The new food factories: Inside India’s organics trade
8 min read 14 Jan 2019, 09:36 AM ISTOn 1 January 2019, India joined a group of roughly 50 countries which mandates consumer-friendly labelling for organic products. Will it work?
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New Delhi: In a bid to maintain good health, Manisha Bhardwaj, a software professional working in Noida, and her banker husband, Sakal Bhardwaj—both turning 40—have decided to bring some changes in their lifestyle and food habits. The couple has not only joined a gym to lose weight but has also completely switched to organic foods—ranging from organic fruits, vegetables, pluses to organic rice.
“Earlier, I was buying vegetables from a local vendor. But now, I order vegetables and fruits from websites that sell organic stuff," said Manisha Bhardwaj. “In grocery stores too, my first preference is organic foods now," she added.
The Bhardwaj family is not the only one undergoing this kind of transformation. Annu Gupta, a yoga and fitness trainer, also ensures that she buys all her vegetables and fruits from a local farm in Faridabad, which claims to be organic and supplies produce across Delhi-NCR.
Because of an emerging class of relatively affluent customers like Bhardwaj who have increasingly started to prefer grocery items that are deemed safe and healthy, organic food is a booming business. The market is niche and most Indians are still price conscious. But there is already a significant amount of money at play—with the organic foods market projected to hit ₹ 10,000 crore by 2020, according to a Associated Chambers of Commerce and Industry of India (Assocham) report. Given that the term ‘organic’ attracts premium pricing, there are huge incentives to game the system and sell pretty much anything under the umbrella term.
But the era of Wild West in the organic realm may be coming to an end. On 1 January 2019, India joined a group of roughly 50 countries which mandates clear and legible consumer-friendly labelling for organic products.
Henceforth, no person will be able to manufacture, pack, sell, market or otherwise distribute or import any organic food unless they label the package with complete and accurate information regarding the organic status of the product. Also, any such product should carry a government quality assurance mark and the new Jaivik Bharat logo, which is meant to distinguish organic products from non-organic ones.
The regulations, which were pending for nearly 2 years, could transform a nascent and important market segment in significant ways. They would immediately have an impact on entities like Mother Dairy Fruit & Vegetable Pvt. Ltd which has been rapidly expanding its organics presence in retail—with the recent introduction of an organic line of products in over a 100 stores across Delhi-NCR alone. Beyond the slew of businesses which sell organic products, the country also has an estimated 800,000 organic farmers—the largest in the world. “The rules will regulate the organic food market in India as manufacturers will have to follow stringent regulations now onwards," said Pawan Kumar Agarwal, chief executive officer of the Food Safety and Standards Authority of India (FSSAI). Things will take some time to settle down though, cautioned Agarwal, since not many people know about the new logo and the online sale of organics is still a big question mark.
Pesticide residue is also an issue since it is difficult to trace whether a food item that is claimed to be organic is actually free of pesticides all along the value chain. Besides, organic food which is marketed through direct sales to the end-consumer by small producers or producer organizations (annual turnover less than ₹ 12 lakh) are currently exempt.
“Only time will tell how these [the new rules] are enforced," said Mukesh Gupta, director, operations, at Morarka Organic Foods Ltd. “Usually, the intention of the government is 1% to prevent adulteration, while 99% will be about trivial issues of mislabelling such as address, ingredients etc. But these regulations are stringent and the manufacturers will try to comply, as the consumer is also losing confidence in organic food products," added Gupta.
Agarwal insists that customers should buy only certified organic food from now. “As organic food is becoming very popular, we have had a major challenge in controlling fraudulent activities in the whole system. There are several farmers and manufacturers of food items that claim to be selling organic products. This has been a totally unregulated area in India. There is no guarantee that what is being claimed as organic is actually organic but with the new regulations in force, the organic market will be streamlined and properly regulated. Proper enforcement though may take some time," said Agarwal.
Organics track record
While customers in India have been purchasing organic foods largely based on trust, the US Department of Agriculture (USDA) has caught several products—including ones exported from India with fake organic certificates. For instance, according to the USDA, Nainital-based Indian Herbs Extraction, Kannuj-based Lala Jagdish Prasad & Co. and Tamil Nadu-based Green India Herbs have been caught with fraudulent organic certificates in the past. Since organic labelling is at a more advanced stage in many other countries, export-oriented products from India have been under a regime of rules for some time. And the performance of these export goods offer lessons on what’s likely to be in store in India.
In 2016, USDA suspended the licences of New Delhi-based Aryan International and the Lucknow branch of Organic India Pvt. Ltd. Four more Indian companies have surrendered the licences which allowed them to sell products claimed to be organic in the US.
“A suspended or revoked operation can’t sell, label, or represent its products as having been organically produced or handled," a USDA spokesperson told Mint. “In some cases, businesses voluntarily surrender their certifications and are no longer in the organics market. Using fraudulent documents to market, label, or sell non-organic agricultural products as organic is punishable by fines of up to $11,000 for each violation."
The most common fraudulent actions include mislabelling of non-organic agricultural products as organic. For example, using the USDA organic seal without being certified organic, using the word “organic" on the front of the package when the ingredients are organic but the entire product is not certified organic. Another fraudulent action is using the USDA organic seal on a multi-ingredient product that only has a small number of organic ingredients (less than 95% of the total product), the spokesperson said.
Regardless of labelling, non-organic and organic agricultural products produced for human consumption must meet food safety requirements and pass inspections. Both non-organically grown and organically grown foods should be safe to consume. In India, most companies in the organic food business are located in Tier-1 and Tier-2 cities. The Indian Council for Research on International Economic Relations (ICRIER) in 2017 surveyed over 100 companies in the sector, located in major cities. According to the ICRIER report, nearly all the firms pointed out that there is a prevalence of fraud and malpractices in the organic business. These malpractices can be of different types, the most serious of which is mixing organic products with conventional products.
The pesticide problem
It is precisely because the existing state of the food industry is far from perfect that the introduction of the new label may not change much, at least for some time. “In India, we are still at a nascent stage when it comes to food safety," said Pankaj Agarwal, co-founder and managing director, Just Organik, an organic food manufacturing company. “Organic is just another layer of safety, where not only the extrinsic safety but also the intrinsic safety of the food is to be ensured," he said.
But to guarantee such standards of quality would require an extensive testing regime, particularly because health-conscious consumers who invest their faith in organics do so assuming that the product is free of all pesticides. Given India’s realities, that could hurt certain well-intentioned players.
“Despite precautions taken by organic producers, there could be traces of [pesticide] residue, given that neighbouring farmers might be using chemicals and the drift might land in the organic farmers’ field," said Kavitha Kuruganti, convener of ASHA (Alliance for Sustainable & Holistic Agriculture) and a safe food activist. “Similarly, if the groundwater is contaminated, or water run-off from a nearby field is bringing in residues into an organic farmer’s field, there could be inadvertent residues," she added.
That is one of the reasons why India’s organic standards verification has been devised as a verification of the processes and inputs used, not the end product. But some players could also pass off food items grown using pesticides as organic since this has become a lucrative business for fly-by-night operators, Kuruganti said. A ministry of agriculture survey in 2015 had found traces of pesticides in samples collected from various outlets across India, including organic ones. Litigating such finer points on quality would become a significant issue for the regulators.
Possible win-win
But despite these challenges, the organics business could emerge as a win-win for consumers, farmers, as well as the industry. Though the organic market is expanding at the fastest rate in the food segment, opportunities are also emerging in textile and beauty and personal care. The food segment alone is expected to grow by 25-27% every year. While the early phase of growth was fuelled by the export market, now we are seeing the domestic market catching up, she said.
“The higher price that we pay for organic food is certainly worth the money spent for various reasons. If you don’t pay here, you might end up paying far more for medical treatment. Secondly, food has always been kept cheaper than it ought to be, and that has been a major source of several problems for farmers," Kuruganti said. “When we make a paradigm shift toward organic farming and food systems, there is no reason to repeat the past mistake of keeping food cheap," she added. This, then, could be one way out of the agrarian crisis, supported by consumers.
“The people who buy organic foods in India are mostly health-conscious consumers who go for organic foods even though they are more expensive than conventional foods. They do not mind paying a little extra for the comfort of knowing that they and their families are safe from the perils of chemical fertilizers and pesticides and antibiotics," said Saurabh Arora, founder of Food Safety Helpline, which aims to provide relevant and effective resources for the food business fraternity.
Indian consumers must now start looking for the government certification mark instead of blindly buying a food item that claims to be organic, Arora said. Ideally, organic food is free of all kinds of adulterants like pesticides, heavy metals, mycotoxins, and antibiotics, he added.
