The Hindu Business Line : Floriculture units caught in a pincer

Despite the agri-export zone status to the floriculture trade and implicit promises by State Governments to push cut flower exports, around 90 per cent of units have liabilities estimated about Rs 100 crore, said Mr A. Ramesh, President, South India Floriculture Association (SIFA). These have accumulated over a period since the industry started around a decade ago, when project costs were too high for the industry to sustain.

Today, with the hindsight of experience, growers are wiser. Indigenous greenhouses cost Rs 400 per sq m as against Rs 1,000 of the imported ones, "consultants" have been eliminated, planting material costs are significantly lower, and the industry has found out that royalty rates can be bargained.

"New units can be put up for just about Rs 1 crore per hectare, compared to the Rs 3 crore that the initial ones did," Mr Ramesh said. The AEZ status will also give them benefits such as lower cost of credit and eligibility to various export promotion schemes.

Ironically, banks are willing to fund fresh promoters who are looking at putting up new units, while the existing entrepreneurs are labelled the "bad boys". Even large companies, which experimented with floriculture (including MRF, IDL, Essar, and Tatas) and opted out of it as they could not generate money, are considered "good" as they were able to pay back loans, Mr Ramesh said.

First generation entrepreneurs, however, are the villains, despite reaching certain quality and performance levels. The industry came into being "because the seventy odd of us took the initial risk,'' he said. Now, "everyone else benefits."

Today, the existing units can meet operating expenses, though they are unable to service old debts, Mr Ramesh said. "The industry has offered to pay back 50 per cent of the outstanding debts and the proposal is under Government's consideration."

If the floriculture industry in India failed in its initial round because of inexperience, experience is being given the short shrift once again, feels the industry.

"Why should we close old units? The new ones will have to go through the same process of learning." At the same time, existing units cannot wind up and start all over again because that would make them NPAs, and even less likely to get funds.

But, as far as the potential of the industry goes, there is optimism still. The plus points are that a domestic market for cut flowers has grown from practically nothing to a significant size.

Though no figures are available, the industry estimates that domestic sales are definitely more than exports (which was about Rs 30 crore for cut roses last year). Export prices too have been going up every year, currently up by 20 per cent.

A 25 per cent increase in volumes is expected this year. Apeda's new marketing centre in Holland, which started operations last year, is expected to check `illegal" and poor quality exports.

New areas are coming under floriculture. Uttaranchal has been identified as the latest AEZ. Lessons learnt elsewhere on strategies for low cost production, marketing channels and systems are expected to benefit the park, said the Apeda Chairman, Mr Anil Swarup.

In Karnataka, Apeda is trying to rehabilitate some of the under performing units after assessing their potential viability. There is a plan "to enable the units to not only revive themselves but also realise their inherent potential,'' Mr Swarup said.

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