtechnologies, along with the experts, from Southeast Asia. The MPEDA standardised thetechnology and designs for commercial hatcheries by late 1980s, but many entrepreneurs alsoimported south-east Asian technology for hatchery construction and this took care of the biggestbottleneck in shrimp aquaculture: availability of seed. Feed had been another importantconstraint, but the liberalisation policies helped to import feed in the early stages, followed bysetting up of feed manufacturing units in India by the foreign companies. The 1990s saw manyfarms moving from extensive farming to semi-intensive and intensive farming systems(ADB/NACA, 1998:100), and the stocking density, feed and other inputs increased accordingly.



Assistance provided to brackishwater aquaculture

Recognising brackishwater aquaculture as one of the potential sectors for development in early1970s, the government supported the All India Coordinated Research Project on BrackishwaterFish Farming (1973-84) to develop and test various farming technologies (AAI, 2001: 15). In theSeventh 5-Year Plan period, under the ‘Integrated Brackishwater Fish Farm Development’programme, the government undertook several measures with the support of FAO and UNDPincluding the establishment of pilot farms and hatcheries, feed mills and training programmes.Subsequently, Brackishwater Fisheries Development Agencies (BFDAs) were set up to extendtechnical and financial services to the farmers. The Ministry of Commerce, Government of Indiatook the initiative to evolve a policy of promoting shrimp farming ‘in line with the objective ofmaximization of foreign exchange earnings’ (Srivastava et al, 1990: 70), which involved subsidyschemes for farm development, seed and feed supply and training of the farmers. The MPEDAalso provided subsidies for establishing hatcheries and, later, for installing effluent treatmentsystems, PCR labs and disease diagnostic facilities (MPEDA, 2001: 16).

Brackishwater land was developed into shrimp ponds and given to rural poor under differentschemes. In Andhra Pradesh, a major chunk of mangroves in Godavari estuarine system was de-reserved in the late-1970s (AAI, 2001: 57) and was converted for shrimp farming in due course.Individual entrepreneurs were encouraged to take up shrimp farming with financial and technicalsupport (AAI, 2001: 17). The District Rural Development Agency (DRDA), Scheduled CasteCorporation and Backward Class Corporation provided assistance to many small farmers undervarious development schemes (EG SC Society, 1990). Subsidies in the form of soft loans, taxbreaks and import tariff relaxations were made available to entrepreneurs and corporations (MarcBonora, 1999). The role played by banks has already been noted.

Until the hatcheries started supplying seed for culture purposes, fishermen and women weretrained in wild-seed collection as an income-generating activity and, in Andhra Pradesh andWest Bengal, the seed collectors were also provided assistance in cash and kind for acquiring therequisite tools for seed collection (BOBP, 1986: 11) (MPEDA, 1984:50).

The World Bank supported a US $ 41 million ‘Shrimp and Fish Culture Project’ during 1992-2001 in three coastal states of India, to assist private entrepreneurs and people from the weakestsocioeconomic sections to enter aquaculture. Infrastructure development, credit for privateentrepreneurs for establishment of support infrastructure and services and initial working capitalfor stocking ponds and feed to benefit poorer farmers were the components of the programme.The state governments constructed basic infrastructure and common facilities on state-ownedlands, and are supposed to recover their costs through lease charges (World Bank, 2004).

‘Deep Sea’ Fishing Fleet

From 1970s, the government promoted a ‘deep sea’ fishing fleet mainly to tap the largelyunexploited deep-sea resources. Shrimp trawlers of over 50 feet OAL were allowed to beimported from Mexico and the USA in the late seventies without import duty. The ShippingFund Development Committee (SFDC) in the Ministry of Agriculture and, from 1986, theShipping Credit and Investment Company of India (SCICI) advanced soft loans (at 4% interest



p.a.) covering 90-95 percent of the total investment without any collateral security. The totalnumber of deep-sea boats rose up to 180 by early 1990s. These shrimp trawlers operated fromVizag and fished at 20-70 metres depth in the northeast coast of India (Kullberg, 1989:6), a depthat which much smaller boats could, and eventually did, fish and competed with them for shrimpwhich the smaller boats targeted more efficiently (Gokhale, 1995:9).

Motorisation of artisanal fishing crafts14

A review of the different 5-Year Plans (Annexure 1) shows that, although efforts to motorisetraditional craft began in 1953 in Jaleshwar in Gujarat under TCM aid from the USA15, it wasnot until the Seventh Plan that a programme to improve traditional fishing craft was taken up.Three factors, (i) the efficiency of outboard motors (OBMs) in increasing production, (ii) theobservation that the annual fluctuations in catch and income of the fishers operating the OBMboats are much smaller than those operating large mechanised boats (Srivastava et al, 1990:34)and (iii) new initiatives such as FRP boat building (BOBP) – encouraged the central governmentto take up motorisation of traditional crafts from the 7th Plan onwards16.

Cooperatives were once again pressed into service for distribution of many of the boats. Underthe scheme, 50 percent of the cost of the engine is provided as subsidy (GOI, 2001a: 20). TheNational Cooperative Development Corporation (NCDC) also provided engines as part of apackage aimed at integrated development of fishers through the apex cooperative bodies indifferent states (Salagrama, 2003b), for which the state governments provided loan guarantee. InKerala, subsidised kerosene was made available to the motorised fleet, and this may haveactually encouraged the boat owners to buy more fuel-intensive engines.

The introduction of motorisation was an important event in the small-scale fisheries on the eastcoast of India. As one fisherman put it (Salagrama, 2003c), it was comparable to shifting, in onejump, from bullock cart to a motorcar. Together with a revolutionary new net – the three-walledtrammel net – which realised very good catches of shrimp, motorisation paved the way for theartisanal fishers on the east coast of India to climb aboard the shrimp export bandwagon. By1999, the total number of motorised boats grew to nearly 45 000 (GOI, 2000: 128).

GROWTH OF EXPORT TRADE DURING 1961-2000

With the development of trawling, aquaculture, motorised fishing with ‘disco’ nets and, to amuch lesser extent, ‘deep-sea’ fishing, Indian seafood exports have grown by over twenty timesin the four decades from 1961-62 to 1999-2000. The export of seafood from the countryincreased from 15 732 metric tonnes (MT) in 1961-62 to 343 041 MT in 1999-2000 (Figure 4).

14 The fact that many motorised fishing operations are now centred on shrimp justifies its inclusion here.15 Gujarat made the artisanal fishing sector the mainstay of its modernisation programme, with the result that whenmechanised sector did indeed take root there subsequently, it had not led to the same kind of dichotomy as in otherstates (Johnson, 2001; Bavinck, 2001: 65).16 The fact that the Seventh Plan follows the most intense period in the conflicts between the mechanised and themotorised sectors in the country indicates that motorisation and other development programmes targeted at thetraditional fisheries – small landing centres, insurance and welfare measures – were intended also to assuage thefeeling of marginalisation that the artisanal fishers felt. That the Seventh Plan also makes provision, for the firsttime, for implementing the existing legislations to control conflict between the two sectors supports this perception.



In terms of value, the exports have gone up from a mere Rs. 4 crore to Rs. 5 117 crore or US $ 1189 million during the period, and the unit value realisation increased from Rs. 2/kg to Rs.149/kg. In terms of overall exports from the country, seafood stands at tenth place, accountingfor 2.7 percent of total export earnings in 2001. Among seafood exporting countries, Indianexports stood 17th in terms of quantity and 12th in terms of value (Mathew, 2003). Thecontribution of exports to the GDP from fisheries in 1998-99 is about 24 percent, and to thenational GDP is 0.3 percent (calculated from GOI, 2000: 1 & MPEDA 2001:27). In terms ofvolume, exports constituted 5.75 percent of the total production and 11.2 percent of the marineproduction in 1998-99, although much support for the sector is targeted at export promotion.

Performance of exports in the 1990s (i.e., the liberalisation decade)

Total exports grew at a faster rate in the 1990s than in any previous decade. While it had taken14 years (from 1978-79 and 1991-92) for exports to double from 87 000 to 172 000 MT, it tookonly half the time, seven years, for them to double again to 386 000 MT. The export of shrimpgrew less spectacularly, although still rapidly, growing by fifty percent in the first 14 years and33 percent in the next 7 years, and this has more to do with failure of supplies than demand.

Infrastructure for the seafood processing industry (from MPEDA, 2001:40)

In marine fisheries, major developments in the last forty years include construction of 30 minorfishing harbours and 130 fish landing centres, apart from five major fishing harbours. Thenumber of registered exporters in the country grew from 864 to 1549 between 1990 and 2000,although it is likely that the largest chunk of the market share is commanded by a very smallnumber of companies. Significantly, the number of peeling sheds declined from 924 to 576between 1990 and 2000, probably a casualty of the changes in the seafood legislation broughtabout by the EU and the USFDA in late-1990s. Ice plants increased from 132 to 157, but theircapacity grew at a faster rate from 1 854 MT/day to nearly 3 000 MT. The number of freezingplants grew 70 percent (from 231 to 394) during the period, but their combined capacity grewnearly four-fold – from 2300 MT to 8500 MT – indicating a consolidation of freezing capacitywithin fewer plants. Cold storages increased from 304 to 479, but their combined capacity morethan doubled from 42 500 MT to 106 000 MT. As of April 2004, a total of 138 processing plantsand five freezer vessels were approved for export to the EU (www.mpeda.com), and the state-wise summary of the approved plants is given in Table 6.

This indicates that nearly two-thirds of the processing plants have yet to receive the EU approval.That there are nearly four times as many registered exporters as there are freezing plants alsoneeds to be noted for possible implications in the context of changing seafood legislation, whichinsists that the exporters have absolute control over their production systems.

Exports from different ports in the country

The east coast has traditionally exported low volume-high value products, mainly shrimp. In theyear 2000, for instance, the total volume of exports from the east coast (95 520 MT) is less than athird of those from the west coast (325 555 MT), but in terms of value, the exports from the eastcoast were higher by more than 30% over those from the west coast (nearly 38 000 million



rupees as against 26 000 million rupees on the west coast) (Table 7). During 1999-2000, KochiPort handled 26.7 percent by volume and 22.2 percent by value of the total exports and stoodfirst in the country. Chennai and Vizag Ports handled 7.5 percent and 6.9 percent by volume and20.6 percent and 17.7 percent by value respectively, reasserting their supremacy in value terms.

Country-wise exports of marine products

The main importers of Indian seafood are Japan, the European Union (EU), the United States ofAmerica (USA), Southeast Asia (including China) and the Middle-east. Analysis of averageannual exports to these regions during 1996-2000 shows that Japan accounted for 19 percent byvolume and 46 percent by value of all exports from India. The EU’s imports work out to 16percent by volume and 15 percent by value and the US’s imports to 10 percent by volume and 14percent by value. The Southeast Asian countries imported 48 percent by volume and 20 percentby value of the total exports, which is in keeping with their preference for finfish, considered tobe a large volume-small margin trade (Table 8 and Figure 5). China imported 42 percent byvolume of the total exports, followed by EU and Japan (16 percent each) and the United States(10 percent). However, there has subsequently been a steep decline in the imports of finfish(ribbonfish, in particular) from China as a result of tighter import policies, which reduced Indianexports to that country to less than half (Elias Sait, 2001). The exports to the top 20 countriesfrom India are given in Table 9. Major markets for Indian shrimp in value terms are Japan (60percent), USA (16 percent) and EU (13 percent), with other countries together accounting forabout 11 percent (Table 10). An important conclusion that emerges is that in value terms Japan,USA and EU account for a lion’s share of imports from India (75 percent of overall revenues and89 percent of shrimp revenues), which has implications on the sustainability of trade.

Contribution of shrimp to total exports

The contribution of shrimp to overall exports has gone up from a mere 13 MT in 1953 (Kurien,1985) to 110 275 MT during 1999-2000 (MPEDA, 2001:37), as shown in Figure 6. However, inpercentage terms, the contribution of shrimp by volume to overall exports has been showing adeclining trend – from about 59% in 1978-79, it came down to a little over 32 percent in 1999-2000 (MPEDA 2001: 27 & 37)(Figure 7). The decline is caused by increases in exports offinfish, cuttlefish, squid, dried fish and live items (MPEDA, 2001: 29) (Table 11). In terms ofvalue, the contribution of shrimp came down from 78.6 percent in 1988-89 to 71 percent by1999-200017(Figure 8). Still, it is quite substantial and any changes in its production or tradeaspects will have an impact on the seafood export industry as a whole.

Contribution from capture and culture sources

Shrimp from marine capture fisheries accounted for the entire quantity of shrimp exported until1987-8818. However, between 1987-88 and 1999-2000, the contribution of capture shrimp has

17 It has become necessary to use different timescales to compare different sets of data due to non-availability ofinformation uniformly for all parameters for the same period. In order to compare the trends, the figures have beenculled from different sources, as the references indicate.18 Some quantity of shrimp from culture sources began to be exported from early 1980s, but was included with themarine production, so it is not possible to see the contribution of culture sector to exports before 1987-88.



come down to 22 percent of the quantity and 24 percent of the value of the total shrimp exportsfrom the country, and in terms of quantity, it has dwindled from a peak production of 55 736 MTto 24 275 MT (MPEDA, 2001: 37), and the declines are still continuing. In 1988-89, shrimpfrom culture sources contributed nearly half the total exports of shrimp, and further increased to78 percent by 1999-2000 (Figure 9). In other words, cultured shrimp account for a quarter of thetotal seafood exports from the country (Figure 10). In value terms, the contribution of culturedshrimp to the total value of shrimp export has consistently grown from 49 percent in 1988-89 to76 percent in 1999-2000 (MPEDA, 2001 Annex 5A). Mathew (2003) notes that in 2001,aquaculture contributed an unprecedented 60 percent of the total export value, thus emerging asthe most important seafood export from India.

However, the increase in the percentage contribution of brackishwater production to exports isdeceptive, and is related more to the poor performance of the capture sector and raising unitvalue (from Rs. 244 to Rs. 330) than to increased production. After reaching a peak 82 850 MTin 1994-95, the aquaculture production dipped and it was only in 1999-2000 that it went upbeyond its previous peak to reach 86 000 MT. Even this achievement masks another factor: thatbetween 1994-95 and 1999-2000, the total brackishwater area under culture grew by 56%, whilethe shrimp production grew only 4 percent, that too only in the final year (MPEDA, 2001:39).

Contribution of small-scale sector to shrimp production

From the available information, it is not possible to calculate the small-scale sector’scontribution to the exports at the country level, although field studies show that shrimp is notonly a targeted catch, but is the mainstay of fishing in many artisanal operations, particularly onthe east coast. In Andhra Pradesh, the artisanal sector contributes nearly half the total shrimplandings in the state (ICM, 2002), in Orissa they contribute 33 percent (CMS, 2002) and inKerala, the motorised sector’s contribution is 21% (SIFFS 2002). On average, it would bereasonable to assume that the shrimp from small-scale capture sector contributes between aquarter and a third of the marine shrimp landings in the country.

Shrimp products exported from India

Traditionally the level of value addition of seafood exported from India has been very low. Manyprocessing plants send their product in the conventional frozen forms such as headless, PUD andPD varieties, and let the importers to do the value-addition. Counties like Thailand and Vietnamhave gone far ahead of India in this respect in recent years. It is possible that a portion of theprocessed uncooked material that is shipped from India is routed through Thailand and Vietnamwhere it becomes value added and sent to western markets (SIFFS, 2002). However, manyprocessors have reportedly begun exporting several value-added products in recent times (Shahin& Parameswaran 2001). MPEDA (2000) lists six categories of shrimp products in the exports,but the percentage of individual varieties to overall exports is not known. Dried shrimp andshrimp pickles are also mentioned in the list, but they are unlikely to be significant in terms ofvalue. The investments that are needed to build brands in foreign markets are reportedly veryhigh and are beyond the capacity of all but of a few processors.



Seafood imports into India

Imports of fish constituted a significant proportion of the exports (up to 50 percent) until 1958(GOI 1961), but they declined drastically in the subsequent decades. The ratio of value offisheries imports to fisheries exports was 0.92 percent in 1983, which dipped to negligible levelsby 1992. In the post-Liberalisation period, particularly after the establishment of the WTO, theimports have started showing improvements and their value has climbed up to 0.94 in 1998 and0.58 in 2000 (Anjani Kumar et al, 2002: 10). In quantity terms, the ratio of imports to exportsshowed a similar trend and constituted 1 to 2 percent of the exports (Table 12).

EXPORT CHANNELS FOR THE IMPORTANT VARIETIES OF SEAFOOD IN INDIA

Relationships between the producers and the traders

The shrimp export chains tend to be long and involve many intermediaries. The relationshipsbetween the intermediaries at different levels are characterised by mutual dependency as well assuspicion. The dependence of the producers on the traders is three fold: (i) if not for the traders,their access to the international markets would be much weaker, if not non-existent; (ii) thetraders provide financial assistance for production and consumption needs; and (iii) the basictools of the trade – ice and transport – are also provided by the traders. The traders’ dependenceon the producers is more straightforward: they need shrimp, which in capture sector only aspecialist like the fisherman can bring. Unlike many other activities, fishing continues to be aspecialised activity, more inherited than taught, and the traders must depend on the fishers fortheir supplies of shrimp.

These mutual dependencies create a balance of power, which tilts one way or the otherdepending on the relative strengths. The access to alternate sources of support determines thebalance. For instance, urban producers do not depend upon the traders to the degree that the ruralproducers do because their access to infrastructure, markets and finance is more assured than inthe case of the latter. While the wide network of commission agents in most coastal areas has theapparent benefit of enabling the fishers to sell their catches immediately on landing at the bestpossible prices and also in giving them access to credit, the arrangements often hide a range ofhidden costs. The commission agents form cartels and ensure that the fishermen cannot hope toget more than the same price elsewhere in that area. Naturally, this leads to the fishers showingpreference to land their catches mostly in urban landing centres, whenever good catches ofshrimp and high value fish are caught. Over course of time, the fishers – particularly those inexport supply chains – have tended to operate from urban landing centres, which give them goodaccess to markets as well as fuel, ice and other requirements.

Another important factor that determines the balance of the relationship between the producersand the traders is the latter’s access to information. Information on the market trends is guardedby each intermediate link in the market chain from passing on to the next, because the lessinformation that flows towards the producers, the greater are the benefits further up the chain.The installation of an ice plant or the introduction of a new bus service in a rural area increasesthe producers’ incomes even when they have not begun to use the ice or travel by the bus.Similarly, the growth of aquaculture reduced the traders’ dependence on the fishers and their



specialist skills for their supplies. The influence of other factors – hierarchies of caste, class,privilege, custom etc – is also evident in tilting the balance one way or the other.

Activities involved in the export of shrimp

Mechanised sector (Figure 12b)

All shrimp producers are routinely indebted to the traders and commission agents. Themechanised boats receive sizeable advances as well as ice (initially free of cost, but nowadays,charged) from the processing companies or commission agents. These advances carry no interest,except the obligation to supply shrimp and there is no written document to seal the contract.

On landing, the shrimp – which would have been carefully washed and kept in ice onboard bythe crew – are handed to the company/commission agent. Companies have their own agents atimportant landing centres, while rural and remote landing centres are serviced throughcommission agents. Rarely, shrimp are sold to a third party when the boat owner does not havean obligation to sell his catch to particular agents or when he was assured of obtaining a betterprice by selling in the open market. In the latter case, he will pay 10 percent of his income to hisregular agent as compensation. A number of players take part in carrying, washing, weighing,pre-processing and packing in ice, before loading the shrimp into the waiting trucks en route tothe processing plants.

Motorised sector (Figure 12b)

In the artisanal/motorised sector, most boats targeting shrimp have access to ‘advances’, a part ofwhich is lent by the owners to their crew. Processing companies do not directly deal with theboat owners in this case preferring to employ commission agents instead. Frequently, when afisherman takes his catch directly to a company, he is curtly directed to the local commissionagent in his area, because the company’s agreement with that agent does not allow directpurchases. Even when the company purchases from the fishers directly, it offers a lesser pricethan it does to the commission agents/traders (unless, of course, the catches are substantial).

An important institution in the artisanal shrimp trade in Andhra Pradesh and Orissa is thetrader/agent’s shrimp collection point – called ‘barapa’ which is a corruption of the Hindustaniword, baraf meaning ‘ice’. Although an economic system, the barapa acts as a meeting point forthe fishers supplying shrimp to a trader and thus gives rise to new brotherhoods which play an

Producers

Commissionagents

Independenttraders

Company agents

Processingfactory

ExportCompany



important role in the social and political arenas as well, although it has never quite acquired thecohesiveness and sense of purpose that the mechanised boat owners’ associations have. Onarrival at the agent’s place, shrimp are weighed, sorted and packed for despatch to the company.Depending on the quantity, the company sends its own vehicles for collecting shrimp. Smallerquantities are carried by the traders to the company on their own. The boat owners generallyreceive their payments within seven days, although some money is frequently paid as advancefor their immediate needs. Independent traders pay the fishermen immediately or as soon as theysell their shrimp to a bigger trader or to the company directly.

The fishermen in Ganjam and southern parts of Puri (i.e., the Chilika belt) seldom receive what they had beenpromised at the time of sale. The traders find a number of causes for not paying them fully. Many traders have otherbusinesses and when they receive payment from the company, they choose to invest the money in these businessesinstead of paying the fishers. While they delay payment (blaming it on the companies or other traders), they are veryforthcoming in giving loans at high rates of interest to the fishermen for meeting their personal needs during theperiod of wait. When they finally make the payment, they never pay an interest for the period they have delayed, butthey do not forget to collect their interest when recovering their loans! More generally, though, they simply keep thefishers to run around them for months and years on end before making them to settle for a fraction of the amountdue to them. Many traders also suffer losses in the business and fail to pay the fishermen. The transactions dependon word of mouth with no binding contracts and written documents, so the losers cannot seek to redress theirgrievances through a legal forum (ICM 2004).

Aquaculture (Figure 12c)

The aquaculturists depend on ‘companies’ to provide all basic inputs for farming activity– seed,feed, fertilizers, ‘medicines’, and even working capital for pumping – so much so that a farmer’sactual investment in one cycle of operations would be only a fifth of the total expenditure. Thecompanies or their local dealers supply these inputs after entering into a buyback arrangement.

The farmer arranges with a company or a commission agent for lifting the harvest. He employsabout 10-20 people depending on the size of the ponds and on the time of the day whenharvesting begins. These will generally be people from the neighbouring village though bringingpeople from a distant town in order not to give the ‘locals’ an entry point into the pond premisesis not uncommon. Once harvesting is done, shrimp are weighed and their value estimated, afterwhich they are kept chilled inside insulated iceboxes waiting for the trucks to take them to theprocessing plant. At the time of sale, the company agent deducts the advances and pays the restto the farmer. The risk that the company or its agents are willing to bear can be appreciated whenit is realised that more than half the small-scale farms in East Godavari and Krishna districts – allof them heavily indebted to the traders – are abandoned to their fate, and all that the trader can dois to take over the farms for what they are worth.

Pre-processing

In important centres like Vizag and Kochi, shrimp are carted off to the processing plant withoutany pre-processing, because most processing plants are located within short distances from thelanding centres (frequently beheading is done on the trawler itself), where as in rural areas,beheading and peeling are carried out in the village. Until recently, the fishermen had theresponsibility of beheading the shrimp before selling it to the agents and traders. But value,quality and weight considerations have made the traders insist on buying the whole shrimp.



Although the EU legislation requires integration of the peeling and pre-processing operationswith the freezing plants, it is not a viable option for India, reportedly due to the factory laws(Tarakan, 1998). The erratic seafood catch encourages employing people on piece rate as it isdifficult to maintain a large labour force with a capacity utilisation of 15 percent.

Insulated vehicles have been the distinguishing feature of the shrimp export chain and theirnumbers proliferated through the 1990s. Most of the insulated and covered vehicles are ownedby the exporting/processing companies and very good care is taken while transporting shrimp:for instance, it is always moved during night in order to keep the temperature as low as possible.

In Kerala, peeling sheds are an important intermediate stage between the landing centres and theprocessing plants. The peeling shed owners obtain shrimp from the landing centres, get thempeeled at the shed as well as by farming out certain quantity for peeling by the women at theirhomes and sell the peeled shrimp to the processing plants.

Processing

The girls from Kerala are reputed to have special skills for processing and grading, so they arepreferred over the local women for processing operations. The company employs a supervisor,normally a male, for every ten girls and the work is done with clockwork precision. The EUapproved plants are generally very big enterprises, spotlessly clean and thoroughly efficient at alltimes. The girls wear facemasks and gowns, although gloves are not worn for peeling work.Facilities for frequent washing are available and shrimp are kept in ice as soon as they are peeledand are taken into the freezing chamber at frequent intervals. Absolute silence prevails in thepremises and watching the girls in those white garbs work silently for hours together gives onethe impression that they are automatons.

Quality maintenance and control

Being an expensive item, shrimp has always been treated carefully right from the time of beingcaught, and everyone in the market chain pay particular attention to maintaining its freshnessbecause a small mistake can easily lead to big losses. Whenever shrimp are to be targeted, manyof the boats – even non-motorised ones – make arrangements to carry some ice along for fishingtrips and shrimp are kept in ice immediately after capture. They remain in ice for the rest of thejourney until they reach the processing plant. If a shrimp shows even slight traces of being notgood in quality or is discoloured or is not right in any way, it will be automatically rejected. Thisfiltering mechanism works at different levels – the fishers, the collection agents, the transporters,and the processing and exporting industries.

That is not to say that things are perfectly all right. Fishers in many areas have problems inobtaining ice and some of the fishing boats are not built to carry an icebox onboard. Theuncertainties in fish catches means that the fishers do not always keep stock of ice onboard, sohalf the time the shrimp are landed without any icing. Quality control at the level of fishingharbours and vessels is perhaps the weakest link in the quality chain. The conditions of thelanding centres and the transport systems leave a lot to be desired, so contamination is always aproblem. Delays are a constant feature with landings in rural areas and, when coupled with non-



availability of ice, could cause serious problems. According to a study conducted by the ExportInspection Agency and the Marine Products Export Development Authority (MPEDA) on therejection of seafood shipments to the EU, the contamination of the product starts on the fishingvessel itself and becomes more contaminated at the landing centres and fishing harbours, andthere is no evidence that this has improved at all.

It is reported that there has been a marked improvement in quality after the EU ban was imposed.The processing industries place emphasis on better handling and preservation of raw and peeledmaterial, because ultimately they are going to pay the price for lax quality. However, thisemphasis is not always translated into practice, either because the cost of ensuring quality is toohigh or, more likely, it requires better infrastructure, a factor that is not within the control ofindividual players.

The greatest change in the perception and practice of quality control has undoubtedly taken placeat the level of the processing plants. This is mainly because of tighter monitoring and regulatoryrequirements. Since the EU approved plants are subject to surprise checks, the integrity of theprocess and the quality of the raw materials used have to be maintained at a basic minimum levelat all times. The cost of ignoring quality issues can be high. In case of a rejection on qualitygrounds, in addition to the financial loss there is a real risk of losing the export licencealtogether. Processor/exporters complain of harassment by government officials in the event ofthe rejection of a consignment and this acts as a deterrent of lax quality control. Post EU ban, theuse of gloves, facemasks and caps has become mandatory for those working within theprocessing area. A high level of hygiene is maintained in most processing plants.

Pricing and Margins of Trade

Information on price development between different players is not easily traceable. Pricesfluctuate all the time and are determined according to species, count and quality. The pricedevelopments in the first few stages from the producer to the company agent, with or without themediation of the middlemen-traders, are ascertainable to a degree, but the company agentsthemselves do not know the price at which the shrimp will be sold in the international market.The processing, packing, storage and transport costs vary from place to place and from companyto company, and thus, even if the going international market price is obtained from MPEDA, itwill not be possible to work out the margins to the company.

There are a few other factors that play a role in determining margins in the trade: theperishability of shrimp stipulates that factors such as the distance to the village, the producers’access to ice and transport systems, the time of landing, the minimum duration of storage ofshrimp in the village before it can be carted off by the company, and the total quantity of shrimpthat can be produced in a village on average (obviously, the larger the quantity, the better theopportunity for realising a good price), have all a role to play in determining the risk that aproducer or a trader will be taking and consequently the margins that he hopes to make out of thetransactions. The margins in trade are also masked under a range of questionable practices by thebuyers – such as short weighing, gross deductions for ‘possible’ spoilage, etc. All these factorsmean that, although the apparent difference in payment received by different stakeholders ismarginal, the actual difference could be higher.



A price differential of about 10 percent from one stage to the next – from the company agentdownwards to the producer – seems to be a valid assumption. Obviously, this is a broadgeneralisation, which does not take into consideration the payment of advances for supply ofshrimp at a fixed or a discounted price, which prevails in the relationships between traders andthe fishers, but in bigger and better-connected villages at least, it is possible that the ‘marketlogic’ works in favour of the fishers in obtaining a reasonable price for their shrimp.

BENEFITS OF SHRIMP PRODUCTION AND TRADE

Contribution to the national economy

Mechanisation and its knock-on effects on other fishing systems in the sector led to increase infish production manifold, thus satisfying one of the basic objectives of the modernisation drive.Besides meeting the country’s need for foreign exchange, the export orientation also helpeddevelop basic infrastructure – which was practically none existent until then – to facilitateexports. Remote and often unproductive wastelands were brought into productive use.

Social and economic benefits

The most important contribution of shrimp trade has been the ‘status’ it has given to the largelyignored fisheries sector, giving it the status of a ‘sun-rise industry’. It is doubtful whether thesector would have received as much attention as it has if not for shrimp trade and at least some ofthe positive changes that one sees in the fishing villages – roads, transport, landing facilities –might not have happened at all. Shrimp became a respectable commodity, bringing many newentrants into the sector – either in capture or culture – from the elite sections of the society andsome of that respectability rubbed off on the fishers.

The economic benefits from shrimp trade to the fishing communities have been considerable. Asshrimp production increased, there has been a corresponding prosperity in the fishingcommunities (although its benefits were uneven and skewed within and between villages), whichled to a transformation of the sector bringing it in line with the international export demands.Many fishers used the surplus to invest in fishing (i.e., more boats, fish trade), ancillary activities(ice plants, transport systems, boat building yards) and non-fishing activities (agriculture). Atleast some fishers became ‘respectable’ enough to get their children move out of fishingaltogether, and employed wage/share labourers to run fishing operations. Quality of housing,access to villages as well as fishing infrastructure improved. In at least a few villages, the first‘pucca’ (permanent) houses were built with shrimp money. The improved access to fishingvillages (to collect shrimp) and the frequent trips that the traders’ vehicles made to the villagesopened opportunities for the normally isolated and inaccessible fishing villages to make contactwith the larger world and access services that were otherwise difficult to procure. Theinteractions of the fishing communities with the external world improved and this has certainlyraised their social consciousness.



Contribution to livelihoods

‘Shrimp’, an experienced fisher in Srikakulam said, ‘is God’s gift to India’. Shrimp productionand trade generated new employment opportunities and being largely informal, helped manypoor people to find work. When the overall fish landings began declining in the 1990s, it wasshrimp which kept the fishing economy – from the sectoral level to a household level – fromcollapsing.

Today, the mechanised sector continues to survive on shrimp, although a sizeable proportion ofits earnings also come from other ‘bycatch’. If shrimp were removed from the catches, the wholemechanised trawl sector will collapse in no time. The artisanal sector on the east coast is also apart of the ‘shrimp economy’ and survives largely on the basis of shrimp in the catches.Although a recent trend is towards targeting other finfish species, the over-capitalised fishingsystems do not permit such luxuries and shrimp will continue to determine the activity for aslong as the motorised boats are in operation. On the west coast, where the artisanal sector wiselyconcentrated more on finfish and domestic markets, shrimp still constitutes an important incomeearner, and if it were not to be targeted, ‘it might not affect our survival, but it will certainlyreduce all surplus from the activity’ as one fisherman put it. On the east coast, it is no longer aquestion of surplus, but of survival in many cases.

Aquaculture is totally focused on shrimp economics and no other species is likely to replaceshrimp for at least eight to ten years according to one conservative estimate (Reddy, pers.com.),and may be not even then. The only alternative species showing some hope is the freshwaterprawn, but a number of questions still remain about its viability as an alternative to tiger shrimp.

For the processors and exporters, shrimp is still the main source of income, with no rival seafooditem even remotely close to it in terms of economic value. For the thousands of girls in theprocessing companies and the peeling sheds, as well as the large multitude of ancillary workers,a shift from shrimp to another species might ring the curtains down on their livelihoods for good.For supporting industries like the hatcheries and feed mills too, the emphasis is entirely onshrimp and it is not considered possible for them to shift their focus to alternate species, withoutpractically rebuilding their enterprises from the scratch.

Thus, the importance of shrimp to the livelihoods of the people in the export chain cannot beexaggerated, and in fact, this single-minded emphasis on a single species is the most importantcause for concern.

NEGATIVE IMPACTS OF SUBSIDY-LINKED TECHNOLOGICAL DEVELOPMENT

Here an attempt will be made to assess the impact of subsidies as manifested in the four subsidy-linked interventions discussed above.

1. Impacts upon traditional livelihoods

The impact of the new technologies – and ‘modernisation’ in general – has been negative on thetraditional livelihoods. There is no denying that the traditional fishing communities have always



been poor, but the modernisation process has made them more marginalised and vulnerable andtheir livelihood systems more unsustainable. The traditional sector experienced the negativeimpacts of modernisation at all four stages of the continuum – i.e., subsidies leading totechnological efficiency leading to resource depletion leading to conservation andmanagement regimes – from 1950s through 1990s, as discussed below.

i. Subsidies and marginalisation

The new technologies involved high capital investment and recurring expenses, andautomatically excluded many poor people from owning them or managing them successfully. Inmany cases, subsidies helped outsiders and more affluent sections of fishers. As modernisationtook much government’s attention, support to traditional systems languished. A review by theGovernment of Kerala in late-1970s concludes, “While the government invested a large portionof its fisheries budget and other support for the distribution of mechanised boats, the traditionalsector was largely left to fend for itself” (GOK, 1978: 8). Kurien (1985) notes that of the total Rs110 million spent on fisheries development during 1961-69 in Kerala, Rs 92 million was spenton developing mechanised sector and setting up training and support infrastructure. Programmesto motorise traditional crafts began only in late-1980s and, in terms of investment, were worthless than half of the HSD oil subsidy programme in the Ninth Plan19.

An important gap in the development of shrimp export sector is the near-absence of attention towomen in the sector. This is particularly significant because women have traditionally played avery important economic role in fisheries, and even in the export sector, many ancillary activitieswere dependent upon them. The use of cooperatives for channelling development supportcontributed to their failure and also tainted the concepts like ‘cooperation’ and ‘self-help’perhaps irremediably and to the detriment of future efforts.

ii. Technology and conflicts

By developing more efficient competitors to the traditional players in the near-shore waters, thetechnologies often gave rise to conflicts. The mechanised boats marginalised the artisanal sector(Sathiadhas, 1998:466) and their relations continue to be characterised by barely concealedhostility and antagonism. Clashes between the two sectors – which turned violent and led to lossof lives in the early stages – are reported from Goa (Nalini Nayak 2002), Tamil Nadu (Bavinck,2001), Andhra Pradesh (Vivekanandan et al 1997), Orissa (Salagrama, 2002), and Kerala(Kurien and Achari, 1994).

Although shrimp trade generated new opportunities, it is doubtful that these were equal to thoselost, and that the people who lost out were also the gainers from the new opportunities. AGovernment of Kerala study states (GOK, 1978:7), “The benefits accruing to the traditionalfishermen on account of the government’s mechanisation programmes were negligible”.

19 To cite another example, in 1993, the outstanding loans advanced to the deep sea fleet stood at more than Rs. 214crores (Vivekanandan et al 1997). For comparison, this is equal to two-thirds of the total outlay (including centraland state schemes) for fisheries development in the country from 1951 to 1980, and the government could hardlyrecuperate a fraction of this amount even after rescheduling the loans repeatedly.



The entry of people who had no firsthand experience of the sector and were lured only by thelucrative markets for shrimp and the incentives provided by the government led to disruptions inthe social and economic fabric of the local communities. Within the fishing communities, thesuperior technology created a new asset-owning class which was comparable to the landholdingclasses in agrarian communities, while a majority of population worked as wage labourers.

iii. Resource declines and unsustainable livelihoods

The high value of shrimp led to general prosperity and improvements in the overall infrastructurein many areas, but the expectations of higher returns contributed to overcapitalisation and aslump in profitability. This in turn led to dependence upon continued availability of subsidies forbreaking even and the growth of ‘subsidy culture’, i.e., the expectation that the State has theresponsibility to contribute to the wellbeing of the sector (see Tharakan, 1998). This high degreeof externalisation of costs had implications on livelihoods, environment and trade. When theimpacts of technology began to be felt in terms of depletion of catches – not only of shrimp butmany other finfish and shellfish resources – in the near-shore waters, it is the artisanal and thepoor stakeholders who were affected first and the most painfully.

iv. Management efforts and marginalisation

When the depletion of stocks brought forth new management programmes into existence, it isstill the poor who were the most affected and bore the brunt of the conservation measures bylosing access to whatever resources they still had. In the 1990s, every state has put somelegislations in place for conservation, but their effectiveness and implementation remainproblematic not the least for their impacts upon livelihoods of the coastal poor (Salagrama, 2003;Mathew 2004). For instance, the only harmful activity in shrimp aquaculture industry aboutwhich a rare unanimity existed among all parties was concerning shrimp seed collection by aragtag bunch of poor people in the coastal areas and this has been promptly banned in manystates. Similarly, the most important measure to conserve the mangroves restricts access to thetraditional users while the larger processes causing their depletion go unchecked.

2. Environmental impacts

A recent FAO study of fisheries legislation on the east coast of India (Hosch & Flewweling,2003) states that “Fisheries policies of India… focused on increased production with littleemphasis on conservation, sustainability or responsible fisheries management.” The focus onpromoting a particular technology or a species – i.e., shrimp – or both has clear environmentalimplications in all the cases. The technologies were imported from elsewhere withoutunderstanding their impacts upon the complex interrelationships between man and environment,and in all cases, the ecological consequences have been severe. Overriding the existingtraditional systems of management (Bavinck, 2001; Salagrama, 2003c), the State chose to treatthe near-shore waters as an open access resource, and this has been a serious cause ofenvironmental degradation.

Negative environmental impacts of trawling are noted to be: (i) upsetting the natural faunisticequilibrium on the sea bottom (Vivekanandan, 2002); (ii) catching sizeable quantities of



juveniles leading to depletion of fish stocks(Salagrama, 1998; Sujatha 1996; Sivasubramaniam1990; Puthra Pravin et. al 1998; Prathibha Rohit et.al 1993); (iii) discarding bycatch at sea(Gordon, 1991; Sudhakara Rao, G. 2001: 119; Salagrama, 1998); (iv) upsetting sensitiveecosystems (nurseries and spawning grounds of important fish) (Vivekanandan et al 1997); and(v) capturing fragile species like Olive Ridley Turtles as incidental catch and leading to massmortalities (Kar, CS 1980; Pandav et al 1998). The deep-sea fleet disturbed the bed twice asmuch as the stern trawlers because they were rigged with pair trawls. The symptoms ofoverfishing in the Sandheads area, which was ‘acclaimed throughout the world as a stable andviable fishery’ (Somvanshi, 2001:2), was clearly evident. The Approach Paper to X 5-Year Plannotes that the deep-sea fishing industry was faced with overexploitation of the available shrimpresources on the one hand and with fierce competition from the smaller class of vessels (GOI,2001a: 51). Moreover, the deep-sea trawlers discarded at least ten times the quantity of fish thatthey eventually brought back to the port, which is a serious environmental and economic loss.

The key environmental impacts of aquaculture are reported to be destruction of mangroves(Hein, 2000); conversion of agriculture land for aquaculture purposes; soil salinisation;salinisation of freshwater resources; discharge of wastes and pollutants into open water bodies;exploitation of natural seed and brood-stock and changes to natural biodiversity by releasingdiseased shrimp (AAI, 2001; Vivekanandan et al 1997; Marc Bonora, 1999). There are manyarguments on both sides of each question, and the truth perhaps lies somewhere in between.

SIFFS (1991; reprinted 2001: 45) found that motorisation in Kerala did not lead to a shift to thedeeper waters for fishing and forced the non-motorised boats to confine their operations to theshallower near-shore waters creating further fishing pressure on them. In Andhra Pradesh, inorder to maximise earnings, the mesh size of the nets is decreasing and the size of manycommercial species being landed are of a smaller size and the catches frequently consist ofjuveniles (see also Sujatha 1996; Luther & Sastry, 1993). The fishers also focus their attentionexclusively on shrimp to recover their investment. The implications on the marine food-chainwhen a species is continuously removed from the system are not known, but may be negative.

3. Impacts upon livelihoods

There has been a drastic decline in the total catches and catch per effort in the mechanised sectoron the east and west coasts (FFPI, 2001; Bhatta, 2001). Fishing Chimes (March 2004) reportedthat many mechanised boat owners in Vizag were resorting to distress sale of their boats becauseof falling shrimp catches, un-remunerative prices and rising operational costs. Many others werereportedly anxious to sell their boats but were unable to find buyers.

In aquaculture, increased stocking density, high cost of feed (60-70 percent of the recurringcosts), electricity and diesel charges for pumping and aeration, ‘medicines’ to keep out diseaseshave all added to the cost of operations and increased risk. Beginning in 1995, shrimp culture hasbeen consistently affected by serious outbreaks of viral diseases which practically wiped outhundreds of farms and farmers. Price fluctuations in the international markets, local resistanceand antagonism in the early stages, adverse judicial decisions (the Supreme Court judgement of1996 banning non-traditional shrimp farming in the coastal zone), and raising costs of productionhave made the activity risky. Poor recoveries and high risk forced banks and insurance



companies to withdraw from the sector. The farmers consider themselves lucky if they manageto get one good crop out of three and frequently refer to the operation as a ‘lottery’. A number oftraders were also reported to have gone bankrupt as a result of failed investments in shrimp trade.

There has been a scaling down of operations and ambitions: many farmers have moved back to‘modified’ extensive systems of production and the cost of operations are also scaled downaccordingly. In Kerala, there is a movement for revival of the traditional systems of farming onceagain (Velayudhan, undated). Since the risk is well known by now, investments are madecautiously and only when the farmers think they can afford to lose the money completely. Somefarmers have shifted to cultivating the freshwater prawn, while many small farmers haveabandoned their farms or use them sparingly. A survey undertaken as part of this study showedthat only 5 percent of the farms in East Godavari were stocked during this season. As withmechanised trawlers, many farmers are willing to sell their farms, but there are few takers.

Perhaps it is just as well that the artisanal sector was ignored for a long time, because themotorisation programme was an attempt to bring the ‘traditional’ sector in line with the modernsector through technological upgradation. The concept of risk entered into operations, a newclass of entrepreneurs emerged in the sector and the social support systems disintegrated. Withthe installation of engines, the investment costs in fishing went up by 60 percent, which – in spiteof the subsidies – had implications on the distribution of ownership in the villages(Vivekanandan, et al 1997: 19). In Kerala, motorisation was found to increase the level ofinvestment five to ten-fold (SIFFS, 2001:46). In the normally cash-starved artisanal fishingeconomies, increased investments could only come from outside, which involved getting intocomplicated trade arrangements. Because subsidies were not available, or accessible, to all, awidening gap developed between the motorised and non-motorised boat owners and this led toproductivity disparities and unequal access to the common resources of the coastal waters(SIFFS, 2001). The motorised units competed with the non-motorised fleet threatening thesurvival of the latter.

A comparative study of the costs and benefits of the traditional and mechanised fisheries inKerala revealed that the traditional units made better use of the invested capital than themechanised units; the highest average returns on investment were made by traditional fishingand the biggest average losses by the mechanised sector (Kurien and Willmann, 1980, cited byGOI, 1983:19). Even in Gujarat, where the growth of artisanal motorised fisheries was a moreequitable process, the sustainability of operations deteriorated sharply (Johnson, 2001).

The increase in numbers of ‘deep-sea’ fleet from 59 in 1981 to 180 in 1991 was accompanied bya decrease in the total landings from 1650 MT to 1565 MT and in the catch per boat from 28 MTto 8.7 MT (Guidicelli, 1992, cited in Vivekanandan et al 1997). Gokhale (1995:11) notes that, in1995, the deep-sea trawlers were fishing twice as long as they did in 1974-75 and still caughtonly half the quantity they used to land earlier. The un-profitability of operations became acuteby mid-1990s, and most of the boats became permanent fixtures at the Vizag fishing harbour.Some of them sank in freak cyclones and several simply rotted. By late-1990s, only about 60were still in operational condition and of these, less than half were fishing regularly (Salagrama,1998). When the government offered a final rehabilitation package in early 2000 offering a one-time settlement, very few boat owners actually paid off their debts.



4. Contribution to food security and exports

Although domestic food security was one of the important objectives of the modernisationprogramme, it could not be reconciled with the capital-intensive, export-market orientedstrategies adopted. While the export of shrimp might not have directly affected food security, itcertainly did so when the fishing boats began targeting shrimp to the exclusion of the otherspecies. The result has been that there is less fish available for domestic consumption by thefishworkers themselves (ICM, 2003).

The continued focus on increasing production was not reflected in development of the post-harvest infrastructure, marketing and quality control systems (Anjani Kumar et al 2003:9). Theinfrastructure has thus remained largely inadequate to cater to the needs. As one seafood industryrepresentative noted in 1998, not one landing centre or fishing harbour in the country would meetthe national standards in terms of hygiene and sanitation if seriously implemented (Tarakan,1998). The condition is even more pathetic when one considers the rural fish landing centres anddomestic markets where frequently even water for drinking remains a serious problem.Naturally, when the industry found itself facing serious consequences in the form of bans frommajor importing countries like the EU or the US on quality issues, it came as a big shock fromwhich many companies could not recover.

It can also be argued that the promotion and development of one sector – mechanised trawling –through subsidies and the continued assistance to reduce its operational costs has a tradedistortion effect for those without such assistance, i.e. the artisanal fishers. Considering that theartisanal sector contributes between a quarter and a half of the total landings of shrimp indifferent states, the argument that the assistance is justified because of the mechanised sector’scontribution to export earnings is not completely valid.

The earnings from the exports are gross earnings, and when the cost of production (including thecost of subsidies and the success-to-failure ratio in aquaculture) is deducted from these, the netearnings may come down significantly. The opportunity costs of diversifying fishing effort tocater to domestic markets and the cost-benefit of focusing the development outlays on otherprogrammes might provide a more realistic picture of the earnings from the shrimp exports.

Overcapacity and overfishing in Indian fisheries: the contribution of subsidies

It can be argued that subsidies are a neutral instrument and their role and impacts are defined by,and depend upon, how they have been put to use. As Porter (2001: 11) suggests, ‘overcapacitywill occur in an open-access, common-pool fishery, whether or not accompanied by subsidies’.Another argument is that subsidies are just one of the many factors contributing to the uptake ofa programme, and may not even succeed every time and ascribing the impacts of a project to thesubsidies may not reflect the whole reality.

However, to the extent that subsidies are an important and visible feature of a particulardevelopment paradigm and the results of the interventions show a consistent pattern case aftercase, it can be said that subsidies do influence the course that the intervention takes. In the caseof fisheries, the entry of outsiders whose inclinations were more towards making quick profits



than sustainable utilisation of the resource is a direct result of the incentives provided in the earlystages. Most interventions assumed that the seas and the coastal areas are an open accessresource, and fundamentally this is the most important – and the most devastating – subsidy ofall. There is also enough evidence world-wide to suggest that subsidies contributed toovercapacity, and although the level of state investments in Indian fisheries are not comparableto those in developed countries, it is clear that (to quote Porter once again) ‘assuming that themanagement system does not effectively impose a sustainable level of catch, cost-reducing andrevenue-enhancing subsidies will drive the level of overcapacity and overall effort even furtherthan would an open-access, common-pool fishery in the absence of such subsidies’.



CHAPTER 3: IMPACTS OF TRADE LIBERALISATION ON FISHERIES SUBSIDIES ANDSEAFOOD LEGISLATION IN INDIA

TRADE LIBERALISATION IN INDIA

Faced with a serious balance of payments crisis, India embarked upon a massive programme ofliberalisation in early 1990s. The reforms involved opening up the economy, reducing the publicsector’s role, and liberalising and strengthening the financial sector (World Bank, 2000:2).Licensing for domestic manufacture was abolished for all but a few industries. The private sectorwas permitted to enter into areas hitherto reserved for the public sector. Import tariffs weredrastically reduced. And the rupee was devalued significantly.

Naturally, these changes have far-reaching impacts not only on the economy, but also on everyfacet of life both directly and, in many cases, indirectly. In practical terms, liberalisation hasbrought about a shift in policy focus from technology to market as the effective purveyor ofgrowth and development, although technology still remains an important instrument of change inliberalisation programmes. In spite of the strong emphasis on information and knowledge asfundamental features of the reform process, major knowledge gaps exist at the grassroots levelon the process and the potential impacts of trade liberalisation. This has implications not only onthe direction that the reforms would take but also on the participation of the people in decision-making processes. Field studies during this research strongly suggest that people’s role in thelarger processes like liberalisation is gradually diminishing not only for lack of space, but alsofor lack of capacity20.

At a different level, the last decade has also seen much debate on the pros and cons of‘globalisation’, and the debate has only been growing with time; the only thing certain about itbeing that the last word on the subject is a long way off yet. In the meantime, one must becautious while ascribing any and every change – either positive or negative – to ‘forces ofglobalisation’ because experience shows that many of these changes could have other causes aswell. This is particularly so in the case of fisheries sector21.

WTO – The New Dimension

The liberalisation of Indian economy in 1990s coincided with the establishment of the WorldTrade Organisation (WTO) and India became an important signatory to the various tradeagreements. This gives a new dimension to the debate on the impact of liberalisation, because thestructural adjustment policies guiding the domestic economy have to reckon not only withstabilising the Indian economic performance but also make sure that the processes are in linewith the global trade agreements. The policy responses have largely been two-fold: at the

20 That the ‘information revolution’ taking place in the country is actually ‘information technology revolution’makes the access to information not only more difficult for a vast majority of population but, for that same reason,makes it possible for a tiny minority to control it.21 As indicated in the previous chapter, the origins and the growth of the modernisation programme lay in theliberalisation of fish trade in a general sense and what happened in the 1990s was only a further entrenchment of thismodel. Thus, one might view the developments from 1950 onwards as ‘changes due to liberalisation’, but thediscussion here will be confined to changes that took place specifically as a result of the economic reforms in 1990s.



domestic level, they are focusing on fiscal discipline while at the international level, they arguefor special preferences to accommodate the conditions that prevail in the developing countrieswith large populations like India. On the other hand, there are differences between the twoprocesses: for instance, within the fisheries sector, while the emphasis of the WTO has been onthe economic and trade-distorting subsidies, that of the domestic liberalisation policies is uponreducing the social or welfare subsidies.

IMPACTS OF TRADE LIBERALISATION

Changes in subsidies and seafood legislation and their impact on the different stakeholders,particularly the poor, will be the focus of this section. This will be done at two levels – at themacro-level and at the primary stakeholders’ level. This is for two reasons. On the one hand, thereforms process has been uneven in terms of the speed with which it has proceeded in differentsectors and on different issues. The cautious pace with which they are progressing means that thereforms process has not run its course yet – in fact, many people are of the opinion that it is onlybeginning in the fisheries sector. Thus, while there are definite indications of changes in policy,their actual implications at the primary stakeholders’ level are not often clear. On the other hand,a number of changes are already happening at the grassroots level and are having significantimpacts on different stakeholders, but these changes and processes are more subtle and general(i.e., they are not specific to any one sector) that they simply seem to happen without anyonenoticing, particularly at the macro-level.

A. Subsidies in the Post-Liberalisation Period

At the macro-level, the issue of subsidies will be reviewed at three levels: (i) in the fisheriescontext at the international level; (ii) in the general macro-economic context at the national level;and (iii) in the fisheries context at the national level.

Fisheries Subsidies in the international context and implications for Indian fisheries

Internationally, fisheries subsidies have been attracting attention since early 1990s for tworeasons: (i) their negative impacts upon the environment and (ii) their trade distortion effects.Studies by the World Bank (Milazzo, 1998), the Food and Agriculture Organization of theUnited Nations (FAO 2000 and FAO 2002), the Asia-Pacific Economic Cooperation (APEC)(PricewaterhouseCoopers 2000), the United Nations Environment Programme (UNEP) (Porter,1998; Porter 2001; UNEP 2000), the Organisation for Economic Cooperation and Development(OECD) (Various) and several others have discussed the issue in detail, defining, classifying,quantifying, evaluating the subsidies from various perspectives (Annexure 2). Within India, thedebate on fisheries subsidies is just beginning so the information available on the subject ismeagre22.

22 The International Collective in Support of Fishworkers (ICSF) did a major study on the issue of fisheries subsidiesin the country for the Ministry of Commerce, Government of India in 2003, but the study and its conclusions remainconfidential. The Center for Management in Agriculture, Indian Institute of Management, Ahmedabad, is reportedlyworking on a research project “Developing India’s Strategic Response to the Global Debate on Fisheries Subsidies”.



The ongoing global debates of fisheries subsidies focus mainly on the impacts of subsidies uponthe twin issues of trade and environment, and largely bypass other dimensions like equity issues,livelihoods and quality of life. This omission could potentially lead to a situation where a subsidywhich does not explicitly distort trade or negatively affect the environment, but has seriousconsequences on the livelihoods of some poor stakeholders would pass muster as beinglegitimate, while the general air of suspicion that hangs over the issue of subsidies in currentdevelopment thinking could mean phasing out even some positive ones, for e.g., thosecontributing to the general welfare of the poor, which, as this study shows, is already happening.

The current debate about what constitutes a subsidy – particularly of the indirect variety – hasmany serious implications for a developing country like India. When issues like tax rebates,subsidised lending rates, user fees for accessing common resources or trade-related infrastructurefacilities (ports, jetties etc) begin to figure in the list of subsidies – whether ‘prohibited’,‘actionable’ or ‘non-actionable’ – there is a need for a wider debate on the issue, particularlyamongst the primary participants in the activity. Unfortunately, very little of the debate on theissue percolates to the primary stakeholder level and this can have negative consequences.

Fisheries subsidies and the WTO negotiations, 2005

During the Uruguay Round of Negotiations, fisheries was discussed in the Negotiating Group onNatural Resource Based Products (NRBPs), and fisheries subsidies were included under theremit of the WTO Agreement on Subsidies and Countervailing Measures (SCM), which coversall goods except agriculture (Porter, 2001). The 1994 SCM Agreement has been criticised, forinstance by the group of countries calling themselves ‘Friends of Fish’ (of which India is one), asbeing mainly a trade agreement and, as such, was negotiated to address market distortions andrespond to trade-related economic injury, and does not adequately address other negative trade,environment and development impacts of fisheries subsidies (Milazzo, 1998; Mathew 2003).There has been much debate on the need for a separate agreement on fisheries subsidies amongthe WTO members and the Fourth WTO Ministerial Conference held in Doha in November2001, agreed to include fisheries subsidies in the new round of negotiations to be held in 2005.

This will lead to a question regarding the possible impacts of the next round of negotiations onIndia23. Within the framework of the SCM agreement, only export subsidies are to be treated asprohibited ones. And, as Mathew (2003) notes, “Even if we treat the entire annual budget ofMarine Products Export Development Authority as a prohibited subsidy, which may not be thecase if we do a careful analysis of all their schemes, it amounts to less than half percent of theannual seafood export value.” MPEDA (2002) provides a detailed assessment of the variousdirect subsidies in fisheries sector. It estimates the subsidies provided by various governmentagencies and departments in the country and concludes that the total subsidy component spent byMPEDA and other departments contingent on export was less than Rs 100 crore (US $ 23.35million) during the Ninth Five Year Plan. This is compared against the total worth of export ofmarine products during the 9th Plan period, which is Rs. 26 842 crores (US $ 6 268.57 million).This shows that the subsidy contingent on export is negligibly low (0.37 percent). However, even

23 A more urgent reason for asking this question would also be the ongoing anti-dumping case filed by the SouthernShrimp Alliance (SSA) against India, Thailand, Vietnam, Ecuador, China and Brazil, accusing them of flooding theUS market with cheap shrimp. It is urging for high tariffs on imports from those countries.



this spending was not only the subsidy directly but for various other sub-sectors which are notcontingent on exports. Even when the total spending by the various Central and stategovernments on fisheries was compared against the total annual value of production, the totalspending in the fisheries sector works out to only 2% of the revenue from the sector.

The MPEDA concludes that discipline on fisheries subsidies will not have major impact on Indiasince the quantum of subsidies is meagre, which will become even less significant if theproposed agreement takes the special characteristics of the sector into consideration whendealing with fisheries subsidies.

Another conclusion that MPEDA draws from this analysis is that, considering the low level ofsubsidies given to the sector, the country could actually increase its current support programmes,particularly to support the development of mechanised and deep sea fishing sector, forencouraging harvesting of Oceanic tuna and deep sea shrimp and lobster resources. The potentialimplications of such a move on the environment and livelihoods – in the light of historicalexperience – can be easily guessed. MPEDA also takes the view that traditional crafts and smallmechanised boats, aquaculture and seafood processing should be exempted from being coveredunder any clause or agreement, because these sectors will be required to be assisted by variousagencies in the coming years.

Thus, as pointed out earlier, going by the existing international frameworks of debate whichfocus on trade effects alone, the negotiations are unlikely to have an impact on the existingsubsidies, but might in fact provide the temptation to a country like India, where fisheriessubsidies have traditionally been a comparatively low-key affair, to spend more on capacity- andeffort-enhancing subsidies. The other conclusion one can draw is that any changes to the subsidyregimes in Indian fisheries are more likely to come as a result of the liberalisation programmeswithin the country than by international trade negotiations, as the next section shows.

Subsidies in the general macro-economic context in India

NIPFP (1997) made an estimate of the total budget-based subsidies for the Central Governmentfor 1994-95 and found that the subsidies in the non-merit category amounted to 3.8 percent ofthe GDP and those in the merit category amounted to 0.72 percent of the GDP. The bulk of non-merit subsidies (93 percent) went to economic services, the largest recipients being industries,agriculture and allied services (in which fisheries is included). An aggregate of subsidies aspercentage of GDP at market prices at the central and state levels indicates that subsidies onmerit goods/services amount to 3.7 percent and non-merit subsidies to 10.71 percent, accountingfor a total of 14.4 percent. A discussion paper brought out by the Ministry of Finance,Government of India, in May 1997 based upon this NIPFP study, proposes a thorough overhaulof subsidies and suggests reducing the overall scale of subsidies (through phased increases inuser charges etc) (GOI, 1997b: 16).

The paper sets a target of reducing the subsidies on non-merit goods from 10.7 percent to 6percent of GDP in three years, with a further goal of reducing it to three percent in another twoyears. Significantly, as a corollary to this Discussion Paper, a classification of publicly providedgoods/services was made to categorise subsidies into ‘merit’ (i.e., deserving continued



subsidisation) and ‘non-merit’ (i.e., deserving either no subsidisation or limited subsidisation)groups (Srivastava and Bhujanga Rao, 2002). According to this classification, most of thefisheries development programmes (marine and inland, processing, marketing and ‘otherexpenditure’) fall into the ‘non-merit’ category, to be withdrawn altogether or reduced in size.More seriously, this exercise puts urban and rural health services, urban water supplyprogrammes, labour and labour welfare, agricultural finance institutions, cooperation, minorirrigation, power, ports, road transport and other transport services, postal services, foreign tradeand export promotion and civil supplies in the ‘non-merit’ category. Many of these changescould have disastrous consequences for the export poor.

Srivastava and Bhujanga Rao (2002:19) found that, despite of the Discussion Paper’s assertionson curbing unwarranted growth of subsidies within a particular timeframe, there is actuallyevidence that these may have sharply risen in the late 1990s. But it appears that a number ofindirect subsidies have been targeted through this period. Subsidies to power and petroleumsectors have been drastically cut and the Ministry of Disinvestment – reportedly the only one ofits kind in the world – is rapidly divesting the government’s investments in the public-sectorunits. Private investments in basic infrastructure projects is increasing and these cannot but havean impact upon the seafood export sector as they do on every other walk of life. The following isa brief summary of the key changes that have a serious impact upon the livelihoods of the shrimpexport stakeholders.

Reduction in indirect subsidies for Petroleum products (HSD oil, Kerosene, LPG)

Traditionally, HSD was cross-subsidised with the surplus from petrol and aviation fuel. This is tosupport the transport industry, which is essential to maintain flow of goods, food materials andother essential commodities throughout the country. As a result, the consumption of diesel hasshown a consistent increase – between 1991-92 and 1995-96, it increased by 42 percent, and thisin turn led to a massive increase in subsidies as well. Total petroleum subsidies in the countrywere estimated at Rs 18 440 crores in 1996-97, and the subsidy for HSD increased from Rs 430crores in 1994-95 to Rs 8 340 crores in 1996-97.

An important strand of the trade reform process has been the reduction in the subsidies forpetroleum products; between 1996-97 and 2002-3, the total subsidy has come down from 18 440crores to 6 709 crores (GOI, 2004). The subsidies on HSD have been completely removed. As aresult, the cost of HSD increased from Rs. 11.43 per litre in 1998 to Rs. 27.88 in April 2003 inMumbai, an increase of 243 percent in five years. In Chennai the increase has been from Rs.11.30 to Rs. 24.65 per litre during period, an increase of 218 percent. When the increase in dieselprice at the beachside is seen from 1989 onwards, it is even more spectacular. Records of theAFCCS diesel outlet at the Kakinada fishing harbour show that HSD was being sold at Rs. 3.77per litre in 1989, which has gone up to Rs. 23.37 by 2004 – an increase of over six times infifteen years (AFCCS, internal records) (see Figure 11).

Kerosene (SKO) is another petroleum product that is heavily subsidised for household cookingpurposes. It is made available to the poor through the PDS outlets at subsidised rates and eventhe open market product is subsidised to some extent. At the national level, the subsidy has comedown from a peak of Rs 8 151 crore in 1999-2000 to Rs 3 018 crore in 2002-3 and the retail cost



per litre has correspondingly moved from Rs. 2.55 in 1998 to Rs. 9.26 in 2003 in Mumbai, anincrease of over 3 ½ times. Simultaneously, the quantity supplied through the PDS outlets hasbeen curtailed. The open market cost of kerosene is at least 50 to 100 percent higher than that ofthe PDS supply.

Similarly, Liquefied Petroleum Gas (LPG) which is used as a cooking fuel, and subsidised to thetune of Rs 6 724 crores in 2000-1, felt the impact of reforms in 2002-3, when the subsidyclimbed down to Rs 3 691 crores. The cost of a single 14 kg LPG cylinder, which was Rs. 138 in1998 (Mumbai price), has almost doubled to Rs. 250 by 2003.

Increased cost of electricity

In the power sector, against the background of constant efforts to mobilize additional resourcesand to help bridge the gap in demand and supply, the government formulated a policy in 1991with the objective to encourage greater investment by private enterprises in the electricity sector.This was followed up with efforts to tighten expenditure, control budgetary deficit, and reducesubsidies. From 1999, several state electricity boards – including Andhra Pradesh, Kerala andOrissa – initiated the process of restructuring following reforms in the power sector. All threestates decided on a set of tariff reforms, which would restore the viability of the state electricityboards, which took the form of revising the tariffs for supply of electricity (www.teriin.org/energy/seb.htm#scenario). A direct impact at the consumer level has been a hikein the cost of electricity. In Andhra Pradesh, for instance, the cost per unit of electricity for iceplants has gone up from Rs. 1.65 in early 1993 to Rs. 3.85 by April 2001 – an increase of 2.3times (APEPDCL, internal documents). In Kerala, prior to 1997, the cost per unit for industrialpurposes was Rs. 1.25, which has gone up to Rs. 3.75 now (SIFFS, pers.com.).

Reduction in social subsidies

Nowhere has the debate on trade liberalisation thrown up more sharply divergent views than incase of its impacts upon quality of life. The World Bank, the UNDP and the DFID, amongothers, suggest that the quality of life indicators have done well during the 1990s, although theystill have to go some way. On the other hand, there are equally critical reviews of theperformance of the economy and the social indicators during the 1990s. The National Centre forAdvocacy Studies (NCAS) (2003) analysed the impact of liberalisation on three basic services –education, healthcare and water – and concluded that these services were becoming increasinglyunavailable and unaffordable to the poor. In education, the overall public expenditure hasdropped from a peak of 4.4% of the GDP in 1989 to 2.75% in 1998-1999. Aggregate healthcareexpenditure is 5.2% of the GDP, of which only 14% is from public resources. The trend in Indiashows a decline in the public financing of health care from 1.25% of GDP in 1993-1994 to 0.9%in 1999-2000. This, as NIRD (1999) says, ‘has disturbing long-term social and ethicalimplications’. Similarly, there are indications that the Public Distribution System is beingdismantled rapidly (Chaturvedi, 2002).

The important point about changes such as this are that their impact on fisheries sector and itsparticipants are not recognised easily. It was when conducting trend analyses exercises that thesechanges and their impacts came out, and needed widening the scope of subsidies to include them.



Liberalisation and fisheries sector in India

In India, right from the beginning, import substitution was an important focus area for achievingself-sufficiency, and thus import of technologies was confined to one-off transactions. While fora developing country with scarce foreign exchange resources, import substitution was ameaningful choice, but when this turned into an obsession with self-sufficiency in every sector,the results were mixed. In fisheries, two examples stand out. The government activelyencouraged indigenous manufacture of diesel engines for fishing craft, which began in 1960 andled to a ban on imports by the end of that year (Srivastava et al, 1990: 33). At least part of thesubsidies for mechanised boats was to compensate the high cost of indigenous engine, nylon etc.(CMA, 1984: 1132). However, the performance of indigenous marine diesel engines has neverbeen really satisfactory, going by their performance in the motorisation programmes (Salagrama2003c). Similarly, while allowing the import of deep sea fishing vessels, the government insistedon a pari-passu clause, which required the companies to place orders for one indigenous vesselfor every boat imported. Many companies chose to forfeit their deposit made for this purposethan buy an Indian vessel, which did not stand up to the imported vessels.

New trade policies in fisheries

Import tariffs and quantitative restrictions (QRs) are considered protectionist measures which fallwell within the definition of subsidies (of the ‘red light’ category), and these have played a majorrole in the pre-liberalisation period when self-sufficiency was the state’s motto. Under the newtrade policy initiated since 1991, three major changes have been effected in agricultural trade(which are applicable to fisheries sector): (i) the government does not determine the value ornature of exports or imports, (ii) QRs on the agricultural trade flows were dismantled completelysince April 2001 and (iii) tariffs were reduced and fish and fish products were allowed to beexported under the open general license (OGL) (Anjani Kumar, et al 2003:10). While the actualimpacts of these changes are not yet clearly apparent, there are apprehensions that some of thechanges will have certain impacts upon the industry.

Impact of dismantling QRs on imports

It was the dismantling of QRs on imports that caused considerable alarm in the fishing industry.Under the Export-Import (exim) policy of 1992, import of most of the fisheries items was eitherrestricted or prohibited. But in the next exim policy (1997-2002), the list of freely importable andimportable items under Special Import License (SIL) was expanded considerably. In the latestexim policy (2002), almost all commodities were moved to the list of freely importablecommodities, except for five groups (Anjani Kumar et al 2002:16) (Table 13). The lifting of QRsis also accompanied by a relaxation in tariffs on fish products, which have come down from 60percent in 1988-89 to 35 percent in 2002-03.

As a result, it was feared, large-scale imports would swamp the Indian markets and, in the shortterm, this would lead to a crash in the market prices and in the long term, the marginalisation ofIndian fish producers (Anjani Kumar et al 2003: 11). The revival of the imports as a percentageof the value of exports from negligible quantities in 1992 to about 1 percent by 1998 boostedthese anxieties. On the other hand, the lifting of QRs on imports was welcomed by the



processing industry, which was working at an average 15 percent capacity and needed newsources of raw material very badly and had been clamouring for a change in import policy for along time (SIFFS, 2001). The consumers were expected to benefit from availability of fish atcheaper prices.

In any case, for many reasons – flux in international seafood markets, sagging global production,commercial non-viability of imports for processing or domestic trade purposes (Swamy,pers.com) – fish imports have not gathered momentum and it becomes difficult to assess theirtrue impacts already.

However, the issue remains important because it has potentially significant consequences for theIndian producers. A large majority of Indian producers depend upon the highly uncertain marineproduction, one which is characterised by multi-species fisheries. It will be extremely difficultfor them to compete with a superior quality, standardised, aquaculture product from abroad,particularly when the latter is available consistently, at a cheaper price and in a much betterpackaged form. The imports from a country like China do not only stand up to the quality andpackaging requirements (helped immeasurably by the fact that India still does not haveproduction specification standards or quality requirements for imports; see Mehta and George,2003: 3), but could also be substantial enough to swamp the local production many times over, ifthe rising tide of diverse Chinese products in Indian markets is any indication.

Already, there are at least a few examples in agriculture sector where imports from abroad havehad a severe impact upon Indian production and trade. The import of palm oil from Malaysia(which drastically affected the groundnut and coconut markets), sugar, cotton and textiles, wheatand rice, livestock products (milk powder and butter oil) – in spite of the fact that India has asurplus production in most of these agricultural commodities – has had serious consequences forIndian producers (Chowdry, 2001). Fears have also been raised over the possible impacts ofimporting rice from China on the already severely stressed rice farmers in India.

Impact of liberalised deep-sea fishing policy

Another potential threat to Indian producers is likely to come from distant water fleets from othercountries as a result of liberalised deep-sea fishing policy, which came into effect fromNovember 2002. The government’s contention is that, considering the inability of the existingfleet to fish in the offshore waters, a vast resource remains untapped, which is an economicwaste. Moreover, the argument goes, if India fails to make use of its EEZ productively, this mayspur landlocked countries like Nepal and Bhutan in the region to lay claim to those waters andlease them to distant foreign nations anyway (GOI, 2001b:578). Constrained as the governmentis in extending direct support for developing indigenous capacity for harvesting deep-searesources by the perennial resource crunches as well as by the winds of liberalisation – whichfrown on subsidies, but support foreign investments – blowing across the country, it expects thatallowing the foreign vessels will help address several problems at once.

Sebastian Mathew (2003) notes that under the changed legal regime for foreign investment inIndia it is possible for excess fishing capacity in other countries to end up in the Indian EEZ. Theexperience of the ‘deep-sea’ fishing fleet on the east coast of India – which seldom fished



beyond 100 metres depths and competed regularly with the small mechanised boats for theshrimp – shows that there is little to stop the new fleet from competing with the domestic sectorfor the same resources. The deep sea trawlers frequently took the plea that the real offshorewaters were not productive at all and fishing there made operations non-viable. The fact ofregular poaching by Southeast Asian boats in the offshore waters in the Indian EEZ makes thisclaim a bit dubious, but it might still hold water to help the new fleet to encroach into thenearshore waters. The fact that the country does not have an effective monitoring system, and theresources of the Coast Guard are already overstretched, will encourage this trend. Under the newregime, since there are no vessel quotas or license fees commensurate with the value of the catch,and no requirement to employ Indian workers or to land in Indian ports, the whole system isloaded in favour of foreign deep sea fishing vessel operators registered as Indian companies.There are also concerns related to safety problems (S Mathew in The Hindu, 6 January 2003).

On the other hand, going by anecdotal evidence, it is possible that many existing boats in thecountry – particularly on the west coast – have already begun fishing in the offshore waters.Estimates put the contribution of these offshore/deep-sea catches to overall landings at 10-20percent on the west coast, but this gets to be recorded as the inshore catch and thus goesunnoticed. What this indicates is that, if a few changes are made to the designs and fishingmethods, it is likely that the existing fleet could undertake operations in the offshore, and thatthere is no need to import new boats with no perceptible benefits to the country, but withconsiderable potentially negative implications.

Impact on exports

It has been argued that the lifting of QRs opens new marketing opportunities for Indian seafoodin other countries and would benefit the producers in the medium- to long-run. However, thereare indications that this is easier said than done. The remaining tariff barriers in some of theimporting countries are not considered to be a problem by the Indian seafood industry, but theydo pose an obstacle by way of exports to countries like China and even the EU (Mathew 2003).Moreover, the new opportunities come in conjunction with quality and other trade-relatedrequirements that the producers would have to subscribe to for entering global trade. It will be anextremely difficult task for the hand-to-mouth coastal fishers of India to stand up to anythingmore than rudimentary standards. In a classic Catch-22 paradox, any efforts by the governmentto improve their capacity – particularly in terms of enhancing access to global markets – willmost likely end up in the category of ‘red light’ or ‘prohibited’ category of subsidies!

Within the existing export trade, while the overall policy environment has become even morepositive than previously to promoting the growth of exports, the opportunities for takingadvantage of the new exim policy remain rather uncertain on account of production trends aswell as the market trends. In 1997, buoyed by the performance of the markets as well as thegrowth in production from aquaculture, the seafood export industry set an export target of US$ 3billion by 2000. However, the export earnings actually fell below the 1997 level (Elias Sait,2000).The export of shrimp, which is the mainstay of exports, has fluctuated at 100 000 MTsince 1994-95, and the contribution of capture sources has consistently declined through theperiod. As indicated, even the culture production stagnated from 1994-95 onwards.



Secondly, on the market front, SPS measures have clearly played a major role in affecting theexports – it has been reported that nearly 15 percent of the total seafood exports from India in1996-97 were lost because of detention by the USA (Jha, 2002 cited in Anjani Kumar, 2003: 21).Many companies and the quality implementation agencies in India consider the implementationof new regulations on fishery products is little more than a de-facto non-tariff measure againstvalue-added products originating from developing countries (Anjani Kumar et al, 2003: 21;Mathew, 2003). The issue of quality control in India and the impact of SPS measures will bedealt with in more detail in a subsequent section.

Other trade fluctuations in late-1990s – turtle excluder device restrictions by the US, theSoutheast economic crisis, the slashing of Indian seafood prices by the Japanese companies by30 to 40 percent, the tightening of import regulations by China – which brought down China’sshare in finfish exports from India from 40 percent down to 20 percent – have all had an impacton the trade and, consequently, on the viability of the industry (Elias Sait, 2000).

Liberalisation and direct subsidies in fisheries in India

Subsidies have traditionally played an important role in Indian fisheries and broadly fall into twocategories: (i) those supporting the promotion and continued use of new technologies related tofish production and processing (i.e., the economic services) and (ii) those contributing to theimprovements in the quality of life of the fishers (the social services). Annexure 3 provides anindicative list of different subsidies provided to the fisheries sector over the last nine Planperiods. Although the term ‘fisheries subsidies’ has been used in the recent debates to focus onthe first of these categories, we also discuss the general welfare subsidies because (i) for the vastmajority of poor stakeholders in the export sector (fishing crew, wage labourers in aquaculture,processing and ancillary activities), it is the social subsidies that were more important than theeconomic ones and (ii) the impact of trade liberalisation appears to have had more impact uponthe social subsidies than on the economic ones.

India does not yet have a separate fisheries policy. Successive 5-Year Plan documents set thethrust areas for fisheries and these provide a good idea of fisheries development in the country(Table 5). Looking at the budgetary provisions for fisheries development in successive 5-YearPlans, it does not appear that trade liberalisation has made any difference to the total outlays forfisheries, which went increasing through the 1990s. In the Seventh Plan (1985-90), the totaloutlay was Rs 547 crores; in the Eighth Plan (1992-97), this went up to Rs 1 205 crores and inthe Ninth Plan, this stood at Rs 2 070 crores. It is only in the Tenth Plan, that the increase inallocation is meagre – it comes to only Rs 19 crores, i.e., the total outlay is 2 089 crores (GOI,2001b: Vol II: A-10 & Vol III: 150), which in real terms will most certainly mean less than theallocation for the Ninth Plan24. The various fisheries development programmes have alsoremained largely intact since early 1990s.

While the outlays show an increase in absolute terms, it has however to be noted that the share offisheries in the total plan outlay has been decreasing – from 0.30 percent in the Seventh Plan, ithas slipped to 0.24 by the Ninth Plan (Anjani Kumar et al 2003:5). Whatever it is, there is no

24 The fact that the expenditure incurred during the Ninth Plan was only about 57 percent of the total allocation mayhave been a consideration in reducing the allocation for the Tenth Plan (GOI, 2001: 44).



denying that the budgetary outlay for fisheries is miniscule, which could be a reason why therehas been no drastic change in subsidies. Simply put, at a quarter of one percent of the GDP, itdoes not make any difference at the macro-economic level to necessitate radical changes to theallocation. On the other hand, considering the quantum of subsidies going into agriculture, theamount for fisheries is negligibly small and at the current levels of investment, the cost benefitsin fisheries must be significantly higher than in many other sectors, and it makes sense tomaintain the allocation at the existing level.

Fisheries subsidies and environmental implications

Mathew (2003) notes, “Even though fisheries subsidies are small, from an overcapacity andoverfishing point of view, their role is to be better recognised in India.” Unfortunately, this doesnot seem to receive much attention as yet. For instance, while the problem of overfishing and theneed for a departure from the open access concept in territorial waters is underscored in thepolicies (GOI, Draft Marine Policy, 2002; GOI 2001), some of the measures suggested toaddress the problem – such as introduction of ‘new generation resource-specific vessels’including trawlers and gillnetters-cum-longliners to tap sources in the offshore waters,‘development, demonstration and popularisation’ of fuel saving designs of fishing craft and gear,pelagic and mid-water trawling, new hull materials and so on (GOI 2001a: 75-78) – couldpotentially be a cure worse than the disease!

B. International seafood legislation on the Indian seafood industry25

The lifting of QRs and tariffs by India in the 1990s coincided with similar changes taking placeinternationally. However, the gains of market access under WTO negotiations may be eroding asa result of non-tariff measures (Anjani Kumar and P Kumar 2003), because the lifting of tariffbarriers has been frequently accompanied by introduction of new and less direct barriers in theshape of technical regulations and standards. The sanitary and phytosanitary measures (SPS) areconsidered an important non-tariff barrier to trade. While some of these measures are certainlybased on genuine apprehensions, there are also others that are motivated by concerns other thanhealth considerations. Food exports from India have been affected adversely by selectiveapplication of sanitary and phytosanitary measures in the last few years26, but the mostoutstanding of these measures in Indian context has been those concerning the export of shrimp.

The issues related to changes in seafood legislation will be discussed at three levels: (i) in theinternational context; (ii) in the general macro-economic context in India and (iii) in the fisheriescontext at the national level.

25 This sections draws mainly from Mathew (2003); Anjani Kumar and P Kumar (2003); Zarrilli (1999); Mehta &George (2003a); Mehta & George (2003b); Mehta, Saqib and George (2002); Deodhar (2001); Jha (Undated) andSaqib (2001).26 The ban on Indian grapes by China citing the presence of a species of fruit fly that does not exist in India is oneclassic example (Mehta et al 2002:18). Insistence on particular technological processes – that are either not availablein the country or are expensive and time consuming or yield uncertain outcomes – such as the Vapour HeatTreatment (VHT) of fruits is another good example of SPS being used as a key instrument for non-tariff barrier.



Changes in seafood legislation: the international context

Overarching the changes in seafood legislation at the international level is the WTO Agreementon Sanitary and Phytosanitary Measures, which attempts to address the fear that the SPSmeasures may be used for crafting trade distortion and used for protectionist ends. The SPSAgreement lays emphasis on institutional and legal mechanisms across the WTO membercountries in order to address the issues of harmonisation, equivalence, transparency, technicalassistance and processes for dispute settlement. Among other things, the SPS Agreementprovides for special and differential treatment in favour of developing countries and least-developed countries (LDC), allowing, under certain circumstances, longer time-frames forcompliance, time-limited exceptions from the obligations of the Agreement and facilitation ofdeveloping country participation in the work of the relevant international organisations.

Despite such provisions, developing countries are handicapped in tackling the sanitary andphytosanitary measures of the importing countries which may be inconsistent with the SPSAgreement and impede the flow of agricultural trade. As Zarrilli (1999) notes, the developingcountries “lack complete information on the number of measures that affect their exports; theyare not sure whether these measures are consistent or inconsistent with the SPS Agreement; theydo not have reliable estimates on the impact such measures have on their exports; theyexperience serious problems on scientific research, testing, conformity assessment andequivalency”.

An important point in the product standardisation in India is that it does not have any qualitystandard for seafood for its domestic consumers – its standards apply exclusively to the exportmarkets. This will have implications in terms of setting standards for imports on the one handand in setting up equivalency standards at the international level on the other (Mehta & George,2003). This is in stark contrast to the prevailing situation in the developed nations like US, EUand Japan, whose domestic standards have actually determined their international standards and,to a large extent, influenced the way standard setting processes evolved at the international level.The result has been that the standard setting process has been dominated by a few countries, andis widely criticised as not being sensitive to the needs of the developing nations. Transparency-related requirements represent a burden for developing countries, while they are often unable tobenefit from them due to the lack of appropriate infrastructure. The provision of adaptation toregional conditions, which would be of great benefit to developing countries, has been little usedbecause of the difficulties related with its scientific side. The provisions relating to special anddifferential treatment for developing countries remain rather theoretical and apparently have notmaterialized in any concrete step in their favour.

The result is that the developing nations face difficulties when forced to meet SPS requirementsbased on international standards. They also find it difficult to lodge complaints against adeveloped country. The regulatory mechanisms and domestic case law for testing such standardsare not always adequate, and the complicated nature of SPS agreements mean that only countrieswith large governmental legal staff may have an advantage in SPS abjudication.

Moreover, as Mathew (2003) notes, strict implementation of the international seafood legislationcould potentially marginalise the small producers from the export markets altogether. There is a



need to develop the systems keeping the social and economic context in which they would beimplemented: to expect a barely-clad subsistence fisherman working his non-motorisedcatamaran on the east coast of India to follow the same standards as a multi-million dollar exportprocessing plant in Cochin is rather optimistic.

In terms of implementation, there are complaints that standards set in developed nations arefrequently trade-distorting. Many processors complain about what Mehta and George (2003)have called the ‘shifting (goal)-post syndrome’, involving frequent raising/shifting of acceptablelevels of chemical elements and foreign bodies in the food commodities. The banning of importof shrimp from India on grounds of drug residues is cited as an example. Advances in thetechnology of seafood analyses have been made to the point that pesticide and pharmaceuticalresidues can often be detected at the parts for billion, and in some cases, at the parts per trillion(ppt) levels. When zero tolerances are established based on the ability of a test to detect parts permillion, the increase in sensitivity to ppb or ppt can turn a ‘safe’ product to an unsafe one. Usingthe HPLC method, the EU laboratories could detect traces of the antibiotics, chloramphenicoland nitrofuran, at 0.3 ppb and 1 ppb respectively in farmed shrimp from India, which led torejection of Indian shrimp imports in the EU markets since February 2002.

The standards also vary from one market to another. Mathew (2003) notes that in the US,histamine in canned sardines, mackerel and anchovies should not exceed 50 parts per million,while in the EU, up to 150 ppm of histamine in canned fish is permitted. Whereas the EUrequires that all imports should be accompanied by a certificate from an authorised nationalagency, in the case of US, the individual processor has to demonstrate an understanding andability to produce seafood according to US regulations. Such differences between nations –within the EU each nation has a separate set of quality requirements spanning from extremelysophisticated to very poor27 – cause serious problems for a investment-strappedproducer/processor from a developing country, because it is almost impossible to be prepared forthe different requirements of different countries all at the same time.

SPS Agreement in the general macro-economic context of India

The SPS Agreement requires all member countries to put in place a reasonable implementationstrategy, and the Government of India has taken appropriate steps since the Agreement came intoforce. The agencies dealing with exports in India fall into three categories. These are:

Export promotion institutions, like the MPEDA, whose role is to act as nodal bodies forinteraction between the industry and the government and help the exporters cope up withthe demands of the international trade effectively.

Standard setting bodies. The Bureau of Indian Standards (BIS) is the main standardsetting body in India, and is the enquiry point of India under the WTO Agreement onTechnical Barriers to Trade.

27 Spain has been known to ban imports of squid and other marine products on the grounds of heavy metalcontamination due to presence of mercury. However, there is a curious coincidence between the time when this banis imposed and excessive landings of these products by Spanish fishermen. The ban is removed when their ownlandings are low! (Deodhar 2001)



Enforcement bodies. The Export Inspection Council notifies export commodities that willbe subject to quality control; establishes standards of quality; specifies the type of qualitycontrol, and ensures that the export of a notified commodity takes place only if itconforms to the standards. All SPS compliant activities are generally handled by the EIC.

Keeping in view the presence of a large number of agencies, an integrated food law is beingconsidered by the Government of India. It has also reconstituted the Ministry of Food ProcessingIndustries in September 2001 to develop and implement standards.

In the background of the requirements of the SPS Agreement, the Central Committee of FoodSafety (CCFS), the Central Fruit Products Advisory Committee (CFPAC), and the concernedapex export promotion institutions are regularly interacting to update and amend the existingdomestic food laws. The relevant processing industry specific association – such as the SeafoodExporters’ Association of India – has become an integral part of these transactions. Mandatoryregulations have become a norm for all export bound commodity lines. A legal framework –which is evolving into a web of inter-linkages between the different bodies – is already in place.

The Export Inspection Council (EIC) and its related agencies provide certification and inspectionservices to the Indian export. Three types of export inspection and certification systems areoperational for agriculture and food products:

Consignment-wise Inspection (CWI) In Process Quality Control (IPQC) Food Safety Management Systems based Certification (FSMSC)

Fish and fishery products are certified under the FSMSC system.

Thus, it has been said that the Indian quality inspection and monitoring system is very sensitiveto the international food safety standards and is constantly evolving to meet the SPS standards.

Changes in seafood legislation: the Indian context

The issue of sanitary and phytosanitary measures (SPS) has been a major cause for concern forthe India seafood industry since August 1997, when the European Union (EU) banned the importof seafood from India. The ban was precipitated on three primary counts: (i) serious deficiencieswith regard to infrastructure and hygiene in fishery establishments and ‘there is not enoughguarantee of the efficiency of the controls by the competent authorities’; (ii) potentially high riskfor public health with regard to production and processing of fisheries products; and (iii)contamination by micro-organisms, which might constitute a human health hazard (Saqib, 2001).

Kerala bore the brunt of the impact of the EU ban. Prior to the ban in 1995/96, 48.5 percent ofthe total value of seafood exported from Kerala was to the EU. In 1996/97 this figure was 37percent. However, in 1997/98, in the aftermath of the ban, this figure declined to 19.7 percent.Most of the large processors in Kerala were geared to cater to the EU market and the ban cameas a rude shock to them.



Faced with the ban, the Indian government began putting in place elaborate process standards.The Commerce Ministry of the Government of India laid down stringent qualification norms forIndian firms to be eligible for export to Europe and ensured their rapid uptake andimplementation by the industry. During November 1997, after a review team visited selectedprocessing plants in the country and satisfied itself that the seafood industry was improvingalong the lines demanded by the EU, the four-month ban was lifted partially, and a few firmsmeeting the European hygiene standards were certified to export to the EU. Currently, thenumber of processing plants and freezer vessels approved for exporting to the EU stands at 138and 5 respectively (MPEDA website, 21 April 2004).

The Export Inspection Agency is in overall charge of EU certification to be accorded to theprocessing units. Multi organisational teams consisting of representatives of EIA, MPEDA andCIFT are formed at two levels: Inter Departmental Panel (IDP) and Supervisory Audit Team(SAT), and these carry out a series of assessments before forwarding their recommendations tothe EU for approval of the plant. The areas covered during these assessments cover as many as36 areas and require a thorough investigation in each case. Subsequent to allotment of the EUapproval, the plant has to undertake periodical checks using a checklist. The EIA, with the helpof CIFT, undertakes periodical inspection of the factory premises. The system seems to beworking effectively, efficiently and along the lines approved by EU.

The new EU standards were followed by the enforcement of the seafood Hazard Analysis andCritical Control Point (HACCP) law in the US from December 1999. This meant that the Indianexporters to the US had to upgrade to HACCP systems. HACCP is also part of the EU foodsafety standard, but the EU standards are higher than the HACCP standards, so those plantsapproved for export to the EU could also export to the US.

In December 2000, EU introduced residue monitoring requirements for veterinary medicines infisheries products from third countries. In March 2001, it further introduced requirements formonitoring heavy metal contamination in a wide range of foods including fish products.Following the EU requirements, the Government of India issued a notification on 17 August2001, specifying the limits for various antibiotics, pesticide and heavy metal residues in seafoodproducts. During 2002-3, Indian shipments to the EU faced rejection when traces of antibioticswere found in the cultured shrimp. In another instance, consignments of shrimp from India alsofaced rejection when muddy smell was detected in them. With each crisis, the government swunginto action and ensured that the standards of the importing countries were strictly applied at theproduction and processing stages.

Thus, thanks to the series of shocks from the EU and the US during the last few years, theseafood export industry in India is generally considered to be well prepared for the SPS regime.The government has also been pro-active both in addressing the quality requirements of theimporting countries through legislative mechanisms and in helping the industry to adapt to thenew requirements. The Australian Quarantine and Inspection Service (AQIS) recognised theIndian certifying agency, the EIC, which means that the seafood consignments from Indiaaccompanied by EIC certificate would undergo only random verification sampling not exceeding5 percent of the consignments.



The experience with quality compliance in the shrimp exports applies at three levels:

production and pre-processing (including shrimp capture and culture and handling of rawshrimp);

processing issues (where water quality, source of water for ice making, infrastructure andtransportation utilities come in for inspection); and

post-processing, including testing, packaging and marketing.

There is evidence to show that the legislative dimensions to stand up the SPS Agreement in thesethree areas have been taken care of by the Indian government, although the implementation ofthe legislation, particularly at the first level – i.e., production and pre-processing – remainsproblematic, as shall be discussed later.

Government support for upgrading the systems to international standards

At the policy level, going by the Approach Paper to the Tenth 5-Year Plan and the Plandocument, the changes to international seafood legislation, or the SPS Agreement itself, appearto receive only marginal interest. The Approach Paper suggests improving hygiene andsanitation in the existing fishing harbours by upgrading them to incorporate the HACCP and ISO9000 requirements and developing a greater awareness amongst the fishers on the issue ofhygienic handling and preservation of fish as the two areas that would need attention. The Tenth5-Year Plan identifies ‘Creation of health and sanitary check facilities to ensure quality ofproducts as per international standards’ as a thrust area during the plan period, but avoids anydiscussion of what this will involve.

In practical terms, however, the government has been extending considerable support to theseafood processing industry to upgrade the existing systems to meet the international standards.The various support programmes from MPEDA include (from MPEDA 2001): financialassistance for acquisition of fish processing machinery, installation of flake/chip/tube ice makingmachines, upgradation of cold storages, installation of generating sets, establishment of chillroom facility, installation of water purification system and setting up of water effluent treatmentplants. Besides, insulated iceboxes are provided at subsidised cost for use in capture and cultureoperations, interest subsidy is provided for seafood units to facilitate upgradation,

Much of the support is in the form of subsidising a part of the cost (generally 25%) of theinfrastructure, which means that the processing plants themselves would still need to investsizeable sums on their own.

SUBSIDIES AND SEAFOOD LEGISLATION: THE VIEW FROM THE BOTTOM

Obviously, the changes in subsidies and seafood legislation are having a serious impact in termsof changing the terms of access to different assets and increasing or reducing vulnerability.However, change has been a determining agent in every walk of life and while its direct impactsare ascertainable to a degree, its secondary/indirect impacts – particularly increased/reducedaccess to assets or increased/reduced vulnerability – are much more complicated and owe to anumber of factors. Reduced fish/shrimp catches and overcapitalisation of fishing effort, to cite



just two examples, have an all encompassing impact on the fisheries sector as a whole, and thismeans that piecing out the impacts of a change in a subsidy – which is frequently an indirectsupport – requires far too many assumptions. The study thus confines itself to discussing thedirect impacts of changes to subsidies/seafood legislation on the stakeholders.

An important, if implicit, aspect of this inquiry has been to understand the information flowsbetween the macro-level and the grassroots level concerning the processes of liberalisation. It isnecessary to know how much the primary stakeholders (particularly the poor) understand aboutthe reforms process, identify with it, and contribute to it, because many of the changes takingplace in the name of liberalisation can have potentially significant impacts upon the life andlivelihoods of their lives.

The field studies have consistently indicated that the information flows have been extremelypoor and in many cases simply non-existent. At the producer level, with the possible exceptionof mechanised fleet owners and large aquaculturists, it does not appear that many people areeven aware of the changes happening within the sector, although they are frequently affected bythem. For instance, on the issue of the fluctuations in the beachside price of shrimp in the lastfive years, as many as eight different reasons were given by different primary producer groupsand in all cases, it is clear that their information was grossly inadequate. Very few people outsidethe seafood processing and export sector are even aware of the changes in the seafoodlegislation, and this will certainly have an impact upon their ability to cope with ‘sudden’decisions affecting their livelihoods, as happened when the antibiotics and muddy smell issuescropped up in aquaculture sector. Already, the gaps in information are wide enough: half thetime spent at the meetings with the different stakeholder groups in fishing villages was devotedto explaining the process of liberalisation (in very skimpy terms at that) to the participants. Asthe reforms gather momentum, these gaps will increase and the people’s capacity to deal withchange will proportionately decline.

CHANGES IN SUBSIDIES AND IMPACT ON THE SHRIMP EXPORT INDUSTRY ININDIA

The discussions with the different stakeholder groups have provided a broad – but by no meanscomprehensive – list of important changes that are attributable to trade liberalisation in thecountry. The changes to subsidies are taking many forms – they cover five of the six modalities(except ‘direct transfers’, which have never been a major subsidy anyway) as defined by APEC –as shown below:

Change ExamplesExisting subsidies are removed,brought down or do not growproportionate to inflation

Diesel subsidies Kerosene subsidies Electricity subsidies: cost of ice and processing operations Social (welfare) subsidies Engine subsidies under motorisation programmes

Stakeholders begin to bear part orwhole of the cost of common facilitiesor pay user fees

Construction of roads and jetties Toll for transport Marketing/development cess for fish trade Berthing fees

Lending support reduced Reduction in lending to priority sector



Tax preferences withdrawn forstakeholders

Income tax payment for seafood exporters

Reduced institutional support Shift in institutional support to group-based activities Downsizing Department of Fisheries staff Closure of public sector units

Stakeholders begin to pay usercharges for common propertyresources

Registration and licensing for fishing vessels Registration and licensing of aquaculture farms

Changes in open access regimes tosupport conservation and managementefforts

Ban on fishing for turtle protection Ban on seed collection Closed seasons, fishing regulation acts etc.

A. Existing subsidies are removed or reduced

This is by far the most significant impact of trade liberalisation and will be discussed in moredetail than the others.

1. Increasing costs of HSD (high speed diesel) and kerosene

The consequences of the diesel price hike are extremely serious on the mechanised andmotorised categories in the capture sector and on all farmers in the culture sector (who use dieselextensively for pumping water) in all three states. Fishing costs in mechanised sector rose fromRs. 1 500 to Rs 10 000 for a single day fishing trip, with the cost of HSD taking 50-70 percent ofthe investment. The Government of India has exempted excise duty on the HSD oil used by themechanised boats, but this works out to a little under ten percent of the cost of fuel, and is notconsidered adequate by the boat owners. In the motorised sector, the cost of fishing operationswent up from Rs. 200 to Rs 1 500 for a single day trip, a major part of it paying for fuel. Themotorised boats do not receive HSD oil subsidy. Cost of diesel for pumping in a small scaleaquaculture farm worked out to 10 to 15 percent of the total recurring costs in 2000 and is nearly20 percent now, even more than the cost of seed. The price hike coincides with reduced shrimpproduction and the motorised fishers estimate that they make a surplus in three out of every tenfishing trips, break even in four cases and lose in the remaining cases.

The cost of transportation of shrimp from the landing centres to distant processing centres andfrom processing centres to the shipping centres has been reported to have increased dramatically.It costs nearly four times more to send shrimp from Puri to Vizag compared to mid-1990s.Obviously, this will be reflected in the prices paid to the primary producers.

Kerala is the only state in the country where the motorised fishing crafts receive subsidies on thekerosene for their imported outboard motors from the government. There is no explicit subsidycomponent, but each boat owner receives a specific quantity of kerosene (determined based uponthe engine horsepower) at the PDS price for fishing purposes. There are boats which had permitsto receive up to 600 litres of kerosene through ration shops, averaging 300 to 500 litres, but havebeen receiving only 150 to 175 litres for the past couple of years, which is barely sufficient for aweek’s fishing. Purchasing the shortfall in the open markets at Rs. 20 per litre (which goes up toRs. 25-30 in black market) increases their costs enormously and leads to unprofitable operations(The Hindu, 19 April 2004).



The State Government of AP launched a new programme called Deepam in July 1999, whichinvolved paying the LPG connection fee for women who belong to self-help groups and whosehouseholds are classified as being below the poverty line (BPL). As of March 2002, over 1.5million LPG connections had been released through the Deepam scheme, including 1.2 millionin rural areas. An evaluation of the programme conducted by NIRD in 2001 (World Bank, 2002)indicated that 89 percent of the users found switching to LPG an expensive proposition. Thefinancial considerations confined LPG to incidental use or to periods when the opportunity costof fuel wood use was high. Subsequently, the cost of LPG has gone up still higher, and duringthe field studies, it has been observed that in many households the LPG stoves were lying in acorner, apparently idle for some time, because their owners could not afford to buy refills.

Coping strategies: The social, economic and environmental impacts of these changes are quiteserious. In fact, increased expenditure on fuel is ranked next only to the decline in shrimpproduction and international price fluctuations for the crisis the industry is facing today. Theraising cost of fuel means that even if the same quantity of shrimp are available now aspreviously, the costs cannot be recovered. Smaller mesh sizes, fishing in inshore fishing groundsand increased capture of juveniles are reported from the capture sector. The fishing duration hasincreased in all cases in order to reduce costs of operation. The number of days a motorised boatgoes fishing has come down to 90-120 days in a year, because they cannot afford to launch theboats at every opportunity due to the cost factor. This leads to increased unemployment,perpetual indebtedness and serious food insecurity problems.

The increase in recurring costs has meant a restructuring of the sharing systems and the crew’sshare has come down from about 40 percent in early 1990s to less than 25 percent. Unable tofinance the operations, many owners simply allow the boats to sit on the beach and work as crewon others’ boats (Salagrama, 2003c), or move into other occupations. Geographical andoccupational migration is on the rise in Andhra Pradesh and Orissa as a result of non-profitabilityof operations (Salagrama, 1999), with the burden of supporting the household falling on women.Lack of savings and need for sizeable investment on every fishing trip mean taking loans on adaily basis, and it is reported that several fishers decamped from Puri-Pentakota, unable to findthe means to repay their debts.

An interesting trend observed in several villages is that the non-motorised crew – who are amongthe poorest in a village – are considered to be more secure than the motorised crew. A new trendin all three states is to leave the engines on the shore and depend on traditional propulsionmethods instead. New boats – plank-built or FRP – are made without provision for installingengines (S Nageswara Rao, pers.com. Ayyappa Boat Builders, pers. com.).

It has also been noted that there are fewer takers for the subsidies being provided formotorisation purpose; unlike in early times, when there was a big demand for the engines, it issaid that a fisher would only need to apply to get the subsidy sanctioned. However, this couldalso be due to another change – or the lack of it – in the existing subsidies: the amount of subsidygiven – which worked out to 50 percent of the total cost of engine in early 1990s – has not keptpace with the engine prices and constitutes only 20-25%, necessitating the fishers to invest more.



In the mechanised sector, up to a third of the boats are idle at any time of the year and a similartrend has been reported from almost all fishing harbours in all three states (SIFFS, 2002). Inorder to reduce operational costs, many boats in Kakinada region use kerosene to run their dieselengines. Considering that 70 percent of the operational cost of a mechanised vessel goes for fuelcost alone, the owners claimed that it would work out cheaper even if they forego the taxexemption on HSD oil and replace the engine annually. In order to minimise costs, a number ofboats work together, sending one boat to scout the fishing grounds and radio back for others tofollow only if good catches are expected (P Sriramulu, pers.com.).

The mechanised boat owners of Andhra Pradesh do not have access to PDS supplies and buytheir kerosene from open market at Rs. 15-16 per litre. This gives them a saving of Rs. 8 whencompared to HSD oil, and the saving comes down to Rs. 5 when the GOI’s exemption on HSDoil is taken into account. Thus, the actual savings from kerosene are marginal, and a slight hikein the price of kerosene will automatically have an impact on their operations. The boat ownersin Kakinada predict that a further hike in kerosene price would rise the percentage of sick boatsin the fleet from the current one-third to at least half of the total fleet.

An evolving strategy of the Kerala fishers to overcome the kerosene crisis takes exactly theopposite route: whereas the mechanised boats in Andhra Pradesh have shifted from HSD oil tokerosene for reducing their operational costs, the motorised OBM fleet in Kerala is on the lookout for a shift from kerosene engines to diesel engines to overcome precisely the same problem.The ring-seine operators have already switched over to diesel engines. The use of more energyefficient diesel engines instead of the fuel-guzzling and faster moving OBMs is expected tocounteract the additional costs of operations more than adequately (Baburao, pers.com.), andtrials are currently underway to test the new inboard engines.

In aquaculture, the additional cost has meant making a choice between more expenditure orrisking attacks by the disease with reduced water management. With the activity having becomea lottery, many farmers are averse to spend more, but they do so anyway, and many take loansfrom the company agents to pay the cost of diesel.

2. Increased cost of electricity and impact on ice production

The cooperative NGO, South Indian Federation of Fishermen Societies (SIFFS) set up two iceplants, one in Tamil Nadu and the other in Kerala, which coincided with the power reforms andan increase in production costs. Poor fishing seasons and high cost of power affected profitabilityof the first ice plant from the beginning (SIFFS, 1999: 8). In the subsequent years, in spite ofincrease in ice sales, the ice plant could not earn profits, and SIFFS was forced to increase thesale price of ice in view of increased electricity rates (SIFFS 2001b:9). The uncertainties relatedto production and marketing also forced SIFFS to settle for lower margins with the second plant,and decide against setting up a third ice plant (ibid; 57). Another study by SIFFS in 2002indicates that electricity is a major variable cost component affecting the profitability of iceplants in Kerala (SIFFS, 2002), amounting to 60 percent of the recurring costs (Rose, pers.com.).

In Andhra Pradesh, the increased cost of electricity has meant that the economics of operationdid not work out well for many ice plants that came up in rural areas. In Uppada village, there



were five ice plants in operation in early 1990s, but only three are operational anymore. This,despite the fact that usage of ice has gone up by three to four times in the meantime! Thisparadox of the numbers of ice plants declining in the face of increasing ice usage by the fishershas also been noted by SIFFS (2002) in Kerala. The seasonal nature of operations and theinability of the markets to pay beyond a particular price, coupled with the increase in electricitycharges has been cited as a reason for the failure of many ice plants.

In most places, the increased cost of electricity is coupled with uncertainties of power supply.This has led several ice plants to install diesel engines to ensure continuous production, but theincreased cost of diesel has meant that the cost of production goes up. The result has beeninadequate availability of ice when required, poor quality of production (the ice blocks arefrequently hollow inside) and increased price for the producers.

The increased cost of electricity – and diesel for standby power generation – has been a majorexpense for the newly revamped processing factories, and is said to work out to a sizeableproportion of the total recurring costs (going up from 8 to 20 percent of the total costs).

In the early stages, the processing plants provided ice free of cost to the mechanised boats andthe aquaculturists, but nowadays, the cost of ice is deducted from the final payments. Althoughmost boats tend to carry an insulated container onboard, they buy ice only when they are sure ofgetting good catches of shrimp. In early April 2004, a motorised boat from Suradapetaaccidentally caught a huge quantity of shrimp, which spoiled by the time the boat reached shorebecause the crew did not take ice onboard on that particular day.

3. Reduction of social subsidies28

Many fishers reported that the availability of foodgrains and other essential ingredients throughPDS has decreased and that there has been a narrowing gap between open market prices and thePDS prices to the extent that there is really very little difference in prices between the two. Thequantity of rice, kerosene, sugar, oil and other commodities supplied through the PDS has comedown, although the poor still buy their foodstuffs from the PDS first and the shortfall from theopen markets. This has food security implications particularly during lean periods, when a familycan spend up to 100 percent of its income on food and yet remain hungry. This has an impact onlivelihood security of the fishers – many fishers have reported they either pawn their livelihoodassets or accept the most outrageous conditions for selling their shrimp catches to the traders, inorder to get something to eat. This kind of deprivation is particularly severe in Orissa and thenorthern districts of Andhra Pradesh.

The field evidence points to a positive environment of growth in terms of education and manysupport programmes – midday meal scheme, for instance – do play an important role inattracting the children to schools. Free books and other study material too seem to be reachingthe children so their own investment in education continues to be low.

28 Although not strictly a ‘trade’ related subsidy, this is included here because it is one of the important changesnoted by almost all the stakeholder groups as being important.



On the health front, the promotion of user-financing and cost-recovery in health sector, thoughstill in the early stages, has been having an impact upon the poor people’s access to healthcare.All government hospitals have begun to charge an entry fee, although the amount charged is notreally significant. However, the various services provided are all charged separately and,depending on the nature of the illness, could add up to a tidy sum. There is unanimity of opinionthat the public hospitals provide far fewer medicines to the poor than they used to and preferinstead to issue prescriptions for purchasing medicines outside. The result is that healthcarespending is an important cause of indebtedness among poor households – an ICM study in Orissa(Salagrama, 2003) indicated that a poor family could spend up to 40 percent of its income onhealthcare. With the public healthcare institutions beginning to charge for everything, poorhouseholds seem to depend more on home remedies or local quacks.

B. Stakeholders bear part or whole of the cost of common facilities

A new trend in terms of government financing for public utilities which began in the 1990s wasto make the users of a utility to bear a part of its cost, in cash or kind. In Andhra Pradesh, it isnecessary for the villagers to bear a third of the cost of installing a service in the village. In BCVPalem village, the villagers paid Rs 50 000 in 1997 as their share for the setting up of a highschool in the village. Whereas public taps were the responsibility of the government until mid-1990s, nowadays it is the villagers who bear the cost of installing the pipelines from the mainwater duct into their streets. For trade related infrastructure like fishing jetties, all expensesbeyond a fixed sum – which is sufficient to build the bare structure – are to be borne by thevillagers concerned.

The impacts of such investments do not yet appear to be particularly felt by the users. If theutility is useful for the village as a whole, the village elders collect the necessary sums or use thereserves from the village fund for the purpose. If the sum is large, communal fishing expeditionsare organised. So far, the fishers in villages like Uppada avoided making payments of large sumsof money by sourcing their contribution from another government department, or by making theestimates sufficiently high so that the government’s share itself would take care of the entireconstruction. However, this is unlikely to last and many fishers were sure they would be made topay for more common services in future.

An important point that was raised in Palaman Peta about the payment of user charges forcommon utilities like taps is that, while the poor are not forced to share the costs, they also get tobe considered only secondary users of the resource, while the more affluent treat the utility astheir private property. The fundamental differences in economic status will determine access toresources. Also, by virtue of their ability to pay more, the more affluent can determine where aparticular utility should be installed, reducing access to the poor.

An important way of recovering the cost of infrastructure is through charging user fees. TheVizag fishing harbour was upgraded to stand up to the changing quality demands, and theberthing fee for the mechanised boats was raised from Rs. 230 to Rs 1970 per month. The boatassociations raised many protests against this and managed to get the berthing fee reduced to Rs480 a month, which is still more than twice the original berthing fee.



New arrangements like ‘Build-Operate-Transfer’ (BOT) are increasingly promoted to make theprivate sector invest in large-scale infrastructure projects and these will certainly raise the costsfor the public. Many newly laid roads and bridges collect a toll, and it is reported that when thenation-wide road expansion programme – which is currently underway – becomes operational,toll will be charged on a per kilometre basis on all traffic. Considering that shrimp trade relies onthe road network regularly, the amount paid for using it could be sizeable. Obviously, theadditional expenditure will be reflected in the payment made to the producer.

C. Reduction in lending support to fisheries

While no figures are available, there is a strong perception amongst the fishers that the creditsupport - at subsidised lending rates – from banks and other credit institutions for fisheries sectorhas declined through the 1990s. The fishers themselves point out that this has largely to do withpoor recovery performance of the past loans, but the influence of liberalising trends cannot beentirely ruled out. There is a clear perception among the fishers that banks have become moreurban-oriented and also more concerned about their credit portfolios, particularly in the face ofcompetition from the private international banks. There is a large scale reduction in bank staff –almost all national banks introduced ‘voluntary retirement scheme’ (VRS) in the 1990s – whichliterally emptied many banks of their staff. With the reduction in staff, some reorganisation toohas taken place and the rural branches have been a major casualty in the process. There has alsobeen a corresponding decline in the development support provided by weaker sectiondevelopment organisations like the BC Corporation and the SC Corporation, which had neverbeen a sustainable source of credit anyway.

D. Tax preferences withdrawn for stakeholders

Seafood exports, by virtue of earning the much needed foreign exchange for India, wereexempted from income tax. However, since 2001, the exemption has been withdrawn and theexporters are required to pay income tax. A previous controversy regarding the status ofaquaculture as an allied activity of agriculture (which is exempted from income tax purview) wasset at rest when the Income Tax Department decided to accord aquaculture with the status of anindustry and make it taxable. Although aquaculturists managed to evade tax payment on the pleathat the shrimp they produced was entirely intended for export, and that export income wasexempt from tax (Santhanakrishnan, MPEDA Newsletter, ?2001), the withdrawal of the privilegeforces them to pay – at least theoretically – income tax. The unfortunate point is that while therewas indeed a time when the seafood processors and exporters could have paid sizeable amountsas income tax, this certainly is not it. At a time when the industry is facing severe crises, this willbe another blow to the profitability of operations. As one seafood exporter lamented, theexporters cannot even fudge records to show nil returns because their business transactions areknown to the government agencies to the last milligram. Obviously, this additional burden willultimately fall on the prices paid to the primary producers.

E. Changes in institutional structures

Perhaps the most significant change in terms of providing livelihood support to the poor in thepost-liberalisation period is the shift from individual support programmes to group-based



programmes. The Integrated Rural Development Programmes (IRDP) which focused largely oncreation of individual assets were deemed to have been a failure because the economies of scaledid not work out and the individual’s capacity to increase production did not match with his orher access to markets. Keeping in line with the shift from technology-led growth to market-ledgrowth in the 1990s, the emphasis shifted to group-based initiatives which – it was hoped –would enhance the access to distant and more lucrative markets for small producer groups.Women and youth were specifically targeted for receiving group-based support – finance,training and marketing assistance – and special markets have been set up in Andhra Pradesh andOrissa to help the groups to market their products. The fact that some of the major povertyalleviation and rural development programmes in Andhra Pradesh and Orissa are funded byinternational organisations like the World Bank and the DFID indicates that the shift in emphasiscertainly has a global background.

One of the key features of trade liberalisation is reducing public sector’s role and streamliningthe expenditure on maintaining a large bureaucracy. There are indications that this has beentaking place in fisheries sector, and the two examples we have come from Andhra Pradesh. InAndhra Pradesh, the Andhra Pradesh Fisheries Corporation (APFC) – which ran a whole gamutof services, most of them loss-making propositions – was one of the first state-ownedcorporations to go in the post-liberalisation period (1998). Among other things, the APFC alsoowned a boat building yard in Kakinada, which was reputed to be the best of its kind on the eastcoast of India, and did a lot of service for small-scale fishing craft development and construction.Over time, it became a standard setter and, as such, acted as a check on quality in the private boatbuilding yards.

However, the closure of the APFC meant that the boat building yard too had to go, andsubsequent events show that this has been a serious loss for the fishers. The quality standards forboat building slipped drastically in the state, and the NCDC-funded integrated marine fisheriesdevelopment programmes, which provided the fishers with FRP boats in the last six years havebeen an unmitigated disaster as a result (Salagrama 2003c). Forced to spend sizeable sums – overand above the NCDC support – for construction of the boat and subsequently on repairs, manyfishers in Vizag district had to sell their agricultural lands. Still, not many of the boats areseaworthy or functional. In the interviews, the fishers in many villages made the point that, hadthe APFC boat yard still been around, their condition would have been far better.

There has also been a major – but subtle – change in the staffing in the Department of Fisheriesin Andhra Pradesh, which has stopped recruitment to the middle-ranking positions – i.e., thosethat are generally involved in extension programmes – since early 1990s. Subsequently, as anumber of people retired from the department, their places have remained vacant, and thus,between 1993-94s and 2001, the staff strength slipped from 2000 (Vivekanandan et al 1997) to1787 (DOF, AP 2001: 2). Irrespective of numbers, a clear gap is perceived by the fishers in manyvillages, who felt that the extension services have certainly not been as effective as they used tobe. The result is that the information flows between the Department of Fisheries and the fisherson various fisheries and trade related issues are reduced to a trickle. The lack of regular contact isalso seen to be contributing to policy making which overlooks the needs of the fishers.



There have also been few new development programmes either at the national level or, moreparticularly, at the states’ level in the last decade. This is owing to resource constraints, but thenew emphasis on ‘fiscal discipline’ has also been cited as an important reason.

F. Stakeholders pay user charges for access to common property resources

The marine fishing regulation acts of various state governments stipulate that all fishing vesselsin the state be registered and levied an annual licensing fee. In Andhra Pradesh and Orissa, thiscould only be enforced with respect to the mechanised trawlers but the traditional sectorremained largely unregistered. Because being registered did not provide any incentive and notbeing registered did not invite any sanctions either meant that the fishers had no particularinterest in registering themselves. However, intense efforts by the officers of the Department ofFisheries began paying dividends by 1999, and most artisanal boats in Andhra Pradesh are nowregistered and licensed. The amount of money charged is not high, but the fact that this systemhas now become operational means that the government has now reasserted its ‘ownership’ ofthe common property resources and that the fact is acknowledged by the fishers too.

Similarly, it is necessary for all aquaculture farmers to register themselves with the AquacultureAuthority of India and obtain a license, which is contingent upon their farming activities beingenvironmentally friendly, but the long delays that the process of registration entails is said todeter many farmers from applying for registration. Only about a tenth of the farms in AndhraPradesh are reported to have been registered with the Aquaculture Authority of India, although itis not legally permissible to undertake farming in the coastal areas without the registration.

G. Changes in open access regimes for conservation and management

A series of conservation and management measures – which implicitly underline the State’sownership of the commons like the sea and the sensitive coastal ecosystems like mangroves –have been put in place to conserve the biodiversity and particularly vulnerable species like thesea turtles. There are also seasonal bans on fishing, bans on destructive fishing practices likeshrimp seed collection and on entry into, or utilisation of, mangrove resources. Different stateand central departments take a role in the conservation measures.

A ban on fishing implemented in Orissa for conservation of turtles has both environmental andtrade implications. In 1996, the US made it mandatory for shrimp to be harvested with turtleexcluder devices (TEDs) to be eligible to export to the US markets. Instead of simply making theTEDs mandatory, the government declared long stretches of the coastal areas in Orissa, wherethe threatened species of turtle is known to frequent for breeding purposes, as wildlifesanctuaries, thus prohibiting fishing and other activities. The impact of the ban has been felt bythe fishers in the dozens of villages abutting the banned fishing zones and has led to seriouslivelihood problems (Mathew, 2004; ICM, 2003). The mechanised fishing operations also wereadversely affected.



CHANGES IN SEAFOOD LEGISLATION AND IMPACT ON THE SHRIMP EXPORTINDUSTRY IN INDIA

So far, the direct impact of changes in seafood legislation has been experienced by theprocessing and exporting companies, while the other stakeholders in the sector felt the shocksonly secondarily, although no less seriously.

Impact on seafood processing sector

The short-term impacts on the seafood processing industry were related to losses due to rejectionof consignments. In the medium-term, this included finding the capital and technology necessaryfor upgradation and obtaining the necessary certification for export. In the long-term, continuedsurvival in the face of declines in production as well as the unit realisation in the internationalmarket has become a serious problem area.

The seafood export industry responded to the ban by investing large sums of money onupgrading their plants to satisfy EU norms. In Andhra Pradesh and Orissa, the impact was lessmarked mainly because the main market for their seafood is Japan. The exports to EU constitutedonly about 5 percent of the total exported from Andhra Pradesh. Still, a number of factors (seeICM 2002) necessitated the processing plants in this area also to upgrade.

Among the difficulties identified with the upgradation are the high cost of adaptation, theirrelevance of foreign standards to local conditions, the lack of timely and adequate informationand consequent transaction costs, the difficulties in understanding the requirements as well astesting and monitoring them, the perceived lack of scientific data for specific threshold orlimiting values and the uncertainty that arises from rapidly changing stringent requirement inoverseas markets. Some of these are discussed below.

Cost of compliance with international standards

Following the norms substantially increases the cost of production, because most of the capitalgoods need to be imported from the developed countries. The EU requirement of infrastructureto meet standards involves heavy investment in equipment and building apart from the runningcost. In order to upgrade their facilities to the required standards, the Indian processing industryspent US $25 million, according to the Seafood Exporters’ Association of India. It is nownecessary for each factory to have potable water system, continuous power (with standbygenerators), effluent treatment plants, flake ice machines, chill rooms and laboratories. It isestimated that such upgrading involves an expenditure of Rs 1 to 2 crores per unit as a fixed cost.Considering that banks are unwilling to extend loans to seafood industry, the investment isfunded through private sources at very high rates of interest, making the costs prohibitive.

As for recurring costs, the compliance costs have increased tremendously. It is estimated that fora medium sized plant, overhead cost goes up by as much as five times. The processing cost hasgone up from Rs. 2 to Rs 7 per kg. The increased compliance cost comes from:



Number of records to be maintained has gone up to 160 and the number of record keepersshot up from 2 to 16.

The number of operators has gone up from 8 to 16 because of additional machinery likeeffluent treatment plants, chill room, flake ice machine etc

Since peeling has been made an in-house activity under the EU regulation, the cost ofpeeling has gone up from Rs 1 to Rs 7 per kg

Water consumption increased by five times and power consumption by three times. Better quality of staff, equipment and uniforms have added to the general overheads

On an average, an export processing firm is estimated to spend about Rs 2 million per year tomaintain a HACCP plant (Anjani Kumar and P Kumar, 2003). The overall compliance cost, asestimated by the exporters and confirmed by MPEDA, for meeting the EU norms is between 15and 40 per cent of the FOB value.

The small firms suffered most seriously as a result of the quality standards. They had to incur anadditional cost of more than Rs 10 per kg on pre-export processing of fish products. These highinvestment and recurring costs have meant that many processing plants could not simply upgradethemselves to the standards. About two-thirds of the plants in the country are expected to be ableto upgrade themselves up to the new requirements, while the rest are expected to perish.Undoubtedly, this will create livelihood problems in the coastal areas.

Relevance of standards

Many of the standards adopted by the government are considered by the exporters as not relevantfor the product quality or are too stringent given the Indian fishing conditions, besides beingcumbersome and costly procedures. The standards set by the importing countries are even moredifficult to justify and many of them can easily pass off as non-tariff barriers. Moreover, theequipment for conducting some of these tests is not even available in India. Many of therequirements are considered to be unnecessary or un-implementable. As per the standards, thewater used in processing has to be tested in 62 different ways. The EU standards require thateven floors and ceilings should be washed by potable water. In many coastal areas, drinkingwater continues to be a major problem for a vast majority of population and the women walkkilometres to fetch a pot of water. Under the circumstances, using 100 000 litres of water dailyfor washing and cleaning purposes in the seafood plants is difficult not only in practical terms,but also for moral reasons.

Effectiveness of implementation

Besides structural upgradation, the changes also involved upgrading the skills of the personnelemployed in processing industry by providing appropriate training in various stages ofproduction and processing. As a result, the EU approved plants are reported to be as good as, ifnot better than, any plant in Europe and USA, as the EU review teams themselves remarked(MPEDA newsletter 2001). But this level of improvement frequently required bending overbackwards to be extra-accommodating to the importing country’s requirements. In what is seenby the processing industry as ‘going overboard in an effort to please the EU’, the Government ofIndia officials who were in charge of inspecting the processing units (for granting EU approval)



initially insisted that the walls and the floor of the processing area be covered with either marbleor granite, both of which are very expensive. In face of such an interpretation of the EECdirective, which only required ‘smooth and easy to clean surfaces’, plant owners had no optionbut to comply. The result was the cost of upgrading processing plants to meet EU standards waspushed up significantly. The general opinion among seafood exporters is that, this single issuecontributed significantly to weaken the overall financial position of many exporters.

Impact on the profitability and viability of operations

For many processing plants across the country, already suffering from the chronic problem ofunderutilisation of capacity (the average capacity utilisation was 15-20 percent in many parts ofthe country), steep declines in availability of shrimp and high cost of operations (as a result ofhike in costs related to labour, electricity and diesel), the need for further investment simplyacted as a final nail in the coffin. Of those which did upgrade, the high cost of investmentpractically drained them and led to a situation where they could not buy shrimp for processinganymore. Knowing that each processing plant offered employment to a number of people,predominantly women, it can be assumed that a sizeable number of livelihoods are lost with theirclosure.

Impact on producers

The impact of the EU ban on the fishermen in Kerala was immediate. The beach prices of shrimpdropped dramatically – to about 25 percent of the pre-ban price. Many trawler owners andartisanal fishermen did not venture out into the sea for about a week to ten days, as they fearedthat the prices would not be enough to cover their operating costs. The prices were slow torecover, as only those processors who were catering to the non-EU markets were buying. It tookabout a year for the situation to improve. The hardest hit by the ban was the trawling industry inKerala as their operations are entirely focused on export species. The EU ban also had a long-term impact on the industry in that the prolonged period of low returns forced many trawlers towithdraw permanently. Trawling as a means of livelihood lost its appeal for many fishermen asincome levels dropped drastically during 1998. The motorised artisanal sub-sector felt the effectof the ban to a lesser extent, since fishermen in this sub sector depended mainly on domesticspecies with export species being an important source of additional income.

The immediate impact of the ban on producers in Andhra Pradesh and Orissa was minimal.However, as the large-scale structural changes that came in the wake of the ban took shape, theproducers started paying the price. Put in market terms, since the buyer will not pay a higherprice for better quality, the producer has the option to bear the additional expenses or not sell atall. The trend over the last few years is that the producer has been bearing the costs, which keepmounting, while the buyers kept paying less, and the margins of trade have reached a delicatestage where it is very likely that the producer simply refuses to come down any further anddiversify his efforts to produce something else. Already this is happening in northern AndhraPradesh, where shrimp fishing has come to be looked upon as a non-paying proposition. Asimilar thinking is prevalent among the aquaculture farmers, who have begun to explore thepossibilities of finfish culture for domestic sale as a viable alternative to culturing the high riskshrimp.



Impact on peeling sheds

Prior to the ban the processing plants used to provide credit to peeling sheds to procure rawmaterial and supply them the peeled material. However the ban was one of the major factorswhich turned this system around. Starved of buyers, many peeling sheds offered raw material oncredit to processing plants. The high investment made on upgrading processing infrastructuremeant that there was a resource crunch for purchasing raw material (a fact that actually led tostopping operations for extended periods by several processors) and the peeling sheds’ offer ofshrimp on credit basis was eagerly accepted. What started as a short-term business tactic quicklybecame the established norm in the industry, and led to a change in the minimum requirementsfor setting up and operating a peeling shed significantly. Peeling sheds which could not providesupplies on credit basis found it difficult to find buyers and thus were quickly forced to adapt tothe new reality or face closure. Closure seems to have been the option exercised by many in thebusiness. While there are no reliable figures on the number of peeling sheds that have closeddown after the ban, the numbers by all accounts seem to be significant.

Impact on women

The only areas where women have played an important role in export sector are in the pre-processing and processing operations. Both these activities have been adversely affected by theEU legislation and its aftermath, and several women found themselves without a job. For anumber of women in Andhra Pradesh and Orissa, this meant losing one of their income sources,but for the girls from Kerala, this has meant the loss of their only livelihood. Anecdotal evidenceindicates that the number of Kerala girls in processing factories is declining. Many womeninvolved in peeling operations also came from single-headed households, and their income wasgenerally the only source of subsistence for their families. It is said that many of the women nowwork as servant maids in urban households: the proximity of most fishing harbours to urbanareas has thus come to their rescue, but at a considerable loss to their personal freedom andreduction in earnings.

THE FUTURE SCENARIO

The next question to ask would be the possible impacts of changes in existing subsidies and afurther tightening of seafood legislation.

Possible impacts of withdrawal of existing subsidies

For the purpose of this discussion, only the direct subsidies being given by the Ministry ofAgriculture under Plan schemes and by the MPEDA are considered. The general consensus, asfar as the direct subsidies in fisheries are concerned, is that even their complete withdrawal isunlikely to affect the conditions very much at the primary producer level. This is because mosttechnology promoting subsidies have largely been implemented as short term promotionmeasures involving one-time payments to the fishermen, and were drawn up as specific time-



bound ‘schemes’ which might or might not be extended in the successive 5-Year Plans29. Aslong as the target species was shrimp, which had a big market demand, the private sector tookover the programmes rapidly and operated beyond the control of the government. Johnson saysin the context of Gujarat (2001), “Although the government… has been an effective link to thesource of technology and ideas about fisheries modernisation, it has not had the necessaryresources necessary to restrain and direct expansion”. Private investment in fisheries is a lothigher than the state investment, and direct subsidies from the state played an ever diminishingrole in the sector. In the 1990s, most fisheries subsidies involved providing assistance to run theexisting systems – for instance, diesel subsidies, upgrading facilities, motorising boats assumethe prior ownership of an asset – than to introduce new systems.

Thus none of the production systems owed its continued existence to direct state support, unlikein agriculture. Also unlike in agriculture, the number of actual beneficiaries from the fisheriesmodernisation programmes is small although their contribution to the overall shrimp exports maybe proportionately high. Consequently, for a large majority of people, subsidies mean little.

Even for those who do receive the subsidies – tax exemption on HSD oil, for motorisation andupgrading processing infrastructure – the subsidies component is not very significant. InKakinada, the mechanised sector prefers to forego the tax exemption on HSD oil and usekerosene to run their boats. In many coastal districts, the subsidies available for engines arereportedly not utilised because the fishers find the cost of engine too prohibitive and the subsidypaltry in comparison. The processing industry, as indicated, received some assistance, but founditself in the doldrums in the end.

However, from the point of view of the poorer stakeholders in the sector, three welfareprogrammes – housing, insurance and lean season assistance – do have a significant positiveimpact on their life and livelihoods. There certainly is a need to streamline their functioning, butit is undeniable that they are the only direct subsidies going to the poor people in the sector andthat they play an important role, although it remains largely unrecognised. Any negative changesto these programmes will affect the poor adversely. If a change must be made to theseprogrammes, it should be in terms of increasing their quantum and reach to include morenumbers of poor people in a more sustainable manner. In the face unrelenting change in everyaspect of trade, those who are marginalised should have access to social security nets. Kurienand Paul (2001) discuss a range of options for setting up social security nets for fishworkers, andthere is a necessity to take the recommendations seriously and implement them with immediateeffect.

Possible impacts of a stricter seafood legislation

It can be said that the 1997 EU ban affected only the processing and export companies, whileleaving a number of people in the production and transport segments largely untouched. This isbecause a large part of the market chain – in fact, all of it, except the processing and the

29 Two subsidies – HSD oil subsidy and lean season assistance can be considered to be the only regular ‘capacity-and effort-enhancing’ subsidies, but the quantum of support they provide is too paltry to make a significantdifference.



exporting companies – is in informal sector, spread over a vast area with dozens of intermediateplayers whose existence and functions were not even properly recognised.

However, recent history has shown that the 1997 ban was only a curtain-raiser, and sooner ratherthan latter, all stakeholders in the sector would be affected by the changes in the global tradelegislation as well as fluctuations. Until 1980s, this kind of fluctuations would not have been sodamaging for two reasons: one, the potential to increase production from the capture and culturesources seemed endless; and two, the systems were not hyper-capitalised to an extent where itwas unprofitable to fish unless a certain minimum income was assured. In other words, profitmargins were sufficiently large to accommodate even a major slump in the market prices. Thismargin of safety is no longer available to the fishers because much of it is absorbed to pay for thefishing operations or to service past loans.

As the number of such scares increases, so will the efforts of the Government of India and theseafood industry to keep up with the international standards because seafood is an importantforeign exchange earner for the country. The potential negative consequences (while not denyingthat there may undoubtedly be some positive ones as well), should the seafood legislation bemade more stringent, can be predicted from past experience.

In the short term, the impact is most likely to be on the producers – in both capture and culturesectors. As the market prices for shrimp slump, the producers will lose heavily and many of themmight not recover. Although the impact of such measures would be felt by everyone in thesector, it will be the poorer producers who will be the most affected because of their inability tofind investment for future operations. Should the food legislation be extended to cover theproducers in a more efficient manner, one of three things would happen: (i) the fishers wouldcontinue to operate the same way as they always did, but would have to ensure that the enforcingofficials are kept in sufficiently good humour – meaning that neither the producer nor theconsumer will get any benefit, but the ‘middlemen’ – i.e., the enforcers of the regulation – willreap the benefits of a criminalising regulation, (ii) the fishers would take to other non-exportspecies, but this is highly unlikely in the short to medium term because the economies of scalewould not any more favour reverting to the old ways, or (iii) the fishers would simply have tostop fishing and go into other sectors in search of work – and this is already happening in mostcoastal areas.

In the medium term, more stringent seafood legislation will lead to a reorganisation of theprocessing and export industries which will come to be owned and controlled by fewer players,as the smaller players, who will be unable to find the investment or the markets to help themupgrade, will move out. The consolidation of the processing activity in fewer hands could meanreduced work opportunities in the processing activity. More importantly, this will mean moreorganised systems of production and trade. Already, many large processing companies have theirown fleet of vessels and there is a likelihood that the capture and culture systems will come to bemore closely integrated with processing and export systems. Considering that it is the informalnature of the fisheries operations that allow entry for some of the poorest people to make a livingout of the sector, it is possible that the change to more formal systems would mean a loss ofopportunities for a large number of people.



In the long term, the legislations affecting the export industry will begin to have an impact uponthe domestic marketing chains as well, forcing them to keep up or ship out. The Draft MarineFishing Policy of the Government of India (2002) envisages harmonising the existing domesticstandards for fishery products and by-products with the international standards so as to ensurequality of fish and fishery products ‘for domestic consumption at par with global standards’(3.2), which is easier said than done but, all the same, a cause for concern from a livelihoods andpoverty perspective, particularly as the point has been made in a policy document. When thismaterialises, many small-scale producers will have to undertake major changes to their currentsystems of production and transport. The generally gloomy situation in which most stakeholdergroups in the fishing industry find themselves today does not allow one to believe that they willbe able to upgrade their systems – with or without government support – to the required levels.When that happens, its impact on many categories of poor producers, processors and traders,including vulnerable sections like women and old people, will be considerable.

Overall impacts of changes in subsidies and seafood legislation

The impact of changes is felt at all levels and by all categories of stakeholders. As a mechanisedboat owner remarked during a poverty assessment exercise, “If someone is in export trade, he iseither already poor or will soon be!” The key changes in the shrimp export market chainsconcerning subsidies and seafood legislation appear to be: (i) changes in terms of access toresources and markets; (ii) increasing cost of production and trading activities; (iii) shift frominformal to formal operations; (iv) better integration of production and marketing chains (bothfor quality considerations as well as for economic viability); and (v) reducing social support. Theimpacts of such changes on environment, trade and livelihoods will be summarised in thefollowing sections:

a. Impacts on environment

The key changes that have an impact on environment are:

Reduction in ‘capacity- and effort-enhancing’ subsidies: This paper shows that the impact ofdirect subsidies in shrimp export chains has not been positive in terms of its impact uponenvironment. Reducing direct subsidies to these areas could then be considered to be a positiveoutcome from an environmental perspective, but for three factors: one, the quantum of subsidiesin the sector has come down so low that their withdrawal may not amount to much; two, there isno evidence that the direct subsidies to fisheries are coming down; and three, the review of thecurrent programmes and prospective plans shows that the essential features of the modernisationframework continue to remain valid in policymaking.

On the other hand, the changes to indirect subsidies like HSD oil and kerosene may havecontributed to more prudent use of fossil fuels. The number of fishing days has come down, butits usefulness is doubtful when it is considered that the intensity of fishing effort increased. Thereported shift in some fishing operations from shrimp to non-shrimp catches too will have apositive impact upon the shrimp stocks and to the food chain in general.



Changes in terms of access to inshore waters: Traditionally the coastal waters adjacent to avillage were treated by the local communities as common property resources, and even wherethere was no ostensible mechanism to ‘protect’ resources, there was certainly a system to ensureequality of access to all members of the community (Bavinck, 2001; Thomson, 1989;Schombucher, 1986; Salagrama, 2003b). An important subsidy in the modernisation programmehas been to treat the coastal waters as an open access resource, to allow entry of outsiders30 andto enhance technical efficiency of extraction methods. However, the focus has once again shiftedto controlling access, and at least two influential GOI documents (the draft marine fisheriespolicy and the approach paper to X-5 Year Plan) discuss the need for implementing a stricteraccess regime to conserve the nearshore resources.

The strategies to deal with this are two: one, controlling access to inshore and promotingdiversification into offshore. Controlling access to inshore waters will take the form of closedseasons, regulations on fishing effort and measures such as licensing and user fees. Theincreasing unsustainability of operations and integration of production and marketing chains intune with the international trade requirements will also favour a much leaner fishing fleetoperating in the coastal waters.

The diversification of fishing effort to the offshore waters is a more doubtful proposition. Itassumes that it is the fishing vessels currently operating in the inshore waters which are going toshift offshore. The current condition of a majority of the mechanised boats shows that it isunlikely that it will be the same boats which will upgrade particularly when the costs ofupgradation will be almost equal to rigging a new boat. This means that a majority of the newboats will be over and above the current size of the fleet. Further it is assumed that the offshoreoperations are sufficiently lucrative to keep the new boats off the inshore waters and that thegovernment can effectively control their ingress into inshore waters as well as proliferation in theoffshore waters (and overexploiting the resources there in due course). Unfortunately, pastexperience shows that these assumptions are rather too optimistic. Also, if the fishing potential inthe offshore waters should indeed prove to be lucrative, a pertinent question posed by a notedfisheries biologist in the country would be worth repeating: “If it has taken us thirty years tooverfish and overexploit the inshore waters (containing two-thirds of the total estimated yield),how much longer would it take us to do the same the remaining one-third?”

b. Impacts on trade

Shrimp export sector has always been a ‘top-down’ industry and all changes generally started atthe top and came down to the grassroots levels in due course. In the case of seafood legislationand its impacts too, what is happening at the top is instructive to draw conclusions about thelikely changes in the whole sector in due course. A lot of consolidation of market share is takingplace in all states, with a handful of companies accounting for a lion’s share of exports. Many ofthe top companies are also into production – both from capture and culture – and where they donot directly run operations, they provide sizeable advances to keep a hold on the activities. Asfewer companies control the markets and also influence or control the integration of productionand marketing activities, the sector will become more systematic and organised, which will makeit more sustainable in the long run, but at the expense of equity and, generally, increased poverty.

30 As contentious a term as any, and is used in a very general sense here.



The most obvious impact on trade is the reduced profitability of operations in shrimp trade.Generally, considering that it is the shrimp export trade that has received attention from theperspective of subsidies and seafood legislation will mean that there will be a shift in focus toother, less controversial, varieties. It is possible that the income from seafood export trade willcontinue to stagnate or decline for a while yet, until the industry re-focuses its strategies anddevelops alternative markets for other species. The reduced profitability will mean reducing thecost of operations and settling for smaller margins, but as the size of these markets grows, sodoes the profitability.

The shift from shrimp to other species also necessitates – and encourages – another shift: fromtraditional developed country markets to non-traditional developing country markets, whosestandards are largely similar to those pertaining in India. The new trade policies also encouragethis diversification.

But a more important shift is in terms of focusing the attention of the industry to developing thedomestic markets. An important impact of trade liberalisation is the growing middleclass withlarge disposable incomes. That the Indian middle class can afford the best that the world canoffer is vouched by the fact of almost all important international brands now appear in India andflourish. The potential for developing domestic markets has never been greater for Indianseafood industry, and already there are moves afoot to set up retail stores across the country forselling various fish and fish products processed and packed according to international standards(Meena, pers.com.).

Thus, in terms of trade, there is a likelihood of shrimp being replaced as prima donna of Indianexports by the entry of a number of other species, including finfish and the markets shifting fromdeveloped countries to developing countries and from export to domestic trade. From allaccounts, this is a healthy, sustainable, environment-friendly and equitable trend.

c. Impacts on Livelihoods

The conflict between environmental conservation vis-à-vis livelihoods has become sharper in thepost-liberalisation period, and there is evidence that the government has increasingly focused onthe first objective – i.e., conservation – through the 1990s. The establishment of a rights-basedcommon property regime would necessarily mean exclusion of a section of the existing users ofthe resource. Considering that at least some of these rights will come from the ability to invest inimproving the current systems, or from paying a ‘user fees’, it will mean that those with limitedresources to capital – i.e., the poor – are likely to be among the marginalised.

Diversification of fishing effort into offshore waters is necessarily linked to high investments innew technology and that again is beyond the scope of the small-scale producers, even if asizeable part of the investment is provided as subsidy by the government (which is veryunlikely). Once the offshore fisheries establishes itself (provided it does not survive byencroaching upon the inshore waters), it will encourage the government to put more restrictionson access to the inshore waters, or simply increase the conditions for allowing access to a levelthat many producers will not be able to buy into the system and have to move out. In



environmental terms, this will certainly be a positive outcome, but in terms of the livelihoods ofthe poor, it will be a disaster.

The shift from informal to formal operations and consolidation and integration of production andmarketing chains will necessitate excluding many poor people from the production andprocessing activities. For instance, the artisanal sector – which contributes a sizeable proportionof shrimp for exports – is increasingly finding itself in an ‘odd man out’ situation, and manypeople in the activity think that its contribution to exports will dwindle further until it stopscompletely.

Thus, the most important impact in terms of livelihoods is going to be the exclusion of a largenumber of poor from the export supply chains. This may not be a serious threat by itselfconsidering that people have already been facing uncertainties for the last five-six years and areon the look out for alternatives anyway. But the indications are that the changed context is alsoreducing people’s access to various assets which affects their ability to diversify in a sustainablemanner. Changes in terms of access to natural assets (the sea and the fish), physical assets(infrastructure) and institutions (markets and government) can reduce the poor people’s capacityto buy into the system and thus marginalise them completely. The reduction in access tolivelihood assets is compounded by the reducing the social subsidies and the state’s increasingwithdrawal from its welfare agenda, which means that for the poor in the export sector, the worstis yet to come.

New opportunities offered by liberalisation

Although liberalisation is supposed to bring many new opportunities in its wake, these have notyet become visible to the export stakeholders, particularly the poor. The dependence on afugitive resource, which is gradually declining, means that the new opportunities – like, forinstance, to export more fish abroad – remain hypothetical. The benefits of liberalisation arecontingent upon the capacity to capitalise on the new opportunities with capital, knowledge,skills and other assets that many stakeholders in the sector do not have. And the opportunitiesalso require a radical transformation at a larger level – improved services, infrastructure andother facilities – which is happening to some extent, but will continue to remain an uphill task. Inother words, for the export poor to take advantage of the new opportunities that tradeliberalisation offers are quite some distance away yet.



CHAPTER 4: CONCLUSIONS AND RECOMMENDATIONS

CONCLUSIONS

General status of shrimp export trade

Modern Indian fisheries sector developed based on shrimp, and continues to be dominated by it.The promotion of the sea as an open access resource, overlooking the customary systems of seatenure and organisation of fishing, has been an important subsidy in the modernisation period.Other, more-direct, subsidies encouraged entry of outsiders and private capital into the sector.

The benefits from the shrimp trade have been considerable and widespread in terms of theircontribution to national economy, livelihoods and social and economic well being, but in thelong run, three detrimental effects dominated the picture: increased social and economicinequality; environmental and resource degradation; and unsustainable livelihoods.

The largely informal nature of the seafood export chain allowed the participation of a number ofpoor and very poor people in the production, processing and distribution activities. However,there is little information on the role of different stakeholders. In spite of the strong emphasis oninformation and knowledge as fundamental features of the reform process, large knowledge gapsexist at the grassroots level on the process and the impacts of trade liberalisation.

The growth in production has not been reflected in terms of development of infrastructure, whichremained insufficient and, with stricter quality requirements, inadequate. Japan, the EU and theUS import a major proportion of India’s exports. This focus on a few developed countries alsohas implications on the profitability of the export trade.

Since 1990s, three issues dominated Indian export scene: decline in overall catches, particularlyshrimp; fluctuations in international markets depressing prices and profitability; andovercapitalisation of the production and marketing activities increasing risk, and any otherchanges in the sector are overarched by these issues. The single-minded focus on shrimp inproduction and export is not a healthy trend from the environmental, trade and livelihoods pointof view.

Trade Liberalisation and shrimp trade

Trade liberalisation in India has had to contend with trade reform and structural adjustmentpolicies at the domestic level and with the WTO and the various trade agreements at theinternational level. The policy responses thus have been two-fold: at the national level, the focusis on fiscal discipline while at the internationally, it is to argue for a consideration of the specialconditions that prevail in developing countries with large populations like India.

The lifting of tariffs and quantitative restrictions in the fisheries sector during the 1990s have sofar not brought any perceptible benefits or ill effects, but apprehensions about their possiblenegative effect are widespread. The import of foreign fish and fishing systems remains a threat,



while the export opportunities remain unutilised because of poor catches and systems oforganisation.

Subsidies

At the international level, the debates on subsidies in fisheries focus mainly on their trade andenvironment implications, and bypass other dimensions like equity issues, livelihoods andwelfare. The contribution of primary stakeholders to the evolving agreements concerning theirtrade is extremely low. There is continuing support at the policy-making level for introduction ofmore technological interventions in the capture sector, which can be potentially counter-productive. By focusing the discussion on subsidies to their trade related impacts alone, theinternational trade agreements might encourage countries like India to spend more on subsidiesof the ‘effort-and capacity-enhancing’ category.

In terms of direct subsidies, while there are changes at the policy level, they have not moved tothe implementation stage, hence their impacts at the stakeholder level are difficult to assess. Onthe other hand, there have been many changes in terms of indirect subsidies, whose impacts areserious, but whose origins and scope remain murky.

There does not appear to have been any cuts in the direct subsidies in fisheries, due perhaps tothe fact that the total outlay of fisheries in the national plans works out to a miniscule percentage.In any case, direct subsidies in fisheries, particularly those that are contingent upon exports,appear to be miniscule and are not likely to be affected even in the context of a stricterdisciplining of fisheries subsidies. Also, a reduction in direct subsidies to fisheries is notconsidered to have much impact on many export stakeholders, because their contribution toreduce the cost of production is small and their reach is confined to a very minute segment of theindustry anyway.

Indirect subsidies have been cut sizeably and this has a serious impact upon all categories ofexport stakeholders and their livelihood assets and strategies. Further reduction in indirectsubsidies will certainly affect many people, particularly the poor, very badly, lead to increasingdisparities in terms of poverty, food security and vulnerability. An overwhelming impression isthat the changes witnessed so far have been only the tip of the iceberg, and that the real changeswill become more significant within the next few years.

Seafood legislation

Many food exports from India have been affected adversely by selective application of sanitaryand phytosanitary measures in the last decade and the most outstanding of these is the case ofshrimp. The frequency and the impact of different SPS related trade measures have beenincreasing and the seafood industry has suffered badly as a result. Poor domestic laws andquality control systems, lack or unaffordability of technology and infrastructure, poverty andunorganised nature affect the seafood export trade, aggravated by constantly changing standards,variations in standards adopted by different importing countries and lack of clarity.



At the international level, developing countries like India are constrained in terms ofparticipation and standard setting in the SPS process, and there is a widespread feeling thatdeveloped countries manage not only set the agenda but also change it as they deem fit from timeto time, adversely affecting the developing countries. Within the country, the debate on standardsetting is confined to a few organisations and individuals, with the result that the country is notadequately prepared to offer effective alternatives.

The Government of India’s quality inspection and monitoring system is very sensitive to theinternational food safety standards and is constantly evolving to meet the SPS requirements.Active efforts by the government and the industry helped in the seafood trade to emerge strongerand the quality standards of the Indian plants are now considered to be world class. However thecost of upgrading the systems has been enormous and affected the operations and also forcedsome companies to simply close down. This has led to loss of employment opportunities for anumber of poor people. Their work status in the existing plants – the non-EU recognised ones –is changing from regular employment to daily wages/piece rate.

Stricter quality control would mean reduced profitability in the short term, marginalisation oftraditional players and consolidation of activity in fewer hands in the medium term and theinternational seafood legislation having an impact upon the domestic trade in the long term. In allinstances, this could potentially lead to marginalisation of the small-scale operators from theexport sector. Helping them to reach international markets with state support might be seen as anactionable, if not prohibited, subsidy.

Summary

Overall, further changes in subsidies and seafood legislation are considered to have a positiveimpact upon the environment by reducing effort and the cost of externalities. In terms of trade,shrimp is likely to be replaced as prima donna of Indian exports by the entry of a number ofother species and the markets shifting from developed countries to developing countries andfrom export to domestic trade. These changes might be accompanied by declining access to thepoor to the natural assets and physical assets on the one hand and to the markets on the other.This is compounded by the state’s increasing withdrawal from its welfare agenda and reductionin social subsidies.

Any new opportunities that liberalisation might offer are contingent upon certain basicrequirements at the individual level – assured access to resources, ability, skills and knowledge –and also at the macro level – a radical transformation in terms of infrastructure and other basicfacilities – which necessarily constrain the poor from taking advantage.

RECOMMENDATIONS

General

1. A fresh appraisal of the marine (inshore and offshore) and brackishwater resources, theirpotential yields and current levels of exploitation in order to develop a comprehensive marine



fisheries policy for the country is a necessary starting point to build future production andtrade strategies;

2. A comprehensive study on the stakeholders in the sector involved in production, processing,trade and ancillary activities to understand the implications of changes in trade liberalisationon their livelihoods is necessary. This will help (i) to ensure that the changes do notadversely affect the livelihoods of the poor and (ii) if the changes are inevitable and do affectthe poor, to develop appropriate measures adequately and sustainably compensate them.

3. Licensing and controlling fishing effort are necessary pre-requisites of a managementprogramme, but these will succeed only when two requirements are met: one, that access toresources is not limited based on one’s ability to pay a user fee (in monetary terms); and two,the primary stakeholders are given a defining role in deciding and implementing the controlstrategies (a ‘Joint Sea Management’ programme along the lines of the ongoing Joint ForestManagement programmes, but less top-down in orientation and approach, and moredemocratic and people-centred).

4. Active focus on diversifying the markets from the ‘Big Three’ – Japan, the EU and the US –to a larger number of developing countries is another essential requirement to addressfluctuations in trade.

5. There is a need to diversify the production systems from shrimp to alternative sources,markets for which should be explored with more vigour. MPEDA could start scouring themarkets more proactively for selling the less exploited species in Indian waters.

6. There is a need for an organisation to promote domestic marketing along the lines ofMPEDA for export trade, particularly considering the growing domestic trade potential. Thiswill help the processing companies to use their idle capacity to process finfish and othervarieties for domestic trade.

7. Diversification from shrimp to other species is likely to be accompanied by a reduction inprofitability of operations or, more likely, a loss because of the high cost of operations, andthere is a need to explore opportunities for reducing production costs at every level. Ratherthan provide subsidies for fuel, this might take the form of giving incentives for eco-friendlyfishing operations in a viable and consistent manner. The focus might need to be on thecommunities rather than on the individuals in this respect, and a socially-based programme ofawareness generation might yield benefits. Involving NGOs and other civil societyorganisations is also necessary.

Trade liberalisation

8. There is a need for improving the information flows to the stakeholders in general and ontrade liberalisation issues in particular. This cannot also be a one-way process, because asprimary stakeholders, the export participants have a right to take part directly and indirectlyin the scope and direction of trade arrangements at the international and national levels, andtheir opinions should be sought more vigorously at every stage.

9. Drawing up a periodical ‘white paper’ on the various changes taking place in differentsectors and their potential impacts, as well as a forecast of what further changes are likely tohappen in due course and disseminating it widely will provide a handle on the reformsprocess to the population and prepares them to (i) take part and move the process along moreequitable lines and (ii) address the changes and their impacts in a better prepared way.



Subsidies and seafood legislation

10. At the international level, India’s stand should be to negotiate for a ‘special and differentialtreatment’ for developing countries in the SPS and subsidies agreements. Generally highlevels of poverty and poor infrastructure mean that the current systems cannot stand up to theinternational requirements and the producers have no capacity to invest in upgrading thesystems either.

11. There is a need to improve the participation of developing countries in the standard settingprocess and this will need more homework. Constituting multi-disciplinary taskforces atvarious levels and for different sectors is an important requirement for making a morecomprehensive and forceful contribution to the process.

12. Similarly there is a need for the international debate on subsidies to take cognisance offactors other than trade and environment which have a bearing on the livelihoods of thestakeholders. There is a need for debate on this issue with various stakeholders in theindustry and there is an urgent need to start this process right away in order to be prepared forthe WTO Trade Negotiations in 2005.

13. At the national level, there is a need to consider putting a stop to all ‘capacity and effort-enhancing’ subsidies, irrespective of their professed objectives, taking Gareth Porter’s advicethat ‘It would be unwise… to base international policy towards the fisheries subsidies regimeon the theoretical presumption that well-managed fisheries can neutralise the negativeimpacts of subsidies”(Porter 2001:16).

14. The lifting of barriers and QRs in the new trade policies should be followed up withincreasing the capacity and competitiveness of Indian producers to work in an internationalenvironment and standards regime.

15. There is a strong and urgent need to understand the impact of reduction in indirect subsidiesand social subsidies on various stakeholders, particularly the poor, and implement measuresto alleviate the hardships caused due to this.

16. An integrated programme for developing infrastructure in order to address the requirementsof the ‘farm-to-fork’ principle which is very likely to become operational. The strategies inthis respect would be specific to each category of stakeholders and take their specialcharacteristics into consideration. This will help address the current quality concerns and alsoimprove the access to other countries for Indian product.

17. Improved storage capacity at key locations will help the producers/processors to retain theirproduct for extended periods when the market prices are not remunerative, and thusovercome a significant problem they face: international price fluctuations.

In summary, reduction in ‘capacity- and effort-enhancing’ subsidies and more stringent seafoodlegislation can have a positive impact on the environment as well as on the production andtrading systems. This, however, will need to be done in a way that the livelihoods of the differentstakeholders involved in the export trade are not adversely affected, and where they are,rehabilitating them in sustainable alternative livelihoods should take precedence over everythingelse. Trade liberalisation by itself cannot ensure equity of opportunities and sustainability oflivelihoods to everyone, particularly in a global context. There is a need for ensuring that therights of the poor are preserved in global trade agreements, and to take up active, meaningful andparticipatory programmes to enhance their capacity to take advantage of the process.



REFERENCES

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APPENDICES

A. ANNEXURES

Annexure 1: Major thrust areas in fisheries sector in successive Five Year Plans (from John& Hameed, 1995a & 1995b; GOI 1996 & 2002).

Plan Period Major thrust areasFirst 5-Year Plan(1951-56)

Mechanisation of country craft or introduction of new mechanised boats Harbour facilities Supply of requisites to fishermen Development of marketing Provision of ice, cold storage and transport facilities Introduction of mother-ship operations Provision for offshore fishing with large powered vessels such as purse seiners and

trawlersSecond 5-Year Plan(1956-61)

Improvement of fishing methods Development of deep sea fishing Provision of fishing harbours Integration of fish transport, storage, marketing and utilisation

Third 5-Year Plan(1961-66)

Increase fish production Improving conditions of the fishermen Development of export trade Formation and running of fisheries cooperatives Expansion of freezing plants, cold storage and canning facilities

Fourth 5-Year Plan(1969-74)

Increase in fish production by introduction of 300 fishing trawlers Development of export potential Improvement in the economy of fishermen

Fifth 5-Year Plan(1974-79)

Trawler Development Fund to help explore and exploit fishery resources throughintroduction of large number of fishing vessels

Acquire large fishing vessels through imports and local construction Assistance to State Fisheries Corporations to undertake diversified fishing,

processing and marketing Introduction of FFDA’s to promote intensive aquaculture Pilot project on brackishwater aquaculture in all coastal states

Sixth 5-Year Plan(1980-85)

Increase fish production Promote inland fish production Organise intensive surveys of marine fishery resources assessment and ensure

optimum exploitation of marine resources using traditional country boats,mechanised boats and deep sea fishing vessels

Intensify efforts on processing, storage and transportation of fish, improvemarketing, tap the vast potential for export of fish and fish products

Improve the socio-economic conditions of fishermenSeventh 5-Year Plan(1985-90)

Exploit the EEZ through higher investments in deep sea fishing Introduction of new motorised and mechanised craft and diversified methods of

fishing Introduction of new gears and new design of boats in traditional sector Legislation to control conflicts between mechanised and traditional sectors Construction of fishing harbours for mechanised fleet and small landing centres for

traditional fishermen Welfare measures such as insurance for traditional fishermen Attention on different aspects of post-harvest technology and marketing of fish



Setting up integrated cold-chains for fish marketing Setting up fisheries industrial estates with all required infrastructure Intensification of survey and design of fish farms in brackishwater sector

Eighth 5-Year Plan(1992-97)

Development of fresh and brackishwater aquaculture Promotion of coastal marine fisheries through motorisation, introduction of offshore

pelagic and intermediate craft, introduction of deep sea fishing Introduction of unconventional materials such as FRP for boat building Strict implementation of marine fishing regulation acts Augmentation of facilities at the fishing harbours and landing centres Promotion of fishermen welfare: coverage of insurance, lean season assistance and

construction of colonies with houses, protected water supply, sanitationNinth 5-Year Plan(1997-2001)

Fishing harbour facilities at major and minor ports Inland fisheries statistics World Bank project for shrimp and fish culture Development of freshwater aquaculture Integrated brackishwater fish farm development Motorisation of traditional craft, introduction of plywood boats and intermediate

crafts Reimbursement of Central Excise Duty on HSD Oil to mechanised boats below 20

M OAL Welfare schemes for fishermen – accident insurance, housing and savings-cum-

relief Infrastructure for inland marketing Enforcement of marine fishing regulation act and setting up of artificial reefs and

sea farming projectTenth 5-Year Plan(2002-2007)

Enhancing productivity and production from inland waters Technical and financial support for enhancing production and productivity R & D for enhancing production of quality fish/shrimp seed and feed Diversification of activities for development of fisheries and aquaculture Improving post-harvest management by processing, value-addition, setting up of

cold chains and packaging Creation of health and sanitary check facilities to ensure quality of products as per

international standards Integrated approach for sustainable development of fisheries and aquaculture



Annexure 2: International categorisation of fisheries subsidies

APECIn 2000 APEC undertook a Study into the Nature andExtent of Subsidies in the Fisheries Sector of APECMember Economies. Among the requirements for the studywere development of a comprehensive inventory of generictypes of subsidisation employed globally in the fisheriessector, including multi-sectoral subsidies applying also tofisheries. On the basis of the inventory the report identifiedfinancial transfers in six categories or “modalities”: Direct assistance to fishers and fisheries workers Lending support programmes Tax preferences and insurance support programmes Capital and infrastructure support programmes Marketing and price support programmes Fisheries management and conservation programmesThe authors also suggested a further categorization of theseprogrammes according to whether they would have theeffect of increasing or decreasing fish stocks, andexpanding or constraining fishing efforts.

OECDA study of government financial transfers in the fisheriessector in OECD countries used the following categorizationas a basis for its analysis: Fisheries infrastructure Management, research, enforcement and enhancement Access to other countries’ waters Decommissioning of vessels and licence retirement Investment and modernisation Income support and employment insurance Taxation exemptions

United StatesA paper submitted to the Committee on Trade andEnvironment by the United States in 2000 suggestedcategorising subsidies according to theireconomic/commercial impact. The two broad categoriesproposed were (a) cost-reducing subsidies and (b) subsidiesthat supported incomes and prices. Under the two broadheadings the paper listed 10 specific categories as follows: Cost Reducing Subsidies Commercially applicable research funding Capital cost-reducing subsidies Reduction of income and sales taxes Risk mitigation Government ownership and State trading if

inconsistent with market terms Assistance to shipbuilding specifically for fishing

vessels Foreign access payments and assistance to foreign

fishing ventures Subsidies that support Income and Prices: Price support programmes Trade-promoting subsidies Sector-specific social assistance programmesThe paper specifically excluded from the list governmentprogrammes for fisheries management, science,enforcement, and most publicly financed port and landings

facilities, as well as government-funded programmes thatfacilitate the transition to sustainable fisheries.

FAOThe FAO held an Expert Consultation on Economic Incentivesand Responsible Fisheries in Rome in 2000. The experts outlinedfour “sets of subsidies”: Set 1 Subsidies are government financial transfers that

reduce costs and/or increase revenues of producers in theshort term.

Set 2 Subsidies are any government interventions, regardlessof whether they involve financial transfers that reduce costsand/or increase revenues of producers in the short term.

Set 3 Subsidies are Set 2 Subsidies plus the short-termbenefits to producers that result from the absence or lack ofinterventions by governments to correct distortions(imperfections) in production and markets that canpotentially affect fisheries resources and trade

Set 4 Subsidies are government interventions, or the absenceof correcting interventions, that affect the costs and/orrevenues of producing and marketing fish and fish productsin the short, medium or long term.

In addition to the “sets of subsidies” the experts defined“categories of subsidies” which are grouped under two broadheadings: cost-reducing and revenue-enhancing subsidies. Theysuggested a further break-down under “trade” and“sustainability” headings.

UNEPA paper commissioned by the United Nations EnvironmentProgramme and published in 2002 suggested a synthesis of theabove approaches. The simplified categorization proposed in theUNEP paper comprised the following: Fisheries management services Subsidies to capital costs including infrastructure Decommissioning and licence retirement Subsidies to access to foreign fisheries Subsidies to incomes


Integrated CoastalManagement, India105

Annexure 3: An indicative summary of subsidies in Indian Fisheries

The following inventory employs the framework used by APEC, with one additional category or ‘modality’ –‘Social Subsidies’. The list is by no means comprehensive and is intended mainly to give an account ofdifferent kinds of subsidies available in the sector at various times in the last fifty years. It has to be noted thatsome of the subsidies are no longer available, but considering their importance in the overall pattern ofdevelopment of the sector, have been included.

1. Direct assistance to fishers and fishworkersa. Direct transfer lean season assistance

disaster relief payments subsidy component provided in cash (HSD oil)

b. Revenues foregone Leasing of tanks on subsidised rates for extensive aquaculture2. Lending support programmes

special component plans for lending to fishers (NABARD; trawler developmentfunds)

loan guarantees: for e.g., the World Bank-funded ‘shrimp and fish cultureproject’ – central government standing guarantee (for the state governments) toWorld Bank; the state governments’ loan guarantee for various programmesgiven by NCDC

subsidised loans from commercial and cooperative banks as well as from weakersection development bodies like BC Development Corporation and SCDevelopment Corporation;

margin money support, over and above subsidised loans interest subsidies on loans for acquisition of deep sea fishing vessels (GOI,

1996:217) loan restructuring (deep sea sector; hatcheries) loan waivers (in late-1980s) interest subsidies for modernisation of processing plants to achieve conformity

with international requirements exemption from collateral security for mechanised and deep-sea trawlers, deep-

sea sector3. Tax preferences programmes

HSD fuel tax exemption for mechanised boats tax exemption on kerosene for motorised boats (in Kerala) income tax exemption and sales tax exemption (for sales) for cooperative

societies sales tax exempted for fish and dried fish seafood exporters exempted from income tax (until recently) reduced cess on seafood exports

4. Capital and infrastructure development programmes subsidies or grants for buying or modernising boats, engines, fishing gear and

other fishing equipment (iceboxes, GPS, communication systems, fish finders)in artisanal and mechanised sectors;

subsidies for land, capital costs and working capital assistance in aquaculture forsmall-scale and large-scale operatives;

equity participation (GOI 1996:217); setting up, management and upgradation of ancillary industries – ice plants,

freezing plants, hatcheries; exploratory fishing and gear/aquaculture development (GOI 1996:217); state investments in fisheries enterprises – the Fisheries Development

Corporations grants for safety equipment; disaster preparedness and mitigation infrastructure

and equipment infrastructure – ports, fishing harbours and jetties, fuel stations, access roads to



fishing villages, markets5. Marketing support programmes

Export marketing promotion programmes Generic product promotion (MFPI)

6. Fisheries management and conservation programmesNo/inadequate

management open access lack of licensing and registration no obligation to report catches and earnings non-enforcement of existing legislations Poor pollution control

Management without usercharges

programmes for development of artificial reefs and fish aggregating devices environment and biodiversity conservation programmes – concerning

mangroves, turtles, sharks and shells, shrimp seed fisheries management programmes – seasonal bans, mesh-size regulations aquaculture regulation programmes – such as the Aquaculture Authority of

India sea ranching

7. Social services food subsidies from PDS subsidised public healthcare subsidised education subsidised housing, drinking water, sanitation and other basic needs



B. TABLES

Table 1: HDI for selected coastal states of India

Trends in the Human Development Index for Selected Major Indian States (1981-2001)States 1981 1991 2001

Value Rank Value Rank Value RankAndhra Pradesh 0.298 9 0.377 9 0.416 10Gujarat 0.360 4 0.431 6 0.479 6Karnataka 0.346 6 0.412 7 0.478 7Kerala 0.500 1 0.591 1 0.638 1Maharashtra 0.363 3 0.452 4 0.523 4Orissa 0.267 11 0.345 12 0.404 11Tamil Nadu 0.343 7 0.466 3 0.531 3West Bengal 0.305 8 0.404 8 0.472 8All-India 0.302 0.381 0.472Source: Planning Commission (2002) National Human Development Report 2001, Governmentof India, New Delhi.

Table 2: Distribution of marine fishery resources in India

State/UnionTerritory

Approx length ofcoastline (km)

Continental shelf(‘000 km)

No of landingcentres

No of fishingvillages

Andhra Pradesh 974 33 508 508Goa 104 10 88 72Gujarat 1600 184 286 851Karnataka 300 27 29 221Kerala (P) 590 40 226 222Maharashtra 720 112 184 395Orissa 480 26 63 329Tamil Nadu 1076 41 362 556West Bengal 158 17 47 652A & N Islands 1912 35 57 45Daman and Diu (P) 27 - 7 31Lakshadweep (P) 132 4 11 10Pondicherry 45 1 28 45Total 8118 530 1896 3937

P – Provisional Source: GOI (2000: 121).



Table 3a: Distribution of marine fishing craft and main fishing gears in Andhra Pradesh(Revised from ICM, 2000)

Fishing craft Zones where represented Main fishing gears usedCatamarans North and south (Marine) Gillnets Trammel nets

Masula Stitched boats North zone Gillnets, shoreseinesPlywood sandwichcatamarans

North zone Gillnets, trammel nets

Small navas/dhonis Central (estuarine) Gillnets, lines, tidal wall netsShoe dhonis Central (estuarine) Gillnets, tidal wall netsMedium navas Central (estuarine and

marine)Gillnets, trammel nets

Large navas Central (marine) Gillnets, longlines

Table 3b: Distribution of marine fishing craft and main fishing gears in Orissa (From ICM2000)

Fishing craft Zones whererepresented

Main fishing gears used

Catamarans South Bottom & surface gillnets, trammel nets, hook & linesBarboats South Shore-seinesNava South Gillnets, trammel nets, hook & linesSalti North Encircling nets, driftnets, shore-seinesDingi/Danga North Encircling nets, driftnetsPatia North Encircling nets, driftnetsSabado North Encircling nets, shore-seines, gillnetsChoat North Encircling nets, driftnets, shoreseines

Table 3c: Distribution of marine fishing craft and main fishing gears in Kerala (From SIFFS2002)

Fishing craft Areas where mainly used Main fishing gears usedPlank canoes From north of Neendakara

(Kollam district) up toMalapuram district

Ring seine, Gill net, Hook andline, shore seine

Dugout canoes From Kasargod to Ernakulam Ring seine, Gill net, Hook andline, mini trawl nets

Kattumarams Thiruvananthapuram andKollam districts

Hook and line

Plywood boats (decked) All districts except Ernakulam Mainly hook and line. Gill netand ring seine are also used

Plywood boats (open) All districts except Ernakulam Mainly large mesh gillnets.



Table 4a: Volume of exports of fish and fish products from India 1950-51 to 1958 (from GOI1961)

(Quantity in '000 Cwts.)

Particulars 1950-51 1951-52 1952-53 1953-54 1954-55 1955-56 1956 (Apr. -Dec.) 1957 1958

1. Fish, dried unsalted 181.8 201.8 261.7 356.5 289.0 215.9 181.9 73.1 117.3

2. Fish, dried salted 174.1 211.8 199.0 173.3 179.4 165.2 160.4 156.0 303.0

3. Fish, wet salted 25.7 16.5 21.6 20.4 14.2 24.3 2.0 11.8 22.3

4. Others - - - - - - - 173.4 146.2

5. Prawn (fresh, chilled, frozen, salted, dried orsimply cooked) - - - - - - - 116.8 100.3

10. Fish manure and fish guano 0.0 1.2 1.2 51.0 77.0 61.8 9.4 29.0 9.6

11. Fish maws and sharkfins 5.2 5.2 5.5 6.1 4.2 4.7 3.4 5.1 5.6

Total : 386.84 436.5 489.0 607.3 563.8 471.9 357.1 565.2 704.3

Table 4b: Value of exports of fish and fish products from India 1950-51 to 1958 (from GOI1961)

(Value of export in '000 Rs.)Particulars 1950-

511951-

521952-

531953-

541954-

551955-

561956

(Apr. -Dec.)

1957 1958

1. Fish, dried unsalted13,058 17,866 23,777 28,375 27,530 20,245 18,030 7,688 11,925

2. Fish, dried salted9,688 13,115 12,710 12,966 15,804 15,655 17,584 16,338 24,855

3. Fish, wet salted545 180 425 507 438 597 370 301 369

4. Others - - - - - - -2,035 2,207

5. Prawn (fresh, chilled, frozen,salted, dried or simply cooked)

- - - - - - -17,375 17,261

6. Fish manure and fish guano3 30 19 998 1,772 1,616 227 627 203

7. Fish maws and sharkfins1,265 1,672 1,769 1,187 1,131 1,106 990 1,497 1,827

Total : 24,559 32,863 38,700 44,033 46,675 39,219 37,201 45,861 58,647

Table 5a: Comparison of farm sizes across Kerala, AP & Orissa (from SIFFS, 2002)

No of farm holdingsState 0-2 ha 2-5 ha 5 - 10 ha > 10 ha Total no of farmersAP 69 738 2190 336 238 72 502Orissa 7580 100 51 13 7 744Kerala 1297 699 234 362 2 592

Table 5b: Productivity per hectare in Andhra Pradesh, Orissa and Kerala (from SIFFS, 2002)

Year 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01



AP 542.8 507.5 514.0 677.1 551.3 746.0Kerala 540.1 479.4 428.3 293.8 312.7 229.2Orissa 614.0 561.1 499.5 581.2 494.1 494.7

Table 6: State-wise summary of the list of EU approved units in India (http://www.mpeda.comlast visited 21 April 2004)

Maritime State PP ZV TotalGujarat 14 0 14Maharashtra 15 0 15Karnataka 5 0 5Kerala 52 0 52Tamil Nadu 19 0 19Andhra Pradesh 24 5 29Orissa 4 0 4West Bengal 5 0 5Total 138 5 143

PP Processing PlantZV Freezer Vessel

Table 7: Port-wise Export of Marine Products from India in 2000 (MPEDA 2000)

Name of Port

West CoastName of

Port

East Coast

Quantity(Tons)

Value(Rs.

Lakhs)

Quantity(Tons)

Value(Rs.

Lakhs)

Cochin 96678 115957 Calcutta 18880 61966Mangalore 3277 1659 Vizag 23825 98027Marmugao 11206 3491 Chennai 34177 166656Mumbai 27102 24288 Tuticorin 18638 51162Jawaharlal NehruPort 78409 60135 Paradeep Neg 1Porbandar 24990 10564Kandla 44783 26609Karwar 602 208Trivandrum 461 1120Pipavav 38047 17815

Total 325555 261846 95520 377812



Table 8: Major markets for Indian marine products (MPEDA, 2000)

Q: Quantity (Tonnes) V: Value (Rs Lakhs)1996 1997 1998 1999 2000

Japan Q: 64698 71948 65568 65202 71060V: 185967 226195 237456 217892 262477

European Union Q: 72229 45227 46963 62899 66462V: 76628 52079 60810 82802 100468

USA Q: 29353 32831 35591 34181 42414V: 43299 57854 60772 67707 117312

South East Asia Q: 165110 224612 133347 140155 208206V: 76515 111729 82320 85506 122955

Middle East Q: 8958 13054 19565 12839 16273V: 6086 9869 18228 10169 17144

Others Q: 13328 11305 12469 11929 16660V: 9507 8432 11369 11663 19301

Total Q: 353676 398977 313503 327205 421075V: 398002 466158 470955 475739 639657

Table 9: Seafood export to major 20 countries (by Value)

Rank Country 1995-96 Share 1996-97 Share 1997-98 Share 1998-99 Share1999-2000 Share

1 Japan 1576.69 45.0 1886.04 45.8 2326.09 49.5 2295.48 49.6 2272.78 44.42 USA 366.26 10.5 436.05 10.6 583.75 12.4 617.32 13.3 775.35 15.23 China 87.15 2.5 306.88 7.4 695.55 14.8 308.94 6.7 373.02 7.34 UK 229.45 6.6 231.22 5.6 92.17 2 185.08 4 243.83 4.85 Spain 156.48 4.5 113.54 2.8 81.45 1.7 137.98 3 177.59 3.56 Hongkong 144.93 4.1 236.58 5.7 121.38 2.6 174.08 3.8 171.69 3.47 Belgium 77.47 2.2 94.69 2.3 46.33 1 69.47 1.5 120.49 2.48 UAE 54.31 1.6 49.4 1.2 134.59 2.9 130.78 2.8 98.28 1.99 Italy 181.23 5.2 112.07 2.7 62.76 1.3 81.59 1.8 93.91 1.8

10 Thailand 65.24 1.9 75.85 1.8 96.62 2.1 93.11 2 92.13 1.811 Singapore 108.25 3.1 95.27 2.3 93.62 2 86.91 1.9 90.44 1.812 Netherlands 72.86 2.1 69.24 1.7 19.82 0.4 37.08 0.8 75.05 1.513 Malaysia 54.35 1.6 78.26 1.9 68.7 1.5 48.53 1 70.43 1.414 France 59.56 1.7 45.48 1.1 18.65 0.4 44.18 1 56.12 1.115 Canada 6.79 0.2 20.2 0.5 21.06 0.4 37.4 0.8 55.3 1.116 Germany 21.09 0.6 33.38 0.8 16.64 0.4 31.7 0.7 50.67 117 Portugal 30.36 0.9 29.47 0.7 17.28 0.4 25.39 0.6 41.89 0.818 Taiwan 16.87 0.5 27.55 0.7 18.71 0.4 21.51 0.5 36.8 0.719 Greece 56.51 1.6 45.92 1.1 48.88 1 58.43 1.3 34.19 0.720 R Korea 16.53 0.5 26.24 0.6 14.13 0.3 7.93 0.2 32.12 0.6

Others 118.73 3.4 108.03 2.6 119.3 2.5 133.98 2.9 154.59 3TOTAL 3501.11 100.0 4121.36 100 4697.48 100 4626.87 100.0 5116.7 100.0



Table 10: Major Markets for Indian Frozen Shrimp (MPEDA, 2000)

(Value in Rs. Lakhs)1996 1997 1998 1999 2000 Average Percentage

Japan 165359 206491 221264 198331 235180 205325 60USA 34416 46534 45684 54067 99724 56085 16European Union 45503 29394 30484 45916 62754 42810 13Others 17913 28534 40408 37924 55845 36125 11Total 263191 310953 337840 336238 453503

Table 11: Contribution of non-shrimp varieties to exports

Percentage by Quantity (1999-2000) Percentage by Value (1999-2000)Finfish 38.3 10.5Cuttlefish 9.6 5.6Squid 10.2 5.8Dried items 1.9 0.8Live items 0.5 0.8Others 7.4 5.3

Table 12: Fish imports as percentage of seafood exports from India

Year Imports as percentage of exportsQuantity Value

1983 0.88 0.921986 0.37 0.211989 0.01 0.011992 Ng Ng1995 0.61 0.301998 1.95 0.942000 1.24 0.58

Table 13: Status of import policy of fishery products

Period Total no of fisherycommodities

Special ImportLicense (SIL)

Free Restricted/Prohibited

1992-97 121 - 7 1141997-2002 121 62 21 382002-07 127 - 122 5



C. FIGURES

Figure 1: Fish production in India 1950-51 to 1999-2000 (from GOI 2000)

Fish production in India 1950-51 to 1999-2000 (in '000 MT) (GOI, 2000:5)

0

5

10

15

20

25

30

35

1950

-51

1960

-61

1970

-71

1978

-79

1980

-81

1982

-83

1984

-85

1986

-87

1988

-89

1990

-91

1992

-93

1994

-95

1996

-97

1998

-99

Hun

dred

s

Marine

Inland

Figure 2: Contribution of shrimp to marine fish landings (GOI 1996 & 2001)

Percentage of Penaied shrimp in total marinelandings

4

5

6

7

8

9

1991 1992 1993 1994 1995 1996 1997 1998



Figure 3: Wholesale price indices

0

100

200

300

400

500

600

1981-82

1982-83

1983-84

1984-85

1985-86

1986-87

1987-88

1988-89

1989-90

1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

MilkEggsPoultry ChickenMuttonFish

Figure 4: Export growth of Indian Marine Products 1961-62 to 1999-2000 (MPEDA, 2001)

Exp o r t Gr o w th o f In d ian M ar in e Pr o d u cts 1961-62 to1999-2000 ( in M T )

050

100150

200250

300350

400

1961-62

1966-67

1971-72

1976-77

1981-82

1986-87

1991-92

1996-97

1999-2000

Th

ou

san

ds



Figure 5: Annual average exports by quantity and value during 1996-2000 (from MPEDA,2000)

Annual average exports by quantity and value during 1996-2000

19 1610

48

4 4

46

15 1420

3 20

10

20

30

40

50

60

Japan EU USA SE Asia Middle East Others

Percentage by quantity Percentage by value

Figure 6: Growth of shrimp exports from India 1953-2000 (from Kurien, 1985; MPEDA2001)

Growth of shrimp exports from India 1953-2000 (in MectricTonnes)

0

20

40

60

80

100

120

1953

1962

1967

1974

1979

-80

1981

-82

1983

-84

1985

-86

1987

-88

1989

-90

1991

-92

1993

-94

1995

-96

1997

-98

1999

-2000

Thou

sand

s



Figure 7: Percentage of shrimp to total exports by quantity (MPEDA 2001: 27 & 37)

Composition of shrimp in Overall Exports

0

50

100

150

200

250

300

350

400

450

1978

-79

1979

-80

1980

-81

1981

-82

1982

-83

1983

-84

1984

-85

1985

-86

1986

-87

1987

-88

1988

-89

1989

-90

1990

-91

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-2000

Thou

sand

s

0

10

20

30

40

50

60

70

80

Total Total shrimp Percentage shrimp to total

Figure 8: Percentage of shrimp to total exports by value (MPEDA 2001: 27 & 37)

Contribution of shrimp to overall exports by Value

0

1

2

3

4

5

6

1988-89

1989-90

1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-2000

Thou

sand

s

55

60

65

70

75

80

Total Value Shrimp Value Percentage of shrimp to total



Figure 9: Contribution of cultured shrimp to total shrimp exports

Contribution of capture and culture sources to shrimp exports

0

20

40

60

80

100

120

1978

-79

1980

-81

1982

-83

1984

-85

1986

-87

1988

-89

1990

-91

1992

-93

1994

-95

1996

-97

1998

-99

Thou

sand

s

Capture

Culture

Figure 10: Contribution of cultured shrimp to overall exports

0

50

100150

200

250

300350

400

450

1988-89

1989-90

1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-2000

Thou

sand

s

0

5

10

15

20

25

30

Total exports Culture shrimp



Figure 11: Cost of HSD Oil at Kakinada Fishing Harbour, 1989-2004

Cost of HSD oil per litre, 1989-2004 (Source: AFCCS Ltd,internal records)

0

5

10

15

20

25

1989

1991

1993

1997

2000

2002

2004

Cost per litre



Figure 12a: Stages in the export of black tiger shrimp (Capture/Mechanised sector/Urbanlanding centre)

Capture andstorageonboard

Landing andsale

Preparations fortransport toprocessingplant by the

agents

Receiving atthe

processingplant

Processingoperations

Packing &storage

Transport toPort & export

STAGES IN EXPORTCHAIN

TASKS AT EACHSTAGE

PEOPLE INVOLVED

Sorting by variety Deheading Keeping in ice in insulatedcontainers

Fishing crew (@ 6-8 peopleper boat)

Handing over catch tocompany/commission agent/sale tomiddlemen traders Weighing for determining value

according to size Resale by traders to commission

agents

Fishing crew Boat owners Company agent Commission agents Middlemen traders

Beheading shrimp Washing Keeping in ice in plastic crates

according to species Loading into insulated/ covered

trucks for transport

Commission/comp agents 2-8 daily wage workers Local women (for peeling and

sorting) Ice sellers Company supervisor Truck drivers and assistants

Variety & size-wisesegregation Washing with freshwater Despatch for processing

Supervisors Salaried processingassistants (about 10 men and 25women)

Peeling (if required) Grading & sorting Slab packing Freezing 1½ hours –400c

Processing workers (mostlywomen) Supervisors

Removal from freezers Packing in cartons Carrying to cold storage Storing on wooden platforms

Processing workers (bothmen and women) Supervisors

Loading into insulatedcontainers @15 MT/container Transport by trucks to ports for

export

Company-employedworkers Truck drivers/assistants Supervisors



Figure 12b: Stages in the export of black tiger shrimp (Capture/Artisanal sector/Rural landingcentre - Uppada):

Capture andstorageonboard

Landing, saleand/ortransport toBarapa

Preparations atBarapa andtransport toprocessing

plant

Receiving atthe

processingplant


Packing &storage


STAGES INEXPORT CHAIN

TASKS ATEACH STAGE

PEOPLEINVOLVED

Keeping in ice or undershade

Fishing crew includingowners (@ 3-6 people per boat)

Handing over catch tocommission agent at Barapa Sale to middlemen traders in

case of small catches or when noadvance was taken Weighing for determining value

according to size

Boat owners Auctioneers Commission agents Middlemen traders Processing assistants

Beheading shrimp Grading Washing Keeping in ice in plasticcrates according to species Transport by companyvan/Auto rickshaw

Commission agents 2-8 daily wage workers Local women (sorting) Ice sellers Truck drivers and assistants

Variety & size-wisesegregation Washing with freshwater Despatch for processing Weekly payment tocommission agent


Peeling Grading & sorting Slab packing Freezing 1½ hours –400c


Removal from freezers Packing in cartons Carrying to cold storage Storing on woodenplatforms


Loading into insulatedcontainers @15 MT/container Transport by trucks to ports for

export




Figure 12c: Stages in the export of black tiger shrimp (Culture)

Harvestingthe crop from

the tanks

Storage at thesite and sale to

company/commission

agent

Transport toprocessing

plant

Receiving atthe

processingplant


Packing &storage


STAGES INEXPORTCHAIN

TASKS ATEACHSTAGE

PEOPLEINVOLVED

Netting the catch Tying net to the outlets Keeping the harvest in icesoon after capture

10-20 daily wage labourers Aquaculturist & assistants Commission/Company agents

Sale to company agent orcommission agent after gradingand weighing Chilling and storing ininsulated containers

Aquaculture farmers Commission/Companyagent and his assistants

Packing in plastic crateswith sufficient (1:1) ice Transporting in insulatedvehicles belonging to thecompany/commission agent

Assistants Vehicle operators and theirassistants

Variety & size-wisesegregation Washing with 5 pptchlorinated water Despatch for processing


Beheading & washing Grading & washing Weighing & Slab packing (1.8

kg blocks) Freezing 1 ½ hours –400c


Removal from freezers Packing in cartons Carrying to cold storage Storing on woodenplatforms


Loading into insulatedcontainers @15 MT/container Transport by trucks to ports

for export


Implications of Trade Liberalisation on Indian Fisheries

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